Macau Business Daily, July 12, 2013 by Business Daily

MOP 6.00 Vitor Quintã

tobacco sales slump

Number 325

Friday July 12, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Ash to ashes –

To Russia with Ho – casino for China border Page 2

Galaxy asks for 6-month closure of Grand Waldo Page 5

State-owned group buys satellite TV stake Page 6

I SSN 2226-8294

igarette sales in Macau were down 30 percent year-on-year in the first half of the year, say industry sources. The trade

Hang Seng Index

has been hit by the triple blows of the partial smoking ban in

casinos from January 1; new rules on packaging that have killed sales

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of some mainland brands; and a decline in the number of tobacco outlets. Around 1,200 sales points have shut down in the last few

Year II

April 19, 2013

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years it’s claimed. “Since the casino smoking ban, there has been a 90-percent decline in the sales we directly make to casinos,” said Companhia de Tabaco Wai Tai Lda, sole distributor of the Marlboro brand here. More on page 3

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July 11

Cash declaration idea of ‘limited impact’

HSI - Movers Name

United States-based analysts have played down the effects of a suggested cross-border cash declaration system for visitors to Macau. J.P. Morgan in New York said selfdeclaration scheme could create “…a bias for tourists to understate the amount of cash that they bring.” On Monday a note from Phoebe Tse and colleagues at Barclays Investment Bank in Hong Kong suggested there could be “some negative impact”. Page 2

Cable TV firm backs plan to avert blackout Macau Cable TV Ltd says it’s willing to give television content to public antenna companies in return for government payments. It’s to solve a long-running dispute with antenna firms that illegally relay television programmes – some copyrighted – to most Macau homes. On Wednesday government officials said the plan was the only way to comply with a court ruling that the government stop – within 90 days – illegal transmissions. Page 4

Insurers prosper on risk, not premiums The city’s insurance sector had its most profitable year ever overall last year although that return came largely from investments and not from writing policies. The industry recorded a net profit of about 590 million patacas (US$74 million) last year, almost three times as much as in 2011 and the most since data collection started in 2001, according to the regulator. But some insurers posted significant losses. Page 7

%Day

GALAXY ENTERTAIN

7.15

CHINA RES LAND

6.57

CHINA OVERSEAS

6.42

CHINA LIFE INS-H

6.42

COSCO PAC LTD

5.82

CHINA MOBILE

1.05

HUTCHISON WHAMPO

0.83

TINGYI HLDG CO

0.62

CHINA RES POWER

0.25

HENGAN INTL

-0.31

Source: Bloomberg

Brought to you by

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July 12, 2013

Macau Record high for trademark applications The applications to register trademarks here increased to a historic high of 9,581 last year, data from Macau Economic Services show. Services trademarks account for one-third of the applications, or 3,158, up by 16.5 percent year-on-year, the bureau revealed in a seminar on Wednesday. Mainland China, the United States, Hong Kong and Macau are the top four sources of applications. Sou Tim Peng (pictured), director of the bureau, said they would finish drafting a revised legal framework for industrial property rights within two years.

Cash declaration idea ‘limited impact’: analysts Self-reporting, volume of travellers, would make enforcement difficult

Adelson proposed amicable deal equal to Suen damages

Michael Grimes

michael.grimes@macaubusinessdaily.com

nited States-based analysts have played down the impact of a possible cross-border cash declaration system in Macau. “…no time frame, declaration threshold or penalties are determined yet at the present stage,” Deborah Ng, director of the city’s Financial Intelligence Office, said in an e-mail to Portuguese news agency Lusa last week. On Wednesday Francis Tam Pak Yuen, the city’s Secretary for Economy and Finance, claimed the idea was “absolutely not targeted at any industry”. He didn’t mention the casino sector by name, but mentioned “anti-money laundering measures”. The official also stressed currency declaration wasn’t a formal policy at this stage, but only an idea for discussion. According to mainland law, outbound Chinese citizens can only export cash to the value of 20,000 yuan (US$3,260) per trip. So far reaction to the idea of active enforcement of that limit has been mixed in the banking community, with Hong Kong-based analysts showing most caution and U.S.-based ones being the most upbeat. “We think the impact likely would be limited, if any,” said a note from J.P. Morgan analyst Joe Greff and colleagues in New York.

Offer made before litigation even considered by HK businessman, says his lawyer

The bank’s note added: “We note that no time frame, declaration threshold or penalties have been determined. Secondly, we think it would be very difficult to implement given the amount of traffic in and out of Macau/China each day.” On Monday a note from Phoebe Tse and colleagues at Barclays Investment Bank in Hong Kong suggested there could be “some negative impact” on mass-market gaming revenue – dependent on cash bets rather than the credit-backed ones made by VIP players – were a border declaration system to be implemented.

To Russia with Ho Melco boss plans casino joint venture on China, North Korea border, confirm filings Michael Grimes

michael.grimes@macaubusinessdaily

awrence Ho Yau Lung – cochairman of Macau casino developer Melco Crown Entertainment Ltd – is planning an independent US$130 million (1.04 billion patacas) casino play in the Far East of Russia, a filing has confirmed. It’s via his Hong Kong investment vehicle Melco International Development Ltd, and another listed entity called Summit Ascent Holdings Ltd in which he has a 37 percent stake.

Cross border money flows – hard to control

If a second phase to the scheme – in the Primorye region next door to China’s northeastern Heilongjiang province– goes ahead, Mr Ho’s total investment could be worth US$630 million, said filings from both firms. Primorye also shares a border with North Korea. Mr Ho’s approach in Russia has some parallels with the Melco Crown investment in the Philippines – in that local entrepreneurs with no gaming background have already built the shell of one casino hotel, and are

But J.P. Morgan in New York said that based on the general terms sketched out so far, a self-declaration scheme could create: “…a bias for tourists to understate the amount of cash that they bring.” The bank adds: “Lastly, we note that VIP players normally use junkets to remit cash for them, so they don’t need to physically bring the cash back to China. Even for the premium mass [player segment], most of the players likely have a bank account in Macau and deposit the money there. So net-net, we don’t see a big impact on market-wide growth.”

looking for an outside partner with operational experience according to the Melco filing. Melco and Summit Ascent will buy a combined 51 percent stake in a holding company called Oriental Regent Ltd that will develop one casino hotel and possibly a second. If Mr Ho follows the template used in the Philippines for Belle Grande Manila Bay, he may also seek a listing for his portion of the venture in order to cover capital costs, several analysts told Business Daily. The first phase of the Russian resort is to have a hotel with 119 rooms, approximately 800 slot machines, 25 VIP gaming tables and 40 mass-market gaming tables, according to the filings. Four years ago this month, Russia shut down its existing land based casinos and restricted casino gambling to four zones in rarely visited regions. Melco International’s shares rose 9.04 percent in Hong Kong trading yesterday to close at HK$14.48.

as Vegas Sands Corp chairman Sheldon Adelson proposed an amicable settlement with Hong Kong businessman Richard Suen “almost identical” to the US$70 million plus US$31.6 million interest awarded in May by a Nevada jury – before litigation was ever considered – an attorney told Bloomberg Law. No comment was available from LVS at the time Business Daily went to press. John O’Malley – partner at the law firm Norton Rose Fulbright LLP in the United States – was speaking to Bloomberg via video link from Los Angeles. He said Mr Suen’s lawsuit claiming he was owed payment for – in 2001 – helping LVS get a Macau casino licence the following year, need never have come to court. “We believe that Mr Adelson should have made good on this obligation many, many, many years ago,” said Mr O’Malley. He represented Mr Suen in the second of the two successful suits the entrepreneur has brought. The judgement in the first trial in 2008 was overturned on appeal in 2010. Mr O’Malley told his interviewer: “…what came out in this trial and in the first trial is that Mr Adelson actually proposed an alternative payment scheme to Mr Suen, while the parties were still friendly with each other – before any litigation had been threatened, much less commenced.” “…we think the jury this time – like before – got it right,” he added. “They considered the offer that Mr Adelson had made; the proposal he had made to alternatively pay Mr Suen in a different structure and that that was worth a substantial amount of money – almost identical by the way to the amount of money that will be ultimately paid under the [second trial] judgement if it’s enforced.” LVS said in a court filing on June 7 the second judgement was ‘wrong in law’. It has asked a Nevada judge to set it aside. Post trial motions will be heard on July 30. M.G.

July April12, 19,2013 2013

Macau

Tobacco retail sales disappear in a puff Importers and retailers say the ban on smoking in parts of casinos has worsened business Tony Lai tony.lai@macaubusinessdaily.com

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ne packet of Huangshan, how much?” asks a mainland tourist looking for a Chinese brand of cigarettes in a wine and tobacco shop outside a NAPE casino he has just left. “We do not have them any more. Chose another brand,” replies the sales assistant. The sales assistant says such conversations have become common since January 1, when the law requiring the packaging of all tobacco products to carry graphic health warnings came into effect. “There are several mainland and foreign brands not producing the new packaging designs, and we cannot sell them,” the sales assistant, who said her name was Meikin, told Business Daily. She said this limited business. “Almost all our customers are mainland gamblers, and some favour brands that are not imported here,” she said. Her shop is not the only one where the law on tobacco packaging and the ban on smoking in parts of casinos, which both came into effect on January 1, have hurt business. “Cigarette sales have dropped by a further 30 percent in the first half of this year due to the new rules,” said Macau Tobacco Industry Chamber president Chan Hou Lam. The chamber’s members include about 10 of the city’s main distributors of tobacco. Mr Chan is the general manager of Hing Cheong Hong Tobaccos Ltd, which distributes several brands of cigarettes. He said about one-tenth of brands formerly sold in Macau were no longer sold here because of the law on tobacco packaging.

About 1,200 outlets have stopped selling tobacco in the past few years, a distributor says (Photo: Manuel Cardoso)

Giveaways “Some manufacturers do not want to produce another batch with the new design for a small order from here,” he said. Mr Chan said tobacco sales to casino operators had dropped by half. “The casinos do not need that much when smoking is not allowed in some of their area,” he said. Smoking is now allowed only in designated smoking areas of casinos, which must take up at least 50 percent of a casino’s floor space. Another distributor of cigarettes, Companhia de Tabaco Wai Tai Lda, the sole distributor of the Marlboro brand here, has had a drastic drop in sales this year. “Since the casino smoking ban, there has been a 90 percent decline in the sales we make direct to casinos,” a spokesperson for the company said. “In the past, they used to give away cigarettes to their customers as souvenirs or gifts, but now most would not consider cigarettes any more.” The spokesperson estimates that Wai Tai’s business has decreased by between 40 percent and 50 percent this year. No official data on retail sales of tobacco are available. Data from the Statistics and Census Service show that Macau imported 441.6 tonnes of cigarettes in the first five months of this year, 40 percent more than in the equivalent

period of last year. Macau exported 240.7 tonnes of tobacco products, 4.6 percent more. No data are available on how much of those exports were re-exports – goods shipped in only to be shipped out.

Struggling The veteran owner of a newspaper stand in the city centre said his sales of tobacco had declined slightly this year. “But I have a mix of customers: residents, tourists and gamblers,” said the vendor, who who said his surname was Lai. He said his sales of cigarettes had been declining for years, even before the latest increase in tax on tobacco products. He gave no figures. Mr Chan said the law on tobacco packaging and the ban on smoking in parts of casinos had “intensified the negative impact” of the ban on smoking indoors in other public places, which began in January last year, and the increase in tax on tobacco products in December 2011. Cigarette imports have rebounded this year, but are still far below the 884 tonnes imported in the first five months of 2009. Until May 2009, tobacco was taxed at the rate of 5 avos (0.6 U.S. cent) per cigarette, or about 6 percent of the retail price at the time, Health Bureau data show.

The rate was subsequently raised to 20 avos per cigarette and, in December 2011, to 50 avos per cigarette. “People often ask: ‘Is our situation really that bad?’ Are we exaggerating? No, we are not. We are struggling to survive,” Mr Chan said. “There were 1,900 points of sale two or three years ago, but now the number stands at only about 700, facing fewer sales and soaring rents,” he said.

KEY POINTS Brands exit market after new law on package design Cigarette sales down 30 pct in H1 – distributor Tobacco sales to casino operators halved Legislators call for heavier tobacco tax

“What we – the distributors or retailers – can do is to try to cut costs,” he said. “For instance, my company has sacked two employees this year.” In separate written inquiries this year, Legislative Assembly members Ng Kuok Cheong and Lee Chong Cheng asked the government to increase the tobacco tax. Mr Ng said in his inquiry: “Macau’s tobacco tax level is still lagging far behind Hong Kong’s.” He said the tax rate here was only 30 percent of Hong Kong’s HK$1.70 per cigarette. Mr Chan said retailers could deal with another increase only if it was gradual. “But does a higher tax mean fewer people smoking?” he said. “They can still get cigarettes across the border in Zhuhai, where the cigarettes are cheaper.” Macau Customs seized more than 810,000 cigarettes that people were trying to smuggle in through the border crossings last year, compared with 440,000 in 2011. Meikin is sympathetic to smokers and retailers alike. “Those people still have to smoke, right? They are so into gambling, smoking that they can’t change,” she said. “That is why you see some jewellery and phone shops in this district also selling cigarettes to help pay the rent.”

July 12, 2013

Macau Brought to you by

HOSPITALITY English spoken here The number of visitors to Macau from outside Asia is small. The contribution of individual countries from other parts of the world to our tally of tourists is tiny. The growth of the casino industry means that countries where English is the predominant language are among our main sources of non-Asian visitors. The United States is our main English-speaking source of visitors, but that does not mean that many Americans visit. In May the number of U.S. visitors was 14,146, or 0.6 percent of all visitors that month. The figure is typical. Americans made up a similar proportion of all visitors in the past three calendar years. The plot in the chart also shows that the numbers of American visitors may vary widely from month to month. Most of the time, over 15,000 visit each month, but at times the number falls suddenly to just over 1,000.

John Chiang Kuong Io, chief commercial officer of Macau Cable TV

Macau Cable TV backs plan to avert blackout Compromise to take public funds in exchange for content relayed by public antenna companies is ‘fair’ Stephanie Lai

sw.lai@macaubusinessdaily.com

M The numbers of Australian visitors follow a very similar pattern. The numbers are lower – an average of 8,563 per month in the period represented in the chart – but the variations are just as wide. Our nextbiggest English-speaking sources of visitors are Canada, Britain, and New Zealand, in that order. Together, the five main predominantly English-speaking countries send us an average of about 35,600 visitors a month, or 1.6 percent of the total. Few stay in hotels. Those most likely to stay in hotels are Australians, 32 percent of whom do; the least likely are New Zealanders with just 21 percent of them getting into a hotel. J.I.D.

5,028

Average number of British visitors each month since January 2010

acau Cable TV Ltd said yesterday it supports a government plan that would see it paid by the government for providing television content to public antenna companies. The proposal is aimed at solving a long-running dispute with companies that illegally relay television programming to the majority of Macau homes. On Wednesday the Bureau of Telecommunications Regulation said the compromise was the only way to comply with a Court of Second Instance ruling that the government stop the illegal transmissions within 90 days. The judgment raised the prospect of a television blackout for many households later this year. “It is a fair solution. First, the plan is legal and second, those public antenna companies lose nothing and can still operate for residential buildings and earn their existing income, with the public paying no extra fees,” said Macau Cable TV operations director Ricky Tam Mong Peng. “The government proposition can solve all the complicated historical problems tied in with the television market and make it fair, which benefits us.” Macau Cable TV has, in theory, held a monopoly of cable television services since 1999. However, the company ran at a loss until 2010 as it had to compete with cheaper services provided by unlicensed

public antenna companies. Its concession expires next year. The company said it could not yet assess how much the government would pay it. “We need to know what [the government] wants first: how many channels and what kind of channels we have to provide to the public,” said chief commercial officer John Chiang Kuong Io. “Without the specific instructions we cannot calculate the costs,” Mr Tam said. “I think, for those requirements we need a long discussion with the government and the public antenna companies, which has not yet started.” Mr Chiang said the government payments should not be viewed as “compensation” for taking decades to address the issue of the illegal relaying of television transmissions. “Under this new plan the government is just paying for our services.” He said the company would not use this agreement as a bargaining chip to win more beneficial terms in the liberalisation of the cable television market planned for next April. “These two issues, the government’s proposal and the concession grant in the coming year, should be two separate subjects.” Six public antennas that organised a press conference disagree with the government’s proposal. The government’s solution is “childish” and would allow Macau Cable TV to “wholly own the rights

to receiving television signals,” said one of the representatives.

Cracking down At present, most households can watch up to 80 channels relayed by the public antenna firms, which pay no copyright fees. “If the new plan is enacted, the number of channels that the public antenna companies’ clients can watch will definitely be reduced,” Mr Chiang said. “Though the public antenna companies have already removed encrypted channels they used to relay before, they are still showing some channels that are not copyrighted to show here.” Macau Cable TV has a commercial agreement with six public antenna firms, according to which it bought the right to use their networks while providing them with free transmissions. “With this commercial agreement there are basically 20 to 30 copyrighted channels being relayed to households, and most of these channels are from mainland China,” said Mr Chiang. The government proposal was similar to this agreement in terms of its technical aspects and customer relations, Mr Tam said. Macau Cable TV said it had a footprint covering about 146,000 households, although only half were subscribers.

July 12, 2013

Macau

Galaxy asked for 6-month closure of Grand Waldo casino Prospective new owner hasn’t so far asked to change venue’s architecture Michael Grimes

michael.grimes@macaubusinessdaily.com

alaxy Entertainment Group Ltd has asked the government for a six-month suspension of the casino operation at Grand Waldo casino hotel according to a person with knowledge of the situation. That might suggest a re-opening date for the venue – with a yet-tobe-announced use – before Chinese New Year. Galaxy confirmed to Business Daily on July 1 that as the provisional new owner of the venue it had closed the operation and was planning to renovate the property. It gave no details on its future use or deadline for reopening. Separately, an e-mailed reply to Business Daily from the Land, Public Works and Transport Bureau said that up to Wednesday of this week, Galaxy had not applied for any permission “to change the architectural plan of Hotel Grand Waldo”. The bureau is responsible for issuing approvals and permits for construction projects including new foundations and new structures, and

modifications to existing architectural plans. Permits for the latter normally take a minimum of 30 days according to the bureau’s website. The fact that Galaxy hasn’t so far applied for such permission could indicate it isn’t planning any major changes to the structure. An industry source additionally told Business Daily it was “expected” that Galaxy would apply to the government to absorb the 38 gaming tables and 148 slots at Grand Waldo into the rest of its operations – even if only on a temporary basis until Grand Waldo reopens. The Macau market currently has a government-imposed cap on table numbers that anticipates the equivalent of only three percent compound growth annually – from a base of 5,500 tables – between 2013 and 2023. Galaxy’s flagship Cotai property across the road from Grand Waldo has 450 tables and 1,500 slots according to analysts’ reports. The majority owner of Grand Waldo – Get Nice Holdings Ltd –

Suspended operations – Grand Waldo (Photo: Manuel Cardoso)

said in a Hong Kong filing on June 11 it had agreed in principle to sell its controlling stake to Galaxy – the concessionaire that provides the gaming licence for the property – for up to HK$3.25 billion (US$418.9

million). But Get Nice added the due diligence process could take up to five months. Galaxy declined to comment on the time frame for Grand Waldo’s closure or the plans for renovation.

July 12, 2013 April 19, 2013

Macau Brought to you by

Financial Monitor A slimmer fit Europe and the United States were until the middle of the past decade among Macau’s main trading partners. The demise of the textiles industry here meant the decline of Europe and the US as big markets for our domestic exports. Exports to Europe and the US are decreasing while exports generally are rising, so they make up a shrinking share of our exports. The share shrank from 17.1 percent in 2010 to 10.1 percent last year. On present trends, based on the data until May, the contraction will continue. The contraction in exports to the US will be more pronounced. In the first five months of this year, garment exports to the US were just 13 percent of what they were last year. Their value had roughly halved in the preceding two years to just over 300 million patacas (US$ 37.5 million).

State-owned group buys MASTV stake Investment could help with public listing, television broadcaster says Stephanie Lai

sw.lai@macaubusinessdaily.com

tate-owned Beijing Enterprises Group Co Ltd has purchased a 30 percent stake in broadcaster Macau Asia Satellite Television Co Ltd (MASTV) with a public listing in mind. Beijing Enterprises will pay HK$300 million (US$38.7 million) for the shares, according to a deal signed during the 2nd Macau-Beijing Cooperation and Exchange Symposium.

MASTV, which operates in Macau since March 2004, runs one television channel with mostly Mandarinlanguage programming focused on mainland China, Hong Kong, Taiwan and Macau. The deal with Beijing Enterprises will be essential in aiding MASTV “to get listed in future,” the television station said in a press statement. Business Daily asked the broadcasting firm for details on its

Shareholder exits Chow Tai Fook Long-term holder exits jewellery retailer through sale of US$103 mln block

The chart shows steep decreases in exports of textiles each year. Exports to the US of machinery and casino goods seemed to be taking off in 2010, but their impact was limited. Machinery exports doubled but remained almost negligible. Casino goods exports failed to take off, and last year were worth under one-third of what they were worth in 2010. The other sorts of exports to the European Union and the US are still growing, but the increases in exports of these goods are insufficient to make up for the decreases in our main exports. J.I.D. The content of this column is the work of Business Daily’s journalists.

49.4 %

Decrease in garment exports to the U.S., 2010-2012

n undisclosed institutional investor sold its remaining stake in Chow Tai Fook Jewellery Group Ltd, taking advantage of the company’s biggestever daily percentage climb in Hong Kong trading. Chow Tai Fook saw its share price jump by 12.95 percent on Wednesday, the biggest spike since listing in December 2011. The block trade was well received, reaching a total deal size of HK$798.2 million (US$103 million),

FinanceAsia reported yesterday in its online newsletter. The demand was multiple times higher than the number of shares available, which allowed the bookrunner to set the price above the minimum of HK$8.40. In the end the shares were sold for HK$8.50, a 7.2 percent discount from Wednesday’s closing price, according to FinanceAsia. The sale was arranged by UBS AG. The deal came a day after the jewellery retailer announced that

listing plan and financial status but the company was not available to comment before we went to press. Beijing Enterprises Group is a state-owned enterprise that owns Beijing Gas, Beijing Water Works Group and Yanjing Beer. “Introducing Beijing Enterprises as our strategic investor and partner will uplift MASTV’s brand and enhances its operation capacity and broadcast coverage,” said the broadcaster. “It will also help strengthen the promotion of the city of Beijing, and the business matching for the city’s companies engaged in cultural and tourism trade,” the company stated. MASTV’s signal now covers more than 60 countries in Southeast Asia, Middle East, North Africa and Oceania with an audience number exceeding 230 million, the company claims. That figure is still far from the target audience stated in MASTV’s operation licence, which said the television station would like to reach an audience of 1.2 billion Chinese speakers throughout the Asia Pacific region.

its revenues surged 63 percent in the three months to June from a year earlier. The world’s largest listed jewellery chain said sales of gold products in existing stores rose by 78 percent year-on-year. With gold sales booming, Chow Tai Fook said its revenue in Macau and Hong Kong has grown by 85 percent year-on-year in the first quarter of its fiscal year. 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. But aside Wednesday’s spike, Chow Tai Fook’s shares have not reflected the pick-up in sales. The stock has been sliding alongside the gold price and it is down 26 percent year-to-date. The stock ended yesterday at HK$8.91, down by 2.73 percent. T.A.

July April12, 19,2013 2013

Macau

Insurers prosper on nous, not premiums Macau firms tripled profits on strength of their own investments to set record high last year Vítor Quintã vitorquinta@macaubusinessdaily.com

he city’s insurance sector had its most profitable year ever last year although that return came largely from investments and not from signing policies. And it was not a good year for every insurer, with some posting significant losses. The industry recorded a net profit of about 590 million patacas (US$74 million) last year, almost three times as much as in 2011, according to the Monetary Authority of Macau’s annual report. That was the biggest annual profit since the financial regulator began publishing data on the insurance sector in 2001. Insurers remained in the black thanks to a jump in sundry income – revenue generated from sources other than a company’s normal business operations. In the insurance sector that income usually comes from financial investments. Sundry income rose 62.9 percent to 1.2 billion patacas compared to 2011. The insurers’ life and non-life operations lost about 610 million patacas last year, up by 3.9 percent from the previous year.

For some of the insurance firms that published annual reports in the Official Gazette on Wednesday, sundry income was not enough to offset losses. MassMutual Asia Ltd lost 18.8 million patacas last year, an improvement on the 20.7-millionpataca loss in 2011. Manulife (International) Ltd lost 54.2 million patacas, up from 13.7 million in the previous year. In contrast, the Macau branch of AIA International Ltd – the city’s biggest life insurance provider – led the way with 292.2 million patacas in profit, up by 85 percent from 2011. AIA Macau had about 1,000 agents at the end of last year. In December, chief executive Chris Ma Chuk Ho said the firm was preparing to hire another 360 agents. In a case decided last year, AIA Macau accused some of its former agents and the local of rival AXA China Region Insurance Company (Bermuda) Ltd of attempting to headhunt AIA agents. AXA Macau registered a profit of 43.2 million patacas last year, a marked improvement for the world’s

Fidelidade results dissatisfy auditor The insurer’s reserves for potential claims were insufficient, the audit report says

he non-life division of Fidelidade – Companhia de Seguros SA should have posted a lower profit for last year, as it failed to set aside enough reserves to meet potential claims, the company’s auditor has said. The division’s results, published in the Official Gazette on Wednesday, show a profit of 11.1 million patacas (US$1.4 million), 26.5 percent more than the year before. The insurer’s auditor, Bao King To of Ernst & Young, said he had reservations about the results. Fidelidade did not use accounting methods that would ensure that its estimates for potential claims for accidents were based on three years of records, Mr Bao’s audit report says. The result is that the company’s reserves were “below the recommended range for reasonable estimates”, the report says. Last year Fidelidade had to pay non-life claims of 28.4 million patacas, the equivalent of 20.7 percent of the premiums it received, official data show.

In 2011 it had to pay non-life claims amounting to the equivalent of 55.7 percent of its premium income. The audit report says Fidelidade also failed to use the right accounting method for income from commissions. It says that in both respects the company deviated from the accounting standards ratified by the government. The insurer should have posted a profit of just 1.7 million patacas, it says. Business Daily tried to get Fidelidade to comment, we had but received no reply by the time we went to press. In the company’s review of last year, Fidelidade managing director Paulo Barbosa made no mention of the issues raised by the auditor. Mr Barbosa said Fidelidade’s share of the non-life insurance market had risen to 8.3 percent last year from 6.6 percent in 2011, owing to a jump of 71 percent in premium income. V.Q.

AIA Macau bolstered its lead in the life insurance market thanks to an 85-percent rise in profit

largest insurer. In 2011 the branch had fallen into the red with a loss of 49.8 million patacas. The city’s smallest general insurance firm, HSBC Insurance (Asia) Ltd, posted a profit of 1.4 million patacas, down by almost half

from the previous year. In April, HSBC Holdings plc sold its general insurance business in Macau to QBE Insurance (International) Ltd, a unit of Australian insurer QBE Insurance Group Ltd.

July 12, 2013 April 19, 2013

Greater China Taiwan scales back currency intervention Taiwan’s central bank is scaling back its intervention in the currency market, which is aimed at limiting appreciation, as the prospect of U.S. monetary stimulus being reined in supports the greenback, traders say. The monetary authority has sold the local dollar in the run-up to the close on most days for more than a year and the amounts involved are falling, they said, asking not to be identified. The exchange-rate impact is moderating, with the 4 pm closes in Taipei over the last two days having been just 0.1 percent weaker on average than levels recorded three minutes earlier, Taipei Forex Inc prices show. The gap averaged 0.6 percent in the month through July 8. The Taiwan dollar has gained 0.3 percent against its U.S. counterpart since May 22, when the Federal Reserve indicated it may pare stimulus that has fuelled demand for emergingmarket assets. “I don’t think the central bank’s goal to maintain the relative stability of the currency has changed,” said Frances Cheung, a Credit Agricole CIB senior strategist in Hong Kong. “It’s just it seems a good time to be a bit more hands off.”

Yum profit hit by chicken woes Yum! Brands Inc, owner of the KFC and Pizza Hut restaurant chains, posted second-quarter profit that topped analysts’ estimates as sales in China began to recover from the avian flu scare and a probe of a supplier. Net income fell 15 percent to US$281 million from US$331 million a year earlier, the company said in a statement. Yum has faced a backlash in China at KFC after an outbreak of avian ‘flu scared diners away from poultry and a former chicken supplier was investigated for selling food with too much antibiotics. Sales at Chinese stores open at least 12 months fell 10 percent in June. That was less than the 12 percent decline estimated by analysts surveyed by Consensus Metrix and better than drops of 19 percent in May and 29 percent in April. “They are discounting, promoting and advertising pretty heavily to try to get people back into the restaurants” in China, Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. “Once you get the traffic, I think you’ll be OK.”

Foreign banks on list to trade govt bond futures Scheme expected to be launched in September

hina’s banking regulator is considering including three foreign banks among a list of two dozen domestic banks that could be permitted to trade in a new government bond futures pilot programme expected to be launched in September, three sources with direct knowledge of the matter said yesterday. The chosen three, HSBC Holdings Plc, Citibank NA and Standard Chartered Plc, have all been active in China’s markets since the 1990s. As part of the country’s wider financial reforms, China has said it will re-launch trading in government bond futures in the Shanghai-based China Financial Futures Exchange after an 18-year ban, starting with a five-year contract. The Chinese commercial banks on the regulators’ list include the big four state-owned banks: Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Agricultural Bank of China Ltd and Bank of China Ltd. The regulator is still deciding how to phase in trading. It is likely a dozen banks will be permitted to trade when the market opens, and the remaining

HSBC among foreign lenders chosen by the regulator

dozen would make their entry later. Alternatively, all 24 could be involved from the start, according to sources. More banks will be allowed to participate if initial trading proves a success and the market operates smoothly, the sources. “Commercial banks will surely play a main role at the initial stage of the government bond futures trading,” one of the

Banks risk crackdown with aggressively lending Unusual high loans in early July may prompt regulator to act

HK horse bets hit record Horse racing bets in Hong Kong reached a record HK$93.8 billion (US$12.1 billion) in the past season as the race organisers poured wine and hosted concerts to attract younger punters to its events. Revenue in the 2012/13 season rose 9 percent from a year earlier, surpassing the previous record set in the 1996/97 season, Hong Kong Jockey Club said in a statement on its website. The 83 races drew over two million attendees, according to the statement. The racing year was “one of the best seasons we’ve had, ever,” said Winfried EngelbrechtBresges, chief executive at the Jockey Club. The club’s strategy “helped to grow our base of racing fans significantly,” he said. The Jockey Club added new restaurants, and hosted music and wine-tasting events to its Wednesday night races to attract a young professional crowd to a pastime that began after the British developed the race track at Happy Valley in 1841. The club is the city’s sole provider of horse racing, football betting and lotteries, and contributed HK$11 billion to Hong Kong’s tax revenue. Bloomberg News

ew local currency yuan loans extended by China’s big four state-owned banks stood at an unusually large 170 billion yuan (US$27.7 billion) in the first week of July, the official Shanghai Securities News said yesterday, a move that may alarm regulators trying to strangle distorted credit growth. Traders said similarly aggressive lending by Chinese banks in early June caused the central bank to set off an acute liquidity squeeze in the country’s interbank market. The credit crunch caused a panic among money dealers, provoking a dramatic decline in domestic equity indexes and raised international concern about the health of the country’s financial system. New loans extended in early July by the big four banks – the Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Agricultural Bank of China Ltd and Bank of China Ltd – were unusually high compared with the estimated 270 billion yuan for all of June, the newspaper said. “The abnormality is believed

to be a burst of new lending after restrictions at the end of June,” the report said. In the beginning of June the big four banks extended 217 billion yuan in new loans in the first 10 days. Traders said the People’s Bank of China (PBOC) convened a meeting in response, warning banks of aggressive lending, and pointing out that some banks had borrowed shortterm money on the money markets and used it to extend medium- and long-term loans – a mismatching of assets and liabilities which increased systemic risk. The PBOC followed up by refusing to inject liquidity at a large scale even as appetite for cash increased sharply, causing short-term rates to set all-time record highs with some tenors rising from their customary 3-4 percent range to as high as 2530 percent. The report said part of the reason for the jump in lending is cyclical, as cash returns to the system after the end of the first-half reporting period. Chinese banks are required to meet regulatory tests of financial

sources told Reuters. “Currently, there are two plans, with the one that banks be queued into two groups more likely to be selected in the name of risk mitigation.” The China Banking Regulatory Commission is likely to announce the choice before the end of July, the sources said. The Commission did not

soundness, including a 75 percent loans-to-deposit ratio, at the end of each month, and they frequently tap the interbank market for cash to do so, causing temporary upward pressure on short-term rates. China’s central bank, meanwhile, released rules allowing companies to move yuan abroad more freely as the authorities seek to bolster global use of the nation’s currency. Companies can now open yuan accounts with local banks through which they can lend in the currency to overseas affiliated companies, the People’s Bank of China said in a statement posted on its website yesterday. The so-called yuan-pool lending business can be shared between subsidiaries or affiliated firms under one company, the central bank said. “Allowing multinationals to lend yuan out via a money pool can help them reduce costs,” Zhang Bin, a researcher with the Chinese Academy of Social Sciences, said. “The move is in line with China’s direction of capital account opening.” Reuters

RMB170 bln

New loans granted by the big four stateowned banks in the first week of July

July April12, 19,2013 2013

Greater China immediately reply to a request for comment. The fledgling futures exchange, established in 2006, currently trades only stock index futures. Aside from adding government bond futures, it is also said to be preparing to begin trading in stock options. Authorities scrapped government bond futures trading in 1995 after a major trading scandal on the Shanghai Stock Exchange caused heavy losses to a state-controlled securities brokerage. The reintroduction of a government bond futures market has been expected since the securities regulator began simulated futures trading in February 2012. Reuters

KEY POINTS Banking regulator has selected 24 banks for trading Lender may be queued in two groups to enter new market Include top Chinese lenders and 3 foreign banks More banks to be approved if market proves success

Beijing may soften policy as Li mentions growth floor Likelihood of policy fine-tuning rising, analyst says

hina may soften its stance on monetary policy after Premier Li Keqiang said the nation’s economic growth and employment must stay above a certain floor, Nomura International (HK) Ltd said. Mr Li said policy should ensure that economic activity moves within a reasonable range, while inflation should be kept below a ceiling, according to a Xinhua News Agency report posted on the government’s website yesterday, without giving precise limits. China should balance policy objectives including economic restructuring, reining in inflation and preventing risks, Mr Li was quoted as saying after meeting the governors of five provinces. China’s exports and imports unexpectedly declined in June, underscoring the severity of a slowdown in the world’s secondlargest economy as Li’s attempts to rein in credit growth contributed to the worst cash crunch in at least a decade. Gross domestic product may grow 7.5 percent in the second quarter, down from 7.7 percent in the first, according to the median estimate of 34 economists in a Bloomberg survey. “This may indicate that he is

Yuan may weaken after export drop Chinese currency the sole gainer in Asia this year

hina may allow the yuan to weaken in the second half to aid exports after June shipments contracted by the most since the global financial crisis, according to economists from UBS AG to Citigroup Inc. The currency should be allowed to depreciate “at least marginally,” Wang Tao, chief China economist at UBS in Hong Kong, wrote in an e-mailed interview. Ding Shuang, Citigroup’s senior China economist, expects “periodic depreciation,” while Credit Suisse Group AG’s Tao Dong said he anticipates a “minor” decline against the dollar. Exports unexpectedly fell 3.1

percent last month, while imports dropped 0.7 percent, official data showed, underscoring the severity of the slowdown in the world’s secondbiggest economy as Premier Li Keqiang reins in credit. China may fail to achieve its trade target for a second year if the softness persists, according to Australia & New Zealand Banking Group Ltd. The yuan is the sole gainer among Asian currencies this year, putting the nation at a disadvantage in terms of overseas sales. “Given a strong yuan relative to other Asian currencies, export competitiveness will continue to erode,” Liu Li Gang, ANZ’s head of Greater

feeling more pressure as the economic data continue to weaken and the risks that China may not be able to achieve its 7.5 percent growth target for 2013 rise,” Zhang Zhiwei, Nomura’s Hong Kong-based chief China economist, wrote in a note yesterday. “The likelihood of policy fine-tuning is rising in the short term.” China’s statistics bureau is scheduled to release economic growth data for the second quarter on July 15. Chinese stocks rallied for their biggest two-day gain in 18 months, as a measure of financial companies surged the most in four years on speculation the government will take measures to bolster economic growth. Ping An Bank Co jumped 10 percent, Haitong Securities Co surged 9.9 percent and China Life Insurance Co rose 6.5 percent as a gauge of financial companies in the CSI 300 Index gained the most since March 2009. Poly Real Estate Group Co, China’s second-largest developer, advanced 6.1 percent after reporting higher first-half profit. The Shanghai Composite Index rose 3.2 percent to 2,072.99 at the close, adding to Wednesday’s 2.2 percent gain. The two- day rally is the biggest since January 2012. “There’s some speculation that

China economics in Hong Kong, wrote in a research note yesterday. “With this in mind, we see a downside risk for the RMB exchange rate.” The yuan has climbed 1.6 percent against the dollar this year and reached 6.1210 in May, the strongest since the government unified official and market exchange rates in 1993. U.S. Treasury Secretary Jacob J. Lew said China needs to move toward a more market-determined exchange rate, calling changes in the yuan’s value inconsistent, as the two countries prepare to meet in Washington for two days of strategic and economic talks that are held every year. The People’s Bank of China strengthened the daily fixing by 0.13 percent, the most since June 7, to 6.1652 per dollar yesterday, which reflects the bilateral talks rather than trade data, Citigroup’s Mr Ding wrote in an e-mailed interview. “This can be reversed following the annual dialogue,” Mr Ding said. “We expect two-way volatility of the RMB in the second half, with periodic depreciation likely in time of capital outflows.” Bloomberg News

Given a strong yuan relative to other Asian currencies, export competitiveness will continue to erode Liu Li Gang, ANZ Banking Group

Exports unexpectedly fell 3.1 percent last month

Stocks rallied for their biggest two-day gain in 18 months

there will be some small- scale stimulus plan from the government to prevent economic growth from slumping too much,” said Dai Ming, a money manager who helps oversee US$19 million at Hengsheng Hongding Asset Management Co. “The speculation may push up stocks like cyclical companies.” Bloomberg News

China, U.S. agree to cut emissions

hina and the U.S., which together burn more than 40 percent of the world’s coal, have agreed to jointly develop technology to capture carbon dioxide from power plants and take other steps to combat climate change. The agreement came during the U.S.-China Strategic and Economic Dialogue that started on Wednesday in Washington. Talks are hosted by Treasury Secretary Jacob J. Lew and Secretary of State John Kerry and include counterparts Vice Premier Wang Yang and State Councilor Yang Jiechi. The two nations will implement “large-scale, integrated” demonstration projects aimed at capturing, utilising or storing carbon dioxide, according to a statement released by the U.S. State Department. “These demonstrations will engage companies in both countries and allow for enhanced trade and commerce.” The countries will also work together to lower emissions from heavy-duty vehicles, increase energy efficiency in buildings and improve greenhouse gas data collection, according to the statement. Implementation plans for those targets will be ready by October, according to the statement. China and the United States are responsible for about 43 percent of global greenhouse gas output. China, meanwhile, widened its airquality monitoring rules, asking more cities to report data as the nation seeks to combat high levels of pollution. A State Council notice told 116 more of its cities to disclose air quality monitoring data, including readings for pollutants such. Reuters

10 10

July 12, 2013 April 19, 2013

Asia

BoJ says Japanese economy ‘recovering’

SoftBank closes Sprint deal

Central bank issues most positive outlook since 2011 Leika Kihara and Stanley White

he Bank of Japan said an economic recovery was underway as it kept monetary policy steady yesterday, its most optimistic view in two-and-half years reflecting the positive impact of a weakening yen and its massive monetary stimulus on activity. The central bank made no major changes to its forecast that consumer inflation will accelerate in the coming years to near 2 percent in the business year ending March 2016, a key target for Governor Haruhiko Kuroda and Prime Minister Shinzo Abe’s drive to reflate the economy. As widely expected, the BoJ voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen (US$608 billion) to 70 trillion yen. “Japan’s economy is starting to recover moderately,” the central bank said in a statement after its two-day meeting, revising up its assessment for the seventh straight month.

“The chance for additional monetary eating is gradually receding,” said Long Hanhua Wang, an economist at Royal Bank of Scotland Group Plc in Tokyo. “Kuroda has made it clear that he’s avoiding incremental easing and so far the governor has succeeded in spurring inflationary expectations and changing mind-sets with his one-time, massive measures.” The last time the BoJ used the word “recover” to describe the economy was in January 2011, two months before the March 11 earthquake and tsunami that devastated the country.

Encouraging signs

KEY POINTS BOJ keeps monetary policy steady as expected Central bank upgrades view Says economy ‘starting to recover’ Price forecasts ‘too optimistic’ – analyst

Many central bank officials are encouraged by bright signs in the economy as the yen’s fall to multiyear lows supports exports and the feel-good mood generated by Mr Abe’s reflationary strategy bolsters consumer spending and business confidence. The BoJ said capital expenditure had stopped weakening and was showing some signs of picking up, and also upgraded its view on factory output to say it was “increasing moderately”. Data yesterday supported that view, with core machinery orders,

a leading indicator of capital expenditure, rising a bigger-thanexpected 10.5 percent in May. The BoJ’s optimism suggests it will probably hold off on any additional stimulus at least until late October, when it overhauls its economic and price projections, analysts said. “There’s no material change to the BoJ’s forecasts from April. Basically, the economy is recovering in line with its main scenario,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo. On Tuesday, the International Monetary Fund raised its growth forecast for Japan to 2 percent this year on the back of the BoJ’s stimulus, its strongest forecast for a G7 nation. The BoJ board slightly cut its median forecast for core consumer inflation to 0.6 percent for the current business year to March 2014 from a 0.7 percent forecast in April, likely due to the impact of falling commodity prices. It also tweaked its core consumer inflation projection for the following year to 1.3 percent from 1.4 percent, but kept its estimate for fiscal 2015/16 unchanged at 1.9 percent. The projection remains far more ambitious than private-sector forecasts around 1 percent, a sign many analysts doubt there can be a quick exit from 15 years of deflation. Mizuho Research’s Mr Yamamoto said the BoJ’s price forecasts are too optimistic given concerns that demand could drop after an expected sales tax hike in Japan next April. “The BoJ could move again early next year as downside risks to its price target are likely to become more clear,” he said. Reuters

Singapore but in some of the regional economies, efforts to put a brake on domestic property market prices, put a brake generally on credit creation,” he said in an interview. But policymakers will have to minimise the volatility as investors pull funds from emerging markets in anticipation that the U.S. Federal Reserve will soon begin rolling back its stimulus measures, said Mr Tharman. As the U.S. economy recovers, the Fed’s plan to cut back on quantitative easing has been the main driver of financial markets in recent weeks, pushing up bond yields around the world and setting off big swings in other asset classes. Emerging markets in particular have been hit by the policy shift. Investors used cheap Fed money to hunt for higher yields in emerging markets but that is now reversing as they look to boost exposure to

Indonesia sells US$1 bln of debt Indonesia sold US$1 billion of 10-year dollar bonds at the highest yield since 2010 as speculation the U.S. Federal Reserve will pare stimulus curbs demand for emerging-market assets. The country issued the notes due October 2023 to yield 5.45 percent, Robert Pakpahan, director general at the debt management office in Jakarta, said. The government chose to sell now because of uncertainty about what market conditions will be like later this year, Mr Pakpahan added.

Malaysia’s factory output up 3.4 pct Malaysia’s industrial production in May rose to 3.4 percent from a year earlier, data from the Statistics Department showed yesterday. The rise beat a Reuters poll of 16 economists which had forecast factory output to edge up 1.7 percent, slowing from a surprise 4.7 percent surge in April as weak external demand and lower commodity prices hits the country’s export-oriented industries. April’s factory output was revised to 4.6 percent year-on-year from 4.7 percent previously.

Australia vows support for auto industry The Australian government vowed yesterday to continue backing its struggling car manufacturing industry amid reports General Motors Co’s Holden unit is seeking another big bailout package. The high cost of manufacturing in Australia and a strong local currency have made it increasingly hard for car companies to compete with cheap imports. The Australian newspaper reported that the company is seeking an extra A$265 million (US$245 million) from the government to survive.

Southeast Asia can cope with fund outflows: Tharman S

outheast Asia’s emerging economies face no fundamental risks as the U.S. central bank scales back its monetary stimulus but must manage volatility as funds flow out, Singapore’s Finance Minister Tharman Shanmugaratnam (pictured) said in an interview. The region is “fundamentally more resilient” and its banking systems are far stronger than before the 1997-98 Asian financial crisis, said Mr Tharman, who is also chairman of the International Monetary Fund’s (IMF) policy steering committee and chairman of Singapore’s central bank. “Both the injection of liquidity that came with quantitative easing and the potential withdrawal are discomforts but are not going to pose fundamental risks,” he said. “No one was very comfortable with the liquidity injection to begin with. That’s why we have, not just in

Japan’s SoftBank Corp closed the US$21.6 billion deal to gain a controlling stake in Sprint, the firm said yesterday, creating a stronger player in the competitive wireless market by acquiring Sprint Nextel Corp, the number three U.S. mobile carrier. The deal was completed after the end of Wednesday’s trade in New York. A separate deal which gives Sprint full control of the wireless broadband provider Clearwire Corp was also closed, SoftBank said.

Asiana’s crash may push airline to loss the United States. Mr Tharman warned that financial markets “may be a little too optimistic” about the extent of the U.S. recovery as it was not yet clear whether the world’s largest economy will get back to sustainable growth of 2.5 percent or higher. Turning to China, Mr Tharman said underlying growth remains fairly resilient, although there would be “wobbles” as it shifts toward an economic model that is more dependent on domestic consumption and services and less on investments. Reuters

Asiana Airlines Inc may take a charge of at least 20 billion won (US$18 million) from the crash of its plane in San Francisco, and that will push the carrier to a loss this year, five analysts said. Insurance payment won’t cover the loss of aircraft, litigation and other charges and an erosion in passenger numbers after the crash of the Boeing Co. 777 aircraft, said Cho Byoung Hee of Kiwoom Securities Co. The loss estimate contrasts with a projected 20.8 billion won profit, according to the average of 18 analyst forecasts compiled by Bloomberg.

11 11

July April12, 19,2013 2013

Asia

S. Korea freezes rates at 2.5 pct Central bank holds rate amid concerns over global uncertainty

he Bank of Korea held its interest rate unchanged for a second straight month, as it gauges the effect of a May cut in boosting growth that is clouded by a surge in bond yields and a slowdown in China. Governor Kim Choong-soo and his board kept the benchmark sevenday repurchase rate at 2.5 percent, the central bank said in a statement yesterday. All but one of the 24 analysts polled predicted the decision. “Today’s decision to hold rates was unanimous,” Mr Kim said yesterday. South Korea is grappling with about a 21 percent fall in the yen against the won over the past year that helps rival Japanese exporters, and a slowdown in China. A jump in bond yields after signs the

U.S. Federal Reserve could scale back quantitative easing this year threatens to increase borrowing costs for households with near-record debt. “When deciding on monetary policy one must consider a number of possibilities but I do not believe this is the time to consider interest rates to deal with capital flows stemming from (the Federal Reserve’s plan to wind down its stimulus),” the bank’s governor said. The South Korean won and bonds shrugged off the Bank of Korea’s decision to keep rates unchanged, as the move was widely expected. “The focus of the Bank of Korea’s July rate meeting will be centred on the central bank’s latest economic forecasts,” said Ronald Man, an economist at HSBC Holdings Plc in Hong Kong. “Given the Bank of Korea will also likely account for the possible effects stemming from tapering by the U.S. Fed, we believe rates in Korea will be unchanged throughout the rest of 2013.”

Revised forecasts The Bank of Korea also upgraded its economic growth forecast for this year and the next. The Bank of Korea changed its economic growth forecast to an annual 2.8 percent in

2013 from its previous forecast of 2.6 percent. The growth forecast for 2014 was changed to 4.0 percent from 3.8 percent previously. “The growth trend is improving gradually. First quarter growth came in at 0.8 percent from the previous quarter, and growth in the second quarter is looking slightly higher,” said Mr Kim. The government on June 27 boosted its growth forecast to 2.7 percent for this year from 2.3 percent in March, reflecting a 17.3 trillion won (US$15.4 billion) extra budget and the quarter-percentage-point rate cut in May. “South Korea’s fundamentals are recovering compared to other emerging markets,” said Lee Jaeseung, a fixed-income analyst at KB Investment & Securities Co in Seoul, who also predicts the central bank will remain on hold for the rest of the year. Inflation is also expected to rise from current levels due to low base effects from the second half of last year, Mr Kim Said. “Our inflation forecast has been changed to an annual 1.7 percent for 2013 from 2.3 percent and 2.9 percent for 2014 from 2.8 percent,” he said. But the rate “will remain stable for the time being as the output gap remains negative.”

Decision was unanimous, says Kim Choong-soo

Reuters

12 12

July 12, 2013 April 19, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

2.790015

36340592

CHINA UNICOM HON

ALUMINUM CORP-H

2.53

5.857741

22680329

CITIC PACIFIC

BANK OF CHINA-H

3.22

3.205128

526304248

BANK OF COMMUN-H

5.08

3.673469

39564474

28.35

1.612903

1808271

BELLE INTERNATIO

11.2

3.703704

BOC HONG KONG HO

24.3

CATHAY PAC AIR CHEUNG KONG

AIA GROUP LTD

BANK EAST ASIA

PRICE

DAY %

VOLUME

10.62

2.115385

14025414

8.59

4.374241

CLP HLDGS LTD

63.65

CNOOC LTD

13.64

COSCO PAC LTD

22573125

ESPRIT HLDGS

2.315789

11069496

HANG LUNG PROPER

13.64

2.865762

3629474

HANG SENG BK HENDERSON LAND D

107.7

1.412429

5481487

CHINA COAL ENE-H

4.17

3.473945

50957951

CHINA CONST BA-H

5.51

2.990654

371989460

NAME

DAY %

70.65

2.688953

3359389

9625059

SANDS CHINA LTD

39.65

4.068241

17083867

1.192369

2985254

SINO LAND CO

10.98

3.195489

12888738

4.122137

75842821

SUN HUNG KAI PRO

101.7

1.7

6731360

10.36

5.822268

5906364

SWIRE PACIFIC-A

95.75

1.861702

1481933

11.56

0.8726003

4765801

TENCENT HOLDINGS

310.8

2.102497

3144735

26.1

1.359223

8878710

TINGYI HLDG CO

19.56

0.617284

7110000

117.9

2.879581

2782954

WANT WANT CHINA

10.84

2.651515

12818448

WHARF HLDG

67.1

1.589705

4994217

48.3

1.257862

4659896

79.55

-0.3132832

2544835

HONG KG CHINA GS

19.84

1.952724

10281127

HONG KONG EXCHNG

120.8

3.336185

6658941

85.2

1.731343

19190539

84.85

0.8318479

5238452

4.95

3.125

480753094

11.36

1.247772

16896085

HIGH

21459.08

29.4

2.797203

3217299

LOW

20584.95

18.9

6.418919

69235939

CHINA MERCHANT

23.7

4.635762

2614509

CHINA MOBILE

81.95

1.048089

21990621

HUTCHISON WHAMPO

CHINA OVERSEAS

21.55

6.419753

44550931

IND & COMM BK-H

5.57

2.578269

143876727

CHINA RES ENTERP

PRICE

POWER ASSETS HOL

HENGAN INTL

CHINA LIFE INS-H

CHINA PETROLEU-H

NAME

HSBC HLDGS PLC

LI & FUNG LTD MTR CORP

24.45

2.731092

3183348

CHINA RES LAND

21.9

6.569343

16258919

NEW WORLD DEV

11.16

1.824818

26046104

CHINA RES POWER

20.2

0.248139

9763455

PETROCHINA CO-H

9.35

2.52193

127283601

CHINA SHENHUA-H

20.95

3.712871

22757193

PING AN INSURA-H

52.45

4.482072

22110520

MOVERS

VOLUME

0 21470

INDEX 21437.49

52W (H) 23944.74 (L) 18710.58984

20580

9-July

11-July

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.19

3.571429

207418364

AIR CHINA LTD-H

5.48

5.587669

ALUMINUM CORP-H

2.53

ANHUI CONCH-H BANK OF CHINA-H

NAME

PRICE

DAY %

Volume

CHINA PACIFIC-H

25.9

4.435484

18275265

13634330

CHINA PETROLEU-H

5.57

2.578269

143876727

5.857741

22680329

CHINA RAIL CN-H

6.32

6.023703

9956587

22.3

8.252427

30549846

CHINA RAIL GR-H

3.43

5.864198

27044661

3.22

3.205128

526304248

CHINA SHENHUA-H

20.95

3.712871

22757193

5.08

3.673469

39564474

CHINA TELECOM-H

3.82

0.5263158

44950516

28.65

1.058201

4278272

DONGFENG MOTOR-H

9.72

0.9345794

25836350

CHINA CITIC BK-H

3.64

4.597701

45724481

GUANGZHOU AUTO-H

7.2

3.746398

16295918

CHINA COAL ENE-H

4.17

3.473945

50957951

HUANENG POWER-H

8.09

4.387097

27027762

CHINA COM CONS-H

5.66

5.009276

26292091

IND & COMM BK-H

4.95

3.125

480753094

CHINA CONST BA-H

5.51

2.990654

371989460

JIANGXI COPPER-H

12.84

6.644518

26494982

CHINA COSCO HO-H

3.35

2.446483

8918407

PETROCHINA CO-H

9.35

2.52193

127283601

CHINA LIFE INS-H

18.9

6.418919

69235939

PICC PROPERTY &

8.99

4.413473

25559877

CHINA LONGYUAN-H

8.16

-0.3663004

15286755

PING AN INSURA-H

52.45

4.482072

22110520

CHINA MERCH BK-H

13.32

3.255814

48490467

SHANDONG WEIG-H

7.84

1.16129

9580000

CHINA MINSHENG-H

8.15

6.955381

154844238

SINOPHARM-H

18.8

1.952278

7636607

CHINA NATL BDG-H

6.76

6.122449

72718245

TSINGTAO BREW-H

56.1

0.5376344

1908234

15.54

2.102497

5351200

WEICHAI POWER-H

BANK OF COMMUN-H BYD CO LTD-H

CHINA OILFIELD-H

24.2

5.446623

NAME

PRICE

DAY %

Volume

5.74

4.553734

61207590

ZIJIN MINING-H

1.6

5.263158

90318650

ZOOMLION HEAVY-H

5.2

4.417671

23875020

11.72

0.3424658

7848892

YANZHOU COAL-H

ZTE CORP-H

MOVERS

0 9620

INDEX 9551.61 HIGH

9610.5

LOW

9014.69

52W (H) 12354.22 (L) 8640.85

9010

9-July

3265800

11-July

Shanghai Shenzhen CSI 300 PRICE

DAY %

Volume

PRICE

DAY %

Volume

9.72

4.628633

48726659

QINGHAI SALT-A

18.83

3.803749

14287945

CITIC SECURITI-A

11.01

7.941176

205191833

RISESUN REAL -A

16.34

6.937173

27228306

33945448

CSR CORP LTD -A

3.63

4.610951

72339773

SAIC MOTOR-A

13.29

3.103181

63513370

7.393577

67409657

DAQIN RAILWAY -A

6.1

4.273504

41230231

SANAN OPTOELEC-A

19.36

3.75134

17349609

8.47

9.857328

88375594

DATANG INTL PO-A

5.19

0.1930502

25457750

SANY HEAVY INDUS

7.59

6.451613

67320476

BANK OF CHINA-A

2.72

2.641509

60362297

EVERBRIG SEC -A

11.4

9.82659

49476190

SHANDONG DONG-A

41.96

0.7442977

9908957

BANK OF COMMUN-A

4.03

4.675325

170979200

GD MIDEA HOLDI-A

13.08

1.160093

18612395

SHANDONG GOLD-MI

23.36

6.569343

40879896

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.57

2.390438

126513662

AIR CHINA LTD-A

4.13

4.030227

27007539

ALUMINUM CORP-A

3.35

2.446483

ANHUI CONCH-A

14.38

BANK OF BEIJIN-A

BAOSHAN IRON & S BEIJING SL -A BEIJING TONGRE-A BYD CO LTD -A

NAME CHONGQING CHAN-A

NAME

4.1

3.015075

38640862

GD POWER DEVEL-A

2.37

3.49345

109228806

SHANG PHARM -A

11.41

3.071364

11396082

60.45

-0.9503523

3599991

GEMDALE CORP-A

7.56

108425397

SHANG PUDONG-A

8.86

9.247842

274152438

23.2

2.745793

11817441

GF SECURITIES-A

12.24

7.462687

48398494

SHANGHAI ELECT-A

15986970

GREE ELECTRIC

25.43

2.210611

25694702

SHANXI LU'AN -A

35.68

-0.8888889

3.37

3.058104

7969111

12.28

5.227078

35303297

CHINA AVIC ELE-A

24.2

0.1241208

8455449

GUANGHUI ENERG-A

10.93

4.393505

55538258

SHENZEN OVERSE-A

5.7

8.365019

105426816

CHINA CITIC BK-A

3.84

5.494505

59740572

HAITONG SECURI-A

10.93

9.849246

299596685

SUNING COMMERC-A

5.27

5.4

95269896

CHINA CNR CORP-A

4.02

4.415584

72296680

HANGZHOU HIKVI-A

19.25

1.315789

19446679

TASLY PHARMAC-A

44.97

2.111717

5490659

CHINA COAL ENE-A

5.06

3.901437

24022218

HENAN SHUAN-A

42.03

0.4061156

6271203

TSINGTAO BREW-A

39.98

1.061678

2428039

CHINA CONST BA-A

4.52

2.961276

48270624

HONG YUAN SEC-A

8.86

10.06211

207166024

WANHUA CHEMIC-A

17.27

3.042959

16108015

CHINA COSCO HO-A

3.01

2.033898

18626501

HUATAI SECURIT-A

8.8

7.711138

68943908

WEICHAI POWER-A

18.46

5.305191

14094733

CHINA EAST AIR-A

2.54

3.252033

20985075

HUAXIA BANK CO

9.54

7.432432

67967729

WULIANGYE YIBIN

20.78

4.160401

31801521

CHINA EVERBRIG-A

2.97

4.946996

204235041

IND & COMM BK-A

3.98

1.272265

164164501

YANZHOU COAL-A

10.76

8.906883

31394305

CHINA INTERNAT-A

31.35

1.226994

8101564

INDUSTRIAL BAN-A

10.4

10.05291

365933009

YUNNAN BAIYAO-A

96.89

2.258575

2091410

CHINA INTL MAR-A

10.6

3.921569

14051131

INNER MONG BAO-A

25.56

9.982788

147085865

ZHONGJIN GOLD

9.89

6.002144

45209857

CHINA LIFE INS-A

14.16

6.466165

37179687

INNER MONG YIL-A

34.45

0.5252407

14285860

ZIJIN MINING-A

2.64

2.723735

129697286

CHINA MERCH BK-A

12.15

7.332155

160521711

INNER MONGOLIA-A

4.2

3.703704

134926013

5.6

8.949416

189261965

CHINA MERCHANT-A

11.7

9.756098

72347148

JIANGSU HENGRU-A

29.11

3.22695

6667547

13.66

3.40651

80162587

CHINA MERCHANT-A

28.05

4.664179

34038012

JIANGSU YANGHE-A

53.47

3.865579

7424676

CHINA MINSHENG-A

9.45

9.883721

326850234

JIANGXI COPPER-A

17.48

7.239264

26456926

CHINA NATIONAL-A

10.38

4.008016

54322740

JINDUICHENG -A

8.58

13787975

14.9

5.524079

12171634

KANGMEI PHARMA-A

20.7

0.7789679

28320770

KWEICHOW MOUTA-A

195.97

1.098844

4605661

24.67

3.308208

17195352

CHINA OILFIELD-A CHINA PACIFIC-A

16.89

6.092965

37347705

CHINA PETROLEU-A

4.65

0.867679

188369883

LUZHOU LAOJIAO-A

CHINA RAILWAY-A

4.33

5.867971

47676803

METALLURGICAL-A

1.66

3.75

85103870

CHINA RAILWAY-A

2.49

4.1841

63817429

NARI TECHNOLOG-A

14.78

4.674221

21746886

7.3

9.939759

85730883

8.14

0.618047

44089131 173361147

CHINA RESOURCE-A CHINA SHENHUA-A CHINA STATE -A

29.6

6437890

OFFSHORE OIL-A

16.74

3.142329

21098912

PETROCHINA CO-A

3.38

4.643963

196844308

PING AN BANK-A

10.34

3.22

2.875399

140460885

PING AN INSURA-A

36.24

5.532906

71012116

CHINA VANKE CO-A

10.78

4.863813

197670616

POLY REAL ESTA-A

11.32

6.091846

160057954

CHINA YANGTZE-A

7.07

1.58046

34418450

QINGDAO HAIER-A

11.56

2.391497

12032841

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

CHINA UNITED-A

ZOOMLION HEAVY-A ZTE CORP-A

MOVERS 283

7 2360

INDEX 2326.688 HIGH

2350.37

LOW

2156.02

52W (H) 2791.303 (L) 2023.171

2150

9-July

11-July

FTSE Taiwan 50 Index NAME ACER INC

23.4

3.0837

21472594

FORMOSA PLASTIC

74.4

2.338377

15339069

ADVANCED SEMICON

25.6

1.386139

16269111

FOXCONN TECHNOLO

74.6

3.3241

7129400

2.209945

6126234

FUBON FINANCIAL

39.95

2.567394

ASUSTEK COMPUTER

262.5

0.1908397

8843196

HON HAI PRECISIO

AU OPTRONICS COR

10.85

1.877934

55516090

HOTAI MOTOR CO

402.5

CATCHER TECH

148

1.023891

6955459

HTC CORP

CATHAY FINANCIAL

42.9

2.754491

58969524

HUA NAN FINANCIA

CHANG HWA BANK

17.4

1.754386

26017482

CHENG SHIN RUBBE

96.8 -0.6160164

8865829

CHIMEI INNOLUX C

15.1

1.683502

47500640

MEDIATEK INC

CHINA DEVELOPMEN

8.58

1.900238

64726400

MEGA FINANCIAL H

24.75

1.851852

57676119

3.950104

37460438

NAN YA PLASTICS

61.5

4.237288

10668063

ASIA CEMENT CORP

CHINA STEEL CORP

NAME

PRICE DAY %

Volume

111

1.369863

TPK HOLDING CO L

400.5

2.298851

8399154

48733165

TSMC

109.5

3.301887

56121428

2.766798

93314807

UNI-PRESIDENT

60.1

1.178451

13130105

6.90571

623208

UNITED MICROELEC

14.5

4.316547

119774151

193.5

1.308901

12153096

WISTRON CORP

27.8

0.7246377

9374398

17.15

2.083333

10203202

YUANTA FINANCIAL

3.225806

26646161

LARGAN PRECISION

990

4.210526

3053399

YULON MOTOR CO

49.7

1.948718

3304401

LITE-ON TECHNOLO

52.3

3.359684

7626975

350 -0.4267425

5694912

7136187

CHINATRUST FINAN

19.3

1.846966

111647438

PRESIDENT CHAIN

214

2.884615

2174399

CHUNGHWA TELECOM

99.8

0.4024145

18671376

QUANTA COMPUTER

69.7

4.341317

13450669

COMPAL ELECTRON

18.8

1.075269

16506394

SILICONWARE PREC

38.15

2.553763

15180757

DELTA ELECT INC

145

-1.360544

5684571

SINOPAC FINANCIA

14.75

0.3401361

23756405

FAR EASTERN NEW

33.1

1.223242

6373907

SYNNEX TECH INTL

39.1

2.222222

5237410

FAR EASTONE TELE

78.2

-2.25

5006111

TAIWAN CEMENT

37.2

0.67659

8959694

FIRST FINANCIAL

18.1

1.685393

16351795

TAIWAN COOPERATI

16.8

1.204819

16787653

FORMOSA CHEM & F

75.7

3.274216

10216151

TAIWAN FERTILIZE

73.2

1.104972

4083175

FORMOSA PETROCHE

78.5

6.368564

3968795

28.35

4.805915

1850726

TAIWAN GLASS IND

TAIWAN MOBILE CO

MOVERS

0 5680

INDEX 5672.62 HIGH

5672.62

LOW

5438.29

52W (H) 5896.71 (L) 4719.96

5430

9-July

11-July

13 13

July April12, 19,2013 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 39.0

58.1

38.3

57.3

37.6

56.5

21.8 21.5 21.2

Max 39

average 38.281

Max 39.8

average 39.581

Min 36.95

Last 38.95

Min 38.25

Last 39.65

36.9

20.9 Max 57.7

average 57.468

PRICE

WTI CRUDE FUTURE Aug13

Min 20.7

Last 21.75

39.4

18.3

21.0

39.0

18.2

20.8

38.6

18.1

20.6

38.2

Max 18.4

average 18.263

106.88

DAY %

YTD %

(H) 52W

Min 18

Last 18.24

(L) 52W

0.337964701

13.99317406

107.4499969

86.29000092

108.7

0.175099069

1.712360812

115.1699982

96.70999908

300.91

-0.192377857

8.170968438

311.8400097

245.5299854

GAS OIL FUT (ICE) Aug13

916.5

0.520976145

0.825082508

983.5

829.25

NATURAL GAS FUTR Aug13

3.639

-1.114130435

1.364902507

4.525000095

3.354000092

300.92

0.249858414

0.403723599

320.449996

273.4999895

Gold Spot $/Oz

1286.55

2.4837

-22.7047

1796.08

1180.57

Silver Spot $/Oz

20.0513

3.8389

-33.4065

35.365

18.2208

Platinum Spot $/Oz

NY Harb ULSD Fut Aug13

18.0

COUNTRY MAJOR

ASIA PACIFIC

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

1396.25

1.8053

-8.0053

1742.8

1294.18

Palladium Spot $/Oz

723.9

1.9965

3.4645

786.5

553.75

LME ALUMINUM 3MO ($)

1818

1.56424581

-12.30101302

2200.199951

1758

LME COPPER 3MO ($)

6825

1.411589896

-13.94527802

8422

6602

LME ZINC

1898

1.551631889

-8.75

2230

1779

13650

2.43902439

-19.98827667

18920

13205

15.245

-0.294310007

-1.038623823

16.47500038

14.60000038

524.25

0.527325024

-12.58857857

665

489.5

682.5

0.515463918

-15.42750929

905.75

652.25

1288

0.252967503

-1.132220303

1409.75

1186.5

123.25

1.315248664

-19.15382092

203.8499908

117.0999985

NAME

16.19000053

ARISTOCRAT LEISU

74.34999847

CROWN LTD

3MO ($)

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

WHEAT FUTURE(CBT) Sep13 SOYBEAN FUTURE Nov13 COFFEE 'C' FUTURE Sep13 SUGAR #11 (WORLD) Oct13

16.28

COTTON NO.2 FUTR Dec13

86.5

0.184615385 -0.334139878

-18.84346959 9.85521971

22.8599987 89.55999756

CROSSES

Max 21.1

average 20.795

Min 20.4

Last 20.65

20.4

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9228 1.5087 0.9504 1.3049 99.23 7.9894 7.7564 6.1317 59.885 31.08 1.2642 29.938 43.295 10015 91.554 1.24015 0.8649 8.01 10.427 129.48 1.03

0.1954 1.255 1.9886 1.7942 0.8566 0.0025 0.0064 0.0457 -0.3841 0.6435 0.9176 0.3875 0.3049 -0.3395 0.6881 0.1968 -0.5284 -1.8477 -1.7733 -0.9113 0

-11.0811 -6.7322 -3.6827 -1.069 -13.2319 -0.0776 -0.0748 1.6129 -8.1657 -1.6088 -3.3855 -3.0229 -5.2893 -2.2167 -2.4324 -2.6344 -5.7209 2.5905 0.9917 -12.2876 -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 1.4814 0.9022 1.2043 77.13 7.9818 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9440 79.408 1.20054 0.77553 7.7018 9.6245 94.12 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.25

0.7109005

34.92063

4.49

2.29

VOLUME CRNCY 3457177

12.89

0.5460218

20.806

13.75

8.28

900249

AMAX HOLDINGS LT

1.09

2.830189

-22.14286

1.72

0.75

244675

BOC HONG KONG HO

24.3

2.315789

0.8298739

22.6

11069496

0.315

3.278689

18.86793

0.42

0.22

64000

5.6

-6.510848

6.74

2.93

58000

CHINA OVERSEAS

21.55

6.419753

-6.709958

25.6

16.761

44550931

CHINESE ESTATES

13.9

1.756955

14.59742

14.12

8.031

57280

CHOW TAI FOOK JE

8.91

-2.729258

-28.3762

13.4

7.44

128822785

EMPEROR ENTERTAI

2.65

3.515625

40.21164

3.07

1.34

560000

FUTURE BRIGHT

2.05

0.9852217

69.13827

2.76

0.954

3434000

CENTURY LEGEND CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15291.66

-0.05673077

16.69336

15542.4

12471.49

NASDAQ COMPOSITE INDEX

3520.759

0.4707409

16.6002

3532.038

2810.8

GALAXY ENTERTAIN

38.95

7.152682

28.33608

44.95

16.98

24828651

FTSE 100 INDEX

6572.6

1.039822

11.44137

6875.62

5478.02

HANG SENG BK

117.9

2.879581

-0.6739654

132.8

104.2

2782954

DAX INDEX

8164.8

1.218871

7.256718

8557.86

6324.53

HOPEWELL HLDGS

25.05

0.2

-24.66165

35.3

20.727

3084000

HSBC HLDGS PLC

85.2

1.731343

4.797044

90.7

61.1

19190539 4841000

NIKKEI 225

14472.58

0.3883024

39.22395

15942.6

8328.019531

HANG SENG INDEX

21437.49

2.549348

-5.382151

23944.74

18710.58984

CSI 300 INDEX

2326.688

4.614209

-7.779139

2791.303

2023.171

HUTCHISON TELE H

4.49

5.399061

26.1236

4.66

2.98

LUK FOOK HLDGS I

20.45

3.596758

-16.18852

30.05

16.16

2982500

MELCO INTL DEVEL

14.48

9.036145

60.71032

18.18

5.12

11418200

TAIWAN TAIEX INDEX

8179.54

2.095064

6.234691

8439.15

6922.73

MGM CHINA HOLDIN

21.75

5.072464

63.80134

21.8

9.509

9659378

KOSPI INDEX

1877.6

2.929568

-5.981326

2042.48

1758.99

MIDLAND HOLDINGS

3.06

-0.3257329

-17.2973

2.68

1116000

S&P/ASX 200 INDEX

4965.7

1.31278

6.813366

5249.6

4062.3

NEPTUNE GROUP

0.168

3.067485

10.52632

0.23

0.089

10755000

4594.396

2.584532

6.433383

5251.296

3963.469

NEW WORLD DEV

11.16

1.824818

-7.154746

15.12

9.38

26046104

FTSE Bursa Malaysia KLCI

1778.57

0.5574684

5.306255

1826.22

1590.67

SANDS CHINA LTD

39.65

4.068241

16.78939

43.7

20.65

17083867

SHUN HO RESOURCE

1.42

1.428573

1.67

1.03

NZX ALL INDEX

975.263

-0.03925604

10.56739

998.487

767.748

SHUN TAK HOLDING

3.54

2.312139

-15.51313

4.65

2.62

6794862

PHILIPPINES ALL SHARE IX

3919.6

1.579568

5.96435

4571.4

3410.76

SJM HOLDINGS LTD

18.24

1.333333

2.774125

22.382

12.995

13653500

SMARTONE TELECOM

12.36

0.3246753

-12.21591

17.38

12.28

1287000

WYNN MACAU LTD

20.65

2.992519

-1.431984

26.5

14.62

11888200

JAKARTA COMPOSITE INDEX

20.6

21.2

GASOLINE RBOB FUT Aug13

NAME

average 21.506

18.4

BRENT CRUDE FUTR Aug13

CORN FUTURE

Max 21.75

Currency Exchange Rates

NAME

METALS

55.7

Last 57.65

39.8

Commodities ENERGY

Min 56

HSBC Dragon 300 Index Singapor

602.28

0.71

-3.03

STOCK EXCH OF THAI INDEX

1437.94

3.56739

3.305474

1649.77

1172.92

HO CHI MINH STOCK INDEX

484.47

0.008257127

17.0981

533.15

372.39

Laos Composite Index

1294.05

-0.07876022

6.52634

1455.82

987.62

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

ASIA ENTERTAINME

4.05

-1.937046

43.88832

4.7647

2.2076

118568

BALLY TECHNOLOGI

59.24

0.4238006

32.49833

59.41

41.74

436688

BOC HONG KONG HO

3.09

0.651468

3.6

2.85

6500

GALAXY ENTERTAIN

4.77

2.141328

20.15113

5.77

2.25

20700 1404900

INTL GAME TECH

17.26

0.2905288

21.80663

18.81

10.92

JONES LANG LASAL

93.28

-0.4588624

11.12699

101.46

61.39

250797

LAS VEGAS SANDS

53.15

0.07531538

15.14298

60.54

32.6127

3147964

MELCO CROWN-ADR

22.01

2.181987

30.70071

25.2

9.13

3573318

MGM CHINA HOLDIN

2.55

37.83784

2.71

1.36

2700

MGM RESORTS INTE

15.35

-0.5829016

31.87285

15.95

8.83

7361206

SHFL ENTERTAINME

18.235

2.44382

25.75862

18.57

12.35

580140

SJM HOLDINGS LTD

2.35

2.173913

3.178059

2.9481

1.7255

37400

127.27

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July 12, 2013 April 19, 2013

Opinion

Broken systems plus bad ideas equals lame recovery

Clive Crook

Bloomberg View columnist

ive years after the financial meltdown, the global economic recovery is hardly worthy of the name. The International Monetary Fund has just revised its forecasts for the world economy down – again. G r o w t h a l m o s t everywhere could and should be faster. What’s holding it back? The list of causes is long, and the details vary from place to place, but toward the top is a kind of self-willed institutional incapacity. In itself, a slow recovery isn’t surprising. Recessions involving financial crashes are harder to shrug off than ordinary downturns. Even so. For 2013, the IMF predicts growth of 1.2 percent in the advanced economies. The U.S. is expected to see output growth of 1.7 percent, which is feeble; output in the euro area is projected to fall by 0.6 percent, which is outrageous. Prospects have worsened in the emerging economies, too. They’re told to expect another year of growth at 5 percent – by their standards, much too slow. When we look back on this calamity, we’ll see two great failures of coordination, neither of them much emphasised in real-time economic commentary. First, a strong response to a global slowdown demands

effective international cooperation. After a promising start in 2009, there has been precious little. Second, at the national level, so deep a recession – one that pulls interest rates to zero and requires unusual kinds of stimulus – demands careful co-management of different strands of policy. That’s something governments have been unable or unwilling to do.

Institutional weaknesses These are very different issues, but they have something crucial in common: They’ve tested the world’s economic-policy institutions and found them wanting. The failure of international cooperation is most egregious in the European Union. The EU did more than just miss opportunities to bolster confidence and investment, a global failing. European policy has actively militated against recovery. On a point of principle, the EU core inflicted severe fiscal contraction on the periphery. On a point of principle, the European Central Bank has let the goal of EU-wide low inflation deflect it from providing monetary stimulus adequate to the needs of countries where demand has collapsed.

Economic policy in a single currency area has to meet special demands. The euro required far-reaching institutional redesign. That has yet to happen. For instance, a genuine banking union is a sine qua non for this enterprise; even though EU leaders have finally acknowledged the issue, they have made scant progress. You could be forgiven for thinking that the European Union was the victim not of a failure of cooperation but of a successful conspiracy to destroy itself. Globally, the story is more one of chances missed.

Governments should have given the IMF more resources sooner, for instance, to better help distressed sovereign borrowers. Governments should have amazed businesses worldwide by reviving the Doha Round of global trade talks, upping their ambitions on trade liberalisation and bringing that project to an urgent and successful finish. Instead they let it shrivel. So far a collapse into trade war has been averted – that’s something, I suppose – but there’s been serious backsliding, and the chance for some much-needed shock and awe on trade reform went begging.

Policy divisions

Two great failures of coordination … tested the world’s economicpolicy institutions and found them wanting

The institutions of economic policy have also failed at the national level. Settled doctrine before the crash of 2008 called for keeping fiscal policy, monetary policy and financial regulation in separate silos. This division rested in part on a view about central banking that worked fine in good and moderately bad times, but fails in a situation like this. Central banks, according to this view, could be set to the simple task of keeping inflation low, and be shielded from politics in discharging it. Post-crash macroeconomic policy recognises that the lines

between fiscal, monetary and regulatory policies aren’t so clear. For maximum stimulus effect, all three have to work in harness. Consider the case of outright monetary financing of government spending – or “helicopter money,” as it’s sometimes called. This is fiscal policy: The government sends everybody a check. It’s also monetary policy: The central bank finances the outlay by buying and indefinitely retaining government debt. And it implicates regulatory policy, because it changes the cost of capital across different asset classes. Quantitative easing isn’t quite helicopter money (because the central bank expects to reverse its debt purchases at some point) but the basic criticism applies. Because it isn’t the purely apolitical intervention that advocates of central-bank independence had in mind, central banks are inhibited in its use. (In Europe, this inhibition is enshrined in law.) The limits imposed by independence also complicate the forward guidance the Fed and other central banks have adopted or are about to adopt. For example, in setting thresholds for unemployment and schedules for getting it down, they’re straying onto political terrain, so they have to be circumspect. Deliberate vagueness muddies the message, adding to the confusion that has lately roiled financial markets. Fears that aggressive QE might cause financial instability when it’s reversed raise a related point. These concerns should be taken seriously, even if signs of a risky “reaching for yield” are few right now. In principle, though, the answer is not to keep QE below the level indicated by the shortfall in aggregate demand; it’s to adopt financial rules that promote safety in times of financial stress (above all by requiring financial intermediaries to be better capitalised). The IMF’s new report makes this point in passing, but without setting it in the bigger picture. In a way, post-2008 monetary, fiscal and regulatory policies are all one. The old consensus on compartmentalising the different instruments has plainly failed, but the institutional apparatus and expectations still mostly persist. The same goes for the global policy architecture. It’s not just a question of what the policy should be. Governments need to reconsider how they decide what the policy should be. A tall order, I know, but if they don’t get it right, nothing much will be different next time round. 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 April12, 19,2013 2013

Opinion Business

wires

Europe’s zombie banks

Leading reports from Asia’s best business newspapers

Korea Herald

Daniel Gros

Director of the Centre for European Policy Studies

The two Koreas failed to narrow their differences over how to reopen the idle joint industrial zone during a second round of negotiations in Kaeseong on Wednesday. After walking down parallel lines throughout five sessions, they agreed to meet again in the border city on Monday, while plant managers continue to check and repair the facilities. “Both sides have a common perception that we should maintain and develop the Gaeseong park,” Seoul’s chief delegate Suh Ho told reporters after the meeting.

Taipei Times Taiwan signed a free trade agreement with New Zealand on Wednesday, its first with a country that has diplomatic relations with China as it seeks to pursue similar deals regionally and halt a competitive slide. Taiwan’s economic and foreign ministers said the pact was considered a barometer and may kick-start the signing of a series of free trade deals between the island and other countries. “Hopefully a similar free trade agreement with Singapore will be signed very soon,” Taiwan’s foreign minister David Lin said.

Inquirer Business European investment firm Brummer & Partners has set up a US$120 million private equity fund to look for opportunities in the Philippines, taking advantage of the country’s fast-growing economy. The new fund, which will be called Navegar, will make long-term investments in the country, putting in about US$10 million to US$20 million in various companies in the consumer and service sectors. “There are probably a lot of good opportunities in this country. The challenge for us is to pick the best ones,” said Patrick Brummer, co-founder of Brummer & Partners.

Myanmar Times A draft law that will make the Central Bank of Myanmar independent could be enacted as soon as this week, members of parliament said. The legislation was sent to the President’s Office for review on July 3. If President Thein Sein does not call for further revisions it will be enacted within one week of his office’s receiving it as the Constitution stipulates. The law was amended to make it clear that the central bank can intervene in the money market independently. “The president’s comments did not oppose this,” said U Ti Khun Myat, chairman of the lower house’s bill committee.

hat is wrong with Europe’s banks? The short answer is that the sector is too large, has too little capital, and contains too many players that lack a viable long-term business model. It is the combination of the last two factors – an overabundance of banks with no sustainable way to turn a profit – that constitutes the most serious and most difficult problem. The banking sector’s size is a cause for concern because, with total liabilities amounting to more than 250 percent of the euro zone’s GDP, any major problem could over-burden public budgets. In short, the banking sector in Europe might be too big to be saved. Undercapitalisation can be cured by an infusion of new equity. But the larger the banking sector, the more difficult this might become. More important, it makes no sense to put new capital into banks that cannot return profits for the foreseeable future. The difficulties in southern Europe are well known, but they differ fundamentally from country to country. In Spain, banks have historically issued 30-year mortgages whose interest rates are indexed to interbank rates such as Euribor, with a small spread (often less than 100 basis points) fixed for the lifetime of the mortgage. This was a profitable model when Spanish banks were able to refinance themselves at a spread much lower than 100 basis points. Today, however, Spanish banks – especially those most heavily engaged in domestic mortgage lending – must pay a much higher spread over interbank rates to secure new funding. Many local Spanish banks can thus stay afloat only because they refinance a

large share of their mortgage book via the European Central Bank. But reliance on cheap central bank (re)financing does not represent a viable business model.

Struggling to survive In Italy, the difficulties arise from banks’ continued lending to domestic companies, especially small and medium-size enterprises (SMEs), while GDP has stagnated. Even before the euro zone crisis erupted in 2010, the productivity of capital investment in Italy was close to zero.

What should be done is clear enough: recapitalise much of the sector and restructure those parts without a viable business model

The onset of the current recession in Europe has exposed this low productivity, with the failure of many SMEs leading to large losses for the banks, whose funding costs, meanwhile, have increased. It is thus difficult to see how Italian banks can return to profitability (and how the

country can resume economic growth) unless the allocation of capital is changed radically. There are problems north of the Alps as well. In Germany, banks earn close to nothing on the hundreds of billions of euros of excess liquidity that they have deposited at the ECB. But their funding costs are not zero. German banks might be able to issue securities at very low rates, but these rates are still higher than what they earn on their ECB deposits. Moreover, they must maintain an extensive – and thus expensive – domestic retail network to collect the savings deposits from which they are not profiting. Of course, some banks will always do better than others, just as some will suffer more than others from negative trends. It is thus essential to analyse the situation of each bank separately. But it is clear that in an environment of slow growth, low interest rates, and high risk premia, many banks must struggle to survive. Unfortunately, the problem cannot be left to the markets. A bank without a viable business model does not shrink gradually and then disappear. Its share price might decline toward zero, but its retail customers will be blissfully unaware of its difficulties. Other creditors, too, will

continue to provide financing, because they expect that the (national) authorities will intervene – either by providing emergency funding or by arranging a merger with another institution – before the bank fails. Recent official tough talk in the European Union about “bailing in” bank creditors has not impressed markets much, not least because the new rules on potentially imposing losses on creditors are supposed to enter into force only in 2018. Starting next year, when it takes over authority for bank supervision, the ECB will review the quality of banks’ assets. But it will be unable to review the longer-term viability of banks’ business models. Current owners will resist to the end any dilution of their control; and no national authority is likely to admit that their national “champions” lack a plausible path to financial viability. Keeping a weak banking system afloat has high economic costs. Banks with too little capital, or those without a viable business model, tend to continue lending to their existing customers, even if these loans are doubtful, and to restrict lending to new companies or projects. This misallocation of capital hampers any recovery and dims longer-term growth prospects. What should be done is clear enough: recapitalise much of the sector and restructure those parts without a viable business model. But this is unlikely to happen any time soon. Unfortunately, until it does, Europe is unlikely to recover fully from its current slump. © Project Syndicate

July 12, 2013

Closing Court rejects ‘Heart of Cotai’ trademark

Apple guilty of e-books price fixing

The Court of Second Instance has again prevented gaming operator Las Vegas Sands Corp from registering a trademark that uses the word ‘Cotai’. In a June 20 judgement but made public only on Wednesday, the judges said Sands cannot register “The Heart of Cotai”. The court sided with the objections raised by Cyber One Agents Ltd, the developer of Studio City resort of which rival operator Melco Crown Entertainment is a controlling shareholder. The judgement stresses that “instead of identifying a product or service, it [‘The Heart of Cotai’] merely distracts or confuses the consumer”.

Apple Inc conspired with publishers to fix the price of electronic books, a U.S. judge has ruled. Judge Denise Cote found “compelling evidence” that Apple violated federal antitrust law by playing a “central role” in a conspiracy with publishers to eliminate retail price competition. The five publishers that were originally named as defendants have already reached settlements. Apple was accused of conspiring to undercut Amazon.com Inc’s e-book dominance. Wednesday’s decision could expose Apple to substantial damages. The firm’s spokesman, Tom Neumayr, said Apple would appeal against the ruling and fight “false allegations”.

Portugal political crisis deepens Portugal’s political crisis deepened yesterday after the president rejected a plan to heal a government rift and critics accused him of igniting a “time bomb” by calling for early elections next year. President Aníbal Cavaco Silva proposed a crossparty agreement between the ruling coalition and opposition Socialists to guarantee wide support for the austerity measures needed for Portugal to exit its bailout next year, followed by elections. The decision was a warning shot to all the leading parties and it indicates that the president does not think any of them is capable of ruling effectively until the bailout is due to finish in June 2014. Mr Cavaco Silva’s move prompted sharp criticism in a country that has descended into its worst economic slump since the 1970s under the weight of austerity imposed by the bailout. Portuguese assets fell in response. Stocks declined 1.4 percent and 10-year bond yields climbed six basis points to 6.95 percent.

China accuses GSK of bribing officials Executives of GlaxoSmithKline Plc in China have confessed to charges of bribery and tax law violations, the country’s security ministry said, in one of the most prominent graft cases involving a foreign company in three years. Bribes were offered to Chinese government officials, medical associations, hospitals and doctors to boost sales and prices, the ministry said in a statement on its website yesterday. GSK executives also used fake receipts in unspecified tax law violations, it added. The statement did not give details on the number of GSK executives questioned, their identities or when the questioning took place. In response to the ministry’s charges, GSK said it is willing to cooperate with the authorities. “We continuously monitor our businesses to ensure they meet our strict compliance procedures – we have done this in China and found no evidence of bribery or corruption of doctors or government officials,” GSK said in its statement.

Tang’s wife admits guilt over basement Lisa Kuo, the wife of former Hong Kong chief executive candidate Henry Tang, pleaded guilty to one charge of building an illegal basement that contributed to his losing in the city’s leadership race last year. Mrs Kuo, appearing at the Kowloon City Magistrates’ Courts yesterday, pleaded not guilty to a second charge of knowingly commencing building works without obtaining approval. The hearing was adjourned until July 30. Mr Tang, formerly Hong Kong’s number two official and the early frontrunner for the 2012 leadership election, lost to Leung Chun Ying. During the campaign, his popularity fell following media reports of the basement. Mr Leung, who criticised Mr Tang over the issue, admitted after winning that he had an illegal structure at his home. The 2,200 square foot basement – more than twice the size of 90 percent of private homes in Hong Kong – contained a wine cellar, tasting room, a movie theatre and gym, the South China Morning Post and Apple Daily reported last year.

Macau, Beijing pledge to keep eye on deals Less than half of all deals inked in last year’s cooperation symposium have been implemented Tony Lai

tony.lai@macaubusinessdaily.com

rade bodies from Macau and Beijing pledged to keep track of the deals signed in a two-day symposium, after less than half the agreements clinched last year have materialised. “The Beijing sub-council of the China Council for the Promotion of International Trade and the Macau Trade and Investment Promotion Institute will actively follow and facilitate all the agreements [signed] in this symposium,” Li Luxia, the subcouncil’s deputy inspector, said. She added: “We will ensure the implementation of the cooperation projects and this will become (…) one of our regular tasks”. Her remarks came at a press conference after the closing of the 2nd Macau-Beijing Cooperation and Exchange Symposium. The event saw 11 deals worth 4.14 billion yuan (5.36 billion

patacas) signed, up by 61.1 percent from last year’s edition. The two trade bodies also facilitated 46 cooperation projects with a tentatively capital of 2.07 billion yuan involved, after 117 trade talk sessions. Ms Li said this year’s result was “fruitful” but she revealed only six of the 13 deals inked in the last edition had been enforced. She quickly added: “The remaining seven projects are in the final stage of implementation and some of them could hopefully have the formal contracts signed this year.” The deputy inspector stressed the importance of the symposium, saying it “rapidly frees the bottleneck [hindering] trade development between Beijing and Macau”. The contracts inked in the past two days focused on the

Indonesia lifts rates to cap inflation B

ank Indonesia raised its benchmark policy rate by an unexpected 50 basis points yesterday, as the central bank continued to surprise with aggressive steps to battle accelerating inflation, halt foreign outflows and bolster its weak currency. Indonesia is scrambling to stop an exodus of foreign funds from Southeast Asia’s largest economy that got started after the U.S. Federal Reserve in May signalled it was thinking about winding down its easy money policies. With yesterday’s hikes – double what the market anticipated – “we believe that market confidence will be stronger. Therefore, the reversal of capital will be shifted,” said central bank deputy governor Perry Warjiyo.

Moves seen strengthening market confidence

“In the last week, there was net buys particularly in government bonds,” he said. “We are sure that foreign capital inflow will be stronger.” The central bank hiked its benchmark policy rate to 6.50 percent, instead of to 6.25 percent as most analysts predicted. The central bank

cultural and creative industries as well as the services sector. The trade talks also included tourism, technology and small and medium enterprises. The most noteworthy deal was a subsidiary of gaming operator Sociedade de Jogos de Macau SA paying 2 billion yuan to Beijing Gehua Cultural Research and Development Centre to help design the non-gaming venues in SJM’s first Cotai resort. Both Macau and Beijing say they will continue to deepen ties after this symposium, namely by joining conventions held in the two sides, said Irene Lau, executive director of the Macau Trade and Investment Promotion Institute. The city can serve as “a bridge for Beijing to explore the international market,” namely the Portuguese-speaking countries, said Ms Li.

also raised its overnight deposit facility rate, known as FASBI, by 50 basis points to 4.75 percent. In mid-June, the bank became the first Asian central bank to hike a policy rate since 2011, raising the benchmark and FASBI by 25 bps. “Investors have been looking for stronger policy signals and this is it,” said Prakriti Sofat, regional economist at Barclays Capital in Singapore, adding that more assertive rate hikes “will serve to anchor inflation expectations and bolster their currency.” The economist said she expects another 50 bps hike in the coming quarter. Inflation is expected to surge to a four-year high this month as the full impact of fuel price hikes imposed on June 22 hits Indonesians. Rising demand during the Muslim fasting month, which began this week, will also further stoke inflation for the country with the world’s biggest Muslim population. The central bank has projected inflation to rise as high as 7.5 percent on an annual basis this month, compared with 5.9 percent in June. Reuters