Macau Business Daily, August 20, 2013 by Business Daily

Website names and shames gambling ‘debtors’

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Year II

Number 352 Tuesday August 20, 2013

Chinese-English website known in English as ‘Wonderful World’ is naming and shaming what it says are Macau casino gamblers that haven’t paid their debts. It doesn’t specify if they have been gambling in VIP rooms or on mass gaming floors. Around 70 people are featured and listed by nationality along with a photograph and personal details for each. A ‘bounty’ amount is also listed inviting viewers to provide the person’s whereabouts to the creditors. Macau’s Personal Data Protection Office told Business Daily via e-mail the blacklist “is allegedly criminal”. The newspaper has learned that the matter has been passed to the Judiciary Police for investigation. “I cannot comment on the legal issues because the operator is away,” said a person answering a phone listed for the site. More on page 3

‘Small’ cost rise in LRT works: govt www.macaubusinessdaily.com

Some of the contractors building the city’s Light Rapid Transit railway have been promised more money, admits the Transportation Infrastructure Office deputy chief André Sales Ritchie. But he said the amounts involved were “relatively small”. One contractor claimed last week the project will be three years late. Worsening traffic congestion coupled with high hotel room rates, could keep visitors away from Macau, adds a scholar. Page 2

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Tourism, gaming rev New pre-sales law tops MOP100 bln in Q2 roils mortgage trade Tourism and gaming are pumping more than 100 billion patacas (US$12.5 billion) into Macau’s economy every quarter this year – although the split, predictably, is 86:14 in favour of gambling. Nonetheless quarterly income from tourism and gaming is twice that achieved three years ago. The Statistics and Census Service estimates that visitors spent 13.9 billion patacas on non-gaming items in the city in the second quarter of 2013. Page 5

The home pre-sales law has put mortgage lending through a roller-coaster ride. The city’s banks approved only 9.3 million patacas (US$1.2 million) on new lending for unfinished flats in June, down by 93.6 percent from the same month a year ago. It was the lowest figure since the Monetary Authority of Macau began giving monthly mortgage data in January 2012. Page 7

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August 20, 2013

Macau

Worsening traffic, LRT delay could scare visitors away Govt must clarify the Light Rapid Transit situation and offer a solution: legislator Tony Lai

tony.lai@macaubusinessdaily.com

worsening of road traffic congestion due to delay in opening the Light Rapid Transit (LRT) elevated railway, coupled with high prices for hotel rooms, could keep visitors away, an academic has warned. “There will definitely be a negative impact on tourism if there is a delay in the LRT completion,” said Edmund Loi Hoi Ngan, a professor of tourism and gaming at the Macau Polytechnic Institute. The LRT is scheduled to open by 2015 and the Hong Kong-ZhuhaiMacau Bridge is due to open in 2016. “As several integrated resorts in Cotai are expected to be ready at the same time, casino shuttles or buses right now are not enough to satisfy the additional influx of tourists drawn by such facilities,” Mr Loi told Business Daily. At least five new casino resorts are scheduled to open in Cotai by 2015 or 2016, and several others already there are due to expand. One of the contractors building the LRT, Top Builders International Co Ltd, warned last week that completion of the LRT could be delayed by two to three years. The Macau Construction Association estimates that work on the

A contractor has warned that the LRT could open two or three years late (Photo: Manuel Cardoso)

five parts of the railway now under construction on Taipa is between seven and 11 months behind schedule. The Transport Infrastructure Office, which is in charge of the LRT project, retorted: “There is still room for the project to get back on schedule.”

Mr Loi said the roads were already “a little bit” overloaded. “With the completion of the big resorts, which could also possibly prolong visitors’ stays, this will increase traffic pressure in the future,” he said.

‘Small’ cost rise in LRT works: govt Elevated railway construction is already half-year behind schedule Tony Lai

tony.lai@macaubusinessdaily.com

ome of the contractors building the city’s first railway project, Light Rapid Transit (LRT),will be granted more money, the Transportation Infrastructure Office confirmed. The office deputy chief, André Sales Ritchie, said in an interview with public broadcaster TDM Radio yesterday that the extra charges were “relatively small”. The office will review the applications in accordance with the law, the official added. But he did not identify the contractors or how much they had asked for. Business Daily asked Mr Ritchie’s office what impact these additional charges could have on the original budget but received no reply before press time. The Commission of Audit criticised the government last year for allowing the LRT costs to surge above 11 billion patacas (US$1.38 billion), almost three times its initial forecast in 2009. Mr Ritchie stressed “there is still time” for the railway works to get back on schedule. However, he

admitted the project was currently facing a delay of up to half-year. On the other hand, he downplayed the importance of the delay in the construction of a transport hub near the Macau Jockey Club. The hub was only “additional” work to the railway and will have no effect on whether the railway will open by 2015 as scheduled,

he explained Mr Ritchie also reassured the public that the type of cement his office had requested had been successfully used in other LRT works here. Top Builders International Co Ltd, one of the LRT contractors, said the government had asked them to use a new material that no cement maker could guarantee.

The LRT will cost at least three-times as much as the initial forecast in 2009

In the second quarter, each visitor to Macau stayed, on average, exactly 1.0 day, official data show.

Answers demanded “Coupled with the soaring room rates, this is not good for longterm tourism development here,” Mr Loi said. He said it was difficult to assess how bad it would be for tourism development. Chief Executive Fernando Chui Sai On said last week that Macau’s capacity was about 81,000 tourists a day, citing the results of a study commissioned by the Macau Government Tourist Office. That implies a capacity of 29.6 million tourists a year. The city had 28.1 million visitors last year. In view of the warning about further delay in the opening of the LRT, members of the Legislative Assembly are asking questions. Assembly member Chan Meng Kam sent a written inquiry to the government yesterday asking for solutions to the problem. Another member, Au Kam San of the New Macau Association, is also concerned. “The public here has become very used to public project delays and budget overruns,” Mr Au told Business Daily. “But we are now talking about a possible delay of two to three years, which is going to be a severe problem for the city’s future traffic,” he said. “The government has to come out and explain clearly what has happened,” he said. “It is not about blaming each other right now, but facing the problem and offering a solution.” Top Builders blamed the government for delays in the work on the LRT. The government countered by accusing some LRT contractors of not being committed to the construction schedule. The Transportation Infrastructure Office previously blamed delays on rain and the complexity of the infrastructure underground.

August 20, 2013 April 19, 2013

Macau

Website names and shames gambling ‘debtors’ But Personal Data Protection Office says ‘blacklist’ is ‘allegedly criminal’ Stephanie Lai

sw.lai@macaubusinessdaily.com

dual- language C hin eseEnglish website known in English as ‘Wonderful World’ is naming and shaming what it says are Macau casino gamblers that haven’t paid their debts. The site doesn’t specify if the people have been gambling in VIP rooms or on mass gaming floors. Around 70 people are featured and listed by nationality. A head and shoulders photograph, a name, and a label accompany each entry for each person saying alternatively ‘hustler’, ‘liar’, ‘thief’, ‘cheater’, or ‘robber’. Some have the slightly less harsh label ‘rogue’. Entries also include in many cases last known cell phone and or business telephone numbers and home and or work addresses for the people. Also attached to each entry is a reference – with family surname only – of the person chasing the debt, and a local contact number. The size of the alleged debt is listed with each entry, but the currency is not specified. The amounts allegedly owed range from ‘5,000’ to ‘1,000,000’. A ‘bounty’ amount is also listed on the debtors’ profile that invites viewers to provide the person’s whereabouts to the creditors. Macau’s Personal Data Protection Office told Business Daily via e-mail that the blacklist “is allegedly criminal”. It did not specify which privacy ordinances were involved or what part of the criminal code the blacklist might have violated.

The blacklist page of the website as it appeared yesterday

“There are signs showing that the [blacklist] case is allegedly criminal,” the office said in its e-mail. It did not clarify who or what was making the allegation of criminality. But Business Daily has learned that the matter has been passed to the Judiciary Police

for investigation.

Legal safeguards Data protection and other privacy ordinances currently in force in Macau prevent companies from

sharing personal data of individuals with third parties.  In March it was announced that gaming operator Wynn Resorts (Macau) SA had been fined 20,000 patacas (US$2,500) for breaching the privacy law by publicly disclosing personal information of hotel guests as part of a report on removed director Kazuo Okada. In April it was disclosed that gaming concessionaire Venetian Macau SA had been fined 40,000 patacas for breaching privacy law in a case linked to the export to the United States of data relating to the company’s former chief executive Steve Jacobs. Macau casino operators have – via the Hong Kong Courts – successfully sued directly managed VIPs (i.e., nonjunket customers) for defaulting on credit markers. The Chinese version of the website – which also includes news and entertainment – says the blacklist is the “best publicity platform” to “help chase debts for the gaming sector” and “exercises deterring effect against cheaters”. The website says it publishes the blacklist free of charge. It categorises the alleged debtors by place of origin and also includes personal details such as marital status and date of birth. Business Daily contacted the website via a Macau number listed on it. The phone was answered by a person identifying himself as Mr Hou, who said was in charge of marketing. He said: “I cannot comment on the legal issues because the operator [of the site] is away.”

Luen Fung Hang keeps ‘secure’ rating Insurer has less capital to face potential losses than rivals, rating agency warns Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau-based Luen Fung Hang Insurance Co Ltd has maintained its ‘secure’ rating but was warned that it has less capital to face potential losses than its rivals. Insurance ratings agency A.M. Best Asia-Pacific Ltd last week rated Luen Fung Hang’s financial strength as ‘A- (Excelent)’, the fourth-best rating, with a stable outlook. The agency praised the insurer’s “excellent business profile, strong underwriting results and its stable income from invested assets”. Luen Fung Hang was able to post “a broad-based” reduction in its spending last year, namely over insurance claims, A.M. Best wrote. The company’s investment portfolio has a “high proportion” of bonds, which have yielded “stable interest income,” the agency added. Macau’s insurance sector as a whole has depended on financial investments to turn in a profit, as

signing policies continues to be a loss-making venture. The insurance sector’s life and nonlife operations lost about 610 million patacas (US$76.4 million) in 2012, up by 3.9 percent from the previous year, according to official data. A.M. Best warned that Luen Fung Hang’s “buffer level of risk-adjusted capitalisation, although remaining supportive of its current ratings, is less than its peers”. If the ratio between the company’s capital and the risk of its policies were to face “a significant deterioration,” the insurer’s rating could be cut. Luen Fung Hang was the third biggest non-life insurer in Macau last year, with a market share of 20.5 percent and premiums worth 338.2 million patacas. The insurance group is co-owned by several banks and insurance companies based in Macau, Hong Kong and mainland China. It also has a much smaller life policy business.

August 20, 2013

Macau Lawrence Ho Russia deal talks continue Talks on a deal to install Macau casino entrepreneur Lawrence Ho Yau Lung as an investor on a Russian casino project have been extended. Summit Ascent Holdings Ltd, a Hong Kong-listed maker of ceramic tiles with no previous reported track record in gaming, is in talks with local investors in the Russian Far East’s Primorye region. According to an earlier filing, Mr Ho is a 37 percent shareholder in – and a non-executive director of – Summit Ascent. It shares a Hong Kong office building address with his gaming investment firm Melco Crown International Development Ltd. Summit Ascent said in its latest filing that talks with New Crescent and Elegant City have been extended until August 31, but that “all other terms and conditions…remain unchanged”. Last month Russian news agency RIA Novosti reported financing for the US$130 million (1.04 billion patacas) first phase had already been agreed and that a formal agreement was due in September. Several analysts say Mr Ho may consider a back door Hong Kong listing of his portion of the Russian project, via Summit Ascent.

Bally Tech systems revenue up 32 pct in Q4 Buy out of SHFL entertainment will strengthen product line up: analysts Michael Grimes

michael.grimes@macaubusinessdaily.com

Birmingham City’s owner to improve governance Birmingham International Holdings Ltd – owner of second tier English professional soccer club Birmingham City – has agreed to make improvements to its financial reporting procedures as part of its bid to resume trading on the Hong Kong Stock Exchange. The changes were recommended by KTC Partners CPA Ltd, an outside auditor hired by the firm. In June 2011 BIHL’s chairman Carson Yeung Ka Sing was arrested at his Hong Kong home by police in the city in connection with alleged money laundering. BIHL voluntarily suspended trading in its shares on the HKEx on June 30 2011 after Mr Yeung’s arrest and has not returned to the bourse since then. Mr Yeung’s Hong Kong trial on the money laundering allegations was adjourned in July for three months and will resume in mid-October. One of the exchange’s key requirements before BIHL can resume trading, is that the firm “inform the market of all material information about the arrest” about Mr Yeung. Those disclosures can’t however be made prior to the conclusion of the trial without risking harm to his defence case.

Solaire owner wants Macau investments The chairman of Bloomberry Resorts Corp – which in March opened its first casino resort in the Philippines capital Manila – would like to have gaming investments in Macau. “We just have to build the brand,” U.S. dollar billionaire and Philippines entrepreneur Enrique Razon (pictured) told Bloomberg. Mr Razon also wants to use his experience in the US$1.2 billion (9.58 billion patacas) Solaire Resort & Casino to develop operations in Latin America, where his family operates port facilities via International Container Terminal Services Inc. Gaming industry sources told Business Daily that Mr Razon – despite being responsible for a large and diversified family business – takes a direct interest in the day-to-day running of Solaire “down to vice president management level”. Solaire generated nearly 3.60 billion pesos (US$82.23 million) in total net revenues in the second quarter of 2013. The company also turned a net profit of 22.7 million pesos. Global Gaming Asset Management, a firm founded by former Las Vegas Sands president Bill Weidner, in December bought a nine percent stake in Bloomberry. GGAM currently has the management contract for Solaire.

Bally’s stand at G2E Asia

ally Technologies Inc – a major supplier of gaming equipment to Macau and other Asian markets – saw revenues from its high-margin casino floor control and monitoring hardware and software rise 19 percent in the financial year ending June 30. In the final quarter of the fiscal year, systems revenue jumped 32 percent year-on-year to a quarterly record US$73 million (583 million patacas) as compared with US$55 million in 2012. In financial 2013 as a whole, systems produced a record US$252 million in revenue, up from US$212 million in the equivalent period last year. The segment saw its gross margins rise two percentage points to 76 percent. Bally’s slot and gaming machine sales revenues increased nine percent to US$340 million in fiscal 2013 as

China Star’s positive profit warning C

hina Star Entertainment Ltd could post first half post-tax profit of up to HK$63 million (US$8.12 million) the firm said in a filing. That’s an increase of up to 50 percent on the HK$42.08 million post-tax profit reported in the first six months of 2012. China Star – a Hong Kong-listed producer of Cantonese-language films – controls Macau casino

compared to US$311 million a year earlier. It was driven by higher sales for replacement machines in the North American market said the firm. Diluted earnings per share (EPS) reached a record US$3.45 for the year on record annual revenues of US$997 million. Last month Bally announced a leveraged buy out for US$1.3 billion (10.39 billion patacas) of fellow Nevada-based casino equipment maker SHFL entertainment Inc. SHFL is strong in electronic table games and slots in Asia and Australasia and in card shufflers globally, and Bally is traditionally strong in slots in North America, and casino floor management systems worldwide.  Under the merger Bally’s revenue from outside North America – as a percentage of total corporate revenue – will increase from around 16

property Hotel Lan Kwai Fong, operating under a Sociedade de Jogos de Macau SA gaming licence. The hotel has eight VIP gambling rooms according to its website. China Star also invests in “operations which receive profit streams from the gaming promotion business in one of the VIP gaming rooms at the Grand Lisboa Casino in Macau,” according to another filing. In 2011 China Star made an annual loss of HK$632.70 million. At the time, China Star blamed in part “keen competition” in the VIP gambling market. Since last year a number of ‘legacy’ casinos built during SJM’s monopoly have reported improved revenues and performance. It coincides with reportedly greater scrutiny by mainland officials of VIP operations in some Macau casinos. M.G.

percent to around 24 percent, said a Bally investor presentation. “With the planned acquisition of SHFL entertainment we now expect to utilise the majority of our excess free cash flow to repay debt,” said Neil Davidson, the company’s chief financial officer following the annual and fourth quarter results. “Since June 30, we have paid down an additional US$45 million on our revolving credit facility placing our leverage at 1.7 times,” added the executive. In the final three months of the financial year Bally announced record quarterly diluted EPS of 95 U.S. cents and record quarterly revenue of US$264 million. “Bally Technologies’ F4Q13 results demonstrate another solid beat, with systems revenue and margins outperforming consensus estimates,” wrote Sterne Agee analyst David Bain. “Systems revenue is now a visible driver to potential FY14 guidance upside, in our view,” he added. Bill Lerner of Union Gaming Group said in a note: “Bally’s systems business continues to grow and provides stable revenue visibility that isn’t found in the competitive set.” He added: “In the longer-term, the marriage with SHFL provides for a host of new complementary opportunities with e-tables, new markets, and other utility products.”

US$252 mln Bally Tech systems revenue in financial 2013

China Star controls casino property Hotel Lan Kwai Fong

August 20, 2013

Macau

Tourism, gaming revenue tops MOP100 bln in Q2 As visitors splurge on food souvenirs, fork out for costlier hotels Vítor Quintã

vitorquinta@macaubusinessdaily.com

ourism and gaming are pumping over 100 billion patacas (US$12.5 billion) into Macau’s economy every quarter this year, twice as much as three years ago, official data show. The Statistics and Census Service estimates that visitors spent 13.9 billion patacas in the city in the second quarter of 2013. This represents “a notable increase” of 22.6 percent year-onyear, the service said yesterday. It was also the fastest growth in fivequarters. Visitor spending does not include gaming expenses. The gaming industry saw its revenue grow much slower, by 15.7 percent to 86.4 billion patacas in the second quarter. All together tourism and gaming injected about 100.4 billion patacas in Macau last quarter, up from 100.1 billion patacas in the previous quarter. Combined revenue has doubled in three years, from just 49.9 billion patacas in the first quarter of 2010.

Even though the amount of money tourists are spending away from the gaming tables represents just 16.1 percent of the casino revenue, it is growing faster. That partly comes from more people staying overnight in Macau. In the first half of this year 48.4 percent of all visitors stayed at least one night in the city, up from 47 percent a year earlier. Overnight visitors left 11.7 billion patacas in the city last quarter, with each one spending an average of 3,396 patacas, up by 17 percent year-on-year. In contrast same-day tourists forked out just 2.2 billion patacas, as their per capita spending rose 3 percent from the same period of 2012 to just 614 patacas. The major difference in spending is the hotel room rates, which reached an average of 1,436 patacas in the first half of 2013, up by 1.4 percent year-on-year, says the Macau Hotel Association. As a result visitors spent

almost a quarter of their money on accommodation, only behind shopping (49 percent of the total). Local food products have become

the most popular shopping target for tourists for the first time since the statistics bureau began collecting data on visitors spending in 2010. About 21 percent of tourists’ shopping budget went to food souvenirs, followed by clothing (19 percent) and jewellery and watches (19 percent). The manufacturing output of Chinese bakery products – among the most popular food souvenirs – has grown by two-thirds in the past four years. Companies are beginning to spot the opportunity, with restaurant operator Future Bright Holdings Ltd paying 4 million patacas for the trademarks of the 85-year-old Macau Yeng Kee Bakery last week.

Food souvenirs have for the first time become the most popular shopping target for tourists

August 20, 2013 April 19, 2013

Macau Court snubs ‘Heart of Cotai’ trademark The Court of Second Instance has again prevented gaming operator Las Vegas Sands Corp from registering a trademark that uses the word ‘Cotai’. In a July 4 judgement but made public only yesterday, the judges said LVS cannot register “At the Heart of Cotai”. The court sided with the objections raised by Cyber One Agents Ltd, the developer of Studio City resort controlled by rival operator Melco Crown Entertainment Ltd. “The average consumer” would not know which company was behind the brand, given there are several gaming operators in Cotai, the judgement stresses.

Govt keeps food bank going with more cash The charity that acts as banker says the poor and elderly really need it Tony Lai

tony.lai@macaubusinessdaily.com

Elderly, education subsidies raised T

he government is going to give more money to elderly residents and schools, from kindergartens to senior secondary, with subsidies rising between 10 percent and 25 percent this year. According to a dispatch from Chief Executive Fernando Chui Sai On published in the Official Gazette yesterday, the annual elderly subsidy will be raised from 6,000 patacas (US$750) to 6,600 patacas.

espite recent economic growth, the poor and elderly still sorely need help from time to time in getting enough food to eat, the Catholic charity Caritas Macau says. The Social Welfare Bureau agrees, and announced over the weekend that it will renew its subsidy for the food bank run by Caritas, which had been due to stop next month. “Half of the food bank users are elderly, while the remainder are lowincome families that do not receive any other public allowance,” said Caritas Macau secretary-general Paul Pun Chi Meng. “Such people have always existed in Macau and they need help regardless of how the Macau economy fares.” Caritas has received 10 million patacas ( US $ 1 . 2 5 m i l l i o n ) i n

government money to run its food bank for two years. The food bank has helped feed over 5,700 people or 3,000 households since September 2011, handing out daily food parcels worth 30 patacas. People aged 65 or more and households with a combined monthly income of no more than one and a half times the official subsistence income are eligible for help. The official subsistence income for a person that lives alone is 3,450 patacas a month. Social Welfare Bureau director Iong Kong Io told reporters that the government would increase its subsidy of 30 patacas per daily food parcel by at least 10 percent to make up for inflation in the past two years. The annual rate of consumer price inflation has been between 4.8

MOP2.3 bln

Government spent in social measures to help the elderly last year The Social Welfare Bureau has previously said it would begin handing out this year’s elderly allowance to residents aged 65 and above by October. The elderly subsidy was first launched in 2005 and it benefited about 308,000 people last year. Last year the government spent about 2.3 billion patacas in social measures to help the elderly. Mr Chui has also raised subsidies to non-tertiary schools by a quarter in the academic year starting next month. The increase is part of 15-year free education programme offered to all residents. Kindergartens will receive 755,000 patacas for each class, up from 605,000 patacas, while allowances for each class in primary schools will increase from 640,000 patacas to 807,000 patacas. Junior secondary schools will receive 1.08 million patacas instead of 820,000 patacas for each class. For senior secondary schools the subsidy jumps from 930,000 patacas to 1.14 million patacas. T.L.

The Caritas food bank has helped feed over 5,700 people

percent and 6.81 percent for the past two years. Mr Pun welcomed the increase in the subsidy. He said it might make it easier for Caritas to do good deals with the food suppliers. “In the past we have had to bargain for a long time,” he said. Mr Pun said more money would allow Caritas to give away more cereals, which the elderly liked but which were more expensive than canned goods. He said his charity had spent the money the government gave it wisely. He said Caritas had spent only 8.5 million patacas of the two-year budget of 10 million patacas for the food bank, thanks to the help of some 200 volunteers. Mr Pun is a candidate in next month’s elections to the Legislative Assembly.

August 20, 2013 April 19, 2013

Macau

Legislation slashes mortgage lending Banks lent more to buy shops and less to buy homes in June Tony Lai

tony.lai@macaubusinessdaily.com

he law on sales of unfinished flats has given mortgage lenders a rollercoaster ride, the amount they lent plunging from its peak in May to the lowest for two years in June. The Monetary Authority of Macau said yesterday that the banks had approved 9.3 million patacas (US$1.2 million) in new lending for unfinished flats in June, 93.6 percent less than a year earlier and the least since the authority began publishing monthly mortgage data in January last year. In May the banks had approved 380.6 million patacas in new lending for unfinished flats. Estate agents had warned that new mortgage lending would plunge in tandem with sales of unfinished flats once the law on such sales came into force. Since June 1 sales of unfinished homes have been allowed only after the foundations of the building that will contain them have been laid and the housing project has been registered. Some estate agents believe the slump in sales of unfinished flats will last until September.

They say that by then property developers will have got round to meeting the legal requirements and will have begun to sell unfinished flats again. In contrast, HKP Estate Agency (Macau) Ltd district sales director Marco Wong Kwok Ki believes the slump will last until early next year. Mortgages for unfinished flats made up 0.3 percent of the 2.97 billion patacas in new lending for homes approved in June, which was about one-quarter of the amount approved a year earlier. Macau residents borrowed 96.5 percent of the money. The banks approved 3.87 billion patacas worth of new mortgages for offices and shops in June, over 76 percent more than a year earlier. In the first half they approved 22.1 billion patacas in new lending for commercial property, almost twice the amount they approved a year earlier. The Monetary Authority said the proportion of mortgage debt that had been unserviced at the end of June was 0.07 percent, the same as at the end of May.

Banks approved 9.3 million patacas in new lending for unfinished flats in June

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August 20, 2013 April 19, 2013

Greater China

Computer error blamed in Everbrigh Brokerage forced to build huge short positions in index futures markets

verbright Securities Co’s woes worsened after erroneous trades that sparked the wildest Chinese stock swings in four years, as the firm was banned from proprietary trading and said it mispriced a bond sale. State-controlled Everbright said yesterday it placed 23.4 billion yuan (US$3.8 billion) of erroneous buy orders on Friday, prompting the three-month ban and an investigation by the China Securities Regulatory Commission. The company gave the wrong price for 10 million yuan of government bonds yesterday, it said on its website. The ban is a further setback to a brokerage already contending with falling profits and a CSRC probe into an initial public offering it worked on, which forced Everbright to delay a US$1.3 billion sale of its own shares. The Shanghai Composite Index jumped from a loss of as much as 1 percent to a gain of 5.6 percent in two minutes on August 16 after the erroneous orders, before erasing the gain. “The consequences for Everbright Securities could be huge,” Song Jian, a Beijing-based analyst at China Minzu Securities Co, said by phone. “This is a serious issue. This may also lead to the cleansing of the internal risk management systems at Chinese brokerages as part of the government’s effort in strengthening risk control.” China’s stock market was roiled on Friday by a 53 percent surge in trading volumes that sent the Shanghai Composite Index to its biggest intraday gain since March 2009. Of the 23.4 billion yuan of buy orders, 7.27 billion yuan were transacted, the company said.

Everbright had a mark-to-market loss of about 194 million yuan based on Friday closing prices, and the final value may change, the company said in a statement to the Shanghai exchange on Sunday. The final trading loss could reach 300 million yuan to 400 million yuan, Citigroup Inc analyst Paddy Ran wrote in a note dated August 16. Everbright will raise money through various channels, including selling assets, to cope with the fund shortfall caused by mistaken trades last week, the company’s board secretary, Mei Jian, told Reuters. Everbright Securities was China’s 12th-largest brokerage by revenue last year, data from the Securities Association of China show. China Everbright Group, the broker’s closely held parent, is led by chairman

This is an extraordinarily big loophole, which doesn’t just show defects in Everbright, but also the A-share market Chen Xingyu, Phillip Securities Group

Regulator slaps brokerage with restrictions

Tang Shuangning and supervised by China’s State Council, with businesses spanning from banking, insurance and asset management to tourism and property development. Set up in 1983, the group had 2.4 trillion yuan of assets and almost 50,000 employees at the end of last

year, according to its website. In yesterday’s incident, Everbright Securities sold 10 million yuan of government bonds at a yield of 4.2 percent, 25 basis points higher than the valuation on the previous trading day, the brokerage said. The company is communicating with its

Beijing bans more NZ dairy products Government withdraws certification for Westland Milk products

ore New Zealand milk products sold to China have been banned after elevated levels of nitrates were found, raising further concerns over quality and testing in the world’s largest dairy exporter in the wake of a contamination scare earlier this month. New Zealand’s agricultural regulator said yesterday it has revoked export certificates for four China-bound consignments of lactoferrin manufactured by Westland Milk Products after higher-than-acceptable nitrate levels were found by tests in China. Two of the four consignments had been shipped to China but had not reached consumers, New Zealand’s Ministry of Primary Industries said. “Any food safety risk to Chinese consumers is negligible because the quantities of lactoferrin used in consumer products was very small, meaning the nitrate levels in those products would easily be within acceptable levels”, Scott Gallacher, the acting director-general of the ministry, said in a statement. “It’s not a food safety issue, it doesn’t present a threat to Chinese consumers,” Prime Minister John Key said at a press briefing in Wellington yesterday. “But it’s certainly unhelpful

exporting lactoferrin to provide nitrate test reports. The General Administration of Quality Supervision, Inspection and Quarantine of China urged the New Zealand government to thoroughly scrutinise its dairy companies as well as their products to ensure the safety of exports to China, New Zealand’s top dairy market.

Affected batches

New Zealand relies on diary products for about a quarter of its annual export earnings

and probably couldn’t have come at a worse time.” The announcement comes just weeks after Westland’s much bigger competitor, Fonterra Cooperative Group Ltd, said some of its dairy ingredients were contaminated with a botulism-causing bacteria. This prompted a recall of infant formula products, sports drinks and other products in China, New Zealand and other Asia-Pacific nations.

“All of the product has been located, none of it has entered the retail food chain,” Westland chief executive Rod Quin told Reuters. “We’re well aware of the wider context of the issue and related concerns, so we’ve acted to make sure the product doesn’t go any further.” China’s top quality watchdog said it had halted all imports of the product from Westland and asked other New Zealand dairy companies

The four consignments were derived from two affected batches of lactoferrin, a naturally occurring protein found in milk, manufactured by Westland at its Hokitika factory on the country’s South Island. Initial investigations pointed to contamination by cleaning products which contain nitrates that were not property flushed from the plant, Mr Quin said. Privately owned Westland makes about 120,000 tonnes of dairy product each year, exporting the majority. Its production pales in comparison with that of Fonterra, which exports 2.5 million tonnes of product. Australia and New Zealand Banking Group Ltd’s agricultural economist Con Williams said that the 390 kg of affected Westland

August 20, 2013 April 19, 2013

Greater China

ht trade

Financial Futures Exchange said in a statement. Everbright Securities shares were suspended in Shanghai trading until today. The stock has dropped 14 percent this year, lagging behind an 8.1 percent decline in the Shanghai Composite.

Not selling

counterparty on the deal, it said. The CSRC didn’t reply to a faxed inquiry about whether it would include the bond transaction in its probe. Everbright Securities has also been barred from creating new stock-index futures positions s ta rt ing yes t er day, th e C h ina

product was much smaller than the 38 tonnes of contaminated product produced by Fonterra. As a result, he expected it would have limited impact on global demand for New Zealand dairy products. “The timing isn’t ideal. There’s heightened concern around food safety issues at the moment especially in the dairy sector in light of the Fonterra issue two weeks ago,” Mr Williams said. “But in terms of the actual issues, it doesn’t seem to be substantial …. It looks like only a very small amount of product was affected and it doesn’t seem to be a food safety issue.” The two batches of lactoferrin showed nitrate levels of 610 and 2,198 parts per million, respectively, above the New Zealand maximum limit of 150 parts per million. Westland exported one batch directly to a Chinese distributor, which sold the product on as an ingredient for other dairy products. The second batch was supplied to New Zealand’s Tatua Co-operative Dairy Co, and also exported to China. “MPI, the Ministry of Foreign Affairs and Trade and the companies concerned are working closely with the Chinese authorities on this issue,” Mr Gallacher said. There was no affected lactoferrin used in products in New Zealand or exported elsewhere. New Zealand relies on diary exports for about a quarter of its NZ$46 billion (US$37 billion) in annual export earnings. Reuters

Everbright Securities apologised and said the incident “brings negative impact to the company’s brand reputation and market image,” according to Sunday’s statement. It said it may face regulatory penalties. Everbright Securities’ proprietary trading revenue rose 77 percent to 165 million yuan last year, according to the broker’s annual report. The company posted net income of 1 billion yuan on revenue of 3.6 billion yuan in 2012. Disruptions in electronic markets have been under scrutiny since a May 2010 incident in which the Dow Jones Industrial Average fell almost 1,000 points in minutes before rebounding. Separately, Knight Capital Group Inc lost more than US$450 million after sending erroneous orders to U.S. exchanges on August 1, 2012, because of a computer malfunction. Knight was later bought by Getco LLC to create KCG Holdings Inc. “I haven’t seen this kind of error in at least the past 10 years,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group, said. “This is an extraordinarily big loophole, which doesn’t just show defects in Everbright, but also the A-share market.” In addition to the buy orders, the brokerage sold 1.85 billion yuan in exchange-traded funds, along with short-selling 7,130 contracts of index futures, according to the statement on the CSRC website. Everbright Securities won’t sell the mistakenly purchased shares immediately, it said yesterday. Bloomberg News/Reuters

Wang Jianlin takes richest person crown W

a n g J i a n l i n, o w n e r o f China’s biggest commercial land developer, is the nation’s wealthiest person, based on regulatory filings that show his non-real estate businesses are more valuable than previously calculated. The chairman of closely held conglomerate Dalian Wanda Group, which became the world’s largest movie theatre chain after acquiring AMC Entertainment Holdings Inc last year for US$2.6 billion, has a net worth of US$14.2 billion, according to the Bloomberg Billionaires Index. He is US$3.2 billion richer than Zong Qinghou, founder of Hangzhou Wahaha Group, China’s No. 3 beverage maker. Mr Zong is the country’s second-wealthiest person. “Wanda leads Chinese enterprises in expanding its business globally and catering to consumers’ demand at home with some high-profile

Technology companies benefiting from government support, analyst says

Bloomberg News

Wang Jianlin

Chinese stocks climb as brokerages fall hina’s stocks rose for the first time in four days as communication shares and rare-earth producers rallied after the government said it will expand the country’s broadband network. ZTE Corp and Yonyou Software Co jumped by the 10 percent daily limit. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co advanced 8 percent. Citic Securities Co and Southwest Securities Co fell at least 1.2 percent after a trading error at Everbright Securities Co. caused the biggest swings in the nation’s shares in four years on August 16. Trading in Everbright Securities was suspended. The Shanghai Composite Index added 0.8 percent to 2,085.60 at the close, erasing an earlier loss of 0.8 percent. Gauges of technology and telecommunication shares have surged more than 40 percent this year, compared with a decline of 8.1 percent by the Shanghai gauge. “Technology companies are benefiting from government efforts to boost the industry,” said Wang Weijun, a strategist at Zheshang

acquisitions,” said Kenny Wu, a Hong Kong-based analyst at Ji-Asia Research Ltd. “Wang’s move to diversify from Chinese real estate seems rewarding.” Mr Wang, whose real estate empire has 148 million square feet under management, plans to increase his property holdings by 68 percent by 2014. He is accelerating acquisitions overseas, including Dalian Wanda’s purchase of Sunseeker International Ltd, a U.K.-based maker of yachts used in the James Bond movies, for US$1.6 billion in June. He said he plans to spend more than US$1 billion to build a luxury residential complex along the banks of London’s Thames river. In two decades, Mr Wang built 72 shopping centres, called “Wanda Plazas,” anchored by his company’s department stores, office buildings and cinemas. “Chinese consumption, particularly high-end consumption is booming,” Mr Wang told reporters in Beijing in June. He plans to have 110 plazas by 2014. The Bloomberg Billionaires Index values closely held companies by comparing some multiples, such as the enterprise value-to-Ebitda or priceto-earnings multiples of similar public companies. When ownership of closely held assets cannot be verified, they aren’t included in the calculations.

Securities Co in Shanghai. “The market is lowering expectations about the development of brokerages’ proprietary trading business.” The CSI 300 Index added 1.2 percent to 2,331.43. The Hang Seng China Enterprises Index slipped 0.2 percent. The Shanghai Composite has tumbled about 40 percent from its August 2009 high, erasing about US$644 billion in market value, as the world’s second-largest economy slowed and local investors emptied more than 2 million equity trading accounts. Only Greece’s ASE Index has fallen more in percentage terms.

Telco spending Gauges of telecommunications and technology shares climbed at least 3.5 percent yesterday. ZTE, China’s second-biggest phone- equipment maker, rose to 16.96 yuan (US$2.77), its highest close since May 2012. Fiberhome Telecommunication Technologies Co added 8.4 percent to 21.18 yuan. Yonyou Software jumped

to 13.89 yuan, taking its 2013 advance to 41 percent. The government will boost spending on fibre optic and wireless networks to ensure half of households have broadband access by 2015 and a third of cellular users have access to third-generation or other fast networks, according to a statement on the government’s website over the weekend. Baotou Rare-Earth, China’s biggest producer of rare earth, surged 8 percent to 30.16 yuan. China Minmetals Rare Earth Co. gained 5.6 percent to 27.13 yuan. “China’s economic situation is ‘good’ and economic growth of 7.5 percent is at a ‘normal level’,’’ People’s Bank of China Governor Zhou Xiaochuan said in an interview with CCTV. Citic Securities, China’s largest broker by market value, fell 1.2 percent to 10.88 yuan. Haitong Securities Co, the second biggest, slumped 2.1 percent to 10.99 yuan. Southwest Securities dropped 3.8 percent to 9.01 yuan. Trading in Everbright Securities shares is suspended until today. China Everbright Ltd, which has a stake in the brokerage, slid 1.6 percent in Hong Kong. The China Securities Regulatory Commission has started an official investigation into Everbright Securities, the watchdog said. The brokerage reported a mark-to-market loss of about 194 million yuan (US$31.7 million) based on Friday closing prices and said the final loss may change. Bloomberg News

10 10

August 20, 2013 April 19, 2013

Asia

Japan trade deficit worsens in July Exports hit three year high on weak yen Leika Kihara

apanese exports rose in July at the fastest annual pace in nearly three years as the benefits of a weak yen finally started to take hold, and brisk sales of cars and electronics to the United States, Asia and Europe showed a recovery in overseas demand. Japan still ran its third-biggest trade deficit on record at 1.02 trillion yen (US$10.5 billion) in July, as the weak yen and rising oil prices made energy imports ever more expensive, which may drag on corporate profits ahead. Analysts expect the world’s third-largest economy to head for a steady recovery, although some warn of risks such as the continued slowdown in China, Japan’s biggest trading partner. “As a trend, exports are recovering and will keep growing because the positive effect of the weak yen will strengthen in coming months,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo. “Hopefully that will offset risks, notably the possibility that China’s economic recovery will remain weak.” The 12.2 percent rise in exports in the year to July was less than a median estimate for a 13.1 percent increase but was the biggest gain since December 2010, data released yesterday by the Ministry of Finance showed. Exports to the United States, Asia and Europe all accelerated. Export volume also rose for the first time in over a year, offering more evidence that overseas demand could strengthen further. “We expect exports to continue to recover,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset

Exports jumped by the most since 2010

Management in Tokyo. “The details are encouraging because you can see that exports to Japan’s main markets are bouncing back.” A depreciation of around 20 percent in the yen since November, when markets began expecting the aggressive easing in monetary policy undertaken by the Bank of Japan in April, has boosted the competitiveness of the exportdriven economy. Japanese auto giant Toyota Motor Corp was among those that benefited

from a weak yen and a pickup in overseas demand, posting a nearrecord quarterly profit and raising its earnings profit for the year to March 2014.

Outlook murky Japan’s economy expanded for three straight quarters in April-June as Prime Minister Shinzo Abe’s reflationary policies brightened sentiment and bolstered personal consumption.

But growth slowed in the second quarter on an unexpected fall in capital expenditure, casting doubt on whether the economy can withstand the pain from a planned sales tax hike next April. Policymakers see export growth as key in gauging the economic outlook and hope that global growth will accelerate enough to make up for the expected downturn in personal spending after the tax hike. For now, the signs are positive. Exports to the United States, which

Thailand cuts growth outlook Domestic demand moderates, exports soft Suttinee Yuvejwattana

hailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis, with rising household debt limiting central bank scope to support the economy. Gross domestic product unexpectedly shrank 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic and Social Development Board said in Bangkok yesterday. Only one of 11 analysts surveyed by Bloomberg had predicted a decline. The economy rose a lessthan-estimated 2.8 percent from a year earlier. Thai policy makers are struggling to sustain growth as government spending plans are delayed, while a slowdown in China curbs demand for exports from Southeast Asian nations. The Bank of Thailand will hold the policy interest rate at 2.5 percent at its August 21 meeting, a Bloomberg survey showed,

after Assistant Governor Paiboon Kittisrikangwan said last month that household debt at 80 percent of GDP limits the scope for further easing. “Exports have remained weak, while domestic demand is also weakening, and the infrastructure spending plan is also delayed,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “The outlook for the economy is more severe now,” he said, adding that he expects the central bank will keep borrowing costs on hold this week. The state agency cut its full-year expansion forecast to 3.8 percent to 4.3 percent from 4.2 percent to 5.2 percent. It lowered its export growth target to 5 percent from 7.6 percent.

Delayed spending The Thai central bank cut its 2013 GDP growth forecast to 4.2 percent from 5.1 percent on July 19, citing weakening exports. Shipments grew

0.95 percent in the first six months. The monetary authority lowered borrowing costs by 25 basis points in May. Singapore last week cut its forecast for exports this year, while Indonesia this month reported secondquarter GDP growth of less than 6 percent for the first time since 2010. Thai consumer confidence fell to the lowest in seven months in July on rising political unrest and the weakening economic outlook. Prime Minister Yingluck Shinawatra imposed the Internal Security Act for eight days this month to contain protests as the parliament debated an amnesty bill for political protesters. The administration has tried to speed up its budget disbursements as 2 trillion baht (US$64 billion) allocated for infrastructure spending and 350 billion baht for watermanagement projects have been put on hold. Toyota Motor Corp said last month industrywide car sales in Thailand will fall 9.5 percent this year. Total

Consumption grew 2.4 percent last quarter

bank loans grew 12.8 percent in the second quarter, compared with 13.2 percent in the previous three months, data showed earlier. Private consumption grew 2.4 percent in the second quarter, slowing from a 4.4 percent pace in the earlier period, today’s data showed. Government consumption increased 5.8 percent from 4.4 percent in the previous three months. “We still have a chance to grow at the high end of the range if we can speed up budget disbursements and try to boost exports,” Arkhom Termpittayapaisith, secretarygeneral of the state planning agency, told a news conference yesterday.

11 11

August 20, 2013 April 19, 2013

Asia bought the most Japanese goods in July, rose 18.4 percent, faster than in June and marking the seventh straight month of gains. Exports to China grew 9.5 percent year on year in July, more than a 4.7 percent annual increase in June. Rising costs of energy and raw material imports, however, may weigh on corporate profits. Almost all of Japan’s nuclear reactors have remained idle since the Fukushima disaster in March 2011, putting extra pressure on the energy import bill. Imports rose 19.6 percent in July, the biggest gain in three years and more than the median estimate for a 15.4 percent increase, due to a jump in the cost of imports for crude oil and liquified natural gas, the ministry data showed. As a result, the trade deficit shot up to 1.02 trillion yen, well above the median estimate for a 785.6 billion yen deficit, and exceeding 1 trillion yen for the first time since January. “This is a pretty big deficit and a negative for Japanese companies that will suffer from rising costs,” said Mr Shinke of Dai-ichi Life Research. “Japan probably won’t see a trade surplus until well into the business year starting in April 2015,” he added.

Singapore’s Lee vows shift in strategy City-state unveils master plan for port, airport, waterfront

This is how we can stay the hub in Southeast Asia and create many more opportunities for Singaporeans Lee Hsien Loong, Singapore’s Prime Minister

Reuters

KEY POINTS July exports climb 12.2 pct Imports rise by most in 3-yrs on high oil prices Export volume rises in sign of recovery Japan logs third largest trade deficit on record

“Economic growth in the second half will rely more on private investment and tourism, as growth in exports and household spending are still limited. Still, those factors are sensitive to the political situation, making it a key risk for economic growth,” he added. While the delayed public spending and last year’s high base following the slowdown after the 2011 floods are a challenge, lower inflationary pressure “allows monetary policy to be accommodative,” Mr Arkhom said. Consumer prices rose 2 percent in July from a year earlier, compared to 2.25 percent in June. Bloomberg News

he Singapore government unveiled a master plan to double capacity at Southeast Asia’s busiest airport, build a new waterfront city, move its massive port and relocate a military airbase to free up land for development. The plan announced by Prime Minister Lee Hsien Loong follows mounting discontent in one of the world’s wealthiest nations over an influx of foreign workers and expatriates blamed for a range of problems – from strained infrastructure to among the highest living costs in Asia. In an annual National Day address, Mr Lee sought to allay those fears, elaborating on a trove of longterm plans that appear intended to counter a growing voter backlash against the People’s Action Party (PAP) that has ruled Singapore for more than half a century. These include changes to

Singapore’s health-care and education systems, and the move of its port – the world’s second-busiest hub for container shipping – to a new location in Tuas in western Singapore from 2027. That would free up land in Tanjong Pagar, next to the central business district, for a sprawling new waterfront city, Mr Lee said. He also unveiled plans for a fourth runway at Changi Airport, Southeast Asia’s busiest. This will allow the government to move a military airbase in central Singapore to Changi after 2030 and free up 800 hectares (1,980 acres) of land for homes, factories and businesses. “This is how we can stay the hub in Southeast Asia and create many more opportunities for Singaporeans,” he said, citing competition from Kuala Lumpur and Bangkok. Mr Lee spent the bulk of his three-hour speech addressing concerns about housing, schools and

Indonesia rupiah, stocks plunge I

ndonesia’s rupiah fell to a four-year low, stocks dropped by the most in 22 months and government bonds plunged after the nation’s current-account deficit widened to a record last quarter. The yield on 10-year notes surged to the highest since March 2011 after Bank Indonesia said late on Friday that the current-account shortfall was US$9.8 billion, the largest in data compiled by Bloomberg going back to 1989. The Jakarta Composite Index of shares has fallen 7 percent in two days after overseas investors pulled US$132 million from local equities last week, exchange data show. Inflation quickened to a four-year high and economic growth slowed to

the least since 2010, figures showed last week. “Indonesia has seen a gradual but persistent bout of bad news, with slowing growth, quickening inflation and then the current-account deficit,” said Leo Rinaldy, a Jakarta-based economist at PT Mandiri Sekuritas, a unit of the nation’s largest lender. “The implication going forward is that demand for dollars will increase.” “This is all because of the

healthcare – hot-button issues that contributed to the PAP’s worst-ever result in 2011 general elections. He said prices would not be cut for new Housing and Development Board (HDB) apartments – subsidised homes where the bulk of the population live. But more grants would be provided to help lower- and middle-income Singaporeans buy new homes. “I will make sure that every Singaporean who is working can afford an HDB flat,” Mr Lee said. The prime minister also said a state-administered health insurance plan, offered by local insurers Great Eastern Holdings Ltd and NTUC Income, will be extended to cover people as long as they live, up from the current cap of 90 years. People will have to pay higher premiums, but the government will assist those who would have difficulty such as the elderly. Reuters

current-account deficit data,” John Rachmat, head of equities research and strategy at Mandiri Sekuritas in Jakarta. “Once the rupiah is considered cheap, capital inflows could start coming back. Right now foreign investors, especially portfolio investors, are worried about investing in Indonesia.” The current account has remained in deficit for seven quarters and overseas sales decreased for a 15th month in June, driven by declines in prices for Indonesia’s key commodity exports. Coal fell 32 percent since the end of 2011, while palm oil slid 26 percent. “The market took the view that Bank Indonesia wasn’t that concerned about the weakness of the currency,” Robert Prior- Wandesforde, an economist at Credit Suisse Group AG in Singapore, wrote in a research note yesterday, referring to the central bank’s decision to leave borrowing costs unchanged. “The good news is that we suspect the second-quarter current-account deficit represents the peak, albeit because deteriorating domestic demand depresses imports further.” Bloomberg News

12 12

August 20, 2013 April 19, 2013

Asia

Indian markets plunge pressures Singh Government measures disappoint market as economy struggles Kartik Goyal and Jeanette Rodrigues

ndia’s biggest stock market slide in almost two years, surging bond yields and an unprecedented plunge in the rupee are pressuring officials for fresh steps to stem capital outflows and revive a struggling economy. The S&P BSE Sensex Index yesterday extended the 4 percent loss from Friday, while the rupee touched an all-time low of 62.46 per dollar. The yield on the government bond due May 2023 rose 8 basis points to 8.98 percent, the highest on a 10-year note since 2008. The market rout underscores the failure of months of measures to contain outflows, from higher interest rates to gold import curbs. Foreigners sold a net US$3 billion of Indian stocks and bonds in July as the slowest growth in a decade made Asia’s third-largest economy vulnerable to a pull-out of funds from emerging markets, spurred by speculation the U.S. Federal Reserve will cool stimulus. “The market is questioning the effectiveness of policymakers’ moves and the options available to them,” said Priyanka Kishore, a strategist at Standard Chartered Plc in London. “Earlier, the government said it had a grand plan. This is what the market expected, but the final measures disappointed.” The currency has weakened about 26 percent versus the dollar in the past two years. The tumble has brought back memories of the early 1990s crisis, when the government received an International Monetary Fund loan as foreign reserves waned.

US$3 bln

Foreigners sold of Indian stocks and bonds in July

March. The Reserve Bank of India estimates the sustainable level is 2.5 percent of GDP. “Slow growth, high inflation, a high fiscal deficit and high currentaccount deficit all point to the inescapable conclusion that India’s problems are deep and structural,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd in Mumbai.

Staunch outflows

KEY POINTS Officials under pressure to revive economy Govt reforming to restrain budget deficit Market rout underscores failure of measures India’s problems ‘deep and structural’ – analyst

India won’t face a repeat of that situation as it has enough reserves for about seven months of imports, compared with 15 days back then, Prime Minister Manmohan Singh said last week. “Our primary concern is that the policy authorities still don’t ‘get it’ – thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions,” Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore, wrote in a note. “If this remains the case, then a swift move to 65 against the U.S. dollar is probable, which in turn should help focus minds.” The current-account gap widened to 4.8 percent of gross domestic product in the 12 months ended

While other developing nations are also striving to staunch outflows, the rupee’s 12 percent fall in the past three months is the worst after the 15 percent decline in Brazil’s real in a basket of 24 emerging markets tracked by Bloomberg. The Reserve Bank of India since mid-July has raised the marginal standing facility and bank rates, capped cash injections into the banking system and tightened lenders’ daily reserve requirements to curb the supply of rupees, seeking to shore up the currency’s value. The government has also raised taxes on gold imports to try and narrow the trade imbalance. It plans to allow some state companies to issue quasi-sovereign bonds to garner inflows to help finance the currentaccount gap. The monetary authority targeted outflows on August 14, cutting the amount Indian companies can invest abroad without approval to 100 percent of their net worth from 400 percent, and saying residents can remit US$75,000 each financial year compared with a previous limit of US$200,000. Finance Minister Palaniappan Chidambaram said last week curbs on gold and silver imports and plans to compress inward shipments of non-essential items will trim the current-account gap to US$70 billion, or 3.7 percent of GDP, this fiscal year. India will “remain exposed to funding risks” if the current-account deficit exceeds 2.5 percent of GDP

and consumer-price inflation stays above 7 percent, according to Chetan Ahya, a Morgan Stanley economist in Hong Kong. Global funds have cut holdings of rupee debt by about US$10 billion since May 22, when U.S. Fed chairman Ben S. Bernanke said US$85 billion a month of debt purchases could be reduced if America’s jobs market shows sustained improvement. India’s economy may expand 5.5 percent in the year through March 2014, compared with 5 percent in the previous 12-month period, the central bank estimates. That lags behind the 10-year average of about 8 percent as well as the performance of neighbors from Indonesia to the Philippines.

Repair image Mr Singh said in a speech on August 15 marking India’s Independence Day that slow growth won’t last long. Work on ports, airports, industrial corridors and rail projects will start in coming months, he said. The premier is seeking to repair the image of his government and the ruling Congress party before elections due by May. Graft scandals, clashes with coalition partners and the risk of a credit-rating downgrade have hurt his administration. The government began reforms in September 2012 to restrain the budget deficit and ease restrictions on foreign investment in industries from aviation to retailing. Etihad Airways PJSC agreed in April to buy a 24 percent stake in Mumbai-based Jet Airways (India) Ltd for 20.6 billion rupees (US$334 million), taking advantage of the changes. AirAsia Bhd in March won approval to form a venture with Mumbai-based Tata Group to set up a local low-fare airline. The latest Indian data show conditions akin to stagflation persist. Industrial production fell 2.2 percent in June from a year earlier. Consumer

prices rose 9.64 percent year-on-year in July, the second fastest in the Group of 20 major economies. The figures underscore India’s need to address structural issues such as “infrastructure bottlenecks, policy uncertainly and governance,” said Rupa Rege Nitsure, an economist at Bank of Baroda in Mumbai. Bloomberg News

Earlier, the government said it had a grand plan. This is what the market expected, but the final measures disappointed Priyanka Kishore, Standard Chartered •

Our primary concern is that the policy authorities still don’t ‘get it’ – thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions Robert Prior-Wandesforde, Credit Suisse Group

13 13

August 20, 2013 April 19, 2013

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

Max 44.1

average 43.931

Max 44.4

Min 43.2

average 44.243

69.6

43.9

69.3

43.6

69.0

43.3

68.7

Max 69.6

average 69.231

68.4

Max 22.9

average 22.720

Min 22.6

Last 22.7

PRICE

21.70

44.3

19.85

21.65

44.2

19.80

21.60

44.1

19.75

21.55

Max 19.82

average 19.795

DAY %

YTD %

(H) 52W

Min 19.78

Last 19.78

(L) 52W

WTI CRUDE FUTURE Sep13

107.33

-0.120975247

14.52198037

108.9300003

86.23999786

BRENT CRUDE FUTR Oct13

110.58

0.163043478

4.587155963

113.6100006

96.37999725

GASOLINE RBOB FUT Sep13

297.89

0.384161752

8.802366777

309.1700077

260.2499962

GAS OIL FUT (ICE) Oct13

943

0.07959671

4.055172414

975.75

835.5

3.441

2.167458432

-4.363535297

4.517000198

3.128999949

309.12

0.262722584

3.263738099

319.1699982

275.5500078

Gold Spot $/Oz

1373.48

-0.2245

-17.4819

1796.08

1180.57

Silver Spot $/Oz

23.2335

-0.0925

-22.8379

35.365

18.2208

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13

Platinum Spot $/Oz

1515.8

-0.6033

-0.1285

1742.8

1294.18

Palladium Spot $/Oz

758.35

-0.6094

8.3884

786.5

587.4

LME ALUMINUM 3MO ($)

1945

1.939203354

-6.174626146

2200.199951

1758

LME COPPER 3MO ($)

7400

1.245040361

-6.695246501

8422

6602

LME ZINC

2006

2.373054351

-3.557692308

2230

1779

15000

1.867572156

-12.07502931

18920

13205

3MO ($)

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

19.70

Max 21.7

average 21.614

Min 21.5

Last 21.65

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

DAY %

YTD %

(H) 52W

(L) 52W

0.9206 1.5641 0.9272 1.3327 97.62 7.9867 7.7544 6.1227 62.65 31.36 1.2738 29.976 43.78 10600 89.866 1.23575 0.85213 8.1593 10.6433 130.1 1.03

0.2286 0.0768 -0.0755 -0.015 -0.0922 0.0013 -0.0039 -0.1372 -1.5063 -0.287 -0.2748 -0.1835 -0.3426 -1.6038 -0.3205 -0.068 0.0821 -0.0453 0.0761 -0.0769 0

-11.2931 -3.3074 -1.2726 1.0387 -11.8009 -0.0438 -0.049 1.7623 -12.2187 -2.4872 -4.1137 -3.1459 -6.3385 -7.6132 -0.5998 -2.2877 -4.308 0.7133 -1.0608 -12.7056 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3627 62.78 31.62 1.286 30.228 44.181 10608 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2295 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78332 7.8281 9.8242 97.74 1.0289

15.64

0.514138817

1.525478741

16.47500038

14.60000038

2.211434736

-21.00875365

665

445.75

WHEAT FUTURE(CBT) Dec13

651.5

1.243201243

-20.62138288

913

635.5

SOYBEAN FUTURE Nov13

1279.5

1.60810006

-1.784686241

1409.75

1162.5

COFFEE 'C' FUTURE Dec13

122.7

-0.768297614

-21.57238734

200

118.1499939

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

15.92999935

ARISTOCRAT LEISU

4.32

0.2320186

37.14285

4.63

2.49

698776

74.34999847

CROWN LTD

13.9

2.205882

30.27179

14.03

8.86

1110220

Dec13

SUGAR #11 (WORLD) Oct13

16.78

COTTON NO.2 FUTR Dec13

-0.944510035

93.11

-0.225032147

-16.35094716

21.82999992

18.2499365

93.72000122

World Stock Markets - Indices NAME

21.50

PRICE

473.75

CORN FUTURE

22.6

Currency Exchange Rates

NAME

METALS

Last 69.15

19.90

Commodities ENERGY

Min 68.5

22.7

44.4

44.0

Last 44.05

22.9

22.8

43.0

Last 44

Min 44.05

44.2

Macau Related Stocks

AMAX HOLDINGS LT

1.16

-17.14286

1.72

0.75

767350

BOC HONG KONG HO

24.85

-0.4008016

3.112032

22.85

5237972

CENTURY LEGEND

0.355

33.96227

0.42

0.22

6.4

6.844745

6.74

3.08

CHINA OVERSEAS

24.15

-2.226721

4.545453

25.6

17.28

13040781

CHINESE ESTATES

15.84

-3.059976

40.85574

16.98

7.996

130000

CHOW TAI FOOK JE

10.08

-0.9823183

-18.97106

13.4

7.44

1207400 400000

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15081.47

-0.2032796

15.08935

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3602.778

-0.09259267

19.3165

3694.188

2810.8

FTSE 100 INDEX

6474.8

-0.3875391

9.783118

6875.62

5605.589844

DAX INDEX

8331.52

-0.7199765

9.446828

8557.86

6871

NIKKEI 225

13758.13

0.7913489

32.35105

15942.6

8488.14

HANG SENG INDEX

22463.7

-0.2402987

-0.852811

23944.74

19076.78906

CSI 300 INDEX

2331.43

1.184214

-7.591186

2791.303

2023.171

TAIWAN TAIEX INDEX

7900.21

-0.3128076

2.606792

8439.15

7050.05

VOLUME CRNCY

EMPEROR ENTERTAI

2.7

-1.098901

42.85714

3.07

1.35

2.27

1.793722

87.28969

2.76

1.053

618000

0.2277904

44.97529

44.95

20.45

5395491

HANG SENG BK

123.7

-1.198083

4.212303

132.8

109

1043945

HOPEWELL HLDGS

25.15

-0.984252

-24.3609

35.3

23.146

1369178

HSBC HLDGS PLC

85.9

-0.2901915

5.658053

90.7

65.85

5541047

HUTCHISON TELE H

3.6

-0.2770083

1.123597

4.66

2.98

5631000

LUK FOOK HLDGS I

24.7

1.646091

1.22951

30.05

16.88

2052000

MELCO INTL DEVEL

16.88

-0.7058824

87.34739

18.18

5.91

721000

22.7

0.4424779

70.95589

23.65

11.346

1778411

FUTURE BRIGHT GALAXY ENTERTAIN

MGM CHINA HOLDIN

KOSPI INDEX

1917.64

-0.1286385

-3.976367

2042.48

1770.53

MIDLAND HOLDINGS

3.26

-0.9118541

-11.89189

2.68

1036000

S&P/ASX 200 INDEX

5112.531

-0.0259882

9.971725

5249.6

4261.2

NEPTUNE GROUP

0.173

-1.142857

13.81579

0.23

0.131

12040000

4323.215

-5.372239

0.1512232

5251.296

3978.078

NEW WORLD DEV

11.52

-4.159737

15.12

9.38

7052438

FTSE Bursa Malaysia KLCI

1779.61

-0.4825974

5.367834

1826.22

1590.67

SANDS CHINA LTD

44.05

-1.122334

29.74963

45.5

26.05

12090985

SHUN HO RESOURCE

1.55

4.72973

10.71429

1.67

1.06

28000

NZX ALL INDEX

959.803

-0.1846962

8.814664

998.487

799.651

SHUN TAK HOLDING

3.83

-8.591887

4.65

2.76

1428640

PHILIPPINES ALL SHARE IX

3974.93

-0.6036403

7.460164

4571.4

3411.69

SJM HOLDINGS LTD

19.78

-1.001001

11.45133

22.382

15.401

3289000

SMARTONE TELECOM

11.14

-0.1792115

-20.88068

17.36

10.92

659570

WYNN MACAU LTD

21.65

-0.6880734

3.341285

26.5

16.92

1950673

JAKARTA COMPOSITE INDEX

HSBC Dragon 300 Index Singapor

607.9

-0.4

-2.12

STOCK EXCH OF THAI INDEX

1412.52

-2.299137

1.479239

1649.77

1207.53

HO CHI MINH STOCK INDEX

511.02

0.6360897

23.51533

533.15

372.39

Laos Composite Index

1370.44

0.2230527

12.81476

1455.82

1003.17

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

ASIA ENTERTAINME

3.99

1.785714

41.75664

4.7647

2.4835

54146

BALLY TECHNOLOGI

70.51

-3.661702

57.70521

75.61

43.16

1344074 11050

BOC HONG KONG HO

3.21

4.560263

3.6

2.99

GALAXY ENTERTAIN

5.613

1.135135

41.38539

5.77

2.735

22724

INTL GAME TECH

18.67

-0.744285

31.75723

20.25

11.56

1151123

JONES LANG LASAL

84.3

-0.5778983

0.4288748

101.46

70.02

496539

LAS VEGAS SANDS

56.31

-0.5826271

21.98874

60.54

37.8353

2619209 1845422

MELCO CROWN-ADR

26.8

1.017716

59.14489

11.452

MGM CHINA HOLDIN

2.92

66.82937

2.98

1.5327

1000

MGM RESORTS INTE

17.19

0.2917153

47.68041

17.67

9.15

6122181

SHFL ENTERTAINME

22.73

-0.1318102

56.75862

23.08

12.35

1024207

SJM HOLDINGS LTD

2.55

-0.7782101

11.95917

2.9481

1.9818

1500

138.568

-0.3681334

23.18251

144.99

93.1279

845962

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME AIA GROUP LTD

PRICE

DAY %

VOLUME

NAME

35.55

-1.931034

18667374

ALUMINUM CORP-H

2.69

-0.3703704

6055180

BANK OF CHINA-H

3.38

0.5952381

199749725

BANK OF COMMUN-H

5.42

-0.5504587

17207413

BANK EAST ASIA

31.25

-0.6990785

1271230

COSCO PAC LTD

BELLE INTERNATIO

11.78

-0.3384095

4761556

BOC HONG KONG HO

24.85

-0.4008016

CATHAY PAC AIR

14.28

0.2808989

CHEUNG KONG

114

-1.041667

2507453

CHINA COAL ENE-H

4.89

0.204918

33396644

CHINA CONST BA-H

5.95

123087313

0.1001001

23108071

23.9

-0.4166667

1270154

CHINA LIFE INS-H CHINA MERCHANT CHINA MOBILE

CHINA UNICOM HON CITIC PACIFIC CLP HLDGS LTD

VOLUME

NAME

PRICE

DAY %

VOLUME

12.16

0.4958678

15978503

9.33

1.413043

9410343

POWER ASSETS HOL

71.15

0.3526093

1769899

SANDS CHINA LTD

44.05

-1.122334

12090985

SINO LAND CO SUN HUNG KAI PRO

11.02

-1.25448

4185112

103.9

-0.8587786

92.1

-0.9677419

2501280 1358542

63.9

-0.6993007

1677427

2.02977

101373147

11.3

2744000

SWIRE PACIFIC-A

ESPRIT HLDGS

13.08

-0.304878

2610932

TENCENT HOLDINGS

370.2

0.9819967

2192509

5237972

HANG LUNG PROPER

25.45

-1.356589

3360809

TINGYI HLDG CO

19.48

-0.7135576

1173059

1645714

HANG SENG BK

123.7

-1.198083

1043945

WANT WANT CHINA

10.9

1.489758

7658321

HENDERSON LAND D

48.15

-1.027749

1840216

WHARF HLDG

68.65

-0.9379509

3715700

86.8

-0.7432819

899322

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

83.9

0.2389486

11497335

HUTCHISON WHAMPO

-2.226721

13040781

IND & COMM BK-H

5.91

0.681431

107488306

CHINA RES ENTERP

23.95

-0.4158004

2951313

MTR CORP

CHINA RES LAND

22.85

-0.867679

3033600

NEW WORLD DEV

CHINA RES POWER

17.54

-6.203209

22050100

PETROCHINA CO-H

CHINA SHENHUA-H

24.85

14054813

PING AN INSURA-H

CHINA PETROLEU-H

DAY %

15.08

CNOOC LTD

24.15

CHINA OVERSEAS

PRICE

LI & FUNG LTD

20.2

0.248139

3754695

125.7

-0.3961965

1998459

85.9

-0.2901915

5541047

92.65

1.035987

5294727

5.3

-0.1883239

129362050

11.86

-0.1683502

30254993

29.2

-0.8488964

11.52

8.94

-1.106195

70105006

54.6

-0.5464481

7840147

MOVERS

4 22690

INDEX 22463.7 HIGH

22686.39

1820656

LOW

22326.16

7052438

52W (H) 23944.74 (L) 19076.78906

22320

15-August

19-August

14 14

August 20, 2013 April 19, 2013

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15 15

August 20, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Debt of one quadrillion yen? Not a problem

Thanh Nien Daily Vietnam’s government should accept losses if it wants stateowned enterprises (SOEs) to successfully withdraw their investments from non-core sectors amid the economic slowdown, economists say. It will be very difficult for SOEs to complete their non-core divestment if the government insists on asking them to do it but without making losses on the sale, economist Nguyen Tri Hieu said. “We should see this as the cost of restructuring of SOEs. The issue is how much loss is acceptable,” he said.

Inquirer Business The Philippine government may lose the “investment grade” rating it worked so hard to achieve if a debt default by one of the country’s handful of major conglomerates should erode investor confidence. Standard & Poor’s (S&P) said that while the Philippines remained one of the strongest markets in the region, the structure of the country’s economy – being dependent on familyowned conglomerates – was a source of vulnerability. “We may… lower the ratings if problems at one of the large conglomerates impair investor confidence,” S&P said.

Wall Street Journal Japan’s three biggest brokerages may be fierce rivals in business, but they all agree on one thing: Japan should go ahead with a hotly contested sales-tax hike. Economists at the three houses don’t see any reason to turn back. “The environment is ready for the sales tax hike,” said Mitsumaru Kumagai, chief economist at Daiwa Research Institute. All three houses stressed the downside of calling off the tax would undermine foreign investors’ confidence in Japan’s shaky finances, possibly leading to a sell-off of both Japanese government bonds and stocks.

William Pesek

Bloomberg View columnist

aruhiko Kuroda doesn’t wear a wizard’s hat when he arrives at Bank of Japan headquarters each morning. Once inside, I do wonder if he dons a cloak, waves a magic wand and concocts mysterious potions. Kuroda has done something truly supernatural in his five months as governor of the central bank. The more yen he conjures up to produce inflation, the more he mesmerises markets. Investors are more bewitched by Kuroda than they are by the number 1,000,000,000,000,000. The 15 zeros now needed to express Japan’s national debt almost have a dark-arts quality all their own. Yet a week after Japan’s IOUs reached the 1 quadrillion yen (US$10.28 trillion) mark, yields have actually declined. What is Kuroda’s secret? Ben Bernanke at the U.S. Federal Reserve would love to know as he fends off bond vigilantes, that mysterious cast of characters who protest fiscal or monetary policies they deem dangerous. Kuroda is winning bondland’s full obedience with two forms of trickery. The first is what economists call “financial repression” – essentially transferring money via monetary policy from citizens to the government. The second is outright monetisation of public debt. Of course, Kuroda can’t admit he’s engaging in either practice.

Straits Times Singapore will move decisively to shield citizens from the harsh effects of global change, an ageing society and rising inequality, with a new approach to government policy. Prime Minister Lee Hsien Loong delivered his 10th National Day Rally (NDR) speech on Sunday and announced key changes in housing, health care and education. Mr Lee said the government will extend help to middle-income households to buy Housing Board flats and widen safety nets to everyone to deal with health-care costs. Haruhiko Kuroda

The first would anger Japan’s 126 million people; the second might have hedge funds the world over shorting Japanese government bonds and creditrating companies pouncing. So far, Kuroda is getting away with it. The longer he does, the better the chances Prime Minister Shinzo Abe can pull off his own miraculous feat of deregulating the economy.

Suspending disbelief It all depends on how long investors are willing to suspend their disbelief over the facts in Japan: an impossibly large debt load, an ageing population and

Should the bond vigilantes get a peek behind the curtain at what the wizard of Tokyo is really up to and panic, then Japan will face devastating problems

a propensity for political paralysis. Were that moment of clarity to arrive, the global economy would be shaken by the worst debt crisis in history. Forget Greece – Japan’s debt burden is larger than that of Germany, France and the U.K. combined. The entire world has a vested interest in Kuroda keeping the magic alive. Last month, Deputy Economy Minister Yasutoshi Nishimura admitted something quite profound: “This is the last chance for Japan’s economy.” Many worry Kuroda is hastening what they see as Tokyo’s demise. Hedge-fund manager J. Kyle Bass, whose Hayman Capital Management LP has been predicting a Japanese collapse since 2010, is now surer than ever in his bet. The usual argument against a crash is that well over 90 percent of government debt is held domestically, eliminating capital-flight risks. But that doesn’t explain how Kuroda has so masterfully silenced the vigilantes. Remember the violent yield swings of May and June? Tenyear yields now sit docile at 0.74 percent. That compares with 2.76 percent in the U.S., which prints the world’s reserve currency, holds a higher credit rating and boasts a growing population. Sure, Kuroda crushed the sceptics with overwhelming monetary force. But the powers of financial repression deserve far more credit. The yield volatility that accompanied the first

wave of Kuroda’s doubling of the monetary base in April shook Japan Inc to its core. Government bonds are the main financial asset held by banks, companies, pension funds, universities, endowments, insurance companies, governmentrun institutions, the postal-savings system and individuals. Rather than reduce their debt exposure, the Japanese doubled down. Kuroda didn’t exactly tell them to do so – it was more a matter of spin, with no direct BOJ fingerprints. Bondholders got the message that it would be in everyone’s best interest to keep a lid on debt yields. What some might label a pyramid scheme, Japanese view as financial security. This dynamic is accelerating a huge redistribution of wealth within society from creditors (the people) to debtors (Japan’s Ministry of Finance). That’s pushing inflationadjusted interest rates even further into negative territory and giving the government cheaper financing.

Japan’s ATM Monetisation is clearly part of the mix. Again, Kuroda can’t admit to being the Ministry of Finance’s ATM. But the BOJ is buying up everbigger portions (more than 70 percent, in many cases) of government debt at auction. What the BOJ does with much of that debt might never be known. Kuroda admits that he’s learned from Korekiyo Takahashi, the 1930s finance minister whose unorthodox policies earned him a reputation as Japan’s answer to John Maynard Keynes. In June, Abe said Takahashi’s exploits “emboldened” him to get radical. Monetising debt is the worst scenario economists like Milton Friedman could imagine. But then, who really thinks an ageing nation carrying a debt approaching 250 percent of gross domestic product can ever repay it? Who actually thinks doubling the consumption tax to 10 percent will slay this beast? That’s why Kuroda’s end goal may justify the means. Things could still go terribly wrong. If Abe’s big talk of structural reform isn’t met with action, then Kuroda is creating the biggest bubble in history. Should the bond vigilantes get a peek behind the curtain at what the wizard of Tokyo is really up to and panic, then Japan will face devastating problems. For now, though, Kuroda’s magic tricks are working, and they’re a wonder to behold. Bloomberg View

August 20, 2013

Closing France new tax could fund airport rail link Yancoal Australia takes hit on coal price fall France may impose a new tax on airline tickets to fund a planned rail link between Paris and the capital’s Charles de Gaulle airport, the transport ministry said yesterday. The government will finalise plans “in the coming weeks” for funding the planned CGD Express line, a ministry official told AFP. “Such a tax would not be out of the question,” Transport Minister Frederic Cuvillier told newspaper Le Figaro, which said the tax could raise up to 400 million euros (US$535 million) for the project. The rail link, which has been in the planning stages for years, is expected to cost about 1.7 billion euros.

The Chinese parent of Yancoal Australia Ltd made a US$343 million provision for losses after warning it expected coal markets to remain weak as its subsidiary slid into the red due to plunging coal prices. In a Hong Kong stock exchange filing yesterday, Yancoal Australia’s Chinese parent, Yanzhou Coal Mining Co Ltd, said falling coal prices made it necessary to take a 2.1 billion yuan (US$343.4 million) provision for impairment of assets, given a decline in the book value of its Moolarben and Gloucester coal mines. Yancoal reported a net loss of A$749 million (US$689 million) for the six months to June.

ECB guidance doesn’t rule out rate increase, Bundesbank says

Indonesia regulator suspends energy tenders

The European Central Bank could raise rates if inflation pressure increases, even as the central bank pledges to keep borrowing costs low, the Bundesbank said. The ECB’s commitment “is not an imperative statement, and it doesn’t represent a change” in the monetary policy stance, the German central bank said yesterday in its monthly report. “Forward guidance doesn’t rule out an increase in the benchmark rate if greater inflation pressure emerges.” ECB President Mario Draghi said in July for the first time that the ECB will keep interest rates at current levels or lower for an extended period of time. He reiterated his statement this month, trying to assure investors that the Frankfurtbased central bank won’t tighten policy too soon after it cut its benchmark rate to a record low of 0.5 percent in May. “It is decisive to note that this statement is conditional upon the unchanged obligation to guarantee price stability,’’ the Bundesbank said. “Therefore, the euro system’s forward guidance doesn’t represent an unconditional promise about the future path of the benchmark rate.” The ECB’s vague commitment has left investors unsure about the time frame of the central bank’s guidance. With the 17-nation economy emerging from its longest-ever recession in the second quarter, some economists suggest the ECB’s loose monetary policy stance might come to an end.

Unclear how long halt of sell tenders will last Fergus Jensen and Randy Fabi

Graft scandal starting to impact oil and gas industry

Alibaba in talks with HKEx Alibaba Group Holding Ltd is in talks with the Hong Kong stock exchange about allowing its founders to maintain control over the Chinese e-commerce company even after it becomes listed, people familiar with the matter told Reuters. Alibaba is widely expected to launch an initial public offering worth more than US$15 billion by the end of the year, with Hong Kong tipped as the likely venue. The Hong Kong Exchanges and Clearing Ltd, however, generally disapproves of dual class listings, which favour a company’s founders and management over its individual investors. Such a structure would also need approval from the regulator, the Securities and Futures Commission, which turned down a similar request by UK football club Manchester United. Manchester United eventually listed on the New York Stock Exchange last year. “If Alibaba wants to pursue this type of structure, I think they’ll have to try and do something more subtle, more realistic than a dual share,” said one Hong Kong banker familiar with the discussions between Alibaba and the exchange. Alibaba, which has yet to officially announce that it will hold an IPO, and the Hong Kong exchange both declined to comment on the shareholding talks.

ndonesia’s energy regulator has suspended all oil, condensate and natural gas sell tenders as it reviews internal procedures after its chairman was caught taking an alleged bribe from an oil trader last week, an agency official said yesterday. The suspension is the first evidence that the graft scandal engulfing SKKMigas is starting to impact day to day operations for Indonesia’s huge oil and gas industry. SKKMigas suspended a tender to sell around 400,000 barrels of condensate from Total SA’s Senipah complex that was due to close yesterday, said an agency official who asked not to be named. “The tender process is on hold. We aren’t continuing the tender process,” he told Reuters, adding that he was not sure how long the halt would last. On August 14, SKKMigas chairman Rudi Rubiandini was arrested for taking an alleged bribe from an executive with Singapore energy trader Kernel Oil Pte Ltd, heightening the uncertainty over energy policy in Southeast Asia’s

largest economy, where oil and gas production contributes a fifth of government revenue. Kernel Oil was a participant in yesterday’s suspended tender, worth at least US$41.5 million based on July prices. The small company, which has denied involvement in the graft case, is among 40 companies authorised to buy oil and gas from SKKMigas. “We need to start over because Kernel was already listed as a participant [in the tender],” the official said. “The impact [from the suspension], of course, is that the income to our nation will be a little bit delayed. But in terms of impact over one year, I don’t think the impact will be that [significant].” SKKMigas, which sells excess oil and gas that cannot be used by state energy company PT Pertamina Persero, has conducted at least seven tenders this year, selling Minas and Duri crudes and Senipah and Geragai condensate. After Mr Rubiandini’s arrest, the scandal widened on Friday to include

three other top SKKMigas officials. The heads of the regulators’ crude and natural gas commercial divisions, as well as the chief of operations support, were all suspended and barred from travel. Officials from the Corruption Eradication Agency (KPK) over the weekend confiscated documents from the office of SKKMigas’ interim chairman Johanes Widjornarko, who replaced Mr Rubiandini. A KPK spokesman said the action was part of the investigation but that Mr Widjornarko was not a suspect. The KPK spokesman said the agency had also seized US$200,000 from the office of a top energy ministry official, which it believed was linked to the Rubiandini case. The energy regulator, which has named temporary replacements for the impugned officials, had earlier said the scandal would not affect oil operations. SKKMigas has existing production sharing contracts with oil majors including BP Plc, Chevron Crop and Exxon Mobil Corp. Reuters