Macau Business Daily, July 10, 2013 by Business Daily

MOP 6.00 Deputy editor-in-chief

Vitor Quintã

April 19, 2013

One country, Two premiums

Investors ‘watch and wait’ on VIP gambling

Page 5

Insurance costs hamper taxi fleet growth

www.macaubusinessdaily.com

Year II

Number 323

Wednesday July 10, 2013

Editor-in-chief Tiago Azevedo

Page 6

s ties between Macau and the mainland grow and more people aspire to drive rather than walk across the border, a proposal for a single motor insurance system reveals just how far off is true integration for the two jurisdictions. The biggest drawback is that a single policy wouldn’t actually save motorists money. They will still in likelihood have to pay premiums on both sides of the border, says local dealer China Taiping Insurance (Macau) Co Ltd, a unit of state-owned Taiping General Insurance Co Ltd. The Guangdong Insurance Regulatory Commission on the mainland will also need to consider the single-policy proposal, but no timetable for such a move has been disclosed. And there is no mutual recognition of driving licences between Macau and Guangdong. More on page 3

I SSN 2226-8294

Franchises give novices in business a head start

Hang Seng Index

Young entrepreneurs should consider using government interestfree loans to acquire a franchise, says an expert in the sector. “How can they start a business? They should first have this insight and learn how to operate,” the president of the Macau Chain Stores and Franchise Association, Jaman Wong Ian Man, told reporters yesterday. The three-day Macau Franchise Expo starts on Friday at The Venetian Macao.

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‘No enforcement’ by SEC on Wynn university pledge Wynn Resorts Ltd said United States’ securities regulators wouldn’t be taking enforcement action over a 1.1 billion patacas (US$137.7 million) donation pledged in 2011 to the University of Macau. Former Wynn Resorts director Kazuo Okada claimed the promise was an improper use of company money, given its unit Wynn Macau Ltd was at the time seeking Macau government permission for a new casino resort on Cotai.

Tourists could face cash declaration at borders The Macau government is considering making travellers declare cash they carry across the border. Some observers argue such a system could hurt the performance of the cash bet-only mass-market tables. Some investors seemed to agree. The city’s gaming stocks tumbled yesterday. Macau is studying a “cross-border cash declaration system,” Deborah Ng, director of the Financial Intelligence Office, told news agency Lusa last week. Page 4

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July 9

HSI - Movers Name

%Day

CHINA RES ENTERP

3.64

SINO LAND CO

3.52

COSCO PAC LTD

3.10

POWER ASSETS HOL

2.62

NEW WORLD DEV

2.31

CHINA LIFE INS-H

-0.90

SANDS CHINA LTD

-1.09

CHINA SHENHUA-H

-2.80

GALAXY ENTERTAIN

-3.79

CHINA COAL ENE-H

-3.89

Source: Bloomberg

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July 10, 2013

Macau

Franchises give novices in business a head start Franchisers are good instructors, an expert says Tony Lai

tony.lai@macaubusinessdaily.com

The government intends to give interest-free loans to young entrepreneurs

oung entrepreneurs should consider using government interest-free loans to get franchises, from which they can learn valuable lessons, an authority on the subject says. “How can they start a business?

They should first have this insight and learn how to operate,” the president of the Macau Chain Stores and Franchise Association, Jaman Wong Ian Man, told reporters yesterday. “Franchising is what can actually teach them about

operations,” Mr Wong said. “They can learn from the experience of others through franchising, as franchisers are good instructors.” Franchising is a business practice by which a franchisee

starts a venture using the brands, trademarks and business models of a successful company. The Macau Chain Stores and Franchise Association has about 60 members. Mr Wong believes the government’s intention to offer interest-free loans to young entrepreneurs is “good news” for franchising. Macau Economic Services told Business Daily last month that it could begin taking applications as soon as the end of this month for loans of up to 300,000 patacas (US$37,500) for first-time businessmen aged between 21 and 44. The loans will be for up to eight years, but borrowers must begin repaying them after a year and a half. Mr Wong thinks the loans will be of mostly “symbolic” help, as operating costs are soaring. He said the loans would cover only part of the start-up capital needed. “Right now, 300,000 patacas or so may not be enough to renovate a store of several hundred square metres,” he said. Mr Wong said most franchisers here were in the food and drink business. He advises businessmen to broaden their outlook and not to limit the expansion of their businesses to Macau. “Use Macau as a platform to look into the mainland market,” is his advice. Mr Wong said businessmen should be aware of whether they were allowed to expand franchises they signed up for beyond the city. He said Macau’s market was limited because it had so few people. The population was 586,300 at the end of the first quarter.

Franchise event hopes to drive SMEs to luxury level Exhibition’s new focus is on creating opportunities in the luxury service industry

his year’s Macau Franchise Expo will zero in on helping small and medium enterprises become high-end service providers. The three-day exhibition starts on Friday at The Venetian Macao. “In past years we mentioned the service industry but this time [we are talking about] high-end services,” Macau Trade and Investment Promotion Institute executive director Echo Chan Keng Hong told a press conference yesterday. The change in focus was due to the city’s economic development and changes in its industrial structure, she said. Organisers of the fifth edition of the exhibition have invited businessmen and brands from around the world to share their experiences. A forum on high-end service industries will be held on Thursday, with speakers from Italy, France, New Zealand and Japan. “Through the rebranding and marketing of existing brands, the value of the service industry can be increased, which leads to rises in market share and profits [for local businesses],” Ms Chan said. The exhibition has attracted 160 exhibitors from 14 different territories, while Macau exhibitors

have risen by almost one-quarter from last year to 61 this year. Just under one-third of the exhibitors are from the retail sector, and about one-quarter are from the food and beverage industry. The expo will cover 6,000 square metres of floor space (64,600 square feet). Event manager Lo Tak Cheong said he hoped to see a 20 percent rise in visitors to 16,000 this year. More than 500 delegates from the Pearl River Delta region and Japan would attend the event over the weekend, he said. Ms Chan said the budget had increased by 10 percent owing to increased promotion costs. The budget was not made public. This expo is a platform for Macau firms and foreign brands to explore markets in the mainland, with Italian fashion houses looking to engage in talks with mainland firms during the exhibition. Event co-organisers the Macau International Brand Enterprise Commercial Association and the Association of Advertising Agents of Macau will hold seminars and a networking cocktail function over the course of the weekend. T.L.

July April10, 19,2013 2013

Macau Two groups refused election registration Two of the 22 groups that tried to register ahead of direct elections to the Legislative Assembly were rejected, the Public Administration and Civil Service Bureau has announced. The bureau said both had failed to meet all the criteria. The excluded groups – one headed by Luiz Pedruco and the other by Hoi Weng Chong – can appeal their omission. Some 20 groups with 147 candidates vying for 14 directly elected seats were registered for the September 15 election. In the 2009 elections, 16 groups with 124 candidates were registered. The indirectly elected seats will be uncontested with 12 candidates running for the 12 seats.

Single insurance for dual-plate vehicles awaits political input An insurer says currency restrictions and differences in cover are problems yet to be solved Stephanie Lai

sw.lai@macaubusinessdaily.com

everal technical difficulties stand in the way of single insurance policies for motor vehicles with dual registration plates for Macau and Guangdong province, the insurer in charge of the singlepolicy plan says. The Guangdong provincial government announced this month that the plan could be tested on Hengqin Island at the end of this year or early next year. The Guangdong Insurance Regulatory Commission suggested in April simplifying insurance for vehicles that cross the border frequently, mainland Chinese news media reported. Owners of vehicles with dual registration plates for Guangdong and Macau must have separate insurance cover for each place. State-owned Taiping General Insurance Co Ltd and its Macau branch are working on arrangements for a single policy valid in both places. “On a single sheet, you will have unified insurance terms covering the mainland and Macau,” said Alexander Hao Tak Seng, senior manager of China Taiping Insurance (Macau) Co Ltd’s motor insurance department. A single policy will not save policyholders money, though. They will still have to pay for two policies, one in each side. But they would be able to take out both policies at the same time and

Chow Tai Fook sales soar last quarter W

ith gold sales booming, Chow Tai Fook Jewellery Group Ltd said its revenue in Macau and Hong Kong has grown by 85 percent year-on-year in the second quarter of 2013. Such “remarkable” increase is “attributable mainly to the increase in sales of gold products following a sharp decrease of gold price since April 2013,” the company told the Hong Kong Stock Exchange. In a filing yesterday the world’s largest listed jewellery chain said sales of gold products in existing stores rose

Owners of vehicles with dual licence plates must have two insurance policies (Photo: Manuel Cardoso)

make just one payment each month for both, Mr Hao told Business Daily.

Obstacles remain He said that if the policyholder were to have an accident in the mainland, the mainland insurer would pay any valid claim, and if the policyholder were to have an accident in Macau, the Macau insurer would pay any valid claim. But Mr Hao said some obstacles had yet to be overcome. “Would the insurance buyer

by 78 percent year-on-year. The group opened 20 new outlets last quarter, including three in Macau and Hong Kong. Gold sales accounted for twothirds of Chow Tai Fook’s revenue in the last quarter, up from 57.4 percent in the financial year ended March 31. Gold products will account for 60 percent of group sales this year, managing director Kent Wong said at a conference call yesterday. But as gold is less lucrative than other jewellery, the firm’s gross profit margin has dropped about 3 percentage points from a year earlier, the filing says. In the last financial year Chow Tai Fook posted a profit margin of 28.4 percent. Chow Tai Fook outlets increased replenishment of inventories in the quarter to meet higher demand, according to the company. V.Q./Bloomberg News

or the injured third party know that when car accidents happen in the mainland, they have to claim for compensation there but not in Macau?” he said. Another obstacle is the yuanpataca exchange restrictions, which complicate the payment of premiums. Macau does not recognise Guangdong driving licences and vice-versa, so drivers that cross the border frequently must have separate licences for each place. The governments of Macau and Guangdong have said they would like drivers to have a single licence valid on both sides of the border, but have said little about how or when they might provide such licences. “If the [driving licence] recognition problem is not solved, it will have some impact on the single insurance policy plan,” Mr Hao said. Compulsory third-party insurance cover for vehicles is different on each side of the border.

Big differences “China’s compulsory insurance does not cover passengers in the car, unlike in Macau,” said Mr Hao. “Mainland car owners have to apply for a separate insurance plan to cover the passengers.” In the mainland, the minimum cover for vehicle damage or other property losses is 2,000 yuan (US$323.50). The minimum cover for medical expenses of injured parties is 10,000 yuan. In Macau, the minimum cover for property losses or medical expenses of injured parties is 1.5 million patacas (US$187,700) for light

vehicles and motorcycles. Business Daily asked the Monetary Authority of Macau to comment, but we had received no reply by the time we went to press. “Not everything concerning the single-policy plan is finalised,” Mr Hao said. “The pricing and the period of insurance cover have all yet to be decided,” he said. His company is awaiting more instructions from the Guangdong government. The Guangdong Insurance Regulatory Commission said last week that the single-policy arrangement could later be expanded to take in Hong Kong. The commission gave no schedule for putting the single-policy plan into action in Macau and Guangdong.

If the [driving licence] recognition problem is not solved, it will have some impact on the single insurance policy plan Alexander Hao, senior manager, China Taiping Insurance (Macau)

July 10, 2013

Macau

Tourists could be forced to declare cash at borders

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HOSPITALITY

Measure could dent mass market revenue, analysts say

Trivial numbers

Tony Lai

tony.lai@macaubusinessdaily.com

The increase in the number of hotel rooms in Macau has been closely followed by an increase in the number of guests that use them. The average number of hotel guests in the first four months of this year was almost one-third higher than in the equivalent period two years earlier. By far the greater part of the guests are Asian visitors, predominantly mainland Chinese. People from other parts of the world usually make up a small fraction of the total number of visitors and the total number of hotel guests. Between January 2011 and April this year no more than 4 percent of hotel guests came from outside Asia. Unsurprisingly, in view of where some of the big operators of casinos come from, a large part of that 4 percent come from the five main countries where English is the predominant language: Australia, Britain, Canada, New Zealand and the United States.

Travellers to Macau are not required to report how much cash they bring in

T On average, over 45 percent of non-Asian guests in the period represented in the chart were from those five countries. Only about 20 percent were from Europe excluding Britain. The numbers of hotel guests from elsewhere varied a lot, and tended to fall between the numbers from the main predominantly English-speaking countries and the numbers from Europe excluding Britain. The underlying trend in all three plots is upward, the fastest-rising plot being that for the five English-speaking countries. J.I.D.

10,250

Average number of non-Asian hotel guests per month in the two years to April

he Macau government is considering a system requiring travellers to declare the cash they carry across the border against money laundering. The city’s gaming stocks tumbling as some critics argue this could hurt the performance of the mass market tables. Macau is studying a “crossborder cash declaration system,” Deborah Ng, director of the Financial Intelligence Office, told Bloomberg on Monday. “But no timeframe, declaration threshold or penalties are determined yet at the present stage,” she added. Any controls imposed by Macau’s government would back China’s currency curbs, which restrict how much money Chinese tourists can take out of the country. Mainland China accounted for over 60 percent of all visitors coming to Macau last year. “Such talk may hurt the sentiment on Macau casino stocks,” Victor Yip, a Hong Kong-based analyst at UOB Kay Hian Ltd, said. “But it won’t hurt the casino revenue because there are so many different ways a traveller can get cash in Macau.” The stocks of the city’s six gaming operators all fell yesterday, with Galaxy Entertainment Group taking the hardest fall: 3.79 percent to HK$35.55 (US$4.58). But Barclays Bank said in a report that there would be “some

negative impact” on mass-market gaming revenue. Zeng Zhonglu, vice president of the Gaming Academic Committee at the Macau Polytechnic Institute, shares this view. “The measure will have more impact on the mass market as most gamblers in that segment carry cash [across the border] with them,” said the gaming professor. “I expect lighter impact on the VIP market as those gamblers can still get money through junkets,” he told Business Daily.

Free port Casino gross gaming revenue was 171.4 billion patacas (US$21.4 billion) in the first half, 15.3 percent more than a year earlier, according to data from the Gaming Inspection and Coordination Bureau, with about 70 percent coming from the VIP market. In contrast, Davis Fong Ka Chio, director of the Institute for the Study of Commercial Gaming at the University of Macau doubts this measure would have any impact on mass market gaming. “According to our previous studies, the median gaming expenses for the mass market was only 5,000 patacas,” Mr Fong told Business Daily. “And I do not think the threshold will be set up as low as like 10,000 patacas.” Currently travellers to Macau are

not required to report how much cash they bring in. But mainland China customs mandates passengers can only bring 20,000 yuan (26,060 patacas) when traveling across the border and withdraw as much as 10,000 yuan a day with each card at cash machines. Mr Fong questioned the need for the territory to have a cash declaration system when there is already one in place in the mainland. “Macau and Hong Kong have a free-port image as there are less strict regulations, like no cash declaration system,” he said. “There should be more discussions as this will bring changes to many industries, not only to gaming.” The Financial Intelligence Office told Portuguese news agency Lusa last week such rules were to “correct the deficiencies” pointed out by the Financial Action Task Force in 2007. The international watchdog said at the time the city “does little to combat cash smuggling”. Mr Zeng believes this potential rule and the dismantling of a major loan shark gang show “Macau and the mainland are determined to further step up measures to regulate the gaming industry”. The Judiciary Police here last month busted the largest loansharking network since 1999. The police believe the gang had extorted over HK$500 million from gamblers. With Lusa/Bloomberg News

July 10, 2013

Macau

Investors ‘watch and wait’ on VIP demand: J.P. Morgan July gambling tracking 16 to 21 pct growth y-o-y in Macau, add analysts Michael Grimes

michael.grimes@macaubusinessdaily.com

nvestors are “closely” monitoring demand for VIP gambling in Macau in the light of recent market concerns over possible tightening of credit conditions in China, said a note from J.P. Morgan in Hong Kong. “Based on historical experience, tighter liquidity normally takes one to two months to filter into the VIP [gambling] system,” wrote the bank’s sector analyst Kenneth Fong. “As a result, the revenue trend over the next few weeks will likely be closely monitored by investors. Until there is clarity on the trend of VIP demand, we believe the sector will consolidate,” he added. Karen Tang of Deutsche Bank in Hong Kong said in a note at the beginning of this month that the Macau casino sector’s stocks were currently “priced to perfection”; an elegant way of saying there’s not much room for significant upside in the short term. “While long-term bullish, we stay Neutral in the near term as the sector seems to be priced to perfection, trading at 12.5 times 2013 estimated enterprise value to EBITDA [earnings before interest, taxation, depreciation and amortisation], above historical average [of] (11 times),” wrote Ms Tang. Macau junket investment firms

listed in Hong Kong took a hit on their generally little-traded stocks yesterday on fears – probably overplayed say analysts – that tighter enforcement in Macau of the rules on physical transportation of currency over the border from the mainland might somehow hit the high roller segment. In other developments, July gaming revenue in Macau is tracking 16 percent to 21 percent ye ar-o n - y ea r g r o wth , s u g g es t several analysts. “Based on early trends through July 7, we estimate Macau gaming

revenue growth for July is trending between 16 to 21 percent year-onyear,” said Cameron McKnight of Wells Fargo in New York in a note. Mr McKnight added that the average daily revenue run rate for the week was one billion patacas (US$125.2 million), up 10 percent week-on-week, and probably driven by high casino hold on VIP play. He pointed out however that year-on-year revenue growth July 2012 was nearly flat. Added to the slower growth in the feeder economy in mainland China, the casino sector was also

Smooth path? Investors wait-and-see on VIP demand

‘No enforcement’ by SEC on Wynn’s university pledge U.S. Department of Justice inquiry on MOP1.1 bln promise not yet formally concluded Michael Grimes

michael.grimes@macaubusinessdaily.com

ynn Resorts Ltd said United States’ securities regulators wouldn’t be taking enforcement action over a 1.1 billion patacas (US$137.7 million) donation pledged in 2011 to the University of Macau.

Stuck in the middle – University of Macau

Former Wynn Resorts director Kazuo Okada claimed the promise was an improper use of company money, given its unit Wynn Macau Ltd was at the time seeking Macau government permission for a new casino resort on Cotai.

But Wynn Resorts said in a filing on Monday U.S. time that on July 2 a letter from the U.S. Securities and Exchange Commission regional office in Salt Lake City, Utah – one of only two U.S. states with an outright ban on gambling – confirmed an inquiry had been completed with no enforcement recommendation. Mr Wynn told the Associated Press: “We were so sanguine that we never paid any attention to it [the allegations]. We had no exposure. It was a non-event, except for the damn newspapers.” No comment was available from Mr Okada’s side at the time Business Daily went to press. The Nevada Gaming Control Board in February advised Wynn Resorts it had completed its own investigation of Mr Wynn and related companies in Macau and found no violations of state gambling regulations, the company said in Monday’s filing.

hit by arrival late in the month of Typhoon Vicente. It made landfall in Macau on July 24 last year, as the first category nine typhoon in a decade, shutting down the transport systems the city relies on to bring in visitors. The event shaved at least 700 million patacas off that month’s revenues said analysts at the time. “We note an easy comparison this month as gaming revenues in July 2012 grew just 1.5 percent year-onyear,” said analyst Mr McKnight. “The strong weekly number was in part due to a higher than normal VIP luck factor,” said Kenneth Fong of J.P. Morgan, commenting on the first seven days of this July. “Given that there are only seven days of revenue, the swing in luck factor could distort the revenue significantly,” adds Mr Fong. “We estimate that the win rate for last week was around 3.2 percent to 3.3 percent (versus theoretical win rate of 2.85 percent). Adjusted for luck, we believe the daily revenue run rate is about 900 million to 930 million patacas,” he wrote. He said that assuming daily revenue for the rest of the month achieves 950 million patacas per day, July revenues should hit 29.8 billion patacas, or 21 percent yearon-year growth.

But a U.S. Department of Justice inquiry covering the same issue hasn’t yet been officially concluded. Wynn Resorts said in a May filing it hadn’t received any subpoena on that. All three regulatory tangles stem from the acrimonious rift in February 2012 between Wynn Resorts’ chairman Steve Wynn, and a former financial backer and director; Japanese pachinko billionaire Mr Okada. Wynn Resorts said in filings it pushed Mr Okada out because his conduct in separately pursuing a Philippines casino licence put the firm’s Nevada licence at risk. Mr Okada’s strongly denies wrongdoing and claimed in a letter to Wynn Resorts’ shareholders his ousting was to consolidate Mr Wynn’s control. At the time Mr Okada held nearly 20 percent of Wynn Resorts, making him the firm’s biggest single stakeholder following the second divorce between Mr Wynn and his first (and second) wife Elaine Wynn, and the splitting of their holding. Mr Okada filed counterclaims to undo a forced redemption of his Wynn Resorts shares. In late April the Justice Department asked for a stay in civil proceedings in Nevada between Mr Okada and Wynn Resorts while it investigated possible criminal conduct and possible breaches of the U.S. Foreign Corrupt Practices Act in Mr Okada’s pursuit of a Manila gaming licence. The statute bars payments to foreign officials. With Bloomberg News

July 10, 2013 April 19, 2013

Macau Brought to you by

FINANCIAL MONITOR VANISHING MARKETS Macau’s external trade is dominated by Asia and, in particular, Hong Kong and mainland China. It is only the status of Macau and Hong Kong as customs territories separate from the mainland that makes it external trade at all. The make-up of Macau’s trade is changing. Ever-greater percentages of our exports go to Asia. The proportion of our exports that goes to Asia rose from around two-thirds early in the period represented in the chart to over three-quarters later on.

Consequently, the amount of our exports generally and their ups and downs are almost exclusively determined by the amount and the ups and downs of our exports to Asia. The value of exports to other parts of the world has been quite stable, being about 200 million patacas (US$25 million) per month, but their relative importance has been declining. In early 2010, the value of exports to Europe and the United States combined was greater than the value of exports to all other countries outside Asia. In August 2010, the value was almost twice as big. All that has changed. For the past nine months, the value of exports to Europe and the United States has been between one-third and twothirds of the value of exports to the rest of the world. The demise of Europe and the United States as markets for Macau’s exports seems irreversible. J.I.D. The content of this column is the work of Business Daily’s journalists.

PROPORTION OF MAY’S EXPORTS THAT WENT TO EUROPE AND THE UNITED STATES

Insurance barrier hinders taxi fleet The operators of most of the 200 new taxis struggled to get their vehicles insured Vítor Quintã

vitorquinta@macaubusinessdaily.com

Insurers were reluctant to cover taxis last year, the Monetary Authority says (Photo: Manuel Cardoso)

he number of road accidents involving taxis has scared off insurance companies, which declined to cover most of the 200 new cabs for which licences were issued last year. The Monetary Authority of Macau says in its annual report, released last month, that it intervened to secure insurance for 480 vehicles last year, 40 percent more than in 2011. Of the applicants for insurance that it helped, 62 percent were owners of private cars and 25 percent taxi operators. “The demand for motor coinsurance relating to taxis went up,” the Monetary Authority report says. It says the increase was due to new licences for taxis being issued by the government. The government issued 200 new eight-year cab licences in April last year. “The insurance sector was reluctant to accept insurance for this type of vehicle,” the Monetary Authority says, without saying why. The Macau Traffic and Transport

General Association speaks for some taxi operators. Last August its chairman, Leng Sai Ho, said insurers “claim to be losing money because we have too many accidents”. Altogether, 729 taxis were involved in accidents reported to the police in the first five months of this year – 159 more than a year before. The law says cars are allowed on the road only if they have third-party insurance.

200 NEW CAB LICENCES WERE ISSUED IN APRIL LAST YEAR

If three or more insurers refuse to provide cover, a would-be policyholder can ask the Monetary Authority for help. The Monetary Authority may then set the terms of a co-insurance policy written jointly by a number of insurers of its own choice. The applicant would have to accept this policy or face disqualification from obtaining any kind of car insurance for anything between six months and three years. Any valid claim would be paid jointly by the insurers that wrote the policy. The results of a Consumer Council survey of the insurance market released last year show that each of the six insurers that took part admitted to refusing cover to some applicants, particularly to drivers involved in cases of reckless or dangerous driving. At the end of last year the number of co-insurance policies was 735, including policies covering 532 private cars and 121 taxis, the Monetary Authority says.

July 10, April 19,2013 2013

July 10, 2013 April 19, 2013

Greater China

Chinese inflation rebounds in June Credit surge adds to consumer price rise of 2.7 percent Kevin Yao and Xiaoyi Shao

We believe the headline inflation data will not change monetary policy stance. We don’t think the central bank will increase or cut interest rates within this year Li Wei, economist, Standard Chartered

Food prices jumped 4.9 pct from a year earlier

hina’s annual consumer inflation accelerated more than expected in June but factory-gate deflation persisted for a 16th month, underscoring the policy dilemma facing the People’s Bank of China as it worries about long-term price risks even as economic growth slows. The central bank is seen keeping policy largely neutral in the near term to balance the need to keep the world’s second-largest economy on an even keel while warding off inflation as well as possible property bubbles, analysts say.

Abbott cuts baby milk prices up to 12 pct

bbott Laboratories will cut prices of its main infant formula products in China by as much as 12 percent, the fourth foreign company to do so in a week after the government began a probe into possible price-fixing. Abbott will reduce prices of products including its Similac and Pediasure-brands by 4 percent to 12 percent in China, Pamela Harrison, a spokeswoman for the company, said yesterday. The company joins Nestle SA, Danone and Dutch producer Royal FrieslandCampina NV in lowering prices after the National Development and Reform Commission, the country’s top economic planning agency, started a probe into their pricing of milk powder. The investigation includes Mead Johnson Nutrition Co and domestic firm Biostime International Holdings Ltd. Guangzhou-based Biostime “may be allegedly” in breach of anti-monopoly laws and is offering

“We believe the headline inflation data will not change monetary policy stance. We don’t think the central bank will increase or cut interest rates within this year,” said Li Wei, an economist for Standard Chartered Bank in Shanghai. The National Bureau of Statistics said that annual consumer inflation quickened to 2.7 percent in June from May’s 2.1 percent, partly because of the base effect. The headline inflation number is still below the government’s target of 3.5 percent and also below the

benchmark one-year deposit rate of 3 percent. Food prices jumped 4.9 percent in June from a year earlier, quickening from the 3.2 percent rise in May. Pork prices rose 1.1 percent year-on-year versus a fall of 4.9 percent in May. Although inflation may stay benign in the coming months in the absence of an economic recovery, the central bank is worried about long-term inflationary risks, which could complicate policy, especially as property prices keep climbing. The data “reduces the likelihood

a discount of about 11 percent on its infant formula products through reward points, starting from July 10, it said in a filing to Hong Kong’s stock exchange yesterday. The investigation is ongoing, it said. The stock rose as much as 4.27 percent at HK$33.0 in Hong Kong trading yesterday, paring its decline since June 27, when it said it was under investigation for price fixing, to about 30 percent. The NDRC has proof the companies sold products at high prices in the mainland and their pricing increased about 30 percent since 2008, the same year melaminetainted baby formula killed six infants, the official People’s Daily has reported. New Zealand’s Fonterra Cooperative Group Ltd, the world’s largest dairy exporter, also said it had been contacted by NDRC, another sign of the nation increasing its scrutiny of overseas company. Danone and Nestle are cutting prices by as much as 20 percent. Zhejiang Beingmate Technology Industry & Trade Co, the Hong Kong-listed arm of China’s secondlargest baby formula company by market share, will also reduce prices by up to 20 percent to increase its competitiveness and market share. Beingmate hasn’t been named in the government probe.

Lan Kwai Fong eyes mainland expansion L

AFP

an Kwai Fong Holdings Ltd, the biggest landlord in the restaurant and bar area in Hong Kong’s business district, plans to complete one project in China annually over the next five years. The group is close to agreeing to help build and invest in an entertainment district comprising offices, theatre, and retail shops in Shanghai with an area of about 6 million square feet, chairman Allan Zeman said. Lan Kwai Fong is currently co-developing a 1.2 billion yuan (US$196 million) retail and restaurant project in the eastern Chinese city of Wuxi with the local government. Lan Kwai Fong is seeking to benefit from an increase in appetite for high-end restaurants and bars among China’s expanding middle-class amid a drive by the government to boost domestic consumption. The Wuxi project, scheduled for completion in 2015, is the company’s third in the country, where per capita disposable income for urban household doubled

of interest rate cuts this year and that is not a good policy background to have,” said Kevin Lai, an economist at Daiwa Securities in Hong Kong. “But I think inflation will ease by the end of the year as demand won’t be strong.”

Gate prices ThebureaualsosaidChina’sproducer prices fell 2.7 percent last month from a year earlier – the 16th consecutive month of deflation, compared with a drop of 2.9 percent in May.

Allan Zeman started its Hong Kong project in the 198

in the past six years. “The younger generation in China are like every other young generation in other places,” Mr Zeman said in an interview. “They spend. They earn. They’re real consumers.” Lan Kwai Fong is the developer of Hong Kong’s iconic stretch of bars and restaurants in the Central business district. The area has more than 100 restaurants and bars, not all controlled by the company. Mr Zeman started its Hong Kong project

July 10, April 19,2013 2013

Greater China Economists polled by Reuters had expected consumer inflation of 2.5 percent and factory-gate prices to fall 2.7 percent in June. The lowest first-half inflation since the financial crisis in 2009 and prolonged factory-gate deflation underscore weaker demand that leaves the government at risk of missing its annual growth target for the first time since 1998. Last week, China’s cabinet laid out plans to cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt. China’s largest private shipbuilder, China Rongsheng Heavy Industries Group Holdings Ltd, was reported this week to have cut 8,000 jobs in recent months, falling victim to too much capacity in a slow international market. The central bank also allowed short-term interbank borrowing costs to spike to close to 30 percent on June 20, a blunt warning to overstretched lenders that they must bring risky lending under control. The cash crunch – caused by factors including fast credit growth, the regulatory deposit reserve requirement and a crackdown on hot money inflows – is abating after the central bank signalled its readiness to soothe market volatility. But despite its efforts so far the central bank has limited room to manoeuvre on the policy front. Cutting interest rates may lend a support to the economy but runs the risk of inflating a property bubble, while tightening may put additional pressure on the economy amid the global uncertainty. China’s annual economic growth likely slowed to 7.5 percent in the second quarter from 7.7 percent pace in the previous quarter - two consecutive quarter of slower growth, according to the poll. The statistics bureau is due to released data on GDP, along with factory output, investment and retail sales, on Monday. Reuters

Shadow banking boosting China Inc More than a third of outstanding credit lies outside banks’ loan portfolios, Fitch says

in the 1980s with a restaurant that served hamburgers. The stretch is now an after-work hangout for bankers, lawyers and executives. The group is setting up one or two funds from investors in Hong Kong and China to finance its developments, instead of taking the company public, Mr Zeman said. “Rather than doing an IPO now, it would make a lot more sense to” wait until its projects in China start bringing in profits, he added.

China’s Yanzhou Coal Mining Company Ltd offered to buy the rest of the shares it does not own in Yancoal Australia Ltd for A$199 million (US$182 million), a deal which would give it control of additional coal supply at a time when a sharp decline in prices has made coal assets cheap. But Yanzhou is expected to need the approval of Australia’s Foreign Investment Review Board, with one analyst noting that the proposal appears to run counter to the board’s requirements that it be run as an Australian company. Yancoal operates about a dozen mines around Australia and has investments in two coal terminals.

Pawn shops are a key layer of shadow banking

ang Zhiyong, the founder of a Shanghai-based gift card company, tried twice to get a bank loan for his business and failed both times. So Mr Wang turned to China’s vast network of alternative lenders, opting for a so called “curb side” loan. Such a loan is just one segment of the country’s shadow banking system, which includes pawn shops, credit guarantee firms, trust companies and other mechanisms as sources of funds for Chinese borrowers. “Banks never lend a hand to start-ups like us,” said Mr Wang, 40. “They only go after big companies and state-owned firms.” The dearth of bank credit available to China’s millions of small to midsized companies is expected to tighten as authorities seek to rebalance the world’s second-biggest economy. The central bank briefly allowed short-term interbank rates to surge last month to crack down on lending tied to property speculation and bloated local government debt.

Bond trading faces stricter rules

80s

Yanzhou offers to take Yancoal private

China’s central bank is tightening rules on interbank bond market trading by ordering all transactions to be conducted through the National Interbank Funding Centre as it seeks to boost transparency. Transactions including forward deals and repurchases can’t be reversed or changed once agreed between the two parties, the People’s Bank of China said in a statement posted on its website yesterday. Clearing agencies should not engage in settling trades outside the interbank market, according to the statement. Alterations to bond ownership, such as inheritance that are not related to trading, must be supported by legal documents explaining the nature of the transaction, it said. Chinese authorities are seeking to clean up the US$3.8 trillion market and encourage companies to raise funds through bonds rather than relying on bank lending. The State Council approved trading of government debt futures for the first time in 18 years to allow investors to hedge risk, the China Securities Regulatory Commission said this month.

The crackdown, however, only reinforced the dependency of many of China’s non-state backed enterprises on the shadow banking industry. Fitch Ratings says some 36 percent of outstanding credit in China, or 34 trillion yuan (US$5.55 trillion), lies outside banks’ loan portfolios, a huge pool of money which market participants find difficult to track and which could cause an ugly credit mess in a steeper slowdown.

On the curb Beijing now faces the difficult task of trying to re-direct a nonbank financing system – created by the government’s own lending policies – that has helped keep its economy humming. “Shadow banking activities have increased because China needs growth, and the banking sector has to a significant degree failed in its role of financial intermediary,” Credit Suisse Group AG said in a February research note. For Mr Wang, the greeting card company founder, tapping the shadow banking industry was his only option, given that banks usually do not lend to small enterprises and the stock and bond markets in China are virtually shut. He received a 5 million yuan, sixmonth loan from the curb side lender, which charged him an annualised interest rate of 14 percent, or about twice as much as a bank loan. The term shadow banking refers to any financing provided by a nonbank entity. The benefits of such a system are that it has allowed China to liberalise its state-mandated interest rate policy – albeit in an unorthodox manner. It’s also promoted a diversification of funding mechanisms inside the country. The risks come from building a system of credit largely out of view of regulators and also one without a control mechanism to assess if borrowers are even credit worthy. China, for example, has never had a corporate bond default, and analysts question whether risk is being priced appropriately. China’s shadow banking boomed after a 2010 directive from Chinese authorities to restrict the flow of bank loans. Beijing was worried that the waves of loans prompted from a 2008 stimulus package was pushing up inflation, among other concerns. Banks could lend to state-backed companies, but most of China’s other corporations would have to find other methods of accessing capital. Reuters

China coal policy ‘cut lifespans’ People in northern China may be dying five years sooner than expected because of diseases caused by air pollution, an unintended result of a decadesold policy providing free coal for heat, according to the research published in the Proceedings of the National Academy of Sciences yesterday. The study was conducted by researchers from China, the U.S. and Israel. They studied pollution and deaths in 90 cities in the north and south between 1981 and 2000. The government gave free heating coal for people living north of the Huai River from 1950 to 1980, and such indoor systems remain common today, the study showed.

Beijing’s top man to meet LegCo members China’s most senior official in Hong Kong will dine with lawmakers next week for the first time since the city’s return to Chinese rule in 1997, amid rising demand for universal suffrage. Members of the legislature received an invitation to meet Zhang Xiaoming, director of the Liaison Office of China in Hong Kong, for lunch, according to Emily Lau, chairwoman of the Democratic Party. The meeting will take place as some lawmakers and civic groups demand that Hong Kong Chief Executive Leung Chun Ying speed up reforms to prepare for universal suffrage in 2017.

China won’t set duties on polysilicon, Germany says China won’t introduce import duties on polysilicon imported from the European Union, according to the German Economy Ministry. “The dispute about trade sanctions with China is resolved for the time being,” a spokeswoman with the Economy Ministry said yesterday. China, the world’s biggest maker of solar panels, was preparing to impose anti-dumping duties on polysilicon imports from the EU after completing an investigation that started in October. The material is the main raw ingredient in solar cells. The move was seen as retaliation after the EU introduced preliminary tariffs in June of 11.8 percent on solar panels from China.

10 10

July 10, 2013 April 19, 2013

Asia

Singh risking fiscal aims on US$21 bln food plan Fiscal strain to be felt next year and may weigh on bond prices, analysts say Unni Krishnan and Kartik Goyal

ndian Prime Minister Manmohan Singh’s US$21 billion-a-year programme to provide cheap food for the poor threatens to impede the nation’s efforts to pare the widest budget deficit in major emerging countries. The Food Security Bill enacted last week entitles about two-thirds of India’s 1.2 billion people to lowcost grains, boosting food subsidies to as much as 1.2 percent of gross domestic product yearly from 0.8 percent, Nomura Holdings Inc said. The policy could pose a risk to Mr Singh’s goal of cutting the fiscal gap to 4.8 percent in 2013-2014, Morgan Stanley said. “The food bill will be unequivocal bad news for fiscal dynamics,” said Rajeev Malik, a Singapore-based economist at CLSA Asia-Pacific Markets. “While it could be politically beneficial for the beleaguered Congress-led government, the medium-term fiscal challenges created by the legislation continue to be ignored.” Finance Minister Palaniappan Chidambaram has pledged to pare the deficit to 3 percent of GDP by 2017, part of wider policy changes since September to avert a creditrating downgrade and revive India’s economy. The full fiscal strain of the food programme will be felt next year and may weigh on bond prices, according to ICICI Securities Primary Dealership Ltd.

The food initiative is a key plank of the government’s re-election strategy ahead of polls due by May 2014. Mr Singh aims to build on vows to help the poor in a nation where World Bank data shows over 800 million people live on less than US$2 per day.

Sinking rupee Budget and trade shortfalls in Asia’s third-largest economy have hurt the nation’s currency, which touched a record-low of 61.2125 per dollar on Monday. The rupee has depreciated about 8.6 percent in 2013, the most after the yen in a basket of 11 Asian currencies tracked by Bloomberg. The food policy provides rice at 3 rupees (5 U.S. cents) a kilogram, wheat at 2 rupees and coarse grains at 1 rupee, under a monthly entitlement of five kilograms per person. The administration will retain the 900 billion-rupee (US$15 billion) food-subsidy estimate for the financial year ending March 2014 given in February’s budget even as it rolls out the measure, two Finance Ministry officials said. That’s because the bill will apply for only about half the fiscal year, with all the supplies available unlikely to be taken up, they said. The legislation involves spending of 1.25 trillion rupees in a full year, the government estimates. The exact impact this financial year

depends on the pace of implementation as states need to identify eligible recipients and set up a distribution mechanism, Morgan Stanley said. The measure in the longer term could push up food-subsidy expenditure and stoke price pressures, said Sonal Varma, an economist at Nomura in Mumbai. Budget objectives may be strained as early as 2013-2014 on higher spending on grains and as the drop in the rupee increases the cost of oil subsidies, according to Tirthankar Patnaik, a Mumbai-based strategist at Religare Capital Markets Ltd. The fiscal gap is at risk of swelling to 5.5 percent of GDP from 4.9 percent in 2012-2013, Mr Patnaik said. India’s excess of expenditure over revenues is the widest in the BRIC group, which also includes Brazil, Russia and China. Targets for narrower deficits are part of a 10-month effort by Mr Singh’s coalition to damp inflation and to revive economic growth from a decade-low 5 percent last fiscal year.

‘Additional spending’ Mr Chidambaram is in the U.S. this week, extending efforts to woo investment and help fund India’s record current-account shortfall. The nation is rated at the lowest investment grade by Fitch Ratings, Standard & Poor’s and Moody’s Investors Service.

Manmohan Singh aims to build on vows to help the poor ahead of polls next year

While the food bill comes with a cost, it will bolster the poor if properly implemented, which is an important step for economic development, said N. R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi. Consumer inflation was 9.31 percent in May, the second-fastest in the Group of 20 major economies. Wholesale prices climbed 4.7 percent, a 43-month low. The Reserve Bank of India left interest rates unchanged in June after the rupee’s drop threatened to make imports costlier. “We are in a spot of trouble due to this additional spending given that economic growth is likely to remain low,” said Religare’s Mr Patnaik. Bloomberg News

Japan slams China over maritime disputes Chinese military expansion a cause for concern, says Defence Ministry

eijing is trying to change the regional status quo by force, based on claims that contradict international law, Japan said in the first defence white paper to be published under Prime Minister Shinzo Abe’s government. “In cases where China’s interests conflict with those of neighbouring countries, including Japan, it has taken measures that have been called high-handed, including trying to change the status quo by force,” the Defence Ministry said in its annual report released yesterday on Japan’s security situation. Relations between the two turned frostier last September than any point since the normalisation of diplomatic ties in 1972, with Japan buying three islands also claimed by China from a private owner, setting off protests across China. As well as asserting its rights over the uninhabited East China Sea islands known as Diaoyu in China and Senkaku in Japan, China has taken effective control of a land

feature near the Philippines. The criticism of China in the white paper reflects comments Mr Abe has made in television appearances in recent days, ahead of an upper house election on July 21, where his ruling Liberal Democratic Party and its coalition partner are seeking a majority. “Of course Abe wants to ratchet up the China threat in the build-up to the elections, because that’s his trump card,” said Jeff Kingston, professor of Asian studies at Temple University in Tokyo. Mr Abe emphasised security issues before his landslide lower house poll victory in December.

‘Extremely regrettable’ Japanese fighter planes were dispatched more than 300 times to investigate approaches by Chinese planes to Japan’s airspace in the year to March 2013, about twice as often as the previous year, according to the report. Chinese government

Relations between both sides turned frostier last September

ships entered Japanese-controlled waters around the disputed islands 41 times between September and April, compared with three incursions in the preceding eight months, it said. Japan called China’s actions, including what it said was the locking of fire-control radar on a Japanese ship in January, “dangerous” and said they risked triggering an unexpected situation. “This is extremely regrettable and China is urged to accept and adhere to international norms,” the report said. In the report, which comes as Japan overhauls its mid-term defence

strategy after Mr Abe increased the defence budget for the first time in 11 years, the ministry reiterated its concern about a lack of transparency in China’s defence budget. “China is expanding and increasing its military and security activities and combined with the lack of transparency, this is a cause for concern in the region.” China, with the second-biggest military budget in the world after the U.S., said in March that defence spending would rise 10.7 percent this year to 740.6 billion yuan (US$120.7 billion). Bloomberg News

11 11

July 10, 2013 April 19, 2013

Asia

Labor boost as Rudd races up polls T

he controversial return of Australian Prime Minister Kevin Rudd appears to be paying dividends for his party, with polling yesterday giving ruling Labor an even 50 percent of the vote. The latest Newspoll of 1,126 voters, published in The Australian newspaper, showed the national election to be held later this year would be a dead heat if held today, with Labor and the conservative opposition each polling at 50 percent. It compares with a 49-51 split to the Tony Abbott-led opposition two weeks ago, just after Mr Rudd toppled Julia Gillard in a dramatic party-room coup due to her own shaky numbers – 43 percent to the Abbott’s 57 percent shortly before her ouster. Mr Rudd, a Mandarin-speaking former diplomat, strongly outpolled

Mr Abbott as preferred prime minister, 53 percent to 31 percent with 16 percent uncommitted. The split was 49 percent Mr Rudd to 35 percent Mr Abbott just after his return to power on June 26, and 33 percent Ms Gillard to 45 percent Mr Abbott before Labor decided to switch leaders. More voters were dissatisfied with Mr Abbott (56 percent) than were satisfied (35 percent). By contrast, 43 percent said they were satisfied with Mr Rudd and 26 percent dissatisfied. Mr Rudd was deposed by Ms Gillard, then his deputy, shortly before the 2010 elections amid claims of dysfunction within his government and poor polling following policy missteps on issues including climate change and mining taxation. It was a fate he revisited upon Australia’s first female leader last month, toppling her in a partyroom ballot 57 votes to 45, with Labor rattled by Ms Gillard’s polling with voters. Elections were scheduled for September 14 under Ms Gillard but the new prime minister has left the date up in the air since returning to office. Under electoral laws, the vote must be held by November 30. AFP

KEY POINTS FOOD SUBSIDIES TO REACH 1.2 PCT OF GDP GOVT AIMS TO CUT FISCAL GAP TO 4.8 PCT IN 2013-2014 GAP IS AT RISK OF SWELLING TO 5.5 PCT THIS FISCAL YEAR – ANALYST FOOD PROGRAMME MAY BENEFIT CONGRESS-LED GOVT

S. Korean officials visit Kaesong A group of South Korean officials and workers visited a joint industrial complex yesterday, just days after the two Koreas agreed to fresh talks on reviving the shuttered site. About two dozen visitors from the South went to the Kaesong industrial complex – a rare symbol of inter-Korea cooperation and a crucial source of hard currency for the North – to restart power supplies, Seoul’s unification ministry said. The trip follows months of friction and threats of war by Pyongyang after its February nuclear test attracted tougher UN sanctions, further squeezing its struggling economy. The visit is the first by southerners to the complex since early May. It was aimed at preparing for a visit today by South Korean officials and dozens of businessmen who run factories at the industrial site. At the end of gruelling 15-hour talks, Seoul and Pyongyang said in a joint statement on Sunday that they had agreed to let South Korean firms restart their shuttered plants at the complex near the border when conditions are ripe. Another round of talks to discuss conditions for reopening the site is scheduled for today.

Olympus drops on funding plans Olympus Corp, the world’s biggest maker of endoscopes, fell to the lowest level in eight weeks in Tokyo trading after saying it plans to sell as much as 118 billion yen (US$1.2 billion) of shares overseas. Olympus dropped 5.40 percent to 2,928 yen. As many as 41 million shares, amounting to 12 percent of the stock outstanding after the sale, will be offered in markets including the U.S. and Europe, Olympus said on Monday. The company plans to use almost half the money raised for research and development at its main medical unit, with the remaining proceeds for general spending and debt payment. Tokyo- based Olympus, which received a 50 billion-yen investment from Sony Corp, needs funds to expand a unit that contributes half of revenue, after the disclosure of a 13-year accounting fraud wiped US$1.3 billion off its balance sheet. The stock will be priced as early as July 18, Olympus said. The estimated amount to be raised was calculated based on the stock’s July 4 closing price of 3,120 yen a share, according to a separate filing to the finance ministry.

Kevin Rudd, Australian Prime Minister

Woori sale may succeed on breakup Separate divisions may attract wider array of bidders

outh Korea may finally succeed in its fourth attempt to sell Woori Finance Holdings Co Ltd, this time by breaking the lender into pieces. The government, which owns 57 percent of the nation’s largest financial group, plans to split it into three divisions and start an auction this month. A collection of banks bailed out after the 1997 Asian financial crisis, Woori Finance trades more cheaply relative to its net assets than any local peer, according to data compiled by Bloomberg. Broken up, the group may fetch US$10.2 billion, 36 percent more than its market value on Monday, said Nomura Holdings Inc. After three failures since 2010, the state now has its best chance of selling the Seoul-based company because

the separate divisions will attract a wider array of bidders, said CLSA Asia-Pacific Markets. Fitch Ratings said the businesses would be more profitable as private entities, and the largest unit, Woori Bank Co Ltd, is already being courted by Kyobo Life Insurance Co Ltd. “This is the first time in a decade that I’ve felt like the plan has a chance,” Shaun Cochran, head of research in Seoul at CLSA, said in a phone interview. “The most logical thing has always been to break it up and find the most interested bidder for each part.”

Past failures

by combining five banks that were crippled in the 1997 to 1998 financial crisis. The government began to sell down its ownership as soon as the following year in an initial public offering. For three years, South Korea has been seeking to offload its remaining stake to a single acquirer. The decision to sell the business in pieces was announced on June 26. “In the past, there was no buyer who was willing to buy the big Woori Finance Holdings all together,” Joanne Lee, an analyst at Korea Investment & Securities Co Ltd in Seoul, said in a phone interview. “It was too burdensome.” Bloomberg News

South Korea’s Financial Services Commission has said it plans to put Woori Finance’s two regional banks, Kyongnam Bank and Kwangju Bank, up for sale on July 15. Woori’s brokerage, asset management and savings bank businesses will also be put on the block. Woori Bank and smaller assets including the credit card division will be sold next year. “The likelihood of a sale looks much higher this time,” Kim Eun Gab, a Seoul-based analyst at NH Investment & Securities Co Ltd, said in a phone interview. “The plans are more detailed and realistic.” South Korea injected 12.8 trillion won (US$11.1 billion) into Woori Finance, which it created in 2001

US$10.2 bln WOORI FINANCE MAY FETCH WHEN SOLD IN PARTS, ACCORDING TO NOMURA

Mizuho steers stimulus cash overseas Mizuho Financial Group Inc expects to boost overseas syndicated loans by 50 percent this fiscal year as it steers regional lenders, flush with cash intended to stimulate Japan’s economy, into Latin America and emerging Asia. Japan’s third-biggest lender by market value may arrange 450 billion yen (US$4.45 billion) of such loans in the 12 months to March 2014, according to Yasuyuki Yamaji, Mizuho’s general manager of cross-border syndication. Facilities for investment- grade companies in Latin America pay more than 100 basis points over the London interbank offered rate, while the premium for Indian and Indonesian corporates exceeds 200 basis points, said Mr Yamaji. That’s more than double the 40 basis-point average for a comparable rate in Japan, data compiled by Bloomberg show. “Spreads in Japan have flattened out, making it difficult for lenders to increase profitability,” Mr Yamaji said. “More and more of them turn to us for the cross-border know-how.” The overseas foray by regional banks, whose excess cash climbed to a record 93.53 trillion yen last month, conflicts with Prime Minister Shinzo Abe’s goal of using monetary easing to stimulate local investment and increases competition for global banks.

12 12

July 10, 2013 April 19, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

33.3

1.990812

24354989

ALUMINUM CORP-H

2.37

1.282051

4843364

BANK OF CHINA-H

3.06

-0.3257329

281621852

BANK OF COMMUN-H

4.79

-0.4158004

24266303

BANK EAST ASIA

27.5

-0.5424955

1552901

BELLE INTERNATIO

10.64

-0.7462687

18474523

BOC HONG KONG HO

23.35

-0.2136752

CATHAY PAC AIR

13.36

1.519757

CHEUNG KONG

DAY %

VOLUME

10.48

0.9633911

15789095

8.28

2.096178

CLP HLDGS LTD

62.55

CNOOC LTD

13.16

CITIC PACIFIC

NAME

PRICE

DAY %

POWER ASSETS HOL

68.6

2.617801

VOLUME 2527911

4551314

SANDS CHINA LTD

36.4

-1.086957

11594606

0.2403846

1590945

SINO LAND CO

10.58

3.522505

5848851

0.152207

34662194

SUN HUNG KAI PRO

98.75

-0.1516684

4165327

COSCO PAC LTD

9.99

3.095975

3941416

SWIRE PACIFIC-A

93.25

1.745772

1088351

11.8

0.1697793

1940615

TENCENT HOLDINGS

301.4

-0.3306878

2764217

7154555

HANG LUNG PROPER

25.6

0.3921569

3101635

TINGYI HLDG CO

0.6036217

4674420

1768793

HANG SENG BK

114.4

0.4389816

1055306

WANT WANT CHINA

10.54

0.3809524

11085451

WHARF HLDG

64.85

0.2318393

2514120

103.5

3635689

3.95

-3.892944

62904372

CHINA CONST BA-H

5.25

132063712

CHINA LIFE INS-H

17.52

-0.9049774

27272459

CHINA MERCHANT

22.85

-0.4357298

1639663

CHINA OVERSEAS

PRICE

CHINA UNICOM HON

ESPRIT HLDGS

CHINA COAL ENE-H

CHINA MOBILE

NAME

80.3

0.6265664

15875306

19.92

-0.3003003

16720057

CHINA PETROLEU-H

5.3

0.952381

68191262

CHINA RES ENTERP

24.2

3.640257

1838481

CHINA RES LAND

20.6

1.228501

10571453

CHINA RES POWER

19.24

4404291

CHINA SHENHUA-H

19.42

-2.802803

20032437

HENDERSON LAND D HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC HUTCHISON WHAMPO IND & COMM BK-H LI & FUNG LTD MTR CORP

47.3

1.829925

2979524

0.2506266

1462009

19.4

1.464435

5814341

116.4

0.7792208

2222858

83.9

1.267351

10905948

0.8403361

6956757

4.74

192304247

11.02

1.100917

21505933

28.3

-0.1763668

1141745

MOVERS

5 20860

INDEX 20683.01 HIGH

20854.67

LOW

20318.46

52W (H) 23944.74

NEW WORLD DEV

10.64

2.307692

14595667

PETROCHINA CO-H

8.98

0.8988764

60040450

PING AN INSURA-H

48.85

-0.4077472

9273095

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

24.1

1.260504

11889800

YANZHOU COAL-H

5.19

-3.351955

29946799

5.3

0.952381

68191262

ZIJIN MINING-H

1.51

2.721088

46265214

5.07

-0.1968504

6263932

11.42

-2.226027

6304729

(L) 18710.58984

20310

5-July

9-July

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.03

74706294

CHINA PACIFIC-H

AIR CHINA LTD-H

5.1

-2.671756

10293509

CHINA PETROLEU-H

2.37

1.282051

4843364

CHINA RAIL CN-H

6.01

-0.8250825

4095294

ZOOMLION HEAVY-H

ANHUI CONCH-H

20.55

0.2439024

10648100

CHINA RAIL GR-H

3.18

-1.547988

6819900

ZTE CORP-H

BANK OF CHINA-H

3.06

-0.3257329

281621852

CHINA SHENHUA-H

19.42

-2.802803

20032437

BANK OF COMMUN-H

4.79

-0.4158004

24266303

CHINA TELECOM-H

3.73

1.358696

38596688

BYD CO LTD-H

28.3

-2.413793

2789393

DONGFENG MOTOR-H

9.58

-1.338826

12956987

CHINA CITIC BK-H

3.39

-0.877193

34559734

GUANGZHOU AUTO-H

6.97

4.497751

9620876

CHINA COAL ENE-H

3.95

-3.892944

62904372

HUANENG POWER-H

7.75

3.195739

21149242

CHINA COM CONS-H

5.38

0.3731343

13958469

IND & COMM BK-H

4.74

192304247

CHINA CONST BA-H

5.25

132063712

JIANGXI COPPER-H

12.28

0.8210181

9585319

CHINA COSCO HO-H

3.26

-0.9118541

4695500

PETROCHINA CO-H

8.98

0.8988764

60040450

ALUMINUM CORP-H

NAME

17.52

-0.9049774

27272459

PICC PROPERTY &

CHINA LONGYUAN-H

7.97

1.918159

10560907

PING AN INSURA-H

CHINA MERCH BK-H

12.68

-0.3144654

11184299

SHANDONG WEIG-H

CHINA MINSHENG-H

7.52

0.5347594

39376623

SINOPHARM-H

CHINA NATL BDG-H

6.19

-1.901743

47131500

TSINGTAO BREW-H

14.92

-2.099738

4438563

WEICHAI POWER-H

CHINA LIFE INS-H

CHINA OILFIELD-H

8.48

-0.5861665

8631825

48.85

-0.4077472

9273095

7.9

-2.948403

9228269

18.5

0.3253796

4122337

55.75

-1.152482

597987

22.7

0.4424779

NAME

MOVERS

3 9240

INDEX 9051.23 HIGH

9233.09

LOW

8940.32

52W (H) 12354.22 8930

(L) 8640.85 5-July

1300354

9-July

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

CHONGQING CHAN-A

8.93

1.824401

20805165

QINGHAI SALT-A

17.15

0.2923977

4806189

9405314

CITIC SECURITI-A

9.87

0.304878

42439908

RISESUN REAL -A

14.34

-3.238866

6640180

2.265372

17603180

CSR CORP LTD -A

3.35

0.2994012

17951175

SAIC MOTOR-A

13.17

0.8422665

13616815 16165786

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.49

52090541

AIR CHINA LTD-A

3.94

0.2544529

ALUMINUM CORP-A

3.16

NAME

ANHUI CONCH-A

13.11

-0.9818731

19889057

DAQIN RAILWAY -A

5.68

0.8880995

21104473

SANY HEAVY INDUS

6.81

-0.1466276

BANK OF BEIJIN-A

7.47

0.6738544

10698897

DATANG INTL PO-A

5.27

-1.862197

11044343

SHANDONG DONG-A

42.51

1.674241

7523180

BANK OF CHINA-A

2.64

1.149425

20348427

EVERBRIG SEC -A

9.94

0.2016129

11917646

SHANDONG GOLD-MI

21.61

0.9341429

17330131

BANK OF COMMUN-A

4.06

0.7444169

45891513

GD MIDEA HOLDI-A

12.71

1.598721

10501657

SHANG PHARM -A

10.82

0.8387698

3606219

BAOSHAN IRON & S

3.94

1.808786

21079184

GD POWER DEVEL-A

2.24

1.818182

40628514

SHANG PUDONG-A

7.92

0.1264223

40964528

BEIJING SL -A

59.65

0.726106

1908575

GEMDALE CORP-A

6.79

-4.366197

39115068

SHANGHAI ELECT-A

BEIJING TONGRE-A

22.33

1.453885

5164056

GF SECURITIES-A

11.01

12821570

SHANXI LU'AN -A

BYD CO LTD -A

34.93

-3.721058

17006978

GREE ELECTRIC

25.44

-1.011673

8442500

CHINA AVIC ELE-A

23.98

2.918455

6485030

GUANGHUI ENERG-A

9.98

-6.641721

76064550

CHINA CITIC BK-A

3.56

8801521

HAITONG SECURI-A

9.36

0.2141328

69840512

SUNING COMMERC-A

CHINA CNR CORP-A

3.69

0.2717391

20890868

HANGZHOU HIKVI-A

36.65

-0.326353

4220240

HENAN SHUAN-A

41.66

1.609756

2272045

7.53

-0.3968254

66283166

WANHUA CHEMIC-A

CHINA COAL ENE-A

4.73

0.4246285

6254480

CHINA CONST BA-A

4.41

0.2272727

21422288

HONG YUAN SEC-A

3.2

0.3134796

4224338

10.97

0.9199632

14898333

SHENZEN OVERSE-A

5.03

-1.757812

22400786

SICHUAN KELUN-A

53.01

-1.468401

1260145

4.94

-0.6036217

27589809

TASLY PHARMAC-A

43.97

2.709647

4956242

TSINGTAO BREW-A

39.54

0.304414

1631705

16.5

-2.251185

7995819

CHINA COSCO HO-A

2.9

0.3460208

5158682

HUATAI SECURIT-A

7.82

0.2564103

15854012

WEICHAI POWER-A

16.9

3113773

CHINA EAST AIR-A

2.41

-0.8230453

7851865

HUAXIA BANK CO

8.65

0.6984866

8255702

WULIANGYE YIBIN

19.59

-0.4067107

7945894

CHINA EVERBRIG-A

2.78

41952412

IND & COMM BK-A

3.95

118351110

YANZHOU COAL-A

8.98

1.698754

4640465

CHINA INTERNAT-A

29.81

-0.3010033

3293309

INDUSTRIAL BAN-A

9.13

0.440044

58974854

YUNNAN BAIYAO-A

94.54

1.112299

1753682

CHINA INTL MAR-A

9.84

-0.7063572

3408346

INNER MONG BAO-A

21.13

0.5711566

25132923

ZHONGJIN GOLD

9.17

1.325967

12219144

0.1540832

8791615

INNER MONG YIL-A

34.39

-1.517755

13897884

ZIJIN MINING-A

2.54

-0.78125

50543220

CHINA MERCH BK-A

11.16

1.178604

49418897

INNER MONGOLIA-A

3.86

-0.2583979

22715023

ZOOMLION HEAVY-A

4.99

-0.9920635

44454836

CHINA MERCHANT-A

10.22

-0.2926829

9341607

JIANGSU HENGRU-A

27.69

-1.036455

3999246

12.86

0.3903201

29064935

CHINA MERCHANT-A

24.61

-3.490196

10263500

JIANGSU YANGHE-A

50.17

-1.414816

2778671

CHINA MINSHENG-A

8.4

0.1191895

57916087

JIANGXI COPPER-A

15.46

0.1295337

5335751

CHINA NATIONAL-A

9.47

-1.354167

25771059

JINDUICHENG -A

7.91

1.28041

3249786

13.73

0.4389173

3690060

KANGMEI PHARMA-A

20.61

-0.6268081

19215437

KWEICHOW MOUTA-A

192.05

-1.593564

2023361

23.6

3173157

CHINA LIFE INS-A

CHINA OILFIELD-A CHINA PACIFIC-A

15.4

-0.1944264

17494764

CHINA PETROLEU-A

4.33

4.589372

125256487

CHINA RAILWAY-A

3.98

0.5050505

8590081

METALLURGICAL-A

1.57

18518498

CHINA RAILWAY-A

2.33

12731297

NARI TECHNOLOG-A

13.84

0.6545455

16012042

6437890

NINGBO PORT CO-A

2.01

5685468

8.1

0.3717472

25979706

0.1112347

51215066

CHINA RESOURCE-A

29.6

LUZHOU LAOJIAO-A

15.81

0.8934269

10172321

PETROCHINA CO-A

CHINA STATE -A

3.11

-0.3205128

40796715

PING AN BANK-A

CHINA UNITED-A

3.05

0.3289474

36774861

PING AN INSURA-A

33.74

-0.677068

11750489

CHINA VANKE CO-A

9.66

-3.4

80460974

POLY REAL ESTA-A

10.12

-2.785783

27799109

CHINA YANGTZE-A

6.97

2.80236

44990297

QINGDAO HAIER-A

11.02

-1.607143

8571752

PRICE DAY %

VOLUME

NAME

PRICE DAY %

VOLUME

CHINA SHENHUA-A

ZTE CORP-A

MOVERS 162

108

30 2260

INDEX 2162.669 HIGH

2251.24

LOW

2156.02

52W (H) 2791.303 (L) 2023.171

2150

5-July

9-July

FTSE Taiwan 50 Index NAME ACER INC

22.4

4986523

25.35

2.217742

15172347

0.5586592

3623595

ASUSTEK COMPUTER

261

0.7722008

AU OPTRONICS COR

10.5

1.449275

ADVANCED SEMICON ASIA CEMENT CORP

CATCHER TECH

145.5 -0.6825939

NAME

PRICE DAY %

72.3

2.553191

15353386

0.6993007

2921592

FUBON FINANCIAL

38.3

2.406417

28405947

TSMC

3834427

HON HAI PRECISIO

74.5

1.498638

27176120

UNI-PRESIDENT

35537912

HOTAI MOTOR CO

357

589974 31866660

7382560

FORMOSA PLASTIC FOXCONN TECHNOLO

VOLUME

TAIWAN MOBILE CO

109.5

-1.351351

TPK HOLDING CO L

374.5

2.46238

7850129

106

0.952381

34316970

59.1

1.72117

9988797

14.25

1.06383

75287512

27.8 -0.7142857

12175424

UNITED MICROELEC

HTC CORP

188.5 -0.2645503

CATHAY FINANCIAL

41.6

65153058

HUA NAN FINANCIA

16.65

0.3012048

6282557

YUANTA FINANCIAL

15.35

1.320132

17059907

CHANG HWA BANK

16.95

0.5934718

13630720

LARGAN PRECISION

929

0.9782609

2175616

YULON MOTOR CO

47.9

1.268499

1491725

CHENG SHIN RUBBE

95.1

0.4223865

5517881

LITE-ON TECHNOLO

51.6 -0.1934236

5473102

CHIMEI INNOLUX C

14.85

1.020408

40078422

MEDIATEK INC

353.5

1.289398

5188960

CHINA DEVELOPMEN

8.34

0.7246377

25757352

MEGA FINANCIAL H

23.65

2.159827

22512239

CHINA STEEL CORP

23.7

1.498929

13247351

NAN YA PLASTICS

59.4

2.946274

6756166

CHINATRUST FINAN

18.6

3.047091

68390412

PRESIDENT CHAIN

208.5

1126831

99.4

0.7092199

13202054

QUANTA COMPUTER

65.1

-1.06383

4989598

18.85 -0.2645503

11896551

SILICONWARE PREC

2.841678

12142691

CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC

146

1.388889

5481930

SINOPAC FINANCIA

14.05

0.7168459

10069753

FAR EASTERN NEW

32.35

2.373418

5816985

SYNNEX TECH INTL

39.05

2.763158

9011436

FAR EASTONE TELE

81.5

2.515723

5430343

TAIWAN CEMENT

36.3

0.4149378

5764695

16.55

0.9146341

8971990

0.8403361

1708231

27.35

1.296296

594025

FIRST FINANCIAL

17.7

1.724138

10057622

FORMOSA CHEM & F

72.5

2.836879

4679882

TAIWAN FERTILIZE

FORMOSA PETROCHE

2.209945

3067659

TAIWAN GLASS IND

TAIWAN COOPERATI

WISTRON CORP

3992626

MOVERS

2 5560

INDEX 5506.2 HIGH

5553.15

LOW

5429.78

52W (H) 5896.71 5420

(L) 4719.96 5-July

9-July

13 13

July 10, April 19,2013 2013

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

Max 36.55

Average 35.795

Min 35.55

Last 35.55

36.6

58.5

36.3

58.4

36.0

58.3

35.7

58.2

35.4

20.5

Max 58.5

Average 58.181

Min 58.1

58.1

Last 58.1

36.9

36.6

36.3

Max 36.9

Average 36.420

Min 36.05

Last 36.4

36.0

Max 18.2

Average 17.801

Commodities PRICE

DAY %

YTD %

(H) 52W

Last 17.54

(L) 52W

WTI CRUDE FUTURE Aug13

103.01

-0.126042273

9.865614334

104.1200027

86.29000092

BRENT CRUDE FUTR Aug13

107.13

-0.279251606

0.243286236

115.1699982

96.70999908

GASOLINE RBOB FUT Aug13

287.86

-0.176856122

3.479761306

311.8400097

244.7299957

GAS OIL FUT (ICE) Aug13

907.25

-0.356946733

-0.192519252

983.5

829.25

3.746

0.133654103

4.3454039

4.525000095

3.354000092

297.46

-0.184557565

-0.750725702

320.449996

272.6999998

Gold Spot $/Oz

1256.59

2.0481

-24.5046

1796.08

1180.57

Silver Spot $/Oz

19.4004

1.6697

-35.5682

35.365

18.2208

NATURAL GAS FUTR Aug13 NY Harb ULSD Fut Aug13 METALS

Min 17.54

Average 20.320

Min 19.94

Last 20.3

ASIA PACIFIC

1370.7

1.8737

-9.6887

1742.8

1294.18

702.8

2.2136

0.4488

786.5

553.75

LME ALUMINUM 3MO ($)

1803

1.979638009

-13.02460203

2200.199951

1758

LME COPPER 3MO ($)

6830

0.603918103

-13.88223427

8422

6602

LME ZINC

1880

2.31292517

-9.615384615

2230

1779

13430

0.93949643

-21.27784291

18920

13298

14.85

0.303951368

-3.602726388

16.47500038

14.60000038

507.5

1.398601399

-15.38140892

665

489.5

667.75

0.716440422

-17.25526642

905.75

652.25

SOYBEAN FUTURE Nov13

1267

1.177879816

-2.744194972

1409.75

1186.5

COFFEE 'C' FUTURE Sep13

123.9

0.364520049

-18.72745162

203.8499908

117.0999985

NAME

16.23999977

ARISTOCRAT LEISU

74.34999847

CROWN LTD

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep13 Dec13

WHEAT FUTURE(CBT) Sep13

SUGAR #11 (WORLD) Oct13

16.32

COTTON NO.2 FUTR Dec13

85.41

-0.061236987 0.093753662

-18.6440678 8.470916942

22.8599987 89.55999756

World Stock Markets - Indices

18.0

20.5

17.8

20.4

17.6

20.3

17.4

Max 20.55

Average 20.422

Min 20.2

Last 20.25

20.2

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9175 1.4918 0.9673 1.2882 101.21 7.9897 7.757 6.1298 60.1475 31.26 1.2765 30.11 43.425 9980 92.86 1.24608 0.8635 7.8997 10.2926 130.37 1.03

0.9351 0.0805 -0.3101 0.2334 -0.0494 -0.0213 -0.0168 0.0653 0.7773 0.5758 0.3839 0.1561 0.6678 -0.2405 -0.98 -0.5425 -0.1552 -0.3468 -0.2584 -0.2761 0

-11.5918 -7.777 -5.3655 -2.3351 -14.9294 -0.0814 -0.0825 1.6444 -8.5664 -2.1753 -4.3165 -3.5769 -5.5728 -1.8737 -3.8047 -3.0977 -5.568 4.0229 2.3104 -12.8864 -0.0097

1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7664 6.3964 61.2125 32 1.286 30.228 44.181 10174 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.9037 1.4832 0.9022 1.2043 77.13 7.9818 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9428 79.408 1.20054 0.77553 7.7018 9.6245 94.12 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.24

-1.165501

34.60317

4.49

2.29

VOLUME CRNCY 1494756

12.49

-0.8730159

17.05717

13.75

8.28

1350178

AMAX HOLDINGS LT

1.08

-1.818182

-22.85714

1.72

0.75

886000

BOC HONG KONG HO

23.4

-1.886792

-2.904566

22.6

9832451

CENTURY LEGEND

0.33

24.52831

0.42

0.22

1500

5.4

1.886792

-9.849746

6.74

2.89

18000

CHINA OVERSEAS

19.98

-0.3491272

-13.50649

25.6

16.761

22957388

CHINESE ESTATES

13.8

-0.4329004

13.77297

14.12

8.031

7500

CHOW TAI FOOK JE

8.07

-1.22399

-35.12862

13.4

7.44

5283800

EMPEROR ENTERTAI

2.74

-1.438849

44.97355

3.07

1.34

695000

FUTURE BRIGHT

2.08

-3.255814

71.61346

2.76

0.944

1752000

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15224.69

0.5870173

16.1823

15542.4

12471.49

NASDAQ COMPOSITE INDEX

3484.831

0.1566658

15.41034

3532.038

2810.8

GALAXY ENTERTAIN

36.95

-1.203209

21.74629

44.95

16.98

7848588

FTSE 100 INDEX

6524.44

1.153011

10.62479

6875.62

5478.02

HANG SENG BK

113.9

-2.147766

-4.043805

132.8

104.2

1298932

DAX INDEX

8058.69

1.131324

5.862808

8557.86

6324.53

HOPEWELL HLDGS

24.8

-0.6012024

-25.41353

35.3

20.727

678000

HSBC HLDGS PLC

82.85

-0.4804805

1.906515

90.7

61.1

12062514

HUTCHISON TELE H

4.18

-1.647059

17.41573

4.66

2.98

2344000

LUK FOOK HLDGS I

17.76

-27.21311

30.05

16.16

2601000

MELCO INTL DEVEL

13.58

-1.164483

50.72142

18.18

5.12

4543000

NIKKEI 225

14472.9

2.576733

39.22704

15942.6

8328.019531

HANG SENG INDEX

20683.01

0.489841

-8.712173

23944.74

18710.58984

CSI 300 INDEX

2162.669

-0.04390792

-14.28022

2791.303

2023.171

TAIWAN TAIEX INDEX

7971.18

1.075784

3.528543

8439.15

6922.73

MGM CHINA HOLDIN

20.5

-0.7263923

54.38747

21.6

9.509

1638178

KOSPI INDEX

1830.35

0.7430443

-8.347316

2042.48

1758.99

MIDLAND HOLDINGS

2.77

1.838235

-25.13514

2.68

6296000

S&P/ASX 200 INDEX

4881.654

1.499606

5.005508

5249.6

4062.3

NEPTUNE GROUP

0.172

13.1579

0.23

0.085

8240000

NEW WORLD DEV

10.4

-2.439024

-13.47754

15.12

9.38

13631540

SANDS CHINA LTD

36.8

-1.208054

8.394696

43.7

20.65

8532140

SHUN HO RESOURCE

1.38

-2.816901

-1.42857

1.67

1.03

40000

-17.18377

4.65

2.62

2779000 7043265

JAKARTA COMPOSITE INDEX

19.9

20.6

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

Platinum Spot $/Oz

NAME

Max 20.8

18.2

COUNTRY MAJOR

Palladium Spot $/Oz

CORN FUTURE

20.2

Currency Exchange Rates

NAME ENERGY

20.8

4417.38

-0.3664045

2.332642

5251.296

3963.469

FTSE Bursa Malaysia KLCI

1768.14

0.2989443

4.688716

1826.22

1590.67

NZX ALL INDEX

968.984

0.7133198

9.855535

998.487

767.748

SHUN TAK HOLDING

3.47

-0.5730659

PHILIPPINES ALL SHARE IX

3876.21

0.04258548

4.79132

4571.4

3410.76

SJM HOLDINGS LTD

18.08

-0.4405286

1.872598

22.382

12.995

SMARTONE TELECOM

12.48

-0.4784689

-11.36364

17.38

12.3

356500

WYNN MACAU LTD

20.55

-2.606635

-1.909311

26.5

14.62

2812439

HSBC Dragon 300 Index Singapor

594.13

-0.57

-4.34

STOCK EXCH OF THAI INDEX

1413.51

0.6314785

1.550362

1649.77

1172.92

HO CHI MINH STOCK INDEX

485.5

0.5654867

17.34706

533.15

372.39

ASIA ENTERTAINME

3.96

-3.414634

40.6908

4.7647

2.2076

61258

BALLY TECHNOLOGI

58.54

2.110588

30.93268

58.79

41.74

450161

LAOS COMPOSITE INDEX

1331.68

0.07665369

9.624047

1455.82

987.62

BOC HONG KONG HO

3.09

1.644737

0.651468

3.6

2.85

6500

GALAXY ENTERTAIN

4.83

0.625

21.66247

5.77

2.25

4073

INTL GAME TECH

16.75

1.086301

18.20748

18.81

10.92

1150665

JONES LANG LASAL

92.14

-0.2705921

9.768879

101.46

61.39

140510

LAS VEGAS SANDS

52.44

1.255069

13.60485

60.54

32.6127

3338892

MELCO CROWN-ADR

22.51

2.597995

33.66983

25.2

9.13

1994841

MGM CHINA HOLDIN

2.55

37.83784

2.71

1.36

2700

MGM RESORTS INTE

15.37

2.947086

32.04467

15.95

8.83

9151261

SHFL ENTERTAINME

18.09

0.7799443

24.75862

18.57

12.35

660977

SJM HOLDINGS LTD

2.35

3.178059

2.9481

1.7255

2977

127.08

0.7452037

12.97004

144.99

84.4902

623068

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July 10, 2013 April 19,19, 2013 April 2013

Opinion

Why I became a Chinese shadow banker Joe Zhang Author of ‘Inside China’s Shadow Banking: The Next Subprime Crisis?’

n the fall of 2010, as deputy head of China investment banking at UBS AG, I spoke to a group of wealthy investors in Beijing about the outlook for Chinese stocks. A rumpled, 50-something man from Hangzhou named Wang Zhigang pulled me aside afterward and asked for my advice about investing. Until then, he had made his money through curbside lending, not stocks. But, he lamented, his returns had dropped from more than 30 percent a year to a mere 23 percent. He worried about his personal fortune, which he had built up from nothing to almost 3 billion yuan (about US$445 million back then). He hardly needed my advice, I told him. “With your performance, even Ba-Fei-Te should farm out some money for you to manage!” I said, referring to Warren Buffett’s name in Chinese. Intrigued, I flew to Hangzhou a few days later to find out how Wang had done so well. He drove me to the Haining Leather Market to meet some of his customers. They were merchants of leather shoes, handbags and accessories. Their network was wide and close-knit, and they sold products globally through traditional channels, as well as online. Twenty years ago, these guys would have looked like small fish to a traditional bank. Even after their businesses had grown exponentially, they couldn’t supply the kind of collateral that banks demanded. Yet these merchants needed money, and they needed it fast. So they turned for help to “shadow” bankers, like Wang.

Shadow portfolios There has been a lot of talk lately about shadow banking in China. Between curbside lenders, microcredit institutions, pawnshops, trust loans, “wealth management products” from banks and other components, this murky and unregulated financial universe is now worth an estimated US$5 trillion, challenging the dominance of the traditional banking sector. Such unrestrained growth

naturally worries China’s central bank, which fears that a flood of bad shadow loans could prompt a financial meltdown similar to the U.S. subprime crisis in 2008. A liquidity squeeze in June, when the central bank allowed interbank lending rates to rise to as high as 20 percent before intervening, was widely interpreted as a warning to banks to clean up their shadow portfolios. China’s shadow bankers are easy to demonise. Like Wang, many are nicotine-stained and seemingly unsophisticated. Their methods are unorthodox, possibly even unsavoury. Their loans don’t show up on any balance sheets. They look like a disaster waiting to happen. I believe these fears are misplaced, and I should know: Eight months after my visit to Hangzhou, I became a shadow banker myself. Since 2011, I have run a microcredit firm in Guangzhou, which provides loans to thousands of smallscale entrepreneurs: florists, restaurateurs, fish farmers, vegetable growers, roadside hawkers. Although we charge about 24 percent annually for our money, demand remains virtually unlimited. Our customers are too small and too unstable to get traditional bank loans. At the same time, because we keep our loan amounts small – US$20,000 apiece on average – and because we have close contact with our clients, the business has proved reasonably secure. Our bad debts have not strayed above 5 percent since the firm was founded five years ago. This month, I visited Wang in Hangzhou again. A few borrowers had defaulted in recent months, he told me, but unlike some of his competitors, he had been “extremely lucky”. He was scrupulous about only lending to clients and businesses he knew well, and years of experience had given him a good eye.

“This is my hard-earned money; I have to be careful,” he told me. “My family was dirt-poor when I was a child. I am just so afraid of becoming poor again.” Wang’s fortune had almost doubled since I had last seen him.

Lower leverage One cannot defend a US$5 trillion industry with a couple of examples. Two of Wang’s colleagues had been wiped out in the last year after large borrowers defaulted. Several other informal lenders in Hangzhou had ended up behind bars after disgruntled investors accused them of fraud. In recent weeks, news reports have described mass bankruptcies among small businesses that had borrowed heavily from shadow banks at exorbitant rates. But neither should one condemn all of shadow banking because of stories like these. Shadow banking

is well diversified, and serves a legitimate customer base. By and large, it has much lower leverage than banks or corporate China. Losses at shadow banks are often absorbed by entrepreneurs themselves, without affecting the taxpayer. Even the “wealth management products” offered by regular banks are not to be feared, because they are just deposits, pure and simple, whatever the theoretical distinctions. I buy them myself. Certainly, the sector could stand to be brought under greater supervision. But many of the regulations already in place are vague and unreasonable. Authorities have never clearly defined something as fundamental as what constitutes “illegal fundraising”. Microcredit operations, like ours, are allowed to borrow from no more than two banks for any

more than 50 percent of their equity capital. Why only two banks? Why only 50 percent? These restrictions are arbitrary, and they severely limit our ability to lend to underprivileged customers. The government and the media are scapegoating the wrong culprit. Shadow banking has flourished in China for one simple reason: financial repression. By keeping interest rates artificially low, authorities have forced savers to search for more lucrative financial products. By favouring banks – which, in turn, favour state-owned or well-connected private-sector companies with loans – they have forced small enterprises to seek out people like me and Wang. Meanwhile, projects that might look sketchy at 9 percent interest rates suddenly look feasible at 6 percent. Under such conditions, traditional banks have steadily lowered their lending standards – from prime loans to subprime and then to simply silly loans. Sound familiar? That’s how the 2008 financial crisis began, too. Leaders are right to worry about the possibility of a banking crisis in China. But instead of focusing their ire on shadow bankers, they should raise benchmark interest rates in order to reduce the amount of credit flowing to dodgy loans through the formal banking sector. The threat to China’s financial system is right there – out in the open – not lurking in the shadows. Bloomberg View

EDITORIAL COUNCIL Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok FOUNDER & PUBLISHER Paulo A. Azevedo | pazevedo@macaubusinessdaily.com EDITOR-IN-CHIEF Tiago Azevedo DEPUTY EDITOR-IN-CHIEF Vitor Quintã ASSOCIATE EDITOR Michael Grimes GROUP SENIOR ANALYST José I. Duarte NEWSDESK Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee CREATIVE DIRECTOR José Manuel Cardoso WEB & IT Janne Louhikari CONTRIBUTORS James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani PHOTOGRAPHY Carmo Correia, Manuel Cardoso ASSISTANT TO THE PUBLISHER Laurentina da Silva | ltinas@macaubusinessdaily.com OFFICE MANAGER Elsa Vong | elsav@macaubusinessdaily.com AGENCIES Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate PRINTED in Macau by Welfare Ltd.

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July April10, 19,2013 2013

Opinion BUSINESS

WIRES

Golden slumbers

Leading reports from Asia’s best business newspapers

Kenneth Rogoff Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

Korea Herald South Korea’s Ministry of Strategy and Finance said that it would overhaul its management and evaluation systems of state-run enterprises and institutions to boost their transparency and efficiency. It said that the government would strengthen its monitoring of state-owned enterprises to see whether they are efficiently managing their debt and human resources. This is part of efforts to wind down the debt that has adversely contributed to an overall increase in national obligations.

Straits Times Singapore will probably see a correction in property market prices but a crash is unlikely, said Samuel Tsien, OCBC Bank’s chief executive. Part of the reason for its resilience is because the Singapore market holds a certain appeal to investors, he said. Still, rising interest rates and cooling measures will have an impact, Mr Tsien added. “As a result of the different measures imposed by the Government in making sure that speculative demand has been removed, there will be a slowdown in market activities,” said Mr Tsien.

Times of India The rupee’s free fall may reverse the moderating trend in inflation and it could again head back to the 6-7 percent range in the months ahead. Food prices, which have remained stubborn so far, may again rise due to an expected increase in fuel prices. “The impact on inflation will depend on how long the rupee’s weakness persists. If it persists for long, inflation could be 6 percent by the year-end,” said D K Joshi, chief economist at credit rating agency Crisil.

Wall Street Journal Early polls show Japanese Prime Minister Shinzo Abe’s coalition doing well enough in a July 21 election to gain control of both houses of parliament. In the first polls since campaigning started last week, many of Japan’s large news organisations showed Mr Abe’s Liberal Democratic Party and its New Komeito ally winning more than the 63 seats they need for a majority in the upper house of parliament. Winning control of both houses of parliament is something no Japanese government has had since 2010.

n principle, holding gold is a form of insurance against war, financial Armageddon, and wholesale currency debasement. And, from the onset of the global financial crisis, the price of gold has often been portrayed as a barometer of global economic insecurity. So, does the collapse in gold prices – from a peak of US$1,900 per ounce in August 2011 to under US$1,250 at the beginning of July 2013 – represent a vote of confidence in the global economy? To say that the gold market displays all of the classic features of a bubble gone bust is to oversimplify. There is no doubt that gold’s heady rise to the peak, from around US$350 per ounce in July 2003, had investors drooling. The price would rise today because everyone had become convinced that it would rise even further tomorrow. Doctors and dentists started selling stocks and buying gold coins. Demand for gold jewellery in India and China soared. Emerging-market central banks diversified out of dollars and into gold. The case for buying gold had several strong components. Ten years ago, gold was selling at well below its long-term inflation-adjusted average, and the integration of three billion emerging-market citizens into the global economy could only mean a giant long-term boost to demand. That element of the story, incidentally, remains valid. The global financial crisis added to gold’s allure, owing initially to fear of a second Great Depression. Later, some investors feared that governments would unleash inflation to ease

Policymakers should be cautious in interpreting the plunge in gold prices as a vote of confidence in their performance

the burden of soaring public debt and address persistent unemployment. As central banks brought policy interest rates down to zero, no one cared that gold yields no interest. So it is non-sense to say that the rise in the price of gold was all a bubble. But it is also true that as the price rose, a growing number of naïve investors sought to buy in.

Gambling with gold Lately, of course, the fundamentals have reversed somewhat, and the speculative frenzy has reversed even more. China’s economy continues to soften; India’s growth rate is down sharply from a few years ago. By contrast, despite the ill-advised fiscal sequester, the U.S. economy appears to be healing gradually. Global interest rates have risen 100 basis points since

the U.S. Federal Reserve started suggesting – quite prematurely, in my view – that it would wind down its policy of quantitative easing. With the Fed underscoring its strong anti-inflation bias, it is harder to argue that investors need gold as a hedge against high inflation. And, as the doctors and dentists who were buying gold coins two years ago now unload them, it is not yet clear where the downward price spiral will stop. Some are targeting the psychologically compelling US$1,000 barrier. In fact, the case for or against gold has not changed all that much since 2010, when I last wrote about it. In October of that year, the price of gold – the consummate faith-based speculative asset – was on the way up, having just hit US$1,300. But the real case for holding it, then as now, was never a speculative one. Rather, gold is a hedge. If you are a high-net-worth investor, or a sovereign wealth fund, it makes perfect sense to hold a small percentage of your assets in gold as a hedge against extreme events. Holding gold can also make sense for middle-class and poor households in countries – for example, China and India – that significantly limit access to other financial investments. For most others, gold is just another gamble that one can make. And, as with all gambles, it is not necessarily a winning one.

Volatile price Unless governments firmly set the price of gold, as they did before World War I, the market for it will inevitably be risky and volatile. In a study published in

January, the economists Claude Erb and Campbell Harvey consider several possible models of gold’s fundamental price, and find that gold is at best only loosely tethered to any of them. Instead, the price of gold often seems to drift far above or far below its fundamental long-term value for extended periods. (This behaviour is, of course, not unlike that of many other financial assets, such as exchange rates or stock prices, though gold’s price swings may be more extreme.) Gold bugs sometimes cite isolated historical data that suggest that gold’s long-term value has remained stable over the millennia. For example, Stephen Harmston’s oft-cited 1998 study points to anecdotal evidence that an ounce of gold bought 350 loaves of bread in the time of Nebuchadnezzar, king of Babylon, who died in 562 BC. Ignoring the fact that bread in Babylon was probably healthier than today’s highly refined product, the price of gold today is not so different, equal to perhaps 600 loaves of bread. Of course, we do not have annual data for Babylonian gold prices. We can only assume, given wars and other uncertainties, that true market prices back then, like today, were quite volatile. So the recent collapse of gold prices has not really changed the case for investing in it one way or the other. Yes, prices could easily fall below US$1,000; but, then again, they might rise. Meanwhile, policymakers should be cautious in interpreting the plunge in gold prices as a vote of confidence in their performance. © Project Syndicate

July 10, 2013

Closing Transatlantic trade talks open amid tensions

Latvia to become 18th euro-area state

The United States and the European Union began talks on a landmark bilateral free trade agreement, despite European concerns about U.S. spying that had threatened to delay the start after nearly two years of preparation. “We have the opportunity to complement one of the greatest alliances of all time with an equally compelling economic relationship,” U.S. Trade Representative Michael Froman said as the talks got under way in Washington. “The reason why we decided to hold the talks now is that we are convinced that this deal is good for Europe,” European Trade Commissioner Karel De Gucht (pictured) said.

Latvia’s bid to become the 18th country in the euro area won final approval from European Union finance ministers, ensuring that the country will start using the single currency on January 1, 2014. The ministers set the conversion rate for the lats at 0.702804 per euro, the last hurdle in Latvia’s euro push after the government in the capital Riga met budget-deficit, governmentdebt, interest-rate and inflation targets. Latvia’s inflation rate may be 2 percent to 2.5 percent next year after the introduction of the euro, Finance Minister Andris Vilks told reporters in Brussels after yesterday’s decision.

Travellers confirms IPO delayed indefinitely

Greece secures more bailout funding

Plan to raise funds for new Manila casino resort on hold Michael Grimes

michael.grimes@macaubusinessdaily.com

ravellers International Hotel Group Inc has confirmed in a letter to the Philippine Stock Exchange it has postponed indefinitely an initial public offering on the bourse. It had aimed to raise up to US$854 million (6.82 billion patacas). Travellers is a joint venture between Singapore-listed Genting Hong Kong Ltd and Alliance Global Group Inc controlled by FilipinoChinese businessman Andrew Tan. It developed and operates the Resorts World Manila casino resort near Manila International Airport.

Analysts had anticipated some of the IPO funds being spent on Resorts World Bayshore, a new US$1.1 billion casino resort planned by the partnership a few miles across town at Entertainment City. Work on the 31-hectare (77acre) scheme reportedly broke ground earlier this year. Travellers said in its letter to the exchange: “In view of current market conditions, the company decided to postpone the implementation of its IPO. We shall inform your good office when the company decides to resume

its IPO as soon as more favorable market conditions occur.” The joint venture had announced in May plans to sell 1.49 billion shares at a maximum price of 23.38 pesos, putting the total deal at 34.8 billion pesos (US$854 million); with the caveat the deal size might change. The IPO had been expected within three months of the announcement. But the rout and subsequent volatility in global equities markets partly sparked by fears of a liquidity crisis in mainland China’s banking industry have led to the postponement.

India’s regulator acts to prop up rupee

IMF demands growth push

Move to restrict speculation follows central bank action

ndia’s financial markets regulator yesterday sought to halt the slide of the rupee by restricting speculative trading in the currency, a day after the unit hit a new lifetime low against the dollar. The Securities and Exchange Board of India (SEBI) said it was taking the action “in view of the recent turbulent phase of extreme volatility in the dollar-rupee exchange rate” and in consultation with the central bank. SEBI said it would “increase margin requirements for currency derivatives”, among other steps, making it costlier for traders to bet on the rupee’s future value. The decision announced on SEBI’s website came after the rupee slid to a record low of 61.21 against the dollar on Monday. It followed an order by the Reserve Bank of India late Monday to the nation’s banks to stop trading for their own accounts in domestic currency futures. The Indian currency steadied yesterday to trade at 60.13 rupees to the dollar in the wake of the measures but remained under pressure. India has been the worst performing Asian currency against the dollar in the last quarter,

as worries mount that the U.S. Federal Reserve will reduce its economic stimulus programme that has prompted investor flows into emerging markets. The Indian government is also struggling to find ways to close the country’s gaping current account deficit, the broadest measure of trade, which is seen as a major drag on the currency. The current account deficit – which stems mainly from huge oil and gold imports and weak exports amid the global economic downturn – hit a record 4.8 percent of gross domestic product in the last financial year.

Greece has passed another hurdle in its bailout programme, by securing the next instalments of funds that are keeping the country afloat. The money, totalling 6.8 billion euros (US$8.7 billion), will come from the troika of the European Commission, the European Central Bank and the International Monetary Fund. But they said that Greece’s reform programme is moving too slowly. The troika added that the country’s economic outlook remains uncertain. Eurozone finance ministers meeting in Brussels said 2.5 billion euros would come from the euro zone rescue fund and 1.5 billion euros from European Central Bank. While the payments are likely to be made this month, another 500 million euros from the rescue fund, plus 500 million euros from the European Central Bank will follow in October. Then the IMF will loan 1.8 billion euros, bringing the overall total to 6.8 billion euros. The loans are conditional on Greece making progress with its reform programme. Greece’s creditors have warned that reforms are behind schedule, especially the privatisation of state assets. Last month, the sell-off of the public gas company collapsed. But the reforms have caused much anger in Greece. Around 25,000 civil servants will be put on reduced salaries, before either being dismissed or redeployed. That will add to the nation’s unemployment rate which already stands at 27 percent.

India’s central bank has been intervening to support the rupee by selling dollars and buying the Indian currency, according to dealers. The bank does not comment on whether it has intervened in the market. But analysts say the Reserve Bank has limited room to bolster the currency with just enough foreign exchange to cover seven months of imports. Weak local share markets and an economy growing at its slowest pace in a decade have put additional pressure on the rupee as overseas funds sell Indian assets.

The euro zone must take coordinated action to revive economic growth, the International Monetary Fund said in a strongly worded statement that cited the need to repair bank balance sheets, advance a banking union and support demand. “Growth remains weak and unemployment is at a record high. Concerted policy actions to restore financial sector health and complete the banking union are essential,” the IMF said in a regular assessment of the currency bloc’s economy. “The centrifugal forces across the euro area remain serious and are pulling down growth everywhere,” it said in a statement. The euro zone economy has been battered by a severe sovereign debt crisis that has required massive bailouts of several of its smaller members. The IMF said the threat to the survival of the single currency evident 12 months ago had been beaten back by the European Central Bank, which announced it could intervene directly to stabilise bond markets, as well as other steps. But it viewed this progress as insufficient to declare the crisis over, and urged euro zone leaders to stay focused on the urgent need to combat record-high unemployment, which risks the long-term economic and political health of the entire region. “Reviving growth and employment is imperative. This requires actions on multiple fronts … A piecemeal approach, on the other hand, could further undermine confidence and leave the euro area vulnerable to renewed stress.”

AFP

Reuters