Macau Business Daily, August 9, 2013 by Business Daily

Phishing expeditions test bank security O

nline security of banks here is as good as in Hong Kong and other important financial jurisdictions, despite recent cybercrime attempts, suggests a computer sciences expert. The Hong Kong Monetary Authority warned on Wednesday of a fraudulent website passing itself off as the official one for Wing Hang Bank Ltd. A ‘phishing’ email has also been circulating claiming to be from Banco Nacional Ultramarino (BNU) SA in Macau. It asked recipients to click on a link to a site resembling the official BNU home page and provide account information. Phishing, say security sources, is an attempt to acquire information by posing as a trustworthy website. Gilbert Chan, executive director of the Macau New Technologies Incubator Centre (Manetic), told media last month the city lacks technology security professionals. More on page 3

Year II

Number 345

Friday August 9, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

More public blocks to tackle homes squeeze Page 3

Loan sharking cases rise in first half Page 7

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Consumers dodge hit on Zhuhai water costs Starting next year, the cost of importing raw water from mainland China could go up by 12 percent but the increase will not be passed on to consumers, the Marine and Water Bureau stressed. The government will have to pay the Guangdong provincial administration around 2.3 yuan (2.98 patacas) per cubic metre of raw water from the Pearl River, up from the present 2.07 yuan. Page 4

Melco Crown ‘rewarded’ with labour quota: Ho Lawrence Ho Yau Lung, co-chairman of Melco Crown Entertainment Ltd, thinks his firm has been “rewarded” with construction labour quota for Studio City because the company continued building on Cotai during the global financial crisis of 2008-09. In November 2008, market rival Las Vegas Sands Corp suspended work on its then underconstruction Sands Cotai Central, while continuing the build on its Marina Bay Sands scheme in Singapore. Page 2

Lao Airlines pulls plug on direct flights plan The Laos national carrier decided at the last minute not to launch flights to Macau after all, the city’s aviation regulator confirmed to Business Daily. Lao Airlines was due to start charter services, with five round trips per week, yesterday, after receiving approval from the Civil Aviation Authority last month. The carrier said “commercial reasons” were behind the decision, the regulator added. Page 5

%Day

BELLE INTERNATIO

3.28

CHINA UNICOM HON

2.67

CHINA COAL ENE-H

2.45

COSCO PAC LTD

2.28

CHINA MERCHANT

1.72

CHINA RES LAND

-0.91

LI & FUNG LTD

-0.97

TENCENT HOLDINGS

-1.05

TINGYI HLDG CO

-1.13

SINO LAND CO

-1.28

Source: Bloomberg

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August 9, 2013

Macau

Melco Crown ‘rewarded’ with labour quota Lawrence Ho says firm kept building on Cotai during 2008-09 financial crisis Michael Grimes

michael.grimes@macaubusinessdaily.com

awrence Ho Yau Lung, cochairman of Melco Crown Entertainment Ltd, thinks his firm has been “rewarded” with construction labour quota for Studio City because the company continued building on Cotai during the global financial crisis of 2008-09. He was responding to a question on progress at majority-owned US$2.9 billion (23.17 billion patacas) Studio City, which is due to be ready by mid-2015. He told analysts on MCE’s second quarter earnings call on Wednesday night: “…don’t forget, during 2008, 2009, City of Dreams was the only project that kept building in Macau and effectively kept the entire construction labour force employed. And so I think we are being rewarded for that,” he stated. “The government has been very supportive in terms of our labour quota – foreign labour quota approval – but at the same time, Melco Crown Entertainment has always been one of the most accommodating, and we always obey the rules and regulations,” added Mr Ho. In November 2008, market rival Las Vegas Sands Corp – which that month had an auditor’s warning about its viability as a going concern – announced it was suspending work on its then under-construction Sands Cotai Central, while continuing the build on its Marina Bay Sands scheme in Singapore. It restarted work on Cotai in early 2010. In May 2010 the Macau government responded to public concern on the number of imported workers in the city by introducing a one-for-one policy (one local for every migrant employed) on construction projects, including the Cotai casino

‘Government supportive’ – Studio City

schemes. That had an impact on how quickly concessionaires and sub-concessionaires were able to complete their projects and helped push up labour costs. The one-for-one policy seems to have been loosened since early 2012, although no formal announcement was made. The shift coincided with the then Labour Affairs Bureau director Shuen Ka Hung being moved sideways to a different post. But the impact of labour constraints and commodity price rises continues to be felt. In March this year Francis Lui Yiu Tung, vice chairman of Galaxy Entertainment Group Ltd, told our

sister publication Macau Business magazine that casino construction costs in Macau had risen by nearly a third in three years. Between January 2010 and the end of the first quarter of this year, median monthly earnings of construction workers rose 26 percent, to 12,000 patacas. The unemployment rate of residents decreased by 0.2 percentage points to 2.3 percent in the second quarter of this year, the Statistics and Census Service announced in late July. Also in late July – on LVS’s second quarter earnings call – chairman Sheldon Adelson was asked about labour for The Parisian,

The new normal Junket operators are diversifying and improving their public image, suggests an academic study

orking for a Macau junket operator is no longer perceived by young people as a ‘grey economy’ career, suggests a new academic study. ‘In Search of Respectability: Legalisation and Diversification of the Junket System in Macau’ is written by Émilie Tran, the dean of the School of Management, Leadership and Government Studies at the University of Saint Joseph, and Fiona Cheong Weng Lam. “There is a new perception of junkets as a line of business,” says Ms Tran. “Junkets have become normal”. The academics interviewed five employees of Suncity Group Ltd, each working at a different level in the company. Suncity is one of the biggest junket operators in Macau, with about 250 gaming tables in 17

VIP rooms. Ms Tran says people used to perceive junket operators as linked to organised crime and regarded working for one as “not

very commendable”. But nowadays junket employees are proud of what they do. “They don’t feel like they are doing any kind of crime-associated job. They

the company’s new US$2.8 billion scheme on Cotai, which the firm says it hopes to open in “late 2015”. He replied: “…the government would not have given [a] building permit to us [if] they didn’t think that they could allow the labour.” He added the firm followed the practice of bringing in different tradespeople to a site sequentially to speed building work and ease labour quota issues. Melco Crown said on Wednesday it hoped to start construction on a fifth hotel tower at its City of Dreams resort on Cotai by the end of this year, with completion in late 2016 or early 2017.

work as accountants, administrative assistants, in the human resources or marketing departments,” she states. Junket operators are also becoming big employers. Suncity reportedly employs about 1,200 people, and Guangdong Group (previously known as Neptune Group Ltd) employs about 1,000, most of them from Macau. One of the smaller operators, Asia Entertainment and Resources Ltd, is listed in New York. Dore Holdings Ltd and Neptune (still officially registered under that name) are listed in Hong Kong. Gaming is still the main source of revenue for junket operators. But many are diversifying, which helps create a better impression, Ms Tran says. “I’m not saying that it is money laundering. They are sitting on huge piles of cash and they could continue doing so, or they can try to gain respectability and give back to the community by venturing into other lines of business,” she says. The extended version of this story is in the August edition our sister publication Macau Business magazine. M.G.

August 9,2013 2013 April 19,

Macau

Phishing expedition tests bank security Financial institutions successfully resisting phishing emails and fraudulent websites, says expert Tony Lai

tony.lai@macaubusinessdaily.com

he online security of banks here is as good as in Hong Kong and other important financial jurisdictions, despite recent cybercrime attempts, suggests a computer sciences expert. The Hong Kong Monetary Authority warned on Wednesday of a fraudulent website with the domain name ‘www.wghgbkhk.com’, similar to the official website of Wing Hang Bank Ltd. A ‘phishing’ email has also been circulating since last month claiming to be from Banco Nacional Ultramarino (BNU) SA. It asked recipients to click on a link to a site resembling the official BNU home page and provide account information. Phishing, say security experts, is an attempt to acquire information by posing as a trustworthy website. Business Daily asked the Judiciary Police whether it had any criminal cases linked to online banking cybercrimes on its hands but received no reply before press time. A spokesperson of Banco Weng Hang SA, the Macau subsidiary of Wing Hang, said they had received no complaints or enquiries from their clients here over the fraudulent website. They would consider putting up a warning on their official website, the spokesperson added. BNU was not immediately available for comment. The bank has put up a notice on its official website saying: “Variants of phishing e-mails are targeting Macau online banking websites.” “BNU will not send and has never sent out e-mails to ask for personal or account data…[or] security credentials,” the notice said. Simon Fong Chi Chiu, computer

Fraudulent website tried to pose as official online site of Wing Hang Bank

and information sciences professor at the University of Macau, said the recent cases did not mean there were more crimes linked to online banking in the city. “There have always been a lot of these phishing emails and fraudulent websites targeting [bank customers],” said the computer and information sciences professor. “And the banks have done their job in warning customers against them,” he said, giving the BNU case as an example. Mr Fong also said the banks have protocols such as security sockets

layer (SSL) and firewalls set up to protect customer and company data. SSL typically requires the customer to input a security code in order to access online banking systems. “The [security] standards are quite high (…), similar to other regions,” said the expert. Gilbert Chan, executive director of the Macau New Technologies Incubator Centre (Manetic), told media last month the city lacks technology security professionals. Macau institutions had to put more resources into this

area, he added. Mr Fong said the city’s big institutions such as banks did not only rely on local companies but also outsourced network security services from foreign firms. He said the recent hacking incident that hit the territory’s sole Internet service provider, Companhia de Telecomunicações de Macau S.A.R.L (CTM), was a “one-off case”. Last month the telecommunication provider said e-mail services for 34 Internet customers, including government departments, had been affected.

More public housing envisaged for Taipa A new block due to be finished in 2016 will have only two-bedroom flats Vítor Quintã

vitorquinta@macaubusinessdaily.com

ublic housing to be built behind the University of Macau’s old Taipa campus, on a plot taken back by the government two years ago, will contain 288 homes. The Infrastructure Development Office put the project out to tender on Wednesday. The bids will be opened on September 19. The Infrastructure Development Office told Business Daily that a 21-storey block would be built on the land. The development will have 288 flats, all with two bedrooms.

The first three floors will have commercial premises, a public car park and a garden. The Infrastructure Development Office’s written reply to our questions did not say if the housing would be for rent or for sale at subsidised prices. Nor did it say when the office expected the project to be completed. The tender programme gives the winning bidder up to 1,000 days – roughly 33 months – to finish the work, implying that the development could be ready by the summer of 2016. The Macau subsidiary of Hong

The Taipa site for public housing was once a builder’s yard

Kong’s P&T Architects and Engineers Ltd has drawn up the project plan for the government, getting 6.8 million patacas (US$847,000) in return. The housing block will be built on a site of about 2,500 square metres between Estrada Nordeste and Rua de Choi Long. The land had been illegally occupied, used to store construction materials and plant, before the government took it back in

September 2011. Last year the government started building public housing on an adjacent plot. The neighbouring complex will have almost 700 flats, 495 of them with one bedroom, and is due for completion by early 2015. These developments will complement the 2,545 homes already available in the public housing at Edifício do Lago.

August 9, 2013

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HOSPITALITY Money shakers The total revenue from casino games has increased by 179 percent in the last five years. That amounts to an average annual rise of 22.8 percent. As we could expect, not all games grew at similar rates. Within a general upward trend, different games saw their revenues growing at very different rates. Most of the sector’s revenue comes from baccarat, in its two forms, VIP and mass market. The average is therefore heavily influenced by the performance of these games. We can, in broad terms, divide all casino games in five groups according to their revenue trends.

Macau imported 85 million cubic metres of water from Guangdong last year (Photo: Manuel Cardoso)

Govt to shield consumers from water price soaking Water will cost more to import next year, but consumers will pay the same as now Stephanie Lai

sw.lai@macaubusinessdaily.com

The first group includes those games for which revenues are rising at rates neatly above the average. This group includes Texas hold’em poker and mahjong – games not represented in the chart – which have seen their popularity rise. Their revenues went up accordingly at rates respectively of 86 percent and 40 percent per year, from 2008 to 2012 – but these have yet to affirm themselves as big money shakers in Macau’s casinos. With revenue growth rates close or slightly above the average we find the main gaming revenue sources: baccarat and machine games. The chart shows how much the revenues for the games in this group grew in the last five years. The third group includes games with revenues rising at about half the average rate, with annual average rates around 10 percent. This group includes games such as cussec and stud poker. A next group includes those for which revenue has, comparatively, stagnated. Their annual rise stands at about five percent, less than a fourth of the average. Among these are popular casino games such as the roulette, blackjack or a local favourite, fantan. The last group includes those games that have seen their revenues actually decline in absolute terms. J.I.D.

23.4 %

Average annual rise in VIP baccarat revenues, 2008-12

he cost of water imported from the mainland may rise by 12 percent next year, but the government will not pass the increase on to consumers, the Marine and Water Bureau has said. The Macau government may have to pay the Guangdong provincial government about 2.30 yuan (2.98 patacas) per cubic metre of water taken from the Pearl River system next year. It pays 2.07 yuan now. Macau took about 85 million cubic metres of water from the Xijiang River, a tributary of the Pearl River, last year. All but 5 percent of the city’s water comes from the mainland. The Marine and Water Bureau’s predecessor as water authority said in 2011 that the reservoirs here could supply only enough water for about nine days. In February the head of the bureau, Susana Wong Soi Man, predicted that the price Guangdong charges for water could rise by 15 percent. A spokesperson for the bureau told Business Daily yesterday: “It is very likely that by next year there will be a rise of 12 percent.” This is the figure produced by the price adjustment method set out in the water supply agreement that Macau and Guangdong signed three years ago. The price is adjusted every three

years, taking into account inflation in the mainland, the amount of water used and the cost of the electricity used in pumping water across the border. The Macau government buys the water from Guangdong, then sells it to the city’s sole distributor, Macao Water Supply Co Ltd, for 0.92 pataca per cubic metre.

High and dry The Marine and Water Bureau said the government would charge the distributor the same price even after the cost of importing water from Guangdong increased next year. The bureau said consumers would

RMB2.30 Probable cost per cubic metre of imported water next year

pay the same for their water as they were paying now. Macao Water gives the government most of what consumers pay the company for their water. The company keeps only what it has paid the government for the water, plus 4.65 patacas per cubic metre of water used by consumers. In middle of June the government allowed Macao Water to increase by 5.92 percent the amount of money the company keeps per cubic metre of water used by consumers. The increase was less than onequarter of the increase it asked for in May last year. Macao Water told Business Daily in May this year that it was disappointed with the increase because it was smaller than the inflation rate last year. Macao Water also complained of high operating costs. The Marine and Water Bureau said the company had not asked for any more money since June. The bureau said this week that its officials had had a meeting with their Zhuhai counterparts and officials of the state-owned water supplier, Zhuhai Water Group Co Ltd. The Macau and Zhuhai authorities are considering building a fourth pipeline to bring water into Macau. The bureau said the details and cost of another pipeline had yet to be worked out.

August 9, 2013

Macau

Lao Airlines aborts charter flights plan The carrier says it has unspecified commercial reasons for its last-minute decision

Food safety centre to wait for new law T

Vítor Quintã

vitorquinta@macaubusinessdaily.com

ao Airlines decided at the last minute not to begin flights to Macau, the Civil Aviation Authority of Macau said yesterday. The Laotian flag carrier was due to begin scheduled charter services yesterday, making five return flights per week to Macau, having received the Civil Aviation Authority’s approval last month. But a spokesperson for the Civil Aviation Authority told Business Daily that Lao Airlines had informed the authority on August 7 that it was cancelling its charter services for “commercial reasons”. Business Daily asked Lao Airlines for more details but we had received no reply by the time we went to press. It was not immediately clear whether Lao Airlines had simply postponed its plans to fly to Macau or scrapped them altogether. The Civil Aviation Authority said it had received no further information from the carrier. Lao Airlines is based at Wattay International Airport, which serves the Laotian capital, Vientiane.

But it was planning to fly to Macau from Savannakhet in western Laos, the country’s second-biggest city. The Savan Vegas Hotel and Casino, which until last November was run by Macau’s Sanum Investment Ltd, is in Savannakhet. The Laotian government seized the casino hotel because it has a dispute with Sanum Investment’s Laotian partner, ST Group. Sanum Investment has asked the World Bank’s International Centre for Settlement of Investment Disputes to

arbitrate. Macau and Laos signed in June an agreement to open up their aviation markets. The agreement puts no restrictions on which airports an airline can fly to, or on how many passengers or much cargo it can carry. The deal was done in part because Lao Airlines had indicated its intention to operate charter services to Macau. There are no official data on how many people from Laos visited Macau last year.

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he city’s food safety centre will only open when the food safety bill comes into effect, despite calls from Legislative Assembly members for an earlier opening. The Food Safety Coordination Group said yesterday the preparatory works to establish the new body “are just about completed,” followed by a trial run. It will have the headquarters at the government’s service centre for northern Macau, located in Areia Preta, as well as an office at the Iao Hon market. But the centre will only start operating on October 20, when Macau’s first food safety law comes into force. The establishment of this new body should not have to wait for the law, Chan Chak Mo, who chairs the Legislative Assembly committee that reviewed the bill, said earlier this year. The Civic and Municipal Affairs Bureau could set up the centre at any time as the bill only gives powers to the bureau not to the centre, he said. V.Q.

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August 9, 2013 April 19, 2013

Macau Manufacturing of LRT carriages start

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The manufacturing of the carriages destined to run on the Light Rapid Transit elevated railway system has begun in one of Mitsubishi Heavy Industries Ltd’s factories. The first carriage will be assembled this year, after which it will undergo testing in Japan, the Transportation Infrastructure Office said on Wednesday. After a one-month showcase of a prototype carriage the office has made some changes to the design. The seats will be made of stainless steel in order to last for longer and there will be more handles at different heights for standing passengers.

Financial Monitor Breakneck speed The number of vehicles on the roads keeps increasing. At the end of last year, it had reached the extraordinary figure of 520 vehicles for every kilometre of road. The light vehicle fleet is rising fast and their share among all vehicles is increasing accordingly. At the end of June, they represented 44.3 percent of all vehicles on the road As a result of the continuous rise in their sales, almost 40 percent of their total was added in the past five years.

10000 9000 8000 7000 6000 5000 4000 3000 2000 1000

Vincent Piket, head of the EU Office to Hong Kong and Macau

The data also show an increase in the size of the engines powering these vehicles. Sales of vehicles with engine capacities bigger than 3,750 cubic centimetres have risen noticeably in the past five years. Among these vehicles, almost one-third had engines bigger than 6,000 cc. Their share of the total number of cars sold here in the past two years was 13.5 percent and 9 percent, respectively. In 2008 that share stood at just 7.8 percent. Unfortunately, the size ranges used in the public statistics are a bit too broad. The main category includes vehicles with engine capacities between 1,500 cc and 3,750 cc. The next category includes vehicles between 3,750 cc and 6,000 cc. These two categories cover a wide range of vehicles. To better analyse trends, these two categories could be broken into three. The two top categories – vehicles more than 6,000 cc and 8,000 cc – could be lumped together. J.I.D. The content of this column is the work of Business Daily’s journalists.

1,127

Cars with engine capacities bigger than 6,000 cc have been registered since 2008

EU again to push for tax agreement New European Chamber of Commerce could help firms push into Hengqin Island

he European Union (EU) will again engage Macau in an effort to tackle tax evasion and increase fiscal cooperation, says the head of the EU Office to Hong Kong and Macau, Vincent Piket. “I am not sure yet if, with Macau, we will aim to have a formal agreement, but definitely we will be engaging the Macau government on this point [within this year],” he told our sister publication Macau Business magazine. The European Union is seeking to introduce an automatic tax information exchange mechanism with Macau, as it widens its efforts to extract more revenue from within its borders. Mr Piket says Macau and the European Union have “an excellent relationship,” built on the framework of a bilateral agreement on trade and cooperation that came into effect in 1993. To celebrate the 20th anniversary of the agreement, several events

jointly arranged by the European Union and the Macau government are scheduled, beginning in October. “We will not reveal the details yet, but there will be something for all corners of society in Macau,” says Mr Piket. “It is very special to have such an agreement. Macau has one, but Hong Kong, no.” The value of European Union exports to Macau surged by 13 percent year-on-year to 9 billion patacas (US$1.1 billion) in the first six months of this year. “There is very strong growth,” Mr Piket says. “Thanks to the phenomenal success of the gaming industry and related tourism sectors, we expect that EU-Macau trade will continue to grow.” The diplomat says many European companies “still lack some awareness” of what investment opportunities Macau offers. They are unaware of Macau’s Closer Economic Partnership

Agreement with mainland China, which “will offer, over time, virtually free access to both goods and services markets” in the mainland, he stressed. The “innovative idea” to set up Hengqin Island as a special economic zone is another point of interest, said Mr Piket. “We are very keen, from the EU side, to look into what Hengqin can mean for us, for our firms.” The Dutch national believes the recently established Macau European Chamber of Commerce can help. “Some European Union memberstates have no business representation in Macaurightnow.TheEuropeanchamber will also be able to provide support to companies from those countries and will be able to help newcomers into the Macau market,” he says. The extended version of this story is in this month edition of Macau Business magazine. V.Q.

August 9,2013 2013 April 19,

Macau Ex-CoD boss leaves Crown Greg Hawkins (pictured) has left Australian casino operator Crown Ltd after his job as chief executive at Crown Melbourne “ceased to exist” says an Australian Stock Exchange filing. Barry Felstead, CEO of Crown Perth, has been moved to a new role of ‘CEO – Australian Resorts’, with his previous post also disappearing. Mr Hawkins was inaugural president of Melco Crown Entertainment Ltd’s City of Dreams from its pre-opening phase in May 2008, through its opening in June 2009, until his resignation in July 2010. Crown said it was discussing the possibility of hiring him for “consultancy and advisory services”.

Loan sharking up in first half Over 130 people arrested for kidnappings connected to gaming Stephanie Lai

sw.lai@macaubusinessdaily.com

he number of loan sharking crimes reported to Macau’s security forces went up in the first half of this year. Many cases were also linked to complaints of kidnapping. Loan sharking – usually defined as moneylending at extremely high rates of interest, typically under illegal conditions – has risen by 10.1 percent year-on-year to 76 cases in the January-June period, said the Secretary for Security Cheong Kuok Va. In addition “there were 133 people arrested by the authorities for kidnapping, and most of them were from mainland China,” the official said. These suspects “are linked to gaming-related loan-sharking cases,” he explained in a press

briefing yesterday. In contrast the police recorded fewer cases of robbery, theft and blackmail in the first half of this year. Nonetheless, theft accounted for more than half of the 3,825 property crimes reported in Macau in the first six months, with a total of 1,997 cases. And, just like during 2012, more than half of the crimes (57.2 percent) were property crimes, up by 213 cases compared to a year earlier. There were in total 6,685 crimes reported in the first half of 2013, a year-on-year rise by 7.4 percent. Crimes against the person, which involve assault or threats, saw a slight year-on-year drop by 0.3 percent to 1,199 cases in the first six months this year.

The police recorded a rapid yearon-year surge of 42.4 percent to 272 cases of forged documents. The secretary did not elaborate on how the forged documents were being used. There was a 23.5 percent rise to 247 cases of people caught sheltering or employing illegal immigrants in the first half of this year.

A total of 613 illegal immigrants from mainland China were caught in Macau from January to June, 8.1 percent more than a year earlier. In the first half there were a total of 19,166 mainland Chinese caught overstaying their visa. Just 2,290 of those were holding an individual travel visa.

Corporate Secretary for Security Cheong Kuok Va

Diamonds are forever…again De Beers has re-opened its Macau store in The Shoppes at Four Seasons on Cotai following a refurbishment. De Beers Diamond Jewellers was established in 2001 as an independently managed and operated company by LVMH Moët Hennessy Louis Vuitton, a luxury products group, and De Beers SA, one of the world’s premier diamond mining and marketing companies. Each piece of De Beers jewellery is certified with what the company describes as a De Beers ‘passport’. It documents the specifications of the purchased jewellery and is described as a guarantee that every De Beers diamond is “natural, untreated, conflict-free and responsibly sourced and crafted”. The company adds each polished diamond above 0.20 carats is microscopically branded. The firm also recently re-opened its outlet at The Landmark in Hong Kong’s Central district. “Greater China is a key region for De Beers, recognising the demand for exquisite designs and diamonds of superlative quality by Chinese clients,” states the brand.

business as usual

Modern mentality

Pedro Cortés newsdesk@macaubusinessdaily.com

Shanghai Min time at City of Dreams Melco Crown Entertainment Ltd’s City of Dreams casino resort has opened a branch of a popular mainland restaurant brand. Shanghai Min Macau is part of the Shanghai Min chain that began with a single four-table venue in Shanghai in 1987. The new Cotai branch is one of the brand’s largest restaurants so far, seating 372 people and covering 17,600 square feet (1,600 sq. metres). It is on two levels and includes five private dining rooms. It is the chain’s first Macau venue. The brand already has nine restaurants in Hong Kong. The chain trades on nostalgia, using décor that combines art deco design popular in 1930s and 40s Shanghai with contemporary Chinese style. The menu is based on what the management describes as “classic Shanghainese delicacies created by master chefs”. Shanghai Min is described as one of only few full service Chinese restaurant brands to branch out internationally.

ne of the things I love most is to be part of history – even if history reads like a bad novel. The holder of the cable television concession, Macau Cable TV Co Ltd, was given its contract in 1999. The world was different then. In view of the large investment required, the concession was granted for 15 years. That is all very well, except that Macau Cable TV never got the exclusivity agreed to by the parties to the contract, which had been written into the document. This did not seem to matter until some weeks ago, when the Court of Second Instance ordered the government to enforce what it had agreed to 14 years before. The court so ordered with just under one year of the concession left to run. Since 1999 the world of electronic communications has changed hugely. Macau has also changed, of course. But the mentality of the small farmer or islander, who lives his life oblivious of the rules, persists here. The Government Tourist Office’s slogan was: “In a world of difference, the difference is Macau.” Some may interpret this as meaning that the forces that really drive this city are accustomed to acting differently. When all is said and done, what I would really like – and you, too dear reader, I am sure – is an all-in-one service that combines access to fixed-line and wireless telephone networks, the Internet and cable television. And, speaking personally, I would like to be able to watch a channel that shows my beloved football club in Portugal play every week, instead of Dutch league or Bundesliga matches. That would be a real public service – meaning a service for the public at large, rather than just the small farmers and islanders.

August 9, 2013 April 19, 2013

Greater China HK ex-minister gets suspended sentence

Chinese trade shows signs of rec Both exports and imports grow strongly in July

Hong Kong’s former development secretary Mak Chai Kwong received a suspended sentence for his role in defrauding the government of more than HK$700,000 (US$90,249) of housing allowances during the 1980s. District Court Judge Johnny Chan gave Mr Mak and former assistant director of the highway department Tsang King Man sentences of eight months each, suspended for two years. Mak and Tsang were convicted in June of concealing that they had an interest in apartments that they leased from each other’s wives in order to claim the allowances.

China Resources’ rejects accusations China Resources Holding Co Ltd chairman Song Lin rejected as “false” allegations in the media that described a 2010 coal-mining deal as “inappropriate,” saying he reserves the right to pursue libel action. The purchase was normal business practice and complied with China’s laws and regulations, according to a signed letter from Mr Song posted on the company’s website yesterday. The transaction also met rules governing publicly traded companies in Hong Kong, he said. Mr Song’s letter is in response to a controversy last month over the acquisition by China Resources Power Holdings Co Ltd of three coal mines in Shanxi province.

Exports rose 5.1 pct from a year earlier

rowth in Chinese exports and imports rose more than expected in July, a sharp recovery from the previous month, adding to signs that the world’s second-largest economy is stabilising following a two-quarter slowdown. Ship m en ts a b r o a d r o s e 5 . 1 percent from a year earlier, the General Administration of Customs said in Beijing yesterday. Imports gained 10.9 percent, leaving a trade surplus of US$17.8 billion. Asian stocks advanced as the

data showed exports to the U.S. and European Union, China’s biggest markets, increased for the first time in five months. Improved trade may bolster Premier Li Keqiang’s chances of achieving the year’s 7.5 percent target for economic expansion, after official manufacturing and serviceindustry indexes rose in July. “This confirms our view that the economy has bottomed out and will re-accelerate” in the second half, Dariusz Kowalczyk, senior economist at Credit Agricole CIB in

Hong Kong, said in an e-mail. “We’d like to call the end to worries over China for this year.” Trade data had shown a slowdown starting in May after the government cracked down on fake invoices that inflated figures earlier in the year. The quality of the data has “improved a lot,” Lu Ting, head of Greater China economics at Bank of America Corp in Hong Kong, said in a note yesterday. The benchmark Shanghai Composite Index of stocks ended down 0.1 percent at 2,044.9 points,

Taiwan to sell TSMC shares for US$600m A Taiwan government venture capital fund will sell more than 170 million shares in Taiwan Semiconductor Manufacturing Co Ltd, the world’s top contract chip maker, in 2014 to help fund Taiwan’s budget, a source with direct knowledge of the sale said yesterday. The National Development Fund plans to sell the shares, worth about T$18 billion (US$600 million), to four pension funds owned by the government, said the source, who declined to be identified because the matter is sensitive.

Beijing tests Japan on island claims China deployed ships to waters near islands disputed with Japan for a record 28 hours, drawing a formal protest as it repeated a strategy of pressing its territorial claims through bolder projections of maritime power. Ships from China’s newly formed coast guard remained in the Japanese-controlled waters for the longest time since Japan bought the islands last year, Cabinet Secretary Yoshihide Suga said at a briefing in Tokyo yesterday. The ships left the waters around the islands, known as Diaoyu in Chinese and Senkaku in Japanese, at about noon yesterday. Japan’s Foreign Ministry summoned a Chinese diplomat and “sternly protested,” he said.

Chong Hing deal may break M& Could be first Hong Kong bank acquisition since 2008 Denny Thomas and Umesh Desai

hong Hing Bank Ltd has received a takeover approach from a company controlled by a Chinese city government, a person familiar with the matter said, in what could be the first M&A deal in Hong Kong’s banking sector since 2008. Shares in Chong Hing, which has a market value of about US$1.5 billion and is part-owned by Japan’s top lender Mitsubishi UFJ Financial Group Inc, jumped as much 23.4 percent to a life high after the bank said it had received an approach. Shares of the bank closed at HK$26.3 yesterday, up by 17.15 percent. Chong Hing is the smallest of Hong Kong’s family run banks in a sector long seen as ripe for consolidation. But with returns on Hong Kong banks shrinking over the past decade, many potential bidders have moved to the sidelines and analysts say other banks are unlikely to follow suit. “For family banks, we believe memories of rich valuations being

offered remains vivid, and as such, we believe pricing will have to be extremely competitive to entice potential sellers,” Bank of America Merrill Lynch said in a report. Late on Wednesday, Chong Hing said its biggest shareholder Liu Chong Hing Investment Ltd, which

owns 50.2 percent of the bank, has received a takeover approach from third parties but did not identify them. They added that no agreement had been reached. A person familiar with the matter told Reuters that Yue Xiu Enterprises (Holdings) Ltd, which is

Chong Hing shares surge as much as 23.4 pct to life high

August 9,2013 2013 April 19,

Greater China

covery while the CSI300 of the leading Shanghai and Shenzhen A-share listings inched down 0.2 percent. The world’s largest exporter, suffered its first fall in exports in 17 months in June, which led some analysts to say crumbling trade growth was testing Beijing’s appetite for slower but better-quality economic growth. The improving U.S. economy as well as delays in June trade transactions because of the government crackdown on fraud aided July’s figures, said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. Authorities will help boost export growth above 5 percent in the coming months by preventing yuan appreciation and increasing export credit insurance, Mr Shen said. Economists’ estimates for July exports ranged from a 4 percent drop to an 8.8 percent increase. The median import projection was for 1 percent growth, with forecasts ranging from a 2.3 percent decline to a 6 percent gain. The trade surplus compared with the median estimate for a US$26.9 billion excess.

improvement. While it’s “risky to make too much interpretation” from one month’s data, the PMI gauges from the U.S., Europe and U.K. and a China PMI export orders subindex “suggest improving external demand, boding well for China’s exports in the near future,” said Ding Shuang, senior economist at Citigroup Inc in Hong Kong. “We expect better trade activity to only partially offset weak domestic demand due to tighter credit conditions” in the second half, and growth will keep decelerating over the next few quarters, Mr Ding said in a note. The Politburo, the nation’s top decision-making group of 25 members, pledged last week to stabilise growth while pressing on with economic reforms. China has announced what Bank of America Corp called a “small stimulus” consisting of measures including tax breaks for small companies and accelerated railway construction while cutting industrial overcapacity and extravagant spending by officials and state-owned enterprises. The statistics bureau will today provide data on July’s inflation, industrial production and retail sales and January-July fixedasset investment. Bloomberg News/Reuters

Demand proxy “Import growth really should be seen as a proxy for domestic demand,” said Helen Qiao, chief Greater China economist at Morgan Stanley in Hong Kong. “Therefore a major surprise on the upside really suggests that domestic demand is in recovery.” The official manufacturing Purchasing Managers’ Index increased to 50.3 in July from 50.1 in June and the non- manufacturing PMI rose to 54.1 from 53.9. Private gauges from HSBC Holdings Plc and Markit Economics didn’t show

&A drought

controlled by the city government of Guangzhou, is a suitor, confirming a report by the Hong Kong Economic Journal. It was not immediately clear if Chong Hing has been approached by a consortium or separate suitors. The source, who declined to be identified as the discussions were confidential, said a deal could be done around two times Chong Hing’s price to book, a near 51 percent premium to Chong Hing’s current price to book ratio of 1.32. That would value the bank at US$2.27 billion. Yue Xiu is seeking a one-year bridge loan to back its acquisition of a stake in Chong Hing, Basis Point, a Thomson Reuters publication, reported. Chong Hing Bank does not require MUFG’s permission to strike a deal, under an agreement with Chong Hing’s founding family in 1994. Sources played down the chances of MUFG, which owns 9.7 percent stake in Chong Hing, making a rival bid. MUFG was not available for an

US$17.8 bln

China’s trade surplus in July

immediate comment. Any potential deal would be the first Hong Kong bank M&A since 2008 when China Merchants Bank Co Ltd bought Wing Lung Bank Ltd. “There could be a transformation of business growth after the acquisition – just look at Wing Lung which went into a growth mode after the China Merchant’s acquisition,” said a Hong Kong based credit analyst, who was not authorised to speak to the media. But he was unsure about the benefits of an acquisition to Yue Xiu. “There is no apparent strategic fit – Yue Xiu has some non-banking operations like securities and asset management in its financial services involvement but no banking business,” he said. Reuters

KEY POINTS Potential buyer a firm controlled by Guangzhou city ROE in mid-sized Hong Kong banks has fallen sharply Deal may be about 2 times Chong Hing’s price to book

Yuan strikes new high for second day Traders ponder source of strength

hina’s yuan hit a record high against the dollar for a second straight day yesterday, with traders citing central bank intervention and short-term hedging trades for the rise. Few market participants, however, believe that present gains signalled the beginning of another sustained rally in the currency’s value, even after China’s stronger-than-expected export performance in July. “Trading was light over these two days, meaning there is not an overwhelming trend for the yuan to appreciate,” said a dealer at a foreign bank in Shanghai. “That implies the invisible hand of the PBOC,” he said. “With the G20 summit drawing near, the yuan is very likely to stage another round of mild appreciation in line with China’s long-standing practice of letting the yuan rise ahead of major political events.” Patrick Wu, head of trading for China at JP Morgan Chase & Co in Shanghai, said the rise was mostly due to traders hedging short yuan positions. The trend may not be sustained given the central bank’s general commitment to exchange rate stability, he said. Other traders concurred, arguing that the yuan breaking through a psychological resistance point of 6.12 on Wednesday had forced traders to get out of more aggressive positions. “Firms typically need to offset some dollar positions if the yuan breaks through a psychological barrier, and Wednesday’s breach at 6.12 sparked liquidation today,” said a dealer at a Chinese commercial bank in Shanghai. “As such, you can still not be certain that the yuan has entered a round of appreciation by today’s record highs.”

Yuan often appreciates prior to international events

Spot yuan struck a series of all-time highs yesterday morning, hitting an intra-day peak of 6.1159 versus the dollar in early afternoon, its highest level since the Chinese foreign currency market was created in 1994, and up 0.05 percent from Wednesday’s close. The yuan has gained 1.87 percent so far this year, bucking a weak trend in emerging market currencies, but the bulk of its gains were logged in April and May. It has flattened out since and economists and traders have speculated that the central bank would move to stabilise the exchange rate, or even force a mild depreciation, after surprisingly weak export data in June. The central bank set its official midpoint at 6.1703 yesterday, up 0.04 percent from Wednesday’s fix, a level traders said only reflected the dollar’s global weakness and gave no hint of guidance from the PBOC. Reuters

Beijing threatens heavier fines after milk powder probe

hinese authorities threatened heavier fines against companies breaking the law yesterday, a day after six milk powder producers were hit with a total of US$110 million in penalties for price fixing and anti-competitive behaviour. Xu Kunlin, head of the pricing unit at the National Development and Reform Commission (NDRC), said the milk powder makers had deleted emails and told staff to avoid leaving a paper trail when discussing prices with retailers. “[These actions] are a clear example of knowingly violating the law,” Mr Xu said in an interview with the People’s Daily newspaper, the mouthpiece of the ruling Communist Party. “From now on, if we discover firms knowingly breaking the law, then fines will be increasingly severe.” The NDRC fined six milk powder fi r m s fo l l o wi n g a fo u r - m o n t h investigation: Mead Johnson Nutrition

Co, Danone SA, New Zealand’s Fonterra Cooperative Group Ltd, Abbott Laboratories, Dutch dairy cooperative FrieslandCampina NV and Hong Kong-listed Biostime International Holdings Ltd. All of the companies said they would not contest the penalties. Several also said they were committed to addressing the concerns raised by the government. Mr Xu said the milk powder companies broke China’s five-yearold anti-monopoly law by effectively setting prices at which retailers could re-sell their products. They used methods such as contracts, direct and covert fines and rebates, as well as controlling and cutting supply to get retailers to comply, he said. “If a retailer didn’t abide by the producer’s pricing rules or went below the set lower price, then it would be penalised and sustain losses,” Mr Xu said. Reuters

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August 9, 2013 April 19, 2013

Asia Philippines’ SM Investments profit jumps in H1 Conglomerate SM Investments Corp, the Philippines’ most valuable listed firm, posted a 16 percent rise in first-half profit yesterday after its shopping mall, property, retail and banking businesses gained from robust domestic demand. SM Investments, owned by the Philippines’ richest man, Henry Sy (pictured), reported a net profit of 12.6 billion pesos (US$288 million) for January to June, compared with 10.9 billion pesos from a year earlier. Total revenue grew 16 percent to 122.1 billion pesos, it said. Belle Corp, a unit of SM Investments, has partnered with Melco Crown Entertainment Ltd for a casino project in Manila.

BOJ’s warns against easing up on fiscal discipline Central bank reaffirms view that recovery under way Leika Kihara

we still need to support the economy with quantitative easing,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “There’s nothing to suggest the need for additional easing. Prices are doing better than expected and the BOJ looks more likely to meet its price target.” Indeed, the BOJ was slightly more optimistic on prices, saying that inflation expectations “appear to be rising on the whole” and core consumer inflation will likely accelerate. Last month, it said there were some signs of heightening inflation expectations and that core consumer price growth will likely turn positive.

Capex key

Economy starting to recover moderately, central bank says

he Bank of Japan kept monetary policy steady and held off on revising up its assessment of the economy yesterday, opting to wait for more clues on whether the increasingly positive mood will encourage companies to ramp up spending. Bank lending rose nearly 2 percent in July from a year earlier, the biggest increase in four years, BOJ data showed earlier in the day, boding well for the central bank’s efforts to boost lending with its aggressive monetary stimulus. As widely expected, the BOJ maintained its policy launched in

April of nearly doubling the monetary base to 270 trillion yen (US$2.8 trillion) by the end of 2014 through massive asset purchases to end nearly two decades of deflation. “Japan’s economy is starting to recover moderately,” the central bank said in a statement announcing the policy decision, maintaining its assessment of the economy after revising it upward in July for the seventh straight month. A slew of positive economic data released since the BOJ’s previous meeting had heightened expectations it may offer a rosier view of the economy to say more convincingly

Rio halts aluminium business sale As first-half underlying earnings fall 18 pct

lobal miner Rio Tinto Group said it has abandoned an attempt to hive off its lossmaking Pacific Aluminium business, as it reported an 18 percent drop in first-half underlying earnings, hit by weaker iron ore, copper and coal prices. Rio put Pacific Aluminium – which houses five aluminium smelters, a bauxite mine and alumina refinery in Australia and New Zealand – on the block in 2011, but failed to find a buyer and

decided not to pursue a spin-off to shareholders. “Following a comprehensive review we have also determined that the divestment of Pacific Aluminium for value is not possible in the current environment and it will be reintegrated into the Rio Tinto Alcan group,” chief executive Sam Walsh said in a statement yesterday. Rio has been punished for its US$38 billion takeover of Alcan ever since the ill-timed deal in 2007, racking up US$30 billion in

that it is recovering. BOJ Governor Haruhiko Kuroda stressed that the Japanese government must keep up efforts to restore the country’s fiscal health. “If fiscal discipline loosens, that may indirectly diminish the impact of the BOJ’s monetary easing,” Mr Kuroda told a news conference. Core consumer prices rose for the first time in more than a year, summer bonuses increased for the first time in three years and the jobless rate hit a 4-1/2 year low. “The BOJ is more confident about the economy, but they are not likely to use more bullish language because

writedowns and booking losses in aluminium as demand slumped and Chinese output soared. To help stem the bleeding, it put Pacific Aluminium in 2011 into a separate business, which analysts at Credit Suisse had valued at US$2 billion to US$3 billion. Rio Tinto had considered selling, closing or spinning off the business to shareholders. Instead it will now bring Pacific Aluminium back into the fold of Rio Tinto Alcan. Underlying earnings fell to US$4.23 billion in the six months to June from US$5.15 billion a year earlier, exactly in line with analysts’ forecasts. Net profit fell to US$1.7 billion, hit by a non-cash exchange loss of US$1.9 billion and a US$300

“The BOJ can sit and wait as the economy is improving and consumer prices are rising,” said Maiko Noguchi, senior economist at Daiwa Securities Co and a former central bank official. The sticking point was capital expenditure, which many within the BOJ place a lot of importance in gauging whether the huge amount of funds the central bank pumps out is reviving economic activity. A survey by the state-backed Development Bank of Japan showed large companies planned to increase capital expenditure by 10.3 percent in the fiscal year that started in March, up from a 2.9 percent increase the previous year. But shipments of capital goods, which help gauge the strength of capital expenditure, fell 12.1 percent in June after a flat reading in May, trade ministry data showed on Monday. Given the mixed readings, some officials likely wanted to see more data to measure the strength of business investment and whether early signs of pickup in wages and labour markets are sustainable. Japan’s economy likely grew an annualised 3.6 percent in April-June to mark the third straight quarter of expansion, a Reuters poll showed, adding to signs the positive effect of Prime Minister Shinzo Abe’s

million write off due to damage from a massive landslide at its Bingham Canyon copper mine in the United States in April. On its closely watched campaign to slash US$5 billion in costs over two years, Rio Tinto said it had cut US$1.5 billion in the first half of this year at its operations and in exploration spending. It raised its dividend 15 percent to 83.5 cents, compared with analysts’ consensus forecast of 84 cents. Rio’s Australian-listed shares have fallen 10 percent this year, well below a 9 percent gain in the broader market on worries about slowing growth in China, a potential oversupply of iron ore and its lossmaking aluminium operations. Reuters

11 11

August 9,2013 2013 April 19,

Asia Fast Retailing joins Bangladesh safety accord Fast Retailing Co Ltd, Asia’s biggest retailer and operator of the Uniqlo clothing chain, said yesterday it had signed a Europe-led safety pact for Bangladesh garment factories after a building collapse in April killed more than 1,100 people. A spokesman for the Japanese firm said the company had taken several months to join the accord because it wanted to thoroughly consider the pact’s conditions. “Our reason is quite simple – our priority is to work across the industry to improve conditions for the workers in Bangladesh, so we just wanted to join in,” said a spokesman.

Bank of Korea holds policy rate steady Tax hike schedule decided in Sept The Japanese government will make a decision on whether to raise the sales tax as planned some time from late September to early October, the economics minister said yesterday, in what is becoming a test of whether Japan’s politicians can enact painful but necessary reforms. Bank of Japan Governor Haruhiko Kuroda warned against a delay in the plan. “Ending deflation and raising the sales tax are achievable at the same time,” Mr Kuroda said yesterday. There are concerns that those members of Prime Minister Shinzo Abe’s administration who favour delaying tax hikes are gaining traction, which could potentially derail the sales tax measure - an important first step toward repairing public finances. “Raising the sales tax next year may not be the best option if the economy loses momentum, although the government will seek the best way to address challenges faced by Japan,” said Economics Minister Akira Amari. Japan plans to raise the sales tax to 8 percent from 5 percent in April next year, and to 10 percent in October 2015 to meet rising health and welfare costs.

reflationary policies is spreading. While the economy appears on track for a steady recovery, which should gradually pushing up prices, many private-sector analysts still see the BOJ’s goal of achieving 2 percent inflation in two years as too ambitious. The International Monetary Fund has said the central bank should be ready to expand its assetbuying programme or shift the mix of assets being purchased in the future if inflation does not pick up as envisaged.

Fed tapering, China jitters greatest worries

he Bank of Korea left its policy interest rate untouched yesterday for a third straight month, widely perceived as ending an easing cycle that began a year ago, and has seen South Korea’s economy turn to recovery. It expects Asia’s fourth-largest economy to build momentum after sequential growth hit a 2-year high in the June quarter, but low inflation amid weak global demand will likely allow it to keep the current easy stance for some time. The Bank of Korea’s monetary policy committee left its base rate unchanged at 2.50 percent. “Today’s decision to hold rates steady was unanimous,” Bank of Korea Governor Kim Choong-soo said at a news conference. All 21 analysts surveyed by Reuters had forecast the Bank of Korea would leave the base rate steady and a majority in the poll said

the central bank would probably stay pat for about a year. “I expect the Bank of Korea to hold rates steady before starting to increase some time in the latter half of next year,” said Seo Hyangmi, a fixed-income analyst at HI Investment & Securities in Seoul. “Although China’s economy is not strong enough, the European and U.S. economies are improving. So I expect South Korea will see growth continuing instead of falling back into a slump again.” South Korea’s economic growth in the second quarter accelerated to a seasonally adjusted 1.1 percent from 0.8 percent in the previous quarter, topping market expectations and the highest since early 2011. “The global economy will recover gradually on the back of improvement in the U.S. economy but uncertainties stemming from factors such as the U.S. Federal Reserve’s exit strategy,

changes in the global financial markets and the possibility of dulling growth in China remain as downside risks to growth,” said Mr Kim. Increased government spending and weak imports contributed most to economic growth while corporate investment in production equipment and private consumption fell short of posting firm growth, Bank of Korea estimates suggested last week. But the recovery will still take time to pick up. “The output gap will remain negative for the time being, although the gap will gradually narrow,” the central bank’s head said. The Bank of Korea is expected to begin raising interest rates from late next year, the Reuters survey showed, but it will depend on how China’s economy fares and how the global markets react to the Federal Reserve’s eventual pull-back of its stimulus drive. Reuters

Uncertainties such as the U.S. Federal Reserve’s exit strategy … and the possibility of dulling growth in China remain as downside risks Kim Choong-soo, Bank of Korea Governor

Reuters

Supply contracts intact: Fonterra CEO Even as companies expand recall of milk formula products

N Outlook for demand for its commodities remained volatile, Rio says

ew Zealand dairy giant Fonterra Cooperative Group Ltd insisted that its customers were sticking to their supply contracts with the world’s largest dairy exporter for the moment, even as Singapore expanded its recall of milk formula products containing a tainted ingredient produced the company. Danone Dumex took more infant formula tins off supermarket shelves in Singapore as a precautionary measure after being told by Fonterra that the product was packed on a production line that may have held residue of the questionable material, Singapore’s Channel NewsAsia reported, quoting

a statement from Danone Dumex. Fonterra chief executive Theo Spierings said he had not seen any signs of a reduction in supply contracts by its clientele, which include major food and beverage multinationals, but he acknowledged the risk that its bottom line may take a hit in the future. “The answer to that question is no,” he said. “Of course that discussion will come to the table, as we do have contracts … but there have been no discussions on future contracts or those kinds of things,” Mr Spierings said. He added that Fonterra would

make full disclosures on the financial impact of the ensuing global food safety scare as necessary. Fonterra has been in damagecontrol mode for nearly a week, reassuring consumers from China to Saudi Arabia that all products containing a tainted dairy ingredient made by the company has been withdrawn from markets. The company has come under fire at home and abroad for dragging its feet in saying it sold whey protein products that contained a bacteria which can cause botulism, a potentially fatal food poisoning. Reuters

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August 9, 2013 April 19, 2013

Asia

Topix finds friend in Bernanke The benchmark gauge up 66 percent since elections last year Yoshiaki Nohara, Masaaki Iwamoto and Masahiro Watanabe

ederal Reserve chairman Ben S. Bernanke’s plans to reduce stimulus are just what Japanese stocks need to revive the biggest rally in three decades, if history is any guide. The Topix index has rallied in anticipation of tighter U.S. monetary policy each time the Fed has signalled a major change of direction since 1986, according to data compiled by Bloomberg. The Japanese equity benchmark rose an average 30 percent in the 12 months before increases in the target rate for loans between American banks in 1986, 1994, 1999 and 2004, the data show. Bulls say the prospect of slowing U.S. bond purchases and an expanding American economy will strengthen the dollar and boost profits at exporters from Toyota Motor Corp to Nintendo Co. Bears say the yen may gain because a selfsustaining U.S. recovery is no sure thing and Prime Minister Shinzo Abe’s policies won’t do enough to spur stocks higher. “Japan will continue to keep monetary easing for a long time, while the U.S. shifts toward stimulus tapering because its economy is good,” said Isao Kubo, a Tokyobased equity strategist at Nissay Asset Management Corp, which oversees about 6.1 trillion yen (US$62 billion). “The yen is likely to fall and Japanese stocks will rebound while U.S. stocks move little. That’s my main scenario.” Stocks rose last week, with the Topix alternating between gains and losses that averaged more than 2.4 percent a day. The benchmark

before the Bank of Japan on April 4 pledged to double its monetary base in two years to reach a 2 percent inflation goal. The Topix decreased 6.3 percent as of August 2 since reaching a 4 1/2year high in May and was down as much as 18 percent in June as the yen, which has depreciated 16 percent against the dollar since Mr Abe’s Liberal Democratic Party reclaimed power in December, rebounded. While the retreat coincided with losses in the Standard & Poor’s 500 Index that reached 5.8 percent between May 21 and June 24, the American gauge has recovered and closed at a record 1,709.67 on Aug. 2.

Fed plans

The Fed will start tapering when it’s certain the U.S. economy is robust, and so the yen will fall, meaning Japanese stocks are likely to outperform Masaaki Yamaguchi, Nomura Holdings

gauge for Japan equities climbed 2.5 percent to 1,196.17 on August 2, pushing the rally to 66 percent since elections were announced that brought Mr Abe to power, even after shares fell for three months through July in the longest streak since September 2011. More than US$800 billion had been added to Japanese stock values in 2013 through August 2 as the fiscal and monetary stimulus sought by Mr Abe sent the Topix to the biggest gain among developed markets. The government will spend 10.3 trillion yen (US$107 billion) to boost growth and encourage private investment, officials said in January,

Rallies lost momentum in both countries after Mr Bernanke said on May 22 that the central bank was planning to start paring stimulus. The Fed may reduce its US$85 billion of monthly bond-buying from later this year and halt it around the middle of 2014, should the economy improve, Bernanke said on June 19. “The Fed’s tapering certainly works to weaken the yen, but it also has a downside of lowering investors’ risk sentiment,” said Tetsuo Seshimo, a Tokyo-based portfolio manager at Saison Asset Management Co, which oversees about 74 billion yen. Tightening by the Fed would help Japanese equities rather than hinder them, said Ayako Sera, a Tokyobased market strategist at Sumitomo Mitsui Trust Bank Ltd, which has about 35 trillion yen in assets. “If the Fed correctly times when to begin tapering, the dollar will strengthen along with the U.S. economy,” Mr Sera, who predicts the Topix will rise to 1,300 by year-end, said in an interview. “That’ll be a plus for stocks.” The Topix surged an average 30 percent in the 12 months before each of the Fed’s four major tightening cycles since 1986, data compiled by Bloomberg show. The Standard & Poor’s 500 Index had a mean return of 15 percent for the periods. The last series of U.S. rate increases began in 2004, when Alan Greenspan and Bernanke raised the fed funds rate to 5.25 percent from 1 percent. Japanese stocks rallied 32 percent, about twice the S&P 500,

in the year leading up to it. The Topix climbed 15 percent before the Fed started boosting in mid-1999. Anticipation of the 1994 increases sent the equity market up 24 percent, and it rallied 50 percent prior to a 1986 increase. The Topix’s 27 percent climb from November through January was its steepest three-month advance since 1993. Shares on the gauge traded at 15 times estimated earnings as of August 2, compared with 15.5 times for the S&P 500 and 13.8 times for the Stoxx Europe 600 Index. The ruling coalition’s landslide poll win on July 21 secured control of both chambers of parliament for the first time since 2007. Investors’ wish list for reforms include lower corporate taxes, law changes to make it easier to fire workers, and a higher sales tax to rein in the world’s heaviest sovereign debt burden.

US$800 bln Have been added to Japanese stock values in 2013 through Aug 2

US$107 bln

The govt plans to spend to boost growth and encourage private investment

Mr Abe is likely to disappoint, said Makoto Kikuchi, chief executive at Myojo Asset Management Japan Co in Tokyo. “Foreign investors expect Abe to make painful regulatory changes,” Mr Kikuchi said. “But I don’t think he’s committed to drastic measures. If nothing comes out by September or October, overseas investors will question his determination.” The prime minister instructed his government to consider four options including freezing the planned twostep increase of sales levies, the Nikkei newspaper reported last month. Even if the yen does fall, Japanese stocks are likely to slide as higher raw material and fuel costs choke profitability at iron and steel, paper and chemical firms, said Mr Kikuchi, who forecasts the Topix will retreat to 950 at year-end. Most stocks strategists surveyed by Bloomberg expect the rally to resume. The Topix will advance 6.2 percent from its August 2 close to finish the year at 1,270, according to the median estimate of 18 analysts. Nomura Holdings Inc was the most bullish, predicting a 25 percent jump. The yen will extend its 12 percent decline since December 31, sinking to 108 per dollar by the middle of 2014, according to a separate survey. “Japanese stocks are more sensitive to the currency than shares in the U.S.,” said Masaaki Yamaguchi, a Tokyo-based equity market strategist at Nomura. “The Fed will start tapering when it’s certain the U.S. economy is robust, and so the yen will fall, meaning Japanese stocks are likely to outperform.” Profits for companies in the Topix almost doubled this earnings season, according to data compiled by Bloomberg using quarterly results from 974 firms in the 1,708-member gauge. Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd, expects the Topix to reach 1,280 by December 31. “The beginning of the Fed’s tapering equals strong U.S. growth, and that means Japan’s exports to the U.S. will pick up,” said Mr Yoshino. “Japanese companies will benefit not only from a weaker yen, but also from better business stateside. Their earnings will be revised upward and Japanese stocks will extend gains.” Bloomberg News

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August 9,2013 2013 April 19,

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 67.10

41.5

22.1

41.4

22.0 67.05

41.3

21.9

41.2

Max 41.5

average 41.293

Max 43.2

Min 41.1

average 42.845

Last 41.5

Min 42.4

Last 42.85

41.1

Max 67.1

average 67.052

20.10

43.0

20.05

42.8

20.00

42.6

19.95

42.4

Max 20.1

average 19.972

Min 19.9

Last 19.92

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Sep13

104.46

0.086231676

11.45966709

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

107.35

-0.083767684

1.016279289

114.3699951

96.65000153

GASOLINE RBOB FUT Sep13

287.73

0.215945108

5.09149348

309.1700077

260.2499962

GAS OIL FUT (ICE) Sep13

905

-0.357830994

-0.302946847

980

832.5

3.235

-0.369571913

-10.0889383

4.517000198

3.224999905

296.53

0.037109507

-0.942041089

319.1699982

275.5500078

Gold Spot $/Oz

1292.61

1.2058

-22.3406

1796.08

1180.57

Silver Spot $/Oz

19.7887

2.5773

-34.2786

35.365

18.2208

Platinum Spot $/Oz

1448.75

2.1145

-4.5462

1742.8

1294.18

Palladium Spot $/Oz

728.65

1.9447

4.1434

786.5

572.7

LME ALUMINUM 3MO ($)

1797

0.475258597

-13.31403763

2200.199951

1758

LME COPPER 3MO ($)

7006

0.014275517

-11.66309419

8422

6602

LME ZINC

1848

-0.538213132

-11.15384615

2230

1779

13975

1.784413693

-18.08323564

18920

13205 14.60000038

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13

3MO ($)

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

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

15.37

0.162919518

-0.227198961

16.47500038

461.75

0.763775232

-23.00958733

665

455

WHEAT FUTURE(CBT) Dec13

657.75

0.228571429

-19.85988425

913

651.25

SOYBEAN FUTURE Nov13

1173.5

0.664808063

-9.921320284

1409.75

1162.5

COFFEE 'C' FUTURE Sep13

121.05

-20.59691702

196.75

115.3499985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

CORN FUTURE

Dec13

SUGAR #11 (WORLD) Oct13

16.78

COTTON NO.2 FUTR Dec13

88.5

0.192460093

-16.35094716

21.82999992

12.39522479

89.55999756

World Stock Markets - Indices NAME

19.90

Max 22.1

average 21.885

Min 21.8

21.8

Last 21.8

21.4

21.3

21.2

Max 21.35

average 21.243

Min 21.1

Last 21.3

21.1

Currency Exchange Rates

NAME

METALS

67.00

Last 67

43.2

Commodities ENERGY

Min 67

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15470.67

-0.3097545

18.05941

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3654.009

-0.320833

21.01316

3694.188

2810.8

FTSE 100 INDEX

6527.93

0.2567879

10.68397

6875.62

5605.589844

DAX INDEX

8276.87

0.1984146

8.728928

8557.86

6871

NIKKEI 225

13605.56

-1.586842

30.88335

15942.6

8488.14

HANG SENG INDEX

21655.88

0.3105308

-4.418249

23944.74

19076.78906

CSI 300 INDEX

2276.782

-0.1684189

-9.757218

2791.303

2023.171

TAIWAN TAIEX INDEX

7907.67

-0.1719417

2.703681

8439.15

7050.05

KOSPI INDEX

1883.97

0.3002667

-5.662355

2042.48

S&P/ASX 200 INDEX

5064.799

1.067587

8.945001

4640.781

0.3556186

FTSE Bursa Malaysia KLCI

1779.32

NZX ALL INDEX

PHILIPPINES ALL SHARE IX

JAKARTA COMPOSITE INDEX

DAY %

YTD %

(H) 52W

(L) 52W

0.906 1.5508 0.9206 1.3351 96.28 7.9891 7.7563 6.1206 61.105 31.27 1.262 29.943 43.61 10298 87.229 1.22905 0.86089 8.168 10.666 128.54 1.03

1.4785 0.3884 0.6192 0.4439 1.0386 -0.005 -0.0026 -0.018 0.315 0.5437 0.4358 0.1169 0.3669 0.3593 -0.4265 0.1749 -0.0558 -0.5436 -0.435 0.599 0

-12.6999 -4.1296 -0.5648 1.2206 -10.5733 -0.0739 -0.0735 1.7972 -9.9992 -2.2066 -3.2171 -3.0391 -5.9734 -4.9039 2.4052 -1.755 -5.2817 0.606 -1.2713 -11.6462 -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 7.799 9.7946 95.94 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.42

1.609195

40.31746

4.63

2.35

VOLUME CRNCY 3333731

13.19

1.150307

23.61762

13.75

8.48

2215914

AMAX HOLDINGS LT

1.2

15.38462

-14.28571

1.72

0.75

9551800

BOC HONG KONG HO

24.85

0.6072874

3.112032

22.85

6161069

CENTURY LEGEND

0.325

1.5625

22.64152

0.42

0.22

6.52

-0.4580153

8.848084

6.74

3.04

41542

CHEUK NANG HLDGS

COUNTRY

PRICE

CHINA OVERSEAS

-0.4329021

25.6

17.28

13204300

CHINESE ESTATES

16.76

3.075031

49.03675

16.98

7.824

342176

CHOW TAI FOOK JE

9.88

-0.1011122

-20.57878

13.4

7.44

795100

EMPEROR ENTERTAI

2.7

42.85714

3.07

1.35

672000

2.23

3.72093

83.98943

2.76

1.013

3774000

FUTURE BRIGHT GALAXY ENTERTAIN

41.5

1.591187

36.73805

44.95

19.6

4540052

121.9

1.161826

2.695875

132.8

109

1422243

HOPEWELL HLDGS

24.7

0.610998

-25.71429

35.3

23.047

537000

HSBC HLDGS PLC

84.25

0.1783591

3.628532

90.7

65.85

9624824

HANG SENG BK

HUTCHISON TELE H

3.63

1.114206

1.966294

4.66

2.98

10479300

LUK FOOK HLDGS I

22.2

-1.552106

-9.016392

30.05

16.88

1714000

MELCO INTL DEVEL

16.32

-0.2444988

81.13207

18.18

5.54

3227496

MGM CHINA HOLDIN

21.8

-0.228833

64.1779

23.65

11.176

2660600

1770.53

MIDLAND HOLDINGS

3.12

-15.67568

2.68

324000

5249.6

4261.2

NEPTUNE GROUP

0.178

1.714286

17.10527

0.23

0.131

14540000

7.507928

5251.296

3978.078

NEW WORLD DEV

10.98

-0.1818182

-8.65225

15.12

9.38

7124751

-0.2980993

5.350662

1826.22

1590.67

SANDS CHINA LTD

42.85

0.7050529

26.21502

43.7

23.7

6951309

SHUN HO RESOURCE

1.42

1.428573

1.67

1.06

969.936

-0.1796884

9.96346

998.487

795.438

SHUN TAK HOLDING

3.75

1.351351

-10.50119

4.65

2.65

4073751

3918.63

-0.1256512

5.938121

4571.4

3411.69

SJM HOLDINGS LTD

19.92

12.24016

22.382

14.573

3013150

SMARTONE TELECOM

11.16

-2.956522

-20.73864

17.38

11.1

1851317

WYNN MACAU LTD

21.3

-0.6993007

1.670641

26.5

16.92

4284700

ASIA ENTERTAINME

4.08

-1.923077

44.95416

4.7647

2.4835

106343

BALLY TECHNOLOGI

72.6

-0.5751849

62.37978

74.26

41.74

345189

BOC HONG KONG HO

3.28

6.840393

3.6

2.99

2151

GALAXY ENTERTAIN

5.33

-1.841621

34.25693

5.77

2.5

13075 2015173

HSBC Dragon 300 Index Singapor

614.21

0.23

-1.11

STOCK EXCH OF THAI INDEX

1447.15

1.200008

3.967151

1649.77

1207.53

HO CHI MINH STOCK INDEX

498.22

-0.3759248

20.42153

533.15

372.39

Laos Composite Index

1357.21

0.1505346

11.72567

1455.82

1003.17

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

INTL GAME TECH

18.93

0.96

33.5921

20.25

11.12

JONES LANG LASAL

88.32

-1.307409

5.21801

101.46

66.82

255036

LAS VEGAS SANDS

56.19

-1.056524

21.72877

60.54

36.3606

2816661

MELCO CROWN-ADR

25.82

-0.8829175

53.32541

26.56

10.01

2520982

MGM CHINA HOLDIN

2.98

70.25737

2.98

1.4381

978

MGM RESORTS INTE

17.28

2.188054

48.4536

17.67

9.15

15098120

SHFL ENTERTAINME

22.76

-0.08779631

56.96552

23.08

12.35

538599

SJM HOLDINGS LTD

2.59

13.71539

2.9481

1.9128

729240

139.01

-0.122144

23.57543

144.99

92.9122

1146597

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME AIA GROUP LTD

PRICE

DAY %

VOLUME

35.05

-0.0305185

22468664

ALUMINUM CORP-H

2.43

-1.219512

6194434

BANK OF CHINA-H

3.16

0.3174603

139755531

BANK OF COMMUN-H

5.02

0.1996008

27178906

BANK EAST ASIA

30.25

0.1655629

1327534

BELLE INTERNATIO

11.34

3.278689

18660160

NAME

DAY %

VOLUME

11.54

2.669039

30574704

POWER ASSETS HOL

8.39

0.4790419

4574000

SANDS CHINA LTD

CLP HLDGS LTD

64.25

0.7053292

1366423

SINO LAND CO

CNOOC LTD

13.88

27277874

COSCO PAC LTD

10.78

2.27704

1795898

SWIRE PACIFIC-A

ESPRIT HLDGS

13.52

1.960784

5765673

TENCENT HOLDINGS

CHINA UNICOM HON CITIC PACIFIC

PRICE

NAME

PRICE

SUN HUNG KAI PRO

DAY %

VOLUME

69.75

1.086957

1251400

42.85

0.7050529

6951309

10.8

-1.279707

3861178

102.7

0.09746589

1742268

92.2

-0.2164502

691330

356.4

-1.054969

4025879

BOC HONG KONG HO

24.85

0.6072874

6161069

HANG LUNG PROPER

25.15

0.8016032

5079311

TINGYI HLDG CO

19.18

-1.134021

1271911

CATHAY PAC AIR

13.94

-0.8534851

1415000

HANG SENG BK

121.9

1.161826

1422243

WANT WANT CHINA

10.36

1.369863

8015819

CHEUNG KONG

111.8

0.7207207

1928327

HENDERSON LAND D

47.45

-0.1052632

1557015

WHARF HLDG

67.95

0.0736377

2395845

4.18

2.45098

46164199

HENGAN INTL

87.15

0.1148765

973748

20.05

1.058468

3789845

120

-0.4149378

2260447

84.25

0.1783591

9624824

CHINA COAL ENE-H CHINA CONST BA-H

5.6

0.5385996

89142791

HONG KG CHINA GS

CHINA LIFE INS-H

18.28

0.109529

15204807

HONG KONG EXCHNG

CHINA MERCHANT

23.6

1.724138

1787084

CHINA MOBILE

1.096224

13249817

HUTCHISON WHAMPO

91.6

0.1640241

6284825

CHINA OVERSEAS

13204300

IND & COMM BK-H

4.95

0.4056795

130397157

CHINA PETROLEU-H

5.59

-0.3565062

52217629

LI & FUNG LTD

10.2

-0.9708738

17793603

CHINA RES ENTERP

23.85

0.845666

1077630

MTR CORP

29.4

1.204819

21.7

-0.913242

5479908

NEW WORLD DEV

10.98

-0.1818182

CHINA RES POWER

17.16

0.5861665

6208946

PETROCHINA CO-H

8.82

0.2272727

42198997

CHINA SHENHUA-H

1.616628

18344332

PING AN INSURA-H

49.5

0.5076142

6623220

CHINA RES LAND

HSBC HLDGS PLC

MOVERS

2 22000

INDEX 21655.88 HIGH

22000.94

1051752

LOW

21588.84

7124751

52W (H) 23944.74 (L) 19076.78906

21580

6-August

8-August

14 14

August 9, 2013 April 19, 2013

Classifieds Mountain Villa For Sale in Koh-Samui

Bruno Beato Ascenção

Price: HK$ 16 million

3 x King Bed en-Suites, 1 x King Bed basement Suite, 2 x 2 Single Bed, Spacious Living area and fully furnished kitchen, Swimming pool - children / adult, 2 levels Maid’s quarter, Fully Furnished, Balcony, Terrace / Patio, 2 x Outside Salas, Barbecue, 2 x Parking Spaces, 7-seater SUV included. Contact Ms Chan - Sarah@clever-cloggs.com.hk Tel: 2861-3317

Lawyer

Avenida da Praia Grande, no. 409, China Law Building, 11th floor. Tel:28785795 Fax:28785797 Email:bascencao@gmail.com

Recruitment

Marketing and Advertising Coordinator

Translations

Duties

Inês Dias

Highly reputable media company is looking to hire a full-time Marketing and Advertising Coordinator with competitive salary. • Plan and implement various promotions, costumer communication and company’s events • Coordination of different marketing teams • Implementing strategic quarterly plans and meeting clients

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

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

15 15

August 9,2013 2013 April 19,

Opinion

Bo Xilai’s trial exposes wires truth about China Business

Leading reports from Asia’s best business newspapers

Asahi Shimbun Public sentiment in Japan and China toward each other has deteriorated to one of the worst levels over the Senkaku/ Diaoyu Islands dispute and differences in historical perceptions, a survey found on August 5. More than 90 percent of Japanese and Chinese have an unfavourable impression of each other’s country, according to a survey by Japanese think tank Genron NPO and the publisher of the English-language newspaper China Daily. It was the first time that the figures exceeded 90 percent since the annual survey started in 2005.

Minxin Pei

Professor of Government at Claremont McKenna College

Inquirer Business The rise in consumer prices in the Philippines slowed to a near four-year low last July amid steady energy prices and the modest rise in food costs, government data showed. The central bank hinted at further adjustments in its monetary policies, citing the slower-than-expected rate in price increases provided space for accommodative policies that would counter the possible effects of weak global economic conditions on the Philippines. Inflation for July was 2.5 percent, the lowest since September 2009.

The Age The flow of wealth from the mines of Australia’s north-west to its cities in the south-east is now permanent, according to new BHP Billiton Ltd chief executive Andrew Mackenzie. Despite fears the peak of the mining investment boom is in the past, Mr Mackenzie said the link between mining growth and consumer spending would not go away. “I believe that this impact is now permanent,” he said. But the country’s productivity and competitiveness are not strong enough, he added. ‘‘We must all get sharper at productivity,’’ he said.

China Daily China’s top economic planning agency has promised to drive more private capital into infrastructure, basic industries and public utilities in response to the new leadership’s market-oriented reform plans currently taking shape. Local governments and ministries in the second half of this year will be urged to roll out some major projects that involve private capital, the National Development and Reform Commission said in a statement posted on its website. It also promised to create an environment conducive for private investors, cutting “unnecessary administrative interference” and innovating services for private investors.

Bo Xilai

lmost 18 months after it roiled the Chinese political establishment, the Bo Xilai scandal is drawing to a close. The trial of the former Chongqing Communist Party chief could start as early as this week. If anything, the ignominious end of Bo – once viewed as a shoo-in for a spot on the party’s Politburo Standing Committee, China’s top decision-making body – is an anti-climax. Even if the trial were public, we would witness no courtroom drama. Bo, who hasn’t appeared in public since March 2012, will almost certainly be presented as a broken and penitent man. A guilty verdict is a foregone conclusion. The only outcome worth guessing is Bo’s sentence. Judges will have no discretion over this matter. The sevenman Politburo Standing Committee will already have determined how much time Bo will serve. (Although the corruption charges against Bo could carry a death sentence, the party has an unspoken policy of not executing any purged Politburo-level leaders.) If Chinese leaders hope that the trial will put an end to the most sordid political scandal since the death of Mao Zedong, however, they are wrong. They will no longer speak of Bo after he is dispatched to the infamous Qincheng Prison outside Beijing, where the Communist Party imprisons disgraced senior officials. The questions raised by Bo’s case, though, will continue to dog the party and undermine its credibility. As is the case with all political scandals, the Bo Xilai affair has exploded several important myths about one-

party rule in China. Among these myths, the most alluring and widespread is the idea that the post-Mao leadership has perfected a system of managing internal conflict and maintaining elite unity.

Exploded myths Proponents of this idea, dubbed “authoritarian resilience,” argue that China’s leaders have bypassed the need for democracy. Instead, they employ devices such as term limits, a regular rotation of appointments, systematic screening and mandatory retirement as effective means of divvying up power among competing groups and individuals. On paper, these arrangements seem flawless. But in practice, they can be gamed, and the competition for power inside an opaque regime that resists binding, well-acknowledged rules can be especially fierce. As Bo’s case shows, in such a system, the greater the prize, the more ruthless the fight. Winners prevail not because of their merits, but because of their ability to cobble together a more powerful coalition. As for the losers, it is hard not to pity their spectacular fall. They not only get booted out of office but also must suffer the most humiliating (though not necessarily undeserved) airing of their personal failings. In fact, Bo is not the first member of the Politburo to fall victim to such a purge since the Tiananmen Square crackdown in 1989. Two former Politburo members were also sent to jail for corruption and debauchery – the same crimes Bo has been

charged with. Despite the image of a consensus-driven leadership, there is simply no political loyalty at the top – just as in the bad old days of Mao’s rule. When Bo was riding high between 2009 and 2011, practically all the senior Chinese leaders – except for Hu Jintao, then the general secretary of the party – visited Chongqing to endorse Bo’s neo-Maoist model of development. But once Bo’s political prospects were doomed by his police chief’s attempted defection to the U.S. consulate in Chengdu, these supposed friends and allies instantly turned against him. The denouement of Bo’s saga will also help destroy yet another widely accepted myth about the Communist Party – namely, that the regime is a meritocracy.

Despite the image of a consensusdriven leadership, there is simply no political loyalty at the top

This idea has a tight grip on Western politicians and business executives who have interacted personally with top Chinese leaders. Adjectives like “smart,” “dynamic” and “cosmopolitan” are generously applied to officials like Bo.

Mediocre careers It remains a puzzle to China-watchers how these Westerners, who speak no Mandarin and normally spend just an hour or two with characters like Bo, could have reached such definitive assessments about their capabilities. Even a casual examination of the records – not the resumes – of leaders similar to Bo would quickly reveal that they all boast mediocre careers. What has lifted them above their often more talented peers are powerful patrons. That brings us to the real reason for Bo’s fall from grace. “In the land of the blind,” the old saying goes, “the one-eyed man is king”. Although much praised for cleaning up Chongqing, Bo hardly stood out as an administrator. Instead, he had outsize ambition, took big risks and used ruthless tactics against his enemies. For a time, this brazenness catapulted Bo to the front of the pack. Rivals knew better than to challenge him. Fear, though, unified his foes and ultimately became Bo’s undoing. As the former swaggering princeling prepares for his final humiliation in a Chinese courtroom, he should understand better than anyone the flaws of a system that made – and destroyed – him. Bloomberg View

August 9, 2013

Closing NagaCorp profit up 20 pct in first half

Nestlé quarterly sales disappoint

Cambodian casino operator NagaCorp Ltd saw net profit increase 20 percent year-on-year in the first half of 2013, thanks to improvements in revenues for mass market table games and slot machines, the firm said in a Hong Kong filing. NagaWorld has a 70-year casino licence that will run till 2065, as well as a 41-year monopoly within a 200-kilometre (124-mile) radius of the capital Phnom Penh. Net profit grew to US$62.9 million (502.50 million patacas). The firm declared an interim dividend of 1.93 US cents per share, to be paid on September 27.

Nestlé SA reported the slowest first-half revenue growth in four years as price reductions and cold weather in Europe weighed on sales. The world’s largest food company by revenues said that in the six months to June, sales rose 5.3 percent to 45.2 billion Swiss francs (US$49.1 billion). Analysts had expected 45.6 billion Swiss francs. Revenue increased 4.1 percent, excluding acquisitions, divestments and currency shifts, the company said in a statement. The company said yesterday it expects to reach organic sales growth of about 5 percent this year, the low end of its target.

China drug sector probe widens Novo Nordisk says site in Tianjin visited by officials this month

hinese authorities have visited a site operated by Danish drugmaker Novo Nordisk A/S, the world’s biggest maker of insulin, the latest evidence of a widening investigation into Western drugmakers. A Chinese newspaper also reported an allegation from an unnamed person that Sanofi SA of France had paid around 1.7 million yuan (US$276,200) in bribes to hundreds of doctors in China in 2007, a claim Sanofi said it took “very seriously”. The latest developments suggest Chinese investigations into bribery and over-pricing, which have so far centred on Britain’s GlaxoSmithKline Plc (GSK), may have a wide impact across the pharmaceuticals industry. Novo said yesterday that the local Administration for Industry and Commerce (AIC) officials visited a production facility in Tianjin on August 1, adding there had been no visit at the company’s head office in the country. “We were asked to provide information regarding our operations in China,” chief financial officer

Analysts see slowing pharma growth due to crackdown

Jesper Brandgaard told reporters as he presented second-quarter results. “Whether this was a routine check or triggered by the (GSK) case reported recently in the media is not completely clear to us. However,

the local AIC hasn’t accused Novo Nordisk of any wrongdoing.” Chinese police have detained four Chinese executives of GSK and questioned at least 18 other staff amid allegations the drugmaker funnelled

up to 3 billion yuan (US$489 million) to travel agencies to facilitate bribes to doctors and officials. At the same time, the powerful National Development and Reform Commission is examining pricing by 60 local and international pharmaceutical companies. AstraZeneca Plc, meanwhile, has had a sales executive detained in Shanghai, while Eli Lilly & Co and Belgium’s UCB SA have also had visits to premises in China. Industry analysts at Wells Fargo Securities, citing the views of a China expert with law firm Ropes & Gray, said the knock-on effect would be to crimp growth for multinational pharmacy companies in China, where the authorities are expected to push for harsher price controls. As a result, the rate of growth for drug sales in the country could fall to around 10 percent a year from an historical 20 percent, they wrote in a research note. For Novo investors, the potential problems in China were offset by the company’s decision to raise its full-year guidance for a third time in six months, after doubledigit sales growth in diabetes drug Victoza and modern insulin helped lift second-quarter operating profit above forecasts. Reuters

JPMorgan faces new criminal probe Bank discloses fresh examination by U.S. government

The U.S. is investigating JPMorgan

PMorgan Chase & Co, the biggest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgagebacked bonds that the Justice Department has already concluded broke civil laws. The department’s civil division told the bank in May of its preliminary finding after examining

securities tied to subprime and Alt-A loans, which were sold to investors from 2005 through 2007, JPMorgan said. The office of U.S. Attorney Benjamin Wagner in Sacramento, California, has been conducting civil and criminal inquiries, the bank said. “It would be a major decision for them to indict a major U.S. bank, and frankly I would not predict it,” said

John Coffee, a professor at Columbia Law School in New York. “You can often bring dual investigations, civil and criminal, in order to maximise pressure for a global civil resolution.” Investigators are seeking to wrap up years-long probes of abuses that fuelled the housing collapse and led global credit markets to freeze in 2008. This week, the Justice Department and Securities and Exchange Commission sued Bank of America Corp, the nation’s second-biggest lender, accusing it of misleading investors in an US$850 million mortgage-backed bond. “Whether they are waking up belatedly to the public’s need for retribution or looking at the expiration of the statute of limitations, they are reaching similar decisions about Bank of America and JPMorgan,” Mr Coffee said. The U.S. is investigating JPMorgan under the Financial Institutions Reform, Recovery and Enforcement Act, according to a person briefed on the matter, requesting anonymity because details of the inquiry aren’t public. The 1989 law, known as FIRREA, allows the government to seek civil

penalties for losses to federally insured financial firms. The Bank of America case cited the same statute. Lauren Horwood, a spokeswoman for Mr Wagner in Sacramento, declined to comment on the bank’s disclosures. JPMorgan “continues to respond to other MBS-related regulatory inquiries,” the New York-based company wrote in a regulatory filing listing investigations. Federal and state authorities have sent subpoenas and requests for information about its origination and purchase of mortgages, and the packaging of debts into bonds, the bank said. Investigators asked about the “treatment of early payment defaults, potential breaches of securitisation representations and warranties, reserves and due diligence in connection with securitizations,” it said. “The Department of Justice is likely to be extremely cautious” in the criminal probe, Mr Coffee said. “If they did anything, they might indict a subsidiary” or individual executives, he said. Bloomberg News