Macau Business Daily, July 2, 2013 by Business Daily

Year II

Number 317

Tuesday July 2, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Chief exec’s nod on waste deal questioned T

he government is pushing forward the award of a 10-year waste management contract worth 2.07 billion patacas (US$258.8 million) even as a losing bidder seeks to stop the process. In a notice in the Official Gazette on July 1, Chief Executive Fernando Chui Sai

On authorises the signing of the contract with Macau Waste Systems Co Ltd (CSR). The move comes two weeks after Urbaser SA, one of the companies in the running for the contract, sought an injunction to prevent the contract from being awarded to CSR. There are questions however

on whether Mr Chui’s move breaches the law. It says a government body must immediately suspend all procedures when facing an injunction bid. No comment was available from the Environmental Protection Bureau before press time. More on page 3

Casino junket operators diversify Page 4

Visitor satisfaction dipping: survey Page 6

Macau Chinese Bank capitalised Page 7 I SSN 2226-8294

www.macaubusinessdaily.com

Govt gets back La Scala plots The companies originally holding the land for La Scala – the upmarket housing project enmeshed in a web of alleged corruption – have decided to return it to the government, a court heard yesterday. Shareholders in one of the companies, Lei Pou Fat Development Co Ltd, decided on the move at a meeting on June 21, the Court of First Instance was told. The court is trying two Hong Kong tycoons, Joseph Lau Luen Hung and Steven Lo Kit Sing. They’re accused of paying Ao Man Long, then a government secretary, HK$20 million (US$2.5 million) to ensure they got the land from the original owners in 2005. Page 2

Hang Seng Index 20810

20750

20690

20630

20570

20510

June 28

HSI - Movers Name

%Day

Grand Waldo to be renovated

Gambling rev up 21 pct in June

HENGAN INTL

7.23

WANT WANT CHINA

4.80

CHINA OVERSEAS

4.57

CHINA RES LAND

4.18

CHINA MERCHANT

4.09

Grand Waldo casino hotel is to be renovated rather than demolished, following the closure of all its operations on Sunday morning, the purchaser Galaxy Entertainment Group Ltd confirmed to Business Daily yesterday. The casino had 38 gaming tables and 148 slots, and the hotel 320 rooms according to Union Gaming Research Macau. Most of Grand Waldo’s 800 staff have been offered and accepted alternative employment.

Macau’s casino gross gaming revenue for June grew by 21 percent year-on-year to 28.3 billion patacas (US$3.5 billion). It’s the fourth month in a row that the city’s casino industry topped the 28-billion patacas mark, show data from the Gaming Inspection and Coordination Bureau. On a cumulative basis, Macau casino revenue has expanded by 15.3 percent year-on-year in the first six months of 2013.

HONG KG CHINA GS

-0.73

POWER ASSETS HOL

-0.96

CHINA SHENHUA-H

-1.74

BELLE INTERNATIO

-2.02

BANK OF COMMUN-H

-3.10

Page 5

Source: Bloomberg

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July 2, 2013

Macau

Govt gets back La Scala plots But there is no word on what the land near the airport will now be used for Tony Lai

tony.lai@macaubusinessdaily.com

he companies holding the land for La Scala, the upmarket housing project enmeshed in a web of alleged corruption, have decided to return the land to the government, a court heard yesterday. Shareholders in one of the companies, Lei Pou Fat Development Co Ltd, decided on this course of action at a meeting on June 21, the Court of First Instance was told. The court is trying two Hong Kong tycoons, Joseph Lau Luen Hung and Steven Lo Kit Sing, who are accused of paying Ao Man Long, then a government secretary, HK$20 million (US$2.5 million) to ensure the success of their bid in 2005 for five plots of land near Macau airport, on which La Scala was to be built. An official of Lei Pou Fat Development, Ieong Pui Wa, told the court: “All the shareholders signed documents giving the land back to the government.” Lei Pou Fat Development used to oversee five other companies, each of which owned one of the five plots sold in 2005 to Moon Ocean Ltd, a firm created by Mr Lo. Ms Ieong said four of the five other companies had been dissolved, leaving only Tai Lei Loi Development Co Ltd. She said the meeting of Lei Pou Fat Development shareholders had been prompted by the government’s

decision last year to revoke the grant of the land to Moon Ocean, now a subsidiary of developer Chinese Estates Holdings Ltd, of which by Mr Lau is chairman.

Future unclear The government owns 88 percent of Lei Pou Fat Development and in each of the five companies it oversaw. In April 2013 the government voided the grant in 2011 of eight more plots of land. Last year the Court of Final Appeal ruled during Mr Ao’s third trial for corruption that the bid for the land had been tainted by bribery. Chinese Estates asked the courts last September and this May to let it keep the land. Business Daily asked the cabinet of Secretary for Transport and Public Works Lau Si Io what the government would do with the land, but the cabinet had failed to reply by the time we went to press. Leong Weng Pun, counsel for Mr Lau in the bribery trial, declined to comment on the Lei Pou Fat meeting. He told reporters outside the court he kept in touch with Mr Lau and his Hong Kong lawyers. Chinese Estates had said before that it expected the five companies that owned the plots to return the HK$1.3 billion that Moon Ocean

The chances of La Scala ever getting off the ground are getting slimmer

had paid for them. But Ms Ieong said yesterday that the proceeds of the sale had already been distributed among the shareholders of each company except Tai Lei Loi Development. Sociedade de Turismo e Diversões de Macau SA owns 5 percent of each of the companies, Macau International Airport Co Ltd owns 5 percent and businessman Ng Fok owns 2 percent. Both Ms Ieong and Lau Kuai I, also a former staff of Lei Pou Fat, acknowledged yesterday the

Joseph Lau knew about land tender beforehand HK tycoon said plots near airport were ‘highly likely’ to be up for bidding Tony Lai

tony.lai@macaubusinessdaily.com

Chinese Estates wanted to build a museum, a zoo and a theme-park for children in Cotai

former employee of Hong Kong developer Chinese Estates Holdings Ltd said his boss Joseph Lau Luen Hung knew the government was going to sell land plots located near the airport months before it was announced. Li Sau Lung, former Chinese Estates project chief, said yesterday they started preparing a feasibility plan in February 2005 for the plots where high-end housing complex La Scala was being built. “Mr Lau said this [land] was… highly likely to be up for bidding and asked us to carry out works to see whether it was viable [for development],” he testified in the Court of First Instance. The government, however, only launched bidding for those five land plots in May of the same year. Mr Lau and Steven Lo Kit Sing, chairman of entertainment firm BMA Investment Group Ltd, are accused of paying Ao Man Long, then government secretary, HK$20

existence of flyers and a model on the development of the airport land plots dated back to at least 2001. But they said they did not know the details and who made those flyers and the model. The counsels for the two Hong Kong businessmen have argued the government wanted to sell the plots as early as the 1990’s and even drafted a development plan. As such, they claim, Mr Lau and Mr Lo were not the onlys one knowing in advance about this intention. With V.Q.

million (US$2.5 million) to ensure the success of their bid for the plots. Mr Li said they tried to prepare the feasibility plan “more accurately” because they already had some data on the plot. “We tried to lay down more details, particularly on money, knowing how much should be put for costs and how much money could be generated from the sales,” said the former staff. Chinese Estates had also started preparing a development plan for a Cotai land plot near the Macau East Asian Games Dome in January 2005. “But the Cotai plan is different from [the airport land one], not knowing whether the government would open it up for bidding,” said Mr Li. The Cotai plan was less complex, he added. Mr Li’s comments were put in question by Mr Lau’s counsel, Leong Weng Pun. Mr Leong said the Cotai plan was “comprehensive,” listing a museum, a zoo, a four-storey shopping mall, four hotels, and a themed park for children to be built on the site. However Mr Li said the Cotai plan was based on “imagination” without much concrete data. It was more like a plan for “persuading others [the government] to give them a chance for development”. The Hong Kong tycoons’ defence had argued it was common practice to carry out feasibility plans for land plots even without knowing whether the parcels could be secured. Mr Li also said they had met with Mr Lo in January and March 2005 over the Cotai and airport plans. Chinese Estates’ staff went to Macau twice for ground inspections.

July 2013 April2,19, 2013

Macau AERL seals junket deal at Le Royal Arc Nasdaq-listed Asia Entertainment & Resources Ltd – an investor in Macau VIP gambling – has finalised the acquisition of a high roller room at Casino Le Royal Arc. The facility on the first floor of the Sociedade de Jogos de Macau SA-licensed casino expands AERL’s Macau VIP portfolio to five rooms and a total of 40 tables, split between Macau peninsula and Cotai. The other rooms are at StarWorld Macau, Galaxy Macau, Sands Cotai Central and City of Dreams. “The addition of this VIP gaming room will enhance our ability to serve our existing customers…,” said chairman Lam Man Pou.

Govt brushes aside prospect of waste contract injunction But the chief executive’s contract signing authorisation is in a legal grey area Vítor Quintã

vitorquinta@macaubusinessdaily.com

he government is pushing through with awarding a new 10-year waste management contract worth 2.07 billion patacas (US$258.8 million), disregarding legal action by a losing bidder to stop the process. In a notice in yesterday’s Official Gazette, Chief Executive Fernando Chui Sai On authorises the signing of the contract with Macau Waste Systems Co Ltd (CSR). Two weeks ago, Urbaser SA of Spain, one of the companies that wanted the contract, sought a court injunction to prevent the government from awarding it to CSR. The Administrative Litigation Procedural Code says a government body facing the prospect of an injunction must immediately suspend what it is doing, unless the government asserts within three days that to stop would cause “serious harm” to the public interest. So the legality of Mr Chui’s authorisation is questionable. Business Daily has learned that the government has responded to Urbaser’s application for an injunction but has made no assertion about any harm to

CSR’s current waste management contract expires on October 31

the public interest. An expert on administrative law, who asked to not be identified, told Business Daily that the matter might not be as straightforward as it appeared. “Some legal minds have interpreted the code as saying that this suspension of procedures remains in effect only until the authority replies to the injunction application,” the expert said.

“But in most cases the applicant explicitly asks the court to issue a temporary suspension while it is deciding on the injunction.” If the government has broken the law, Urbaser could ask the court to declare invalid the notice authorising the signing of the contract with CSR. In that case, government officials could face disciplinary action and

be liable for contempt of court, and the government could be obliged to compensate Urbaser.

Odd rules The Environmental Protection Bureau is in charge of putting the new waste management contract out to tender. Asked by Business Daily if it would sign the contract despite the legal dispute, the bureau said “the MSAR government is following up on the procedures in accordance with the law”. CSR already disposes of Macau’s rubbish, but its current contract expires on October 31. CSR is a joint venture by Hong Kong’s SITA Waste Services Ltd and Macau’s HN Group Ltd. Business Daily asked CSR and SITA Waste Services to comment but had received no reply by the time we went to press. The environmental bureau pledged that the waste management services will continue “in order to guarantee the public environment’s hygiene and public interest”. According to documents seen by Business Daily, Urbaser has reviewed the government’s decision to award the new contract to CSR and concluded: “It is undeniable that the adjudication is illegal and invalid.” The rules for tendering for the contract were the cause of some concern. Therulesfortenderingforbigcontracts typically contain criteria that must be met to reduce the risk of corruption. The rules for tendering for the new waste management contract omitted these criteria, and banned consortiums from bidding. Urbaser has said that once its application for an injunction is granted it will contest in court the government’s decision to award the new contract to CSR.

Airport passengers hit new record last quarter T

he Macau International Airport handled nearly 2.3 million passengers in the second quarter, 15 percent more than a year earlier. The growth pace in passenger volume was similar to the first quarter, when nearly 1.2 million passengers arrived or departed from the airport. The Macau International Airport Co Ltd noted that growth was also felt in aircraft movements. There were over 23,000 aircraft movements in the second quarter, a rise of 21 percent year-on-year. Almost 402,000 passengers went through the airport in June, up by 12 percent year-on-year. Aircraft movements rose by 23 percent to 4,038. With the number of flights

growing faster than the number of passengers, airplanes were less full in the second quarter than a year earlier. The airport operator expects a spur in its traffic during the summer period. Air Macau Co Ltd, for instance, is adding three more weekly flight to Bangkok during the summer. Xiamen Airlines Co Ltd will launch daily flights from the southeast coastal city of Xiamen, in Fujian province. The exact date is yet to be announced by the carrier. As for Southeast Asian routes, Malaysia’s FlyFirefly Sdn Bhd and Lao Airlines are also planning to launch charter flight services to Macau in August, the airport operator announced. S.L.

The airport operator expects a spur in its traffic during the summer

July 2, 2013

Macau

Data mining to iron ore Macau’s casino junket operators branch out to other sectors Farah Master

hen junket operator Suncity Group Ltd opened its first high roller baccarat table at Steve Wynn’s Macau casino in 2007 to lure China’s wealthiest punters, the firm had fewer than 30 employees and no computers or equipment other than pen and paper. Five years later, Suncity has emerged as the dominant junket in the territory. It is planning to open its own resort, independent of casino stalwarts such as Las Vegas Sands Corp, and is expanding into everything from mining to cinema films. It didn’t detail what resort it was referring to. Macau’s booming gaming revenues totalling US$38 billion [304.14 billion patacas] last year – six times that of the Las Vegas strip – are indebted to its unique VIP junket system, where licensed middlemen act on behalf of the casinos to attract “big whale” spenders by arranging their travel and accommodation and handle their gambling credit. The evolution of the junkets is welcomed by the authorities, who are eager to re-position Macau as an allround international travel destination.

Diversity drive “Suncity is a young and very energetic corporate. There is a need to be diversified,” said Choon Yoon Ming, a senior executive at the company, in an interview with Reuters. “For future investments we would look to expand in different areas, particularly property, finance and media. We would look to list other parts of the business.” That could shake-up the dynamics of the world’s largest gambling market. The junkets have traditionally worked for the casinos, which rely on them for more than twothirds of their revenue. Now, leveraging their extensive

customer databases and sophisticated resources, they could one day start competing with them. “Macau’s junket operators are fully aware that their network and database of high net worth VIPs is valuable,” said Edmund Lee, a partner at financial services business PwC in Hong Kong and specialist on the gaming sector. Suncity, headed by 39-year-old Alvin Chau Cheok Wa, is one of more than 200 junket operators licensed in Macau. The biggest operators, which include Neptune Group Ltd, Golden Group, Jimei and Dore Holdings Ltd, account for more than half the monthly junket turnover of US$75 billion. Despite robust massmarket demand, a crackdown on corruption and pervasive graft has seen the supply of millionaire VIP players to Macau decline over the past year, prompting junkets to seek to diversify their income streams. Suncity, which makes around HK$135 billion (US$17.4 billion) in monthly gaming turnover, according to Mr Choong, has expanded into mining with iron ore operations in Indonesia. It has also branched out into financial services in Hong Kong with 24hour securities, forex and commodities trading, real estate in China, food and beverage interests, and film and media investments. The company has two listed arms, Sun International Resources Ltd and Sun Century Group Ltd. Golden Resorts Group, headed by Pollyanna Chu Yuet Wah a U.S. dollar billionaire from Hong Kong, has been investing in financial services through listed arm Kingston Financial Group Ltd since 2011. But the trend for larger junkets, flush with cash from the gambling boom over the past decade, to diversify as a hedge against the volatile

KEY POINTS Suncity planning to open ‘own resort’ Junkets diversifying from gaming Bosses sitting on mainland political bodies ‘Big effort’ to diversify city: DICJ boss Neves

Choon Yoon Ming (pictured right) of Suncity launches of young designer contest (Photo: Manuel Cardoso)

VIP gaming sector has accelerated over the last year. Large junkets such as Jimei, which operates casinos in the Philippines and hosts golf tournaments, have moved into wealth management and securities, which complement its VIP clientele base. Neptune, which also uses the name GuangDong Group, sponsored a high profile poker tournament this month, while Dore announced it was buying a majority stake in a Chinese pawn loan business. Macau’s junket system was created in the 1970s with the rise of Stanley Ho Hung Sun, an influential local businessman who opened the gaudy egg-shaped Casino Lisboa. Mr Ho gave the junkets control of the casinos’ VIP rooms, sparking a turf war in the late 1990s as rival gangs fought to dominate. Since the liberalisation of Macau’s casino market in 2002, which marked the entry of foreign players such as Las Vegas moguls Steve Wynn and Sheldon Adelson, the junket industry has been a subject of scrutiny from U.S. regulators, who allege the operators have ties to organised crime and facilitate illicit money flows. To combat this image, Emilie Tran, a professor at the University of Saint Joseph Macau, says junkets are trying to associate with more wholesome activities, such as organising community and youth events. “Working for a junket is now seen as respectable and a job like any other,” said Ms Tran.

The shift to sophisticated corporate entities with sizable business development, accounting and marketing teams is clearly visible. Shabby junket storefronts at the Hong Kong-Macau ferry terminal have been replaced with marble offices in prime business districts, while customised Hummer limousines owned by the operators are frequently seen parked outside Macau’s newest casinos. Politics is the next phase of the junkets’ makeover, says Ms Tran, who cites the example of Suncity’s Chau, who joined the Guangdong provincial committee of the Chinese People’s Political Consultative Conference (CPPCC), China’s parliamentary advisory body, this year. Mr Chau, with his dapper appearance is often likened a famous Hong Kong movie star. An avid tennis player and gym-goer, he is frequently pictured in the local tabloids at parties. Golden Resorts Group’s Pollyanna Chu, ranked by Forbes as the 35th richest billionaire in Hong Kong, sits on the CPPCC national committee, while Hoffman Ma Ho Man, deputy chairman of Success Universe Group Ltd sits on the Chongqing Committee of the CPPCC. Manuel Joaquim das Neves, director of Macau’s gaming regulator the Gaming Inspection and Coordination Bureau, said junkets diversifying into other industries fitted into the government’s attempts to wean the territory, home to about 600,000 people, off the gambling industry that

accounted for more than 80 percent of government revenues last year. “For the government, when people talk about Macau, we want them to not talk about gaming. We are doing a very big effort to push the diversification. It’s not an easy task,” said Mr Neves. Despite the move to diversify, the role of the junket is likely to remain critical to Macau gaming sector over the coming years, as gambling debts are not legally enforceable in China. Junkets bring in gamblers from the mainland and then find their own ways to collect debts. Suncity is massively expanding its gaming division, doubling its workforce to 1,200 over the past year and is still short staffed.

Customer offer But as major junkets move from operating one or two VIP rooms in Macau’s flashy casinos to owning their own properties, Macau’s licensed concessionaires Sands China Ltd, Wynn Macau Ltd, MGM China Holdings Ltd, Melco Crown Entertainment Ltd and Galaxy Entertainment Group Ltd may have to find new ways to lure the customer. “I think everybody is fighting for the customer,” said Francis Lui Yiu Tung, head of Galaxy Entertainment. “We are doing the same thing, I am sure the junket would be thinking the same thing. We just have to offer more, a bit extra something new, something more creative to get them to come back again.” Reuters with editing by Michael Grimes

July 2, 2013

Macau

Gambling revenue up 21 pct y-o-y in June

July was potentially off to a choppy start yesterday with Severe Tropical Storm Rumbia – in severity one notch below a typhoon – due at the time Business Daily went to press, to pass 350 kilometres southwest of Macau, bringing with it heavy rain. Kenneth Fong of J.P. Morgan in Hong Kong said in a note on June 24 that there was currently Michael Grimes “limited room for significant upside” michael.grimes@macaubusinessdaily.com in Macau gaming stocks. He cited reasons including valuations being close to historical average; earnings before interest, taxation, depreciation and amortisation trading above the historical average; and price to acau’s casino gross gaming earnings ratios being only slightly revenue for June grew by below historical average. 21 percent year-on-year to He wrote: “Stock prices are not 28.3 billion patacas (US$3.5 billion) reacting to good news: Sands China 32000 recovering strongly after a slow start fell two percent (on June 5) after to the month. receiving government approval This is the fourth month in a to sell its Four Seasons serviced 30000 row that the city’s casino industry apartments.” produced results above the Deutsche Bank analyst Karen 28000 28-billion patacas mark, show data T a n g i n H o n g K o n g r e c e n t l y from the Gaming Inspection and downgraded four Macau gaming 26000 Coordination Bureau. stocks to ‘hold’ from ‘buy’. On a cumulative basis, Macau The HSBC/Markit Purchasing 24000 casino revenue has expanded by 15.3 Managers’ Index (PMI) for June – a percent year-on-year in the first six measure of confidence in China’s 22000 months of 2013. industrial activity – retreated to 48.2, Union Gaming Research Macau in figures released yesterday. It was said in a note commenting on the June the lowest level since September 2012 numbers: “The calendar [year-on- and down from May’s final reading year] comp[arison] was essentially of 49.2. A reading below 50 indicates neutral, although the weather comp contraction. The HSBC index is said was easy as a Signal 8 typhoon in late to factor in private businesses in June 2012 had a negative impact on China, an important component of visitation and GGR.” the country’s export effort. A separate PMI survey released by China’s government statistics office yesterday slipped to 50.1 in June from 50.8 in May, but came in Market Share Per Operator (2012-2013) above the median market forecast of 50.0 reported Reuters. But Union Gaming said it Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun saw no deterioration of Macau’s SJM 26% 26% 26% 27% 27% 28% 26% 26% 26% 27% 26% 23% 24.5%** gaming industry fundamentals Sands China 18% 22% 19% 18% 21% 21% 21% 20% 21% 21% 22% 21% 20.5%** in VIP, premium mass and mass Galaxy 23% 19% 21% 18% 19% 16% 18% 19% 19% 18% 18% 19% 19%** market gambling. “Over the last four years the back Wynn 12% 11% 12% 13% 10% 12% 10% 11% 12% 11% * 12% 10%** half of the year has accounted for MPEL 13% 13% 13% 14% 14% 14% 14% 14% 13% 14% * 14% 14.5%** 54 percent of annual GGR. Should MGM 9% 9% 10% 10% 9% 10% 11% 9% 10% 9% * 11% 11%** historical patterns hold true, we believe GGR should meet or even exceed our Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 16 percent [year-on-year growth] Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total * Not available ** Source: Lusa forecast,” said the research house.

Photo by Manuel Cardoso

Severe Tropical Storm Rumbia gives rainy start to July

Grand Waldo to be renovated Casino hotel closed on Sunday, but no confirmation yet on what’s happening to its 38 gaming tables Michael Grimes

michael.grimes@macaubusinessdaily.com

rand Waldo casino hotel is to be renovated rather than demolished, following the closure of all its operations on Sunday morning, the purchaser Galaxy Entertainment Group Ltd confirmed to Business Daily yesterday. The casino had 38 gaming tables and 148 slots, and the hotel 320 rooms according to a note from Union Gaming Research Macau in early May. There was no guidance yesterday from Galaxy – which supplies the gaming licence for the venue – on whether it can use those live dealer gaming tables in its other casinos prior to the purchase of Grand Waldo being finalised. Nor was there any guidance on whether any or all of

the tables and slots will be returned to action at Grand Waldo once the renovation is completed. A spokesman for the gaming concessionaire added that most of Grand Waldo’s 800 staff had been offered and accepted alternative employment in other group properties. The firm did not give a date for the reopening of the property. Grand Waldo’s 65 percent owner Get Nice Holdings Ltd said in a Hong Kong filing on June 11 it would take up to five months to finalise sale of the venue. It is located just southwest of Galaxy Macau with a public road separating the two sites. Sources outside the company suggested it will be given a new façade as part of the renovation, but there

was no guidance as to whether it will be a gaming or non-gaming site. Get Nice was reportedly at one stage looking at redeveloping Grand Waldo as a high-end shopping mall. Galaxy is already planning more retail capacity for the HK$19.6 billion (US$2.5 billion) Galaxy Macau phase two, which is due to open in 2015 according to the concessionaire. Buddy Lam Chi Seng, Galaxy’s vice president, public relations, told Business Daily: “We are suspending operations at Grand Waldo as we work on the renovation plans. The plans are very exciting but unfortunately I can’t say more about them at this stage.” He added: “As far as Grand

Waldo’s tables are concerned, we are acting in accordance with requirements [of the government and the sale process].” Mr Lam said 95 percent of Grand Waldo’s casino staff had been reassigned, and 70 percent of the hotel workers. “We have offered all the local staff new jobs already. Most of them have accepted offers working in other GEG properties. For the nonlocals we have also offered most of them jobs already. There are a few we couldn’t offer other jobs because they had particular skills where we didn’t have a job match.”

July 2, 2013 April 19, 2013

Macau Loss-maker Amax wants casino in Northern Cyprus Loss-making Macau junket investor Amax Holdings Ltd said in a Hong Kong filing it wants to operate a casino in the Turkish Republic of Northern Cyprus. The area of the Mediterranean island is only recognised by Turkey. The United States’ Department of State said in its latest International Narcotics Control Strategy Report in March: “The Turkish Cypriot community lacks the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made in recent years with the passage of ‘laws’ better regulating the onshore and offshore banking sectors and casinos.”

Visitors less happy here, survey finds Events held in Macau last year pleased tourists, but the city’s heritage lost some allure Stephanie Lai

sw.lai@macaubusinessdaily.com

isitors to Macau were less satisfied with their time here in the fourth quarter of last year, mainly because they were less impressed by the heritage sites and restaurants, the results of a survey show.

The tourist satisfaction index compiled by the tourism research centre at the Institute for Tourism Studies fell to 70.2 points in the fourth quarter from 69.7 in the third. Researchers for the fourth quarter

Visitor satisfaction with heritage sites fell last year for the second year in a row

survey asked 1,161 visitors about their satisfaction with and expectations of various aspects of, their visits. Of the tourist satisfaction subindexes, the index of satisfaction with hotels rose the most, to 74.1 points from 70.2. Events, which include festivals, shows and concerts, remained the most satisfactory experiences for tourists, the index of satisfaction with events rising 0.4 point to 75.4. However, the survey found that attending events was not among the three main purposes of visiting Macau, which were shopping, eating out and seeing heritage sites. Visitors were less happy with restaurants and the heritage sites, the indices of satisfaction with these aspects being lower than the overall satisfaction index. The index of satisfaction with heritage sites fell to 68.4 points from 71.1, its second-lowest reading since the satisfaction surveys began in 2009. Visitors were least impressed by

Main reason for visit

Attraction of gambling fades further A study of visitors by the tourism research centre at the Institute for Tourism Studies suggests that the proportion of visitors that come to Macau primarily to gamble continues to shrink. Of 1,013 visitors surveyed in the fourth quarter of last year, just 6.2 percent acknowledged that the primary purpose of their visits was to gamble. In the third quarter, 7.2 percent came primarily to gamble. The fourth-quarter percentage is the lowest since surveys of the purposes of visiting Macau began in 2009. Of the visitors that gambled or planned to gamble, 31 percent said they had over 5,000 patacas (US$626) to bet. Another 22 percent said they intended to bet between 2,001 patacas and 5,000 patacas. Nearly 70 percent of the gamblers said they were spending one to two hours at casino tables. The reading of the index of satisfaction with gaming was 70.1 points in the fourth quarter, 0.7 point less than in the third quarter but 4 points higher than a year earlier. The reading of the index of satisfaction with gaming for the whole of last year was 69.8 points.

Macau Tourist Satisfaction Index (MTSI)

Source: IFT

tour guides and tour operators, the index of satisfaction with tour guides and tour operators falling to 65 points from 69.7.

Better than Shenzhen The reading of the index of satisfaction with immigration formalities was 65.1 points. Of the tourists interviewed, most were from Hong Kong or mainland China and visiting independently rather than belonging to tour groups, and 60.2 percent had visited before. The tourist satisfaction index for the whole year rose to 69.8 points from 68.1 in 2011. The reading for last year is below the average of 69.9 points for 2009 to 2012. The survey found that satisfaction with events, low in the first quarter, rose steadily during the year, so that the index of satisfaction with events averaged 73.7 points. Transport was the next-most satisfactory aspect of visiting Macau, the index of satisfaction with transport averaging 72.3 points. Hotels were the next-most satisfactory aspect, the index of satisfaction with hotels averaging 71 points. But satisfaction with heritage sites fell for the second year in a row. Heritage sites were the second-most satisfactory aspect in 2011 but were the seventh-most satisfactory last year. Despite improvements, restaurants, tour guides and tour operators, and immigration formalities were among the least satisfactory aspects of visiting Macau. Visitors ranked Macau above Shenzhen and Zhuhai as a place to visit, but below Hong Kong and Guangzhou. Hong Kong’s tourism satisfaction index averaged 75.1 points last year and Guangzhou’s averaged 73.1 points.

July 2013 April2,19, 2013

Macau

Macau Chinese Bank gets capital injection Hong Kong developer Lippo steps in to shore up the bank’s finances Vítor Quintã

vitorquinta@macaubusinessdaily.com

roperty development and investment company Lippo Ltd has put more capital into Macau Chinese Bank Ltd as the bank struggles to improve its earnings. Lippo told the Hong Kong Stock Exchange last week that it had injected about HK$78 million (US$10.1 million) into Macau Chinese Bank in the first quarter of this year. The injection was meant “to strengthen its financial position”, Lippo said. Requests for comment from Macau Chinese Bank and Lippo went unanswered yesterday, a banking holiday in Macau and a public holiday in Hong Kong. Lippo said the bank’s “operating environment is still challenging because of strong competition, high operating costs and subdued global economic activities”. Macau Chinese Bank had revenue of HK$4.69 million in the first quarter and made a profit of HK$274,000. The bank’s annual results, published in the Official Gazette here

Lippo says strong competition and high costs are eating into Macau Chinese Bank’s earnings (Photo: Manuel Cardoso)

in May, show that it made a profit of 10.2 million patacas last year. Unspecified “exceptional profits” made up most of its profit, and only 1.45 million patacas came from banking operations. The bank made a loss of 48,900 patacas on its financial operations in 2011.

Macau Chinese Bank “remains positive to the development and growth in the region, continues to focus on customers’ needs, and seeks opportunities to launch new products and services to enlarge its customer base”, Lippo said. Business Daily asked the Monetary Authority of Macau to comment but

had received no reply by the time we went to press. Lippo said it intended to start work on the superstructure of its only project in Macau, M Residences on the peninsula, in the second half of this year. It expects the development to be completed by next year. The 13-storey building will sit on 3,398 square metres of land in Estrada de Cacilhas, near the reservoir. It will contain 311 flats with a combined sellable floor area of about 26,025 square metres. Of the homes in M Residences, 165 will be studio flats, 35 will be onebedroom flats, 95 will be two-bedroom flats and 16 will be three-bedroom flats, according to the Land, Public Works and Transport Bureau website. By the end of April, 297 had been sold, the website says. Pre-sales of homes in the development began in November 2011. The response was “ satisfactory”, Lippo said. The company has pocketed about HK$1.1 billion in deposits. The pre-sales helped to prevent Lippo’s liabilities from climbing above HK$7.8 billion by the end of March. Its liabilities a year earlier were HK$7.5 billion. Lippo said its finances remained healthy, its assets having increased slightly to HK$22.8 billion by the end of March. Property-related assets accounted for 81 percent its assets, having made up 80 percent at the end of December. Pre-sales of homes in M Residences ceased last year, so Lippo made a loss of HK$10 million in the 15 months ended March 31.

Corporate

Test-drive rush for new Mercedes E-Class Zung Fu Motors (Macau) Ltd, the retailer of Mercedes-Benz vehicles in Macau held an exclusive test-drive for the new Mercedes Benz E-Class Saloon automobiles on Saturday. “The show-up rate was quite good,” Zung Fu Motors’ Linda Chang told Business Daily. A total of 25 parties pounced on the chance to take the new model out for a spin. The feedback from Macau potential buyers who joined the test drive was also “quite good,” she said. Mercedes-Benz said in a statement it “has comprehensively modernised the E-Class and as such is extending its leading position in the luxury segment even further”. The German carmaker has added a four-cylinder BlueDIRECT petrol engine that offers “the highest levels of efficiency and best-in-class emissions performance,” the company says. “The customers enjoyed the fact that the new E Class (Avantgarde version) is very sporty (especially with the new headlamp and the exterior trim). The customers also mentioned that they the handling is better than the old E Class,” the company said in a statement. The E-Class models also include new or optimised safety assistance systems from the future S-Class, which Mercedes-Benz calls “intelligent drive”. Seven E-Class Saloon models are available in Macau with the prices ranging between 508,000 patacas (US$63,600) and 1.4 million patacas. These new models were launched in late May in Macau and Hong Kong. “So far we have been receiving many feedbacks on the new E Class and we hope this will translate into sales,” the retailer said. “We are confident of the new E Class in terms of its features, technology, comfort, safety and design.”

July 2, 2013 April 19, 2013

Greater China Stocks post first 2-day gain in month

Anaemic data raise China growt

China’s stocks rose for a second day, completing its first back-to-back gain in a month, after technical indicators signalled equities were oversold and money-market rates slumped. PetroChina Co Ltd advanced 1.1 percent, gaining for a third day after the biggest energy producer slid to a record low last week. Jiangxi Copper Co, the largest producer of the metal, surged the most in a month. Apple Inc. supplier Goertek Inc. and drugmaker Yunnan Baiyao Group Co. led gains for technology and health-care stocks. SAIC Motor Corp and Angang Steel Co. slid after two gauges of Chinese manufacturing dropped in June. The Shanghai Composite Index advanced 0.8 percent to 1,995.24 at the close, adding to a 1.5 percent gain on June 28. The index dropped 4.5 percent last week, the biggest loss since February. The Shanghai gauge trades at 8.2 times 12-month projected profit, rebounding from 7.99 on June 23, the cheapest level in at least five years. “After a big slide last week, stocks could see a rebound as investors return to bargain hunt,” Zhang Haidong, an analyst at Tebon Securities Co., said.

Survey suggests factories have virtually stopped growing

HK protesters call for universal suffrage Thousands of people rally in Hong Kong on the 16th anniversary of the city’s handover to China, marching through heavy rain to demand the government address a widening wealth gap and introduce broader democracy. Organisers said last week they expected at least 50,000 people to take part in the demonstration, which started at Victoria Park in the city’s Causeway Bay area. Six soccer pitches at the park were filled with people and more were streaming in with umbrellas and raincoats as the city’s Observatory raised a typhoon warning. “It’s an explosion of anger in the streets,” the Oriental Daily wrote, two of the city’s bestselling newspapers which ran headlines calling for its readers to join the march. People should march “to defend the core values of the city, fight for universal suffrage and request that Chief Executive Leung Chun Ying step down,” the Apple Daily said in an editorial. The annual July 1 protest serves as an indicator of how the city’s 7.2 million people regard the leaders in Beijing. Housing remains “the policy area of greatest public concern” and the government will start consultations “at an appropriate juncture” on the implementation of universal suffrage for the election of the chief executive, Mr Leung said at a reception yesterday ahead of the protest.

Langi Chiang and Koh Gui Qing

rowth in China’s vast factory sector slowed to multi-month lows in June on faltering new orders, a pair of surveys showed yesterday, boding ill for the world’s second-largest economy still smarting from fears of a credit crunch. An official Purchasing Managers’ Index dropped to 50.1 from 50.8, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. A private PMI from HSBC Holdings Plc and Markit Economics was 48.2, the weakest since September. Readings above 50 signal expansion. Weaker gains in manufacturing and a cash squeeze in the banking system add to odds that Li Keqiang will become the first premier to miss an annual growth target since the Asian financial crisis in 1998. In the latest signal that policy makers will tolerate slower expansion, President President Xi Jinping said local officials shouldn’t be judged solely on their record in boosting gross domestic product. Economists said the two PMIs reinforced their concerns that China’s economic cooldown could deepen in the second quarter, especially with Beijing looking increasingly reluctant to take action to stimulate growth. “The Chinese economy is still struggling at the bottom,” said Haibin Zhu, chief China economist of JPMorgan in Hong Kong. Mr Zhu

Manufacturing hurt by slowing demand from key markets

said slowing growth in China’s factory sector, as well as tighter monetary conditions in coming months after a squeeze in the interbank market in the last two weeks, could further hobble the Chinese economy this year.

Leaders at ease The surveys showed demand slackening at home and abroad. New orders in the official PMI survey tumbled to a four-month low of 50.1 in June. Unlike previous

months, it did not publish a reading for new export orders this month without explaining why. The HSBC/Markit PMI, which focuses on smaller firms and exporters, showed new orders in June slumped to their lowest level since October, even though producers had cut prices to improve sales. “Although new leaders have no intention to achieve a higher GDP growth, the current growth rate is quite close to the floor that new leaders have indicated to tolerate,” Lu Ting,

Cash crunch a reminder for banks, says Zhou Central bank governor soothes jitters but economy weighs

Beijing may change cotton policy in 2014 China may change its cotton reserves policy in favour of direct subsidies to farmers rather than buying their crops, according to the China National Textile & Apparel Council. Any changes would have to wait until at least the middle of next year because the government has pledged that China National Cotton Reserves Corp will buy an unlimited quantity of local fibre from farmers at 20,400 yuan (US$3,328) a metric ton during a stockpiling programme starting September 1, Robert Yang, assistant president of the council, said in Beijing. Inventories in China, the biggest producer, consumer and importer, may swell to 12.8 million tons by July 2014, according to the U.S. Department of Agriculture. Stockpiles at the end of this season would be enough to meet China’s production shortfall for about the next six years, Joe Nicosia, an executive vice president at Louis Dreyfus Commodities, said in November. “The government has recently shown signs of willingness to consider changes to the existing policy,” said Mr Yang. “The stockpiling programme’s pushed up local cotton prices to the point that they’re much more expensive than prevailing global prices, which is really hurting domestic cotton users.”

he recent cash squeeze in China’s interbank market was caused by rapid loan expansion at some banks and is a timely reminder that they need to adjust their businesses, the People’s Bank of China governor Zhou Xiaochuan said in an interview with China Business News. The market volatility was the result of rapid loan growth in the first week of June, with excessive expansion in commercial paper business at some banks, reflecting lenders’ strong impulse to expand credit toward the end of June, Mr Zhou was quoted by the newspaper as saying. The central bank refused to inject liquidity into the market despite a surge in interbank rates because it wanted the banks to adjust their practices, and the message has been correctly understood by the market, he added. Mr Zhou said banks had already scaled back their balance sheets since mid-June, and that as the lender of last resort, the central bank would definitely help institutions with acute liquidity shortages to maintain financial stability, the newspaper said.

He added that the central bank would guide financial institutions to maintain reasonable credit levels to support the growth of the real economy, the paper said. The head of the central bank reiterated that China’s current economic situation was smooth and inflation stable, and that a prudent monetary policy was appropriate.

KEY POINTS Short-term lending rates lowest since peak of cash crunch PBOC chief say crunch was a reminder for banks Message ‘correctly understood by the market’ – Zhou

China’s chief banking regulator said on Saturday that liquidity in the banking system was sufficient and pledged to control risks from local government debt, real estate and shadow banking.

Rates easing Chinese markets stabilised yesterday as investors spooked by last month’s cash crunch took heart from a flurry of official reassurances that there is ample liquidity in the financial system. But the return towards normality from the wild swings of the second half of June was tempered by further signals that China’s policymakers are determined to rein in soaring credit expansion even at the cost of lower growth in an already slowing economy. Inter-bank lending rates, while still elevated, eased to the lowest levels since the crunch peaked in late June, but stocks lost some of the ground regained in a bounce on Friday as the latest economic data offered further evidence of stuttering growth. “Inter-bank rates have eased of late after the central bank injected

July 2013 April2,19, 2013

Greater China

th fears

New home prices jump on increasing sales

KEY POINTS June official PMI slips to 50.1 HSBC manufacturing PMI at 9-month low

head of Greater China economics at Bank of America Corp in Hong Kong, said in a note yesterday. The lower official PMI “could worsen concerns that the liquidity squeeze in June will hit economic growth,” he wrote. The HSBC survey also showed new export orders shrinking in June at their fastest pace since September as U.S. and European clients reduced purchases even after Chinese producers passed on cost savings. Despite growing worries from investors, China’s new leadership appeared comfortable with the economic slowdown and reiterated efforts to speed up reforms. “We need to improve method and means of measuring performance,” said President Xi, during a weekend meeting with his high-ranking team. “We should no longer call someone a hero simply based on GDP growth rate.” His determination to push on with market reforms and the rebalancing of the investment- and export-driven economy was highlighted by turmoil in the interbank market in the last two weeks, when the central bank let short-term borrowing cost spike to record highs without immediately injecting liquidity to ease conditions.

Slowing further “The June PMI fall, across the board on major sub-indexes, indicates downward pressure in the economy,”

China Q2 annual growth slower than Q1 – economists Top leaders comfortable at slowing growth, focus on reforms

Zhang Liqun, an economist with the Development Research Centre, a top government think tank, said in a statement accompanying the release of the official PMI. The output sub-index dropped to 52.0 in June from May’s 53.3 and the inventories level worsened to 47.4 from 47.6 in May. The HSBC/Markit PMI showed a rising stock of finished goods, for the fourth month in a row in June, and its output sub-index contracted last month for the first time since October while factories shed jobs at the quickest pace since August. Economists expect other data for June, to be released in the next two weeks, to confirm their concerns of even slower growth in the April-June quarter from 7.7 percent in the first three months. “The weak PMI reinforces our view that there is 30 percent chance GDP may drop below 7 percent in Q3 or Q4,” said Zhiwei Zhang, chief China economist of Nomura Holdings Inc. in Hong Kong. Reuters

Last month’s increase the biggest since December

hina’s new home prices jumped in June by the most since they reversed declines in December, defying the government’s tightened property curbs as increased sales supported developers’ efforts to avoid price cuts. Prices surged 7.4 percent last month from a year earlier to 10,258 yuan (US$1,671) per square metre (10.76 square feet), SouFun Holdings Ltd, the nation’s biggest real estate website owner, said in a statement after a survey of 100 cities. Last month’s increase was the biggest since December, when prices climbed 0.03 percent, reversing a 0.46 percent fall in November. The Chinese government is facing a dilemma to cool the property market while sustaining growth in the world’s second-largest economy, according to Nomura Holdings Inc. The country stepped up a three-year campaign to cool home prices in March, while only the capital city of Beijing among 35 provincial-level cities issued the toughest measures, according to Centaline Property Agency Ltd., China’s biggest real estate agency.

Sales have been stable, but supplies didn’t increase; prices naturally will trend upwards Dai Fang, analyst, Zheshang Securities

“Sales have been stable, but supplies didn’t increase; prices naturally will trend upwards,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co., citing the current demand to own or upgrade first homes after speculators were driven out by government curbs. “The central government will probably still wait and see, as the current price increases are a result of market mechanisms.”

‘Remains strong’ A gauge tracking property shares rose 1.1 percent at the close of trading in Shanghai, while the benchmark Shanghai Composite Index added 0.8 percent. The value of home sales rose 1.7 percent in May from the previous month to 503 billion yuan, the National Bureau of Statistics reported on June 9. “Both new and existing-home transactions gradually stabilized recently in many cities, indicating that home buying demand remains strong,” SouFun said in the statement yesterday. “Driven by the multiple factors including demand and a heated land market, the pressure for home-price increases is still relatively large” for the second-half of this year. Home prices rose 0.77 percent last month from May, narrowing by 4 basis points from the previous month on a month-on-month basis as some banks tightened mortgage policy amid a cash crunch, according to the SouFun statement. The city of Changshu in eastern Jiangsu province had the biggest gain last month from May, with prices increasing 3.6 percent, SouFun said. Home values in the capital Beijing jumped 1.6 percent from the previous month, while those in Shanghai, the country’s financial centre, added 0.6 percent. Bloomberg News

Beijing agrees to Asean sea spat talks Zhou Xiaochuan urges lenders to maintain reasonable credit levels

cash and promised to keep things on a more even keel,” Frederic Neumann, co-head of Asian Economics Research at HSBC Holdings Plc, said in a note. “What’s more, short-term rates, while down, remain substantially higher than over the past year. Inevitably, this will curtail the build-up in leverage … The key question, here, is how the housing market will react.” China’s frothy property market is seen by analysts as one of the biggest financial risks to the world’s secondlargest economy, along with the runup of debt by local governments and the explosive growth of the opaque “shadow banking” system. The central bank allowed short-

term borrowing costs to spike to record levels on June 20, sending a blunt but effective message to overstretched lenders that it was determined to bring risky credit growth under control. Key short-term lending rates, which began to ease last week, fell further yesterday to the lowest levels since the crunch peaked. However, they are still higher than before the market started to tighten. The weighted average for the benchmark seven-day repo rate fell 71 basis points to 5.45 percent, still above its usual range of 3-4 percent. The overnight rate fell by 49 basis points to 4.46 percent. Reuters

hina agreed to talks with Southeast Asian nations on a set of rules to avoid conflict in the South China Sea, winning praise from diplomats even as the Philippines warned of increased “militarisation” of the waters. Talks on a code of conduct between China and the 10-member Association of Southeast Asian Nations will begin in September, according to a joint statement released after the two sides met in Brunei. The move represents a reversal from a year ago, when Asean failed to show a united front amid Chinese pressure to avoid discussing the topic at regional meetings. “China and Asean countries are close neighbours and we are like members of one big family,” China

Foreign Minister Wang Yi told reporters. “We believe that a united, prosperous and dynamic Asean that seeks greater strength through unity is in China’s strategic interest.” China had resisted the talks as competition for oil, gas and fish in the waters increased tensions with fellow claimants including the Philippines, which has boosted military ties with the U.S. and Japan. The Philippines said “the massive presence of Chinese military and para-military ships” around two land features it claims in the South China Sea posed “threats to efforts to maintain maritime peace and stability in the region”. At the same time, the country backs Asean’s bid for a binding code of conduct, it said in a statement. Mr Wang, in his first Asean meeting as foreign minister since President Xi Jinping took office in March, called the overall situation in the South China Sea “stable”. He pledged to upgrade an Asean-China trade agreement and “push forward” talks on the Regional Comprehensive Economic Partnership, which includes Asean, China and five other Asia-Pacific countries. Bloomberg News

10 10

July 2, 2013 April 19, 2013

Asia

Japanese business sentiment turns positive Large manufacturers optimistic for first time in two years Thai PM sacks minister after rice fiasco Thailand’s commerce minister Boonsong Teriyapirom was sacked after coming under fire over a rice intervention scheme that resulted in huge losses to the budget and saw the country lose its place as the world’s top rice exporter. The government has put its losses at around US$4.5 billion for the first year of the rice-buying programme from October 2011. Its intervention was meant to help poor farmers, but it pushed the price of Thai rice way above that of India and Vietnam, which leapfrogged above it in the world exporters listing for 2012. Much of the rice bought remains in stockpiles.

Apple seeks ‘iWatch’ trademark in Japan Apple Inc., the world’s most valuable technology company, is seeking a trademark for “iWatch” in Japan as rival Samsung Electronics Co Ltd readies its own wearable smartphone device. The maker of iPhones is seeking protection for the name which is categorised as being for products including a handheld computer or watch device, according to a June 3 filing with the Japan Patent Office that was made public last week. Apple has been working on a wristwatchlike device that may perform some of the tasks now handled by the iPhone and iPad, two people familiar with the company’s plans said in February.

ig Japanese manufacturers turned optimistic for the first time since September 2011, indicating confidence in Prime Minister Shinzo Abe’s reflationary policies even after stock market volatility. The quarterly Tankan index for large manufacturers rose to plus four in June from minus eight in March, the Bank of Japan said yesterday. A positive figure means optimists outnumber pessimists. The median estimate of 22 economists surveyed by Bloomberg News was for a plus three reading.

Large companies from all industries plan to increase capital spending 5.5 percent in the year through March 2014. Japan’s economy is strengthening, with data last week showing factory output rose the most since December 2011, retail sales climbed and core consumer prices ended a six-month slide. Mr Abe’s task now is to put the world’s third-largest economy on a sustainable recovery path and spur private sector activity and wage growth. “Companies are becoming pretty confident about the economy’s outlook,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo. “They still have scope to revise upward their profit forecasts and capital investment plans.”

Volatile stocks

Companies are becoming pretty confident about the economy’s outlook Yoshiki Shinke, chief economist, Dai-ichi Life Research

Companies on the Nikkei 225 Stock Average estimated aggregate operating income of 19.7 trillion yen (US$198 billion) this fiscal year, up from 16 trillion yen in the year ended March, according to 178 company forecasts compiled by Bloomberg. Isuzu Motors Ltd said May 14 it will raise capital spending almost threequarters this year to 100 billion yen. The Topix index rose 0.3 percent in Tokyo. The stock gauge has fallen more than 10 percent from a four-

year high on May 22, paring its increase this year to 33 percent. The yen has weakened 13 percent this year against the dollar and traded at 99.36 in Tokyo. Japan’s gross domestic product grew an annualised 4.1 percent in the first quarter and is forecast to expand until the second quarter of 2014 when a planned sales tax increase may cause an economic contraction. “Japan’s recovery is gathering pace gradually as sentiment improves on a weak yen, higher stocks and solid consumer spending,” said Kyohei Morita, chief Japan economist at Barclays Plc in Tokyo. Yesterday’s data “signals market corrections from late May didn’t have a major impact on business decisions.”

Boosting confidence Confidence may be helped by the government’s growth strategy, a plan for tax cuts on fixed investment, the continued impact of fiscal stimulus and a rush in demand ahead of the planned consumption tax rise, according to Yasunari Ueno, chief market economist at Mizuho Securities Co in Tokyo. Even so, some firms may be holding back on spending because of concerns over stock and bond market volatility, and higher fuel costs stemming from the weaker

Singapore homes prices climb to record NZX halts trading as glitch hits Equities trading in New Zealand resumed after a technical fault caused NZX Ltd, operator of the country’s stock exchange, to halt trading. An unspecified connectivity issue was resolved and trading resumed in the afternoon in Wellington, NZX said in an e-mailed statement. The exchange operator decided to halt trading earlier, citing “the interests of running fair, orderly and transparent markets,” while it investigated the problem. The nation is headed for its busiest year for initial public offerings in a decade as Prime Minister John Key pledged to raise between NZ$5 billion (US$3.9 billion) and NZ$7 billion selling shares in stateowned companies.

Daewoo to build two LNG carriers Daewoo Shipbuilding & Marine Engineering Co Ltd said yesterday it had won a 469.6 billion won (US$411.2 million) order to build two liquefied natural gas (LNG) carriers from Angelicoussis Shipping Group Ltd. The South Korean shipbuilder said in a statement the vessels are slated to be completed by the second half of 2016, and operated by Maran Gas Maritime Inc., a gas shipping unit of Angelicoussis Group.

Government introduced new measures on property loans

ingapore home prices rose for a fifth straight quarter in the three months to June, and analysts said owners and developers of private apartments in the outer suburbs appear most at risk should the property market correct. Singapore’s central bank on Friday introduced rules to cap a property buyer’s monthly payments

at 60 percent of income in a bid to stabilise the housing market and to ensure those buying homes would not be caught out by a rise in interest rates. Based on flash estimates released by the Urban Redevelopment Authority (URA) yesterday, prices of apartments in Singapore’s core central region, which includes the

posh Orchard Road district popular with foreign investors, have risen by 49 percent since the end of the global financial crisis in 2009. In contrast, prices of homes outside the central region, which are areas more popular with ordinary Singaporeans on lower budgets, have increased by 70 percent. Wilson Liew, a property analyst

11 11

July 2013 April2,19, 2013

Asia

S.Korea data show recovery still fragile June manufacturing index falls to 7-month low

Big manufacturers’ mood turns positive

currency and the closure of nuclear power stations, Mr Ueno wrote in a report last month. Large Japanese manufacturers are more confident for the third quarter, with the outlook index – which gauges how firms see conditions in three months – at plus 10 in yesterday’s report. They forecast the yen will trade at 91.20 per dollar on average in the fiscal year ending March 2014, compared with a projection of 85.22 in the previous report. The 5.5 percent planned increase in capital spending this fiscal year compares with a forecast 2 percent drop in the March report. The index for small non-manufacturers was at minus four, the highest since 1992, and the small manufacturer index was at minus 14. The BOJ surveyed 10,623 companies from May 28 to June 28, with a 99 percent response rate.

Japan’s recovery is gathering pace gradually as sentiment improves on a weak yen, higher stocks and solid consumer spending Kyohei Morita, chief Japan economist, Barclays Plc

Bloomberg News

at Maybank Kim Eng Holdings Ltd, said the large majority of property transactions in recent quarters have been in areas outside the city-centre, whereas activity in the core central region has been muted. “In the immediate-term, there could be some negative impact on property sales as buyers and banks alike take time to digest how the new framework impacts them,” he said in a report. “Our view is that the mass market residential segment is the most vulnerable to downside price pressure,” he added.

Preventing a bubble National Development Minister Khaw Boon Wan, in remarks reported by local media yesterday, said the tougher rules were aimed at property investors rather than potential home owners. “It’s not really a cooling measure as such… It is a structural measure which is good to ensure a more stable property market,” he told the Straits Times newspaper, adding that current low interest rates are not sustainable. “We do have buyers stretching themselves, buying second or third properties,” Mr Khaw said. The URA flash estimates showed private residential property prices rose 0.8 percent in the second quarter from the first three months of the year, accelerating from the preceding period’s 0.6 percent gain. The rise in the index hid a divergence in the housing market, however, as prices of non-landed homes in the core central region fell, while prices outside central region rose 3 percent quarter-on-quarter,

more than double the previous quarter’s 1.4 percent pace. Maybank Kim Eng said in a report the new measures will have a relatively muted effect on local banks, since the average total debt servicing ratios of their customers is around 40-50 percent, well below the 60 percent limit. “While some cooling off of property loan approvals cannot be ruled out, we expect the impact to be limited,” it said of Singapore lenders DBS Group Holdings Ltd, OverseaChinese Banking Corp and United Overseas Bank Ltd. Barclays Plc said in a recent report that Singapore property prices were vulnerable to a sharp rate increase after three years of super-low interest rates due to quantitative easing measures by Western central banks. Reuters

Property shares down Shares of Singapore’s blue-chip property firms fell as much as 2.3 percent yesterday as investors reacted to new measures aimed at cooling the city-state’s housing market. Shares in Southeast Asia’s biggest real estate company Capitaland Ltd fell 1.95 percent while City Developments Ltd dropped 1.40 percent, figuring among the biggest losers in the market in early trade.

outh Korea’s growth momentum remained subdued in June, key government and private-sector data showed yesterday, casting fresh doubts about whether the tradedependent economy can stage a firm recovery in the coming months. The country’s overseas shipments shrank by 0.9 percent from a year earlier in June, according to data released by the Ministry of Trade, Industry and Energy, marking the first decline since February and suggesting that external demand remains lacklustre. Separate data showed that June’s consumer price index rose an annual 1.0 percent from a year earlier, remaining unchanged from May and staying at the lowest level since September 1999. The indicators suggest that Asia’s fourth-largest economy remains under pressure and that a gradual recovery forecast by local policymakers remains far from a certainty. “We have yet to see a clear rebound,” said Park Sang-hyun, chief economist for HI Investment

Australia PM Rudd unveils cabinet A

ustralian Prime Minister Kevin Rudd announced his ministerial team yesterday, opting for less familiar names as he seeks to distance himself from predecessor Julia Gillard and narrow the Labor party’s deficit in opinion polls. Mr Rudd also rewarded some of his supporters, with deputy Anthony Albanese given the communications post, Joel Fitzgibbon agriculture and powerbroker Bill Shorten adding school education to his portfolio of workplace relations. The new ministry of 30 will have 11 women. “I have assembled today a strong economic team,” Mr Rudd told reporters in Newcastle. “We’ll have the largest number of women of any cabinet in Australia’s history.” Mr Rudd, 55, needs to rally Labor and clarify his policy priorities as polls taken in the wake of his return as leader indicate he may help avert a wipeout by Tony Abbott’s opposition coalition at this year’s election. The party’s talent pool has been drained by ministerial resignations, dismissals and reshuffles from three leadership spats since Ms Gillard ousted Mr Rudd in 2010. “The prime minister will be impressing on his team that there can’t be any slip-ups and it needs to portray a unified front,” said

& Securities. “The industrial output data released on Friday showed that the domestic economy remains at a standstill, while there are some signs of deflationary pressures.” The HSBC Holdings Plc/Markit purchasing managers’ index for June also showed that South Korea’s manufacturing activity contracted for the first time in five months and hit a seven-month low as export orders declined, adding to doubts on whether the government’s fresh growth target of 2.7 percent for the year is achievable. “Korea’s weaker manufacturing conditions are reflective of sluggish demand and, to some extent, sustained weakness in the yen,” said HSBC economist Ronald Man in a statement. “If the downward trend is sustained, this will likely prove negative for Korea’s growth outlook and put pressure on policymakers in Seoul to deliver more stimulus.” The Bank of Korea earlier this month left South Korea’s key seven-day repo interest rate unchanged at 2.5 percent. The decision followed a surprise 25-basis point cut in May because of slowing exports and weak growth. Reuters

Korean overseas shipments shrank by 0.9 percent

Kevin Rudd – trying to narrow the gap in polls

Haydon Manning, a politics professor at Flinders University in Adelaide. “The fact that a lot of the names in the ministry won’t be familiar to many in the public isn’t the main concern. It’s all about getting the message across that this can provide credible government.” Mr Albanese’s communications portfolio will see him take over responsibility for the broadband network and retain his infrastructure brief, the prime minister said. Brendan O’Connor was given the employment portfolio; Kim Carr innovation, industry and science; Catherine King regional Australia; Tony Burke immigration; Mark Butler climate change and Richard Marles trade. Penny Wong will remain as finance minister. While Mr Rudd hasn’t committed to Ms Gillard’s pledge to hold an election on September 14, he must hold it this year. “The new ministry isn’t even the B team, it’s the C team” Mr Abbott told reporters yesterday. “Not too many days will pass under Kevin Rudd when people will feel nostalgic for Julia Gillard.” Bloomberg News

July 2, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

31.85

0.6319115

41459689

CHINA UNICOM HON

9.79

-0.5081301

26794201

POWER ASSETS HOL

66.25

-0.4507889

2582113

ALUMINUM CORP-H

2.31

0.4347826

39741806

CITIC PACIFIC

8.25

3.773585

12820390

SANDS CHINA LTD

34.75

-1.697313

26461426

BANK OF CHINA-H

3.03

1.337793

603097652

SINO LAND CO

10.26

1.584158

9684118

BANK OF COMMUN-H

5.07

0.1976285

58429596

96.5

1.04712

8164408

BANK EAST ASIA

26.9

-1.284404

3767219

BELLE INTERNATIO

9.95

-1.485149

37290666

AIA GROUP LTD

BOC HONG KONG HO

23.1

-1.702128

28264315

CATHAY PAC AIR

13.12

0.9230769

5725903

CHEUNG KONG

NAME

CLP HLDGS LTD

VOLUME

61.4

0.1631321

3850716

12.28

-0.4862237

60238571

9.31

-3.121748

8688227

SWIRE PACIFIC-A

91.05

0.7747648

1972794

ESPRIT HLDGS

11.28

1.98915

8840191

TENCENT HOLDINGS

283.4

1.7229

6855212

HANG LUNG PROPER

26.15

2.54902

12645059

TINGYI HLDG CO

18.72

-1.473684

8693804

HANG SENG BK

111.4

-0.2685765

2534492

WANT WANT CHINA

10.04

-1.181102

25246846

WHARF HLDG

63.8

4.590164

11076985

CNOOC LTD COSCO PAC LTD

101.1

0.4970179

11014079

HENDERSON LAND D

45.25

1.914414

5485620

CHINA COAL ENE-H

4.18

-4.56621

65433752

HENGAN INTL

78.45

5.090422

4297297

CHINA CONST BA-H

5.08

555562073

HONG KG CHINA GS

18.62

1.085776

11758693

CHINA LIFE INS-H

17.72

-1.116071

88121158

HONG KONG EXCHNG

CHINA MERCHANT

21.4

-2.059497

5486517

CHINA MOBILE

75.75

-0.2633311

CHINA OVERSEAS

18.54

-0.7494647

114.1

-1.553063

7692533

HSBC HLDGS PLC

79.7

0.5678233

20363667

23140435

HUTCHISON WHAMPO

79.1

2.66061

10372526

34953473

IND & COMM BK-H

4.4

-1.785714

973069505

10.42

18841337 4709618

CHINA PETROLEU-H

5.16

1.574803

170289691

CHINA RES ENTERP

22.6

0.2217295

3659627

MTR CORP

27.4

-0.1821494

19.08

0.952381

18453950

NEW WORLD DEV

10.2

-0.5847953

16997535

CHINA RES POWER

16.8

-2.211874

10547045

PETROCHINA CO-H

7.86

-0.6321113

112874515

CHINA SHENHUA-H

21.55

-2.045455

34561737

PING AN INSURA-H

50.25

-2.427184

27296443

CHINA RES LAND

NAME

LI & FUNG LTD

SUN HUNG KAI PRO

MOVERS

2 20370

INDEX 19855.72 HIGH

20367.2

LOW

19510.76

52W (H) 23944.74 (L) 18710.58984

19500

21-June

25-June

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.01

0.6688963

239284232

AIR CHINA LTD-H

5.08

-4.150943

ALUMINUM CORP-H

NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

23.3

-3.519669

26279035

27660634

CHINA PETROLEU-H

5.16

1.574803

170289691

NAME

PRICE

DAY %

YANZHOU COAL-H

5.93

-0.8361204

48662078

ZIJIN MINING-H

1.41

-5.369128

175621878

5.22

-1.879699

22611477

11.76

4.440497

7975769

2.31

0.4347826

39741806

CHINA RAIL CN-H

6.31

-0.1582278

11479724

ZOOMLION HEAVY-H

ANHUI CONCH-H

20.05

-1.95599

31124061

CHINA RAIL GR-H

3.34

-1.764706

15951839

ZTE CORP-H

BANK OF CHINA-H

3.03

1.337793

603097652

CHINA SHENHUA-H

21.55

-2.045455

34561737

BANK OF COMMUN-H

5.07

0.1976285

58429596

CHINA TELECOM-H

3.59

0.8426966

75930727

BYD CO LTD-H

24.9

-4.230769

14733965

DONGFENG MOTOR-H

10.46

1.750973

20842249

CHINA CITIC BK-H

3.43

-2

144066436

GUANGZHOU AUTO-H

6.97

-2.7894

18638654

CHINA COAL ENE-H

4.18

-4.56621

65433752

HUANENG POWER-H

6.78

-4.101839

45204107

CHINA COM CONS-H

5.92

-4.20712

44188410

IND & COMM BK-H

4.4

-1.785714

973069505

CHINA CONST BA-H

5.08

555562073

JIANGXI COPPER-H

13.02

-4.545455

30249488

CHINA COSCO HO-H

3.16

-3.658537

24004534

PETROCHINA CO-H

7.86

-0.6321113

112874515

17.72

-1.116071

88121158

PICC PROPERTY &

8.47

1.194743

30229698

7.2

-2.834008

21561665

PING AN INSURA-H

50.25

-2.427184

27296443

CHINA MERCH BK-H

12.42

-1.11465

78963811

SHANDONG WEIG-H

8.97

-5.578947

18588563

CHINA MINSHENG-H

7.43

2.908587

174951646

SINOPHARM-H

18.36

-1.290323

7242676

52W (H) 12354.22

CHINA NATL BDG-H

6.8

1.040119

74923928

TSINGTAO BREW-H

50.65

-1.459144

2162151

(L) 8640.85

13.98

-0.7102273

11559350

WEICHAI POWER-H

CHINA LIFE INS-H CHINA LONGYUAN-H

CHINA OILFIELD-H

23.8

-0.6263048

MOVERS

VOLUME

1 9310

INDEX 8871.28 HIGH

9300.26

LOW

8692.95 8690

21-June

5708914

25-June

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

Volume

AGRICULTURAL-A

2.49

1.219512

123624058

CHINA VANKE CO-A

9.88

0.3045685

103759338

AIR CHINA LTD-A

4.15

-2.122642

16332058

CHINA YANGTZE-A

6.59

0.02382965

ALUMINUM CORP-A

3.16

0.3174603

12574244

CHONGQING CHAN-A

8.95

-3.659849

ANHUI CONCH-A

13.16

-1.644245

21519248

CITIC SECURITI-A

10.18

BANK OF BEIJIN-A

7.89

-1.003764

17413730

CSR CORP LTD -A

3.62

BANK OF CHINA-A

2.72

0.3690037

53980643

DAQIN RAILWAY -A

BANK OF COMMUN-A

4.05

-0.4914005

100444581

DATANG INTL PO-A

BAOSHAN IRON & S

3.91

-0.5089059

20520667

BEIJING SL -A

60.75

3.668942

BEIJING TONGRE-A

22.34

2.102377

NAME

BYD CO LTD -A

32.9

9.996657

NAME

PRICE

DAY %

Volume

QINGDAO HAIER-A

10.87

-0.3666361

6092468

12798439

QINGHAI SALT-A

16.89

-0.2951594

4982254

66029919

RISESUN REAL -A

14.34

1.63005

14003243

0.4935834

65929042

SAIC MOTOR-A

13.12

-0.681302

26942780

0.5555556

32496477

SANAN OPTOELEC-A

19.93

1.476578

12864169

5.8

-2.356902

27940450

SANY HEAVY INDUS

7.42

-1.198402

21825525

5.43

5.642023

26086715

SHANDONG GOLD-MI

28.77

-10.00938

1443300

EVERBRIG SEC -A

10.16

-0.3921569

17592459

SHANG PHARM -A

10.99

3.386642

7606757

3070963

GD MIDEA HOLDI-A

12.19

-1.851852

17518633

SHANG PUDONG-A

8.17

-1.328502

86027064

8310239

GD POWER DEVEL-A

2.35

3.070175

69184794

SHANGHAI ELECT-A

14372054

GEMDALE CORP-A

6.86

42343637

SHANXI LU'AN -A

3.38

1.197605

2360407

11.68

-2.341137

19796567

5.18

0.1934236

30866717

-0.1996008

41171975 7177948

CHINA AVIC ELE-A

21.37

2.004773

7508525

GF SECURITIES-A

11.11

0.2707581

20862670

SHENZEN OVERSE-A

CHINA CITIC BK-A

3.7

-0.2695418

18714356

GREE ELECTRIC

24.95

-0.4389465

18423091

SUNING COMMERC-A

CHINA CNR CORP-A

3.8

1.06383

34384053

GUANGHUI ENERG-A

13.18

1.697531

38294464

TASLY PHARMAC-A

41.27

5.41507

CHINA COAL ENE-A

4.94

1.022495

9636236

HAITONG SECURI-A

9.4

0.2132196

72797831

TSINGTAO BREW-A

38.95

2.553976

2302931

CHINA CONST BA-A

4.3

3.614458

76792041

HANGZHOU HIKVI-A

36.86

4.301075

11013183

WANHUA CHEMIC-A

16.44

2.621723

11109160

CHINA COSCO HO-A

3.05

1.328904

6616941

HENAN SHUAN-A

40.5

5.359001

5887986

WEICHAI POWER-A

-2.017291

9756707

CHINA EAST AIR-A

2.59

1.171875

6170800

HONG YUAN SEC-A

8.7

-1.023891

59395466

WULIANGYE YIBIN

19.97

-0.3493014

11457144

CHINA EVERBRIG-A

2.91

0.6920415

92480217

HUATAI SECURIT-A

8.05

-0.1240695

20338468

YANZHOU COAL-A

9.49

0.9574468

6519887

6989301

HUAXIA BANK CO

8.92

-1.108647

19706104

YUNNAN BAIYAO-A

87.99

4.737531

4028801

CHINA INTERNAT-A

30.29

3.732877

CHINA INTL MAR-A

10.28

-0.4840271

7517216

IND & COMM BK-A

4.03

0.2487562

195591804

ZHONGJIN GOLD

9.22

-0.7534984

22944805

13.6

-0.6574142

8507780

INDUSTRIAL BAN-A

14.61

-1.083277

62833322

ZIJIN MINING-A

2.41

1.260504

40066585

CHINA MERCH BK-A

11.38

-1.896552

48482145

INNER MONG BAO-A

21.27

1.916627

22367838

ZOOMLION HEAVY-A

5.38

-0.9208103

58721547

CHINA MERCHANT-A

10.43

0.2884615

16096232

INNER MONG YIL-A

33.8

8.056266

18195849

ZTE CORP-A

12.77

0.1568627

59067699

CHINA MERCHANT-A

24.48

0.8237232

12397636

INNER MONGOLIA-A

4.03

-1.707317

37977700

CHINA MINSHENG-A

8.59

0.2333722

133709591

JIANGSU HENGRU-A

27.03

2.54173

5888688

CHINA NATIONAL-A

9.98

4.831933

36455292

JIANGSU YANGHE-A

53.22

-1.98895

4502525

14.19

0.7097232

3135649

CHINA LIFE INS-A

CHINA OILFIELD-A

JIANGXI COPPER-A

16.03

1.84244

7767310

20.12

4.628185

39932090

194.29

0.9980766

2582852

15.63

-1.883239

21940698

KANGMEI PHARMA-A

CHINA PETROLEU-A

4.27

2.15311

67563957

KWEICHOW MOUTA-A

CHINA RAILWAY-A

4.24

0.952381

10953497

LUZHOU LAOJIAO-A

23.57

-0.883095

6491543

CHINA RAILWAY-A

2.44

17245551

METALLURGICAL-A

1.61

32376318

CHINA RESOURCE-A

29.6

6437890

NARI TECHNOLOG-A

15.41

3.215003

16825582

2.04

0.990099

14671935

1.051248

34083194

CHINA PACIFIC-A

CHINA SHENHUA-A

16.9

-0.2361275

6794530

NINGBO PORT CO-A

CHINA SHIPBUIL-A

4.52

59982923

PETROCHINA CO-A

7.69

CHINA SOUTHERN-A

2.82

16537333

PING AN BANK-A

9.75

-2.20662

80019667

CHINA STATE -A

3.26

-0.3058104

60279097

PING AN INSURA-A

34.5

-0.7479862

22136553

65433488

POLY REAL ESTA-A

9.99

0.8072654

43514847

PRICE DAY %

Volume

CHINA UNITED-A

3.08 -0.003246648

MOVERS 181

105

14 2230

INDEX 2213.317 HIGH

2222.36

LOW

2149.03

52W (H) 2791.303 (L) 2023.171

2140

27-June

1-July

FTSE Taiwan 50 Index NAME ACER INC ADVANCED SEMICON ASIA CEMENT CORP ASUSTEK COMPUTER AU OPTRONICS COR CATCHER TECH CATHAY FINANCIAL

PRICE DAY %

Volume

NAME

6.976744

25911750

FORMOSA PLASTIC

25.4

0.9940358

19596629

FOXCONN TECHNOLO

36.35

-1.490515

4957411

5293076

TAIWAN MOBILE CO

73.5

0.9615385

2343023

FUBON FINANCIAL

39.75

-0.250941

-4.219409

TPK HOLDING CO L

483

0.625

2007702

20556347

TSMC

108

-2.702703

51631015

UNI-PRESIDENT

266

3.100775

16436841

HON HAI PRECISIO

74.1

0.1351351

26287328

11.15

2.293578

116042159

HOTAI MOTOR CO

327

1.23839

718784

160

2.564103

5771988

HTC CORP

231

-3.34728

23019177

40.65 -0.6112469

12442716

HUA NAN FINANCIA

16.7 -0.5952381

5563847

YULON MOTOR CO

0.3021148

9046803

LARGAN PRECISION

984

2.5

1498212

CHENG SHIN RUBBE

93.1

-1.585624

3620118

LITE-ON TECHNOLO

52.7

0.1901141

5247001

CHIMEI INNOLUX C

15.8

5.685619

82034904

MEDIATEK INC

345

-1.004304

8137034

CHINA DEVELOPMEN

8.68

3.087886

82099574

MEGA FINANCIAL H

1.098901

14621390

-2.240326

17535663

NAN YA PLASTICS

60.7

-3.955696

9271110

18.6

0.2695418

25192494

PRESIDENT CHAIN

197

0.2544529

1239404

64.6 -0.6153846

CHUNGHWA TELECOM

-3.921569

15019855

QUANTA COMPUTER

17.7

5.04451

32917639

SILICONWARE PREC

DELTA ELECT INC

142

4.029304

5015096

SINOPAC FINANCIA

FAR EASTERN NEW

32.4

5165487

SYNNEX TECH INTL

FAR EASTONE TELE

78.6

-2.360248

4726373

TAIWAN CEMENT

COMPAL ELECTRON

FIRST FINANCIAL

17.65 -0.5633803

Volume

113.5

16.6

CHINATRUST FINAN

PRICE DAY %

-2.068966

CHANG HWA BANK

CHINA STEEL CORP

NAME

5093430

3.448276

21377564

14.2 -0.3508772

9752246

39.55

1.021711

5860374

0.2710027

7705426

16.55 -0.3012048

7946803

8108230

TAIWAN COOPERATI

FORMOSA CHEM & F

70.4

-4.217687

5879664

TAIWAN FERTILIZE

72.4

2302266

FORMOSA PETROCHE

75.2

-1.699346

2589494

TAIWAN GLASS IND

26.7

-1.476015

821814

58.3 -0.1712329

UNITED MICROELEC

15.05

WISTRON CORP YUANTA FINANCIAL

MOVERS

4529023

12374066

3.793103

157630239

29.45

-2.644628

13771178

15.65

0.3205128

17533881

2.083333

1942456

3 5620

INDEX 5561.45 HIGH

5613.94

LOW

5411.64

52W (H) 5896.71 5400

(L) 4719.96 27-June

1-July

July 2, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 58.0

38.2 37.5

19.5 19.2

57.5

18.9

36.8

Max 38.1

average 37.293

Min 35.45

Last 37.85

35.4

18.6

57.0

36.1

18.3 Max 58

average 56.977

Min 56.5

56.5

Last 56.95

Max 19.5

average 18.957

Min 18.02

Last 19.28

18.0

35.4

20.4

17.8 34.8

20.2

17.6 20.0

17.4

34.2

19.8

17.2 Max 35.35

average 34.589

Min 33.65

Last 34.75

33.6

Max 17.92

average 17.53

Commodities PRICE

DAY %

YTD %

(H) 52W

Last 17.82

(L) 52W

WTI CRUDE FUTURE Aug13

96.77

0.217481359

3.210324232

99.98000336

86.29000092

BRENT CRUDE FUTR Aug13

102.32

0.156617071

-4.257509123

115.1699982

96.70999908

GASOLINE RBOB FUT Aug13

272.3

0.272499632

-2.113739305

311.8400097

244.7299957

874.75

-0.284981476

-3.767876788

983.5

829.25

3.598

0.925666199

0.222841226

4.525000095

3.354000092

NY Harb ULSD Fut Aug13

286.76

0.307821464

-4.320843482

320.449996

270.7499981

Gold Spot $/Oz

1245.3

0.8724

-25.1829

1796.08

1180.57

Silver Spot $/Oz

19.84

0.8335

-34.1083

35.365

18.2208

GAS OIL FUT (ICE) Aug13 NATURAL GAS FUTR Aug13

METALS

Min 17.08

17.0

Max 20.4

average 20.033

Min 19.62

Last 19.92

Platinum Spot $/Oz

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

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9187 1.5209 0.9451 1.3035 99.64 7.988 7.7554 6.132 58.975 30.97 1.2666 29.991 43.109 9975 91.538 1.23193 0.85706 7.9938 10.4134 129.89 1.03

0.5362 -0.0263 -0.0106 0.1922 -0.5018 0.0138 0.0142 0.0897 0.7037 0.2583 0.1026 -0.03 0.0603 0.2907 -1.028 -0.2249 -0.2124 0.1764 0.2583 -0.7083 0

-11.4762 -5.978 -3.1425 -1.1751 -13.5889 -0.0601 -0.0619 1.608 -6.7486 -1.2593 -3.5686 -3.1943 -4.8807 -1.8246 -2.4154 -1.9847 -4.8585 2.7984 1.1236 -12.5645 -0.0097

1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7664 6.3964 60.765 32 1.2814 30.228 44.181 10174 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.911 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9338 79.408 1.20054 0.77553 7.7018 9.6245 94.12 1.0289

1355.12

1.0529

-10.7152

1742.8

1294.18

Palladium Spot $/Oz

678.2

2.9135

-3.0672

786.5

553.75

LME ALUMINUM 3MO ($)

1773

0.45325779

-14.47178003

2200.199951

1758

LME COPPER 3MO ($)

6750

-14.89093431

8422

6602

LME ZINC

1853

0.108049703

-10.91346154

2230

1779

13710

-1.010830325

-19.63657679

18920

13525

15.5

-0.577293137

0.616682895

16.47500038

14.60000038

505

-1.174168297

-15.79824927

665

503.75

656

-0.266058533

-18.71127633

905.75

652.75

1254.25

0.17971246

-3.722893878

1409.75

1186.5

120.4

-1.230516817

-21.02328632

203.8499908

117.0999985

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

16.47999954

ARISTOCRAT LEISU

4.04

-0.2469136

28.25396

4.49

2.29

2124846

74.34999847

CROWN LTD

11.5

-2.871622

7.778818

13.75

8.28

1920144

AMAX HOLDINGS LT

1.19

-0.8333333

-15

1.72

0.75

1987425

BOC HONG KONG HO

23.1

-1.702128

-4.149379

22.6

28264315

0.345

-1.428571

30.18869

0.42

0.22

5.3

-11.5192

6.74

2.89

13000

CHINA OVERSEAS

18.54

-0.7494647

-19.74026

25.6

16.661

34953473

CHINESE ESTATES

12.92

-0.7680492

6.517886

14.12

8.031

664347

CHOW TAI FOOK JE

7.76

-6.393245

-37.62058

13.4

7.44

15260090

EMPEROR ENTERTAI

2.62

3.557312

38.62434

3.07

1.32

2716822

FUTURE BRIGHT

2.19

-4.782609

80.68918

2.76

0.884

9174000

GALAXY ENTERTAIN

37.85

2.021563

24.7117

44.95

16.98

39475235 2534492

3MO ($)

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

Dec13

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

16.93

COTTON NO.2 FUTR Dec13

83.76

0.059101655

-15.60319043

-0.297571753

6.375412751

22.8599987 89.55999756

CROSSES

Macau Related Stocks

CENTURY LEGEND

World Stock Markets - Indices NAME

CHEUK NANG HLDGS

VOLUME CRNCY

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14909.6

-0.7646849

13.77778

15542.4

12471.49

NASDAQ COMPOSITE INDEX

3403.247

0.04068359

12.70845

3532.038

2810.8

FTSE 100 INDEX

6271

0.8934159

6.327602

6875.62

5478.02

HANG SENG BK

111.4

-0.2685765

-6.149955

132.8

102.7

DAX INDEX

8005.66

0.5834743

5.166183

8557.86

6261.74

HOPEWELL HLDGS

24.6

1.026694

-26.01504

35.3

19.839

1843508

HSBC HLDGS PLC

79.7

0.5678233

-1.968023

90.7

61.1

20363667

HUTCHISON TELE H

6687000

NIKKEI 225

13852.5

1.280806

33.25888

15942.6

8328.019531

HANG SENG INDEX

20803.29

1.77695

-8.181301

23944.74

18710.58984

CSI 300 INDEX

2213.317

0.5761054

-12.27273

2791.303

2023.171

4.22

3.431373

18.53933

4.66

2.98

LUK FOOK HLDGS I

-2.411022

-30.32787

30.05

15.3

2279900

MELCO INTL DEVEL

14.28

1.854494

58.49056

18.18

5.12

11635192 10480777

TAIWAN TAIEX INDEX

8036

-0.325097

4.370414

8439.15

6922.73

MGM CHINA HOLDIN

19.28

5.010893

45.19954

21.6

9.509

KOSPI INDEX

1855.73

-0.4073374

-7.076441

2042.48

1758.99

MIDLAND HOLDINGS

2.83

-0.3521127

-23.51351

2.77

2649000

S&P/ASX 200 INDEX

4710.289

-1.921921

1.319413

5249.6

4032.4

NEPTUNE GROUP

0.16

-1.234568

5.263161

0.23

0.084

24135000

4810.792

-0.1681506

11.44639

5251.296

3903.659

NEW WORLD DEV

10.2

-0.5847953

-15.14143

15.12

8.66

16997535

FTSE Bursa Malaysia KLCI

1773.49

-0.00281922

5.005479

1826.22

1590.67

SANDS CHINA LTD

34.75

-1.697313

2.356404

43.7

20.65

26461426

SHUN HO RESOURCE

1.4

-1.408451

1.67

1.03

168000

NZX ALL INDEX

946.357

-0.3072875

7.290267

998.487

758.678

SHUN TAK HOLDING

3.68

1.098901

-12.17184

4.65

2.56

4767000

PHILIPPINES ALL SHARE IX

3971.26

0.9974466

7.360949

4571.4

3410.76

SJM HOLDINGS LTD

17.82

-0.1121076

0.4076156

22.382

12.995

12304073

SMARTONE TELECOM

12.64

0.7974482

-10.22727

17.38

12.3

1324298

WYNN MACAU LTD

19.92

-4

-4.916471

26.5

14.62

15780994

JAKARTA COMPOSITE INDEX

19.6

Currency Exchange Rates

NAME ENERGY

18.0

HSBC Dragon 300 Index Singapor

599.95

1.06

-3.4

STOCK EXCH OF THAI INDEX

1451.9

0.3767845

4.308404

1649.77

1172.11

HO CHI MINH STOCK INDEX

480.04

-0.22655

16.02736

533.15

372.39

ASIA ENTERTAINME

3.75

1.351351

33.22993

4.7647

2.2076

353740

BALLY TECHNOLOGI

54.22

-1.597096

21.27041

57.86

41.74

570448

Laos Composite Index

1340.86

10.37974

1455.82

987.62

BOC HONG KONG HO

2.99

-0.9933775

-2.605861

3.6

2.85

65239

GALAXY ENTERTAIN

4.79

-7.170543

20.65491

5.77

2.25

20700

15.83

-2.524631

11.71489

18.81

10.92

3432616

JONES LANG LASAL

86.5

-0.5404162

3.049794

101.46

61.39

360174

LAS VEGAS SANDS

49.47

-5.393001

7.170711

60.54

32.6127

18001173

MELCO CROWN-ADR

21.36

-5.024455

26.84085

25.2

9.13

8742387

MGM CHINA HOLDIN

2.34

-13.65314

26.48648

2.71

1.36

3300

MGM RESORTS INTE

13.25

-4.055033

13.83161

15.95

8.83

17156645

SHFL ENTERTAINME

17.35

-2.964206

19.65517

18.57

12.35

555151

SJM HOLDINGS LTD

2.38

-0.8333333

4.495225

2.9481

1.7255

5801

124.12

-4.294857

10.3387

144.99

84.4902

3326278

INTL GAME TECH

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

WYNN RESORTS LTD

AUD HKD

USD

14 14

July 2, 2013 April 19, 2013

Opinion

What China central bank learned from credit crunches Stephen Bell

Professor of political economy in the School of Political Science and International Studies at the University of Queensland

Hui Feng

Research fellow in the School of Political Science and International Studies at the University of Queensland

n signalling this week that it was prepared to inject liquidity into the markets, the People’s Bank of China brought the country’s financial system much needed relief that a “Lehman moment” might be avoided. The current credit crunch, in which the central bank has refused to act as the lender of last resort, differs markedly from two previous episodes, in the late 1980s and early 1990s. It also shows that China’s approach to macroeconomic governance has evolved: Its leadership no longer relies solely on political and administrative controls, and is allowing market forces take a greater role. For much of the 1980s, the central bank had to rely on strict enforcement of credit quotas to contain economic overheating, even though reserve requirements had been introduced and the central bank could regulate credit to the banking system. This was essentially a form of financial planning. The first crunch, in the late 1980s, was triggered by a failed price-reform effort led by Premier Deng Xiaoping. It was supposed to unify the dual-track pricing system into a single regime based on market prices. But it lacked complementary wage reform and ultimately produced inflation.

Credit controls That cash squeeze was also partly caused by the People’s Bank’s decision to relax credit

controls in response to the previous monetary tightening in the mid-1980s. The subsequent retrenchment – which included the crackdown on the protestors in Tiananmen Square – cost key reformers such as Zhao Ziyang their political careers, led to a resurgence of pro-planning conservatives and to the reversal of many reforms. The central bank found the new market measures ineffective at restricting credit growth as long as the old planning system remained in

…The latest action is a credible early warning that banks need to address their risk management and off-balance-sheet activities

place. Moreover, an emerging regional interbank market encouraged banks to sidestep the credit quota and to use reserves for additional lending. As a result, the PBOC’s two increases of the reserve ratio had limited impact in constraining liquidity. Instead, the government and the central bank resorted to strict administrative measures as part of an austerity programme. The PBOC subsequently reversed its experiment: Credit quotas became mandatory again, interest-rate liberalisation measures were reversed and interbank lending was controlled more tightly. To deal with exceptionally high investment growth, investment quotas were established for each province. All investment projects were required to be approved at either the provincial or the national level. These harsh measures led to an economic hard landing. In 1990, growth of industrial output declined to 6 percent, the slowest one-year growth since 1979, while gross domestic product growth fell by two-thirds. Thousands of township and village enterprises failed and thousands of rural migrant workers in urban areas lost their jobs. The second round of credit contraction 10 years ago was another attempt to quell nationwide economic overheating. It coincided with a push for market reforms from the top, a renewed investment

campaign sanctioned by local governments, an expansion of the money supply, an active informal financial sector and a lack of limits on the expansion of policy loans to subsidise the state sector. The result was large amounts of unauthorised loans to finance fixed-asset investment, with a significant exposure to real estate, stocks and local capital-investment projects. Part of the blame belongs to the PBOC’s inability to discipline the banks and control the activities of nonbank financial institutions. Chaos ensued: The consumer price index peaked at 24.1 percent in 1994, real interest rates turned negative, and there were runs on banks and rampant disorder in the interbank market.

Reformist premier To avoid a repeat, the leadership focused on stability. A reformer, Zhu Rongji, who was then vice premier, took over the governorship of the central bank in July 1993, and implemented an austerity programme. The package contained market-based measures, but the basic theme was once again administrative command. There were four main policies: withdrawing loans granted without authorisation, raising interest rates on deposits and loans, restraining irregular capital-raising activities, and restoring order among investments in real estate and development. The package also was intended to strengthen the powers of the PBOC. The central bank separated the state-owned banks from their affiliated trust and investment companies, required state banks to call back all loans made outside the credit plan, restricted inter-regional lending and sent working groups to the provinces to monitor progress. By 1997, the austerity policy had succeeded in lowering inflation to 2.8 percent, and GDP growth was brought down

to a more sustainable level of 9.3 percent, from 14 percent in 1993. The second credit crunch had produced a soft landing. The most recent tightening of liquidity appears to have been caused by a crackdown on bond-market irregularities along with a reduction in foreign-exchange inflows and by seasonal factors such as a surge in demand for cash during holidays that often lead to cash shortages. The PBOC’s tardiness in responding to market concerns suggests the beginning of a different dynamic. The new economic leadership under Premier Li Keqiang has stated that it will put much more emphasis on market forces. For starters, the government extended Zhou Xiaochuan’s tenure as central bank governor and announced measures aimed at strengthening the real economy. This suggests that the leadership is worried about a financial crisis developing as a result of its 2009 anticrisis lending spree, the rapid expansion of the money supply from the PBOC’s foreignexchange intervention and the phenomenal growth of a shadow banking sector that escapes regulatory supervision.

Structural problem By turning off the credit tap, the authorities sent a clear message to the financial sector that the liquidity shortage was structural, and that it would have to be overcome by financial institutions themselves rather than by the central bank. By accommodating a surge in interbank interest rates, the latest action is a credible early warning that banks need to address their risk management and off-balancesheet activities. The bank only stepped in after the liquidity shortage led to a slump in the stock and bond markets. In light of the domestic economic slowdown and a possible exit from quantitative easing in the U.S., China’s largely regulatoryinduced credit restrictions also serve as a real-world stress test of the capacity of its banking system and financial markets. It can be seen as the PBOC’s orderly exit from the austerity programme. The PBOC’s strategic decision not to intervene in the market heralds a more proactive and market-oriented approach. However, official tightening only targets the symptom, not the disease. When the party congress meets this fall, it could bring renewed momentum to financial reform in areas such as interest-rate marketization, capital account liberalisation and the regulation of the shadow banking system. 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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15 15

July 2013 April2,19, 2013

Opinion Business

wires

The Euro on the mend

Leading reports from Asia’s best business newspapers Jean Pisani-Ferry

China Daily China would “welcome” the creation of a free trade agreement with the European Union, its largest trading partner, but it could “take time” to be established, Premier Li Keqiang said. “If China and the EU could set up a regional FTA, the impact on both sides and worldwide would be far-reaching and profound,” Mr Li was quoted as saying. But as China and the EU remain at different stages of their development, “it could take a while for them to put such a FTA in place,” he added.

Korea Herald After two years of implementation of South Korea’s Free Trade Agreement with the European Union, the economic leverage of the pact still seems to be subject to disputes. Back in 2010, the nation’s total trade volume and export volume with the EU wereUS$92.2 billion and US$53.5 billion, respectively. The overall trade figures over the past two years, however, did not meet the original expectations. According to the ministry’s recent data, Korea’s exports to the EU from last July to May this year amounted to US$43.7 billion, down 6.5 percent on-year.

The Star With the global economy showing a slower recovery and the likelihood of the commodity super cycle coming to an end, the World Bank has urged Malaysia to accelerate structural reforms to ensure the country’s economy remains diversified and dynamic. The bank has noted that the country’s economic performance in recent years has been skewed towards commodities, especially in oil and gas exports. “The economic diversification seems to be slowing down in Malaysia,” World Bank senior country economist Fredrico Gil Sander said.

The Age The Reserve Bank’s rate cuts appear to have boosted the Australian manufacturing sector, but exports continue to struggle despite the falling dollar, a private monthly survey has found. The Australian Performance of Manufacturing Index rose 5.8 points in June to 49.6, just slightly below the 50-mark, which signals an expansion in activity. The rise in the index was mainly the result of a marginal pickup in production. Employment in the sector continued to contract, according to the survey.

Professor of Economics at Université Paris-Dauphine and currently serves as Director of Economic Policy Planning for the Prime Minister of France

year ago the euro zone was in serious trouble. A series of policy actions – the creation of a rescue fund, a fiscal treaty, and the provision of cheap liquidity to the banking system – had failed to impress financial markets for long. The crisis had moved from the monetary union’s periphery to its core. Southern Europe was experiencing a sell-off of sovereign debt and a massive withdrawal of private capital. Europe was fragmenting financially. Speculation about a possible break-up was widespread. Then came two major initiatives. In June 2012, euro zone leaders announced their intention to establish a European banking union. The euro, they said, had to be buttressed by transferring banking supervision to a European authority. For the first time since the onset of the crisis in Greece, it was officially recognised that the root of the euro zone’s problem was not the flouting of fiscal rules, and that the very principles underlying the monetary union had to be revisited. The endeavour was bound to be ambitious. In the eyes of most observers, to reach the leaders’ goal of “break[ing] the vicious circle between banks and sovereigns” required centralising authority for bank resolution and rescue. The second initiative came a month later. Speaking on July 26, European Central Bank President Mario Draghi announced that the ECB was ready to do “whatever it takes” to preserve the euro: “Believe me,” he said, “it will be enough”. The meaning of these words became clear with the subsequent announcement of the ECB’s “outright monetary transactions” (OMT) scheme, under which it would purchase short-term government bonds issued by countries benefiting from the European rescue fund’s conditional support. Both measures had an immediate and profound impact on financial markets. Seen from Wall Street, the euro was moving closer to becoming a normal currency. Turmoil in bond markets began to abate. A year later, where are we? First, the two initiatives resulted in markedly improved borrowing conditions for southern European governments (at least until Federal Reserve Board chairman Ben Bernanke created new shockwaves with his indication in mid-June that the U.S. would wind down more than three years of socalled quantitative easing). Capital stopped flowing out of southern Europe and speculation eased. Second, an agreement

on authorising the ECB to oversee the banking sector was reached at the end of last year. In a year, the new regime will be fully operational – not a trivial achievement in view of the complexity of the issue. Third, discussions are being held to prepare the next steps, namely how to arrange the resolution of failed banks and support for ailing ones. Ministers recently agreed upon a template for action.

Not yet done So there are clear positive outcomes. But questions remain. One problem is architectural: any banking union is only as strong as its weakest component. What matters for markets is not what happens in normal times, or even what happens when uncertainty and volatility rise; what markets care about are possible scenarios in truly adverse conditions. Breaking the negative feedback loop between distressed sovereigns and

Much has been done to overcome the euro zone crisis. But it is still too early to declare the job done and claim victory

distressed banks – whereby bank rescues exhaust fiscal resources and make it likely that the next financial institution in trouble will not be able to count on government support – requires ensuring that it will not recur even in extreme circumstances. Merely “weakening” this loop, as European officials recently advocated, could prove deeply insufficient. There are two ways to eliminate the feedback loop. One is to exclude bank rescues altogether: only creditors would have to pay for bankers’ mistakes. This type of rule could insulate governments from banking risk only if applied systematically, even at the expense of financial stability. Simply put, governments should be ready to let banks fail. The other solution is to mutualise the cost of rescue at the margin. States could be involved and accept losses, but catastrophic risks would have to be shared among all euro zone members. Europe these days is vacillating between these two approaches. France does not want to rule out state-financed bailouts; Germany is reluctant to mutualize budgetary costs. A compromise is being worked

out, but it must pass the test of reality. Unfortunately, the middle way between two logically consistent solutions may itself not be a logically consistent one. Meanwhile, the credibility of Draghi’s atomic weapon is being undermined. The miracle of the OMT scheme is that, since it was announced a year ago, it has had its intended effect without ever being used. Strong opposition on the part of the Bundesbank and many German academics, however, has raised questions about whether and how it could ever be used. To defend its legality in hearings before Germany’s Constitutional Court, the ECB itself has argued that the OMT programme is a less potent instrument than many believe. Although the German government has been adamant that it is not a German court’s role to rule on the legality of ECB instruments, markets have taken note. In a few months, it will be four years since the euro zone crisis began – almost an eternity by historical standards. Much has been done to overcome it. But it is still too early to declare the job done and claim victory. © Project Syndicate

July 2, 2013

Closing Nokia buys Siemens out of joint venture

Croatia celebrates on joining EU

Nokia OYJ shares surged yesterday after it announced plans to buy out partner Siemans AG’s share of their valuable network equipment joint venture, betting on the technology to run 4G networks after it stumbled as a maker of smartphones. Loss-making Nokia gains full control of the profitable venture Nokia Siemens Networks (NSN) for US$2.2 billion, a cheaper than-expected price, analysts said, although they also noted the acquisition would put pressure on Nokia’s balance sheet. “With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones,” Bernstein analyst Pierre Ferragu wrote in a note to clients.

Croatia has become the 28th member of the European Union, with crowds joining celebrations in the capital Zagreb. Fireworks lit the sky as membership became effective at midnight yesterday, with President Ivo Josipovic describing the event as historic. Croatia is the first new EU member since Bulgaria and Romania joined in 2007. It is 10 years since it applied. Two-thirds of Croatians voted in favour of accession last year. But with one in five unemployed and Croatia’s national debt officially classed as junk, some Croatians feel joining an economic bloc with its own serious troubles will do little to improve their prospects.

Finnair to join BA, JAL on Asia air routes

EU warns trade deal under threat over U.S. bugging claims

Little service overlap so move seen as revenue booster, not costs cutter Robert Wall

innair Oyi said it will seek to join a British Airways and Japan Airlines business arrangement to coordinate schedules and share revenue on flights to Japan as it expands ties with its Oneworld alliance members. Combining fares will be a main element of the partnership, Allister Paterson, senior vice president for commercial operations at Finnair, said in an interview. Regulatory approval from Japanese authorities could come this quarter, with the business ties operational by year end, he said. Finnair struck a similar agreement in March to join a trans-Atlantic venture between British Airways and BA’s Spanish sister unit Iberia, as well as with American Airlines; that effectively lets the carriers operate flights as a single business. Asian routes are even more central to Finnair’s network, which has long tried to provide a bridge from Europe using its geographic position to serve transfer traffic. “Japan is one of Finnair’s core markets and we look forward to the benefits this strategic joint business agreement will bring to our customers and other stakeholders,” Finnair

Finland’s flag carrier well placed to link east and west

Chief Executive Officer Pekka Vauramo said in a joint statement with BA and JAL. The three carriers currently operate a combined 10 flights between Europe and Japan, with JAL providing the most services linking Tokyo to London, Paris, Frankfurt and, from Monday, Helsinki. BA and JAL agreed to the initial ties in October. “Because we don’t do a lot of overlapping flying with these airlines,

the joint venture will add revenue more than cut cost,” Mr Paterson said. The joint venture agreement with BA, Iberia and American will become active “soon,” he said. The airline would also consider additional such deals, although none are currently planned. “Whenever we can tie our fortunes into bigger carriers that make our product more meaningful that is always of interest to us,” he added.

A long-awaited trade deal between the European Union and the United States could be in jeopardy over allegations that Washington bugged EU offices, European Justice Commissioner Viviane Reding warned. It is the latest spying claim attributed to fugitive intelligence analyst Edward Snowden. Revelations in yesterday’s Guardian that the U.S. also targeted the Washington embassies of France, Italy and Greece look set to further strain relations. Brussels, Paris and Berlin reacted angrily to a report in German weekly Der Spiegel on Sunday which detailed covert surveillance by the US National Security Agency (NSA) on EU diplomatic missions. The report was based on confidential documents, some of which it had been able to consult via Mr Snowden. Ms Reding warned that talks to create what would be the world’s biggest free trade area, formally launched earlier this month, could be jeopardised if the bugging allegations proved true. “We can’t negotiate a large transatlantic market if there is any doubt that our partners are bugging the offices of European negotiators,” Ms Reding said at a meeting in Luxembourg, her spokesperson told AFP. “We have immediately been in contact with the US authorities in Washington DC and in Brussels and have confronted them with the press reports,” the European Commission said in a statement. The U.S. said it would respond to the EU via diplomatic channels over the bugging allegations. “While we are not going to comment publicly on specific alleged intelligence activities, as a matter of policy we have made clear that the United States gathers foreign intelligence of the type gathered by all nations,” said a statement from the office of the Director of National Intelligence in Washington.

Bloomberg News

Taiwan mulls setting up yuan reference rate

Spain manufacturing at 26-month high

pain’s manufacturing activity recorded its strongest reading for more than two years in June, but euro zone unemployment remains at a record high. An increase in new orders meant Spain’s purchasing managers’ index (PMI) rose to 50, up from 48.1 in May. The monthly survey provides a snapshot of industry conditions and a reading above 50 indicates growth. Meanwhile, separate data indicated that the euro zone unemployment rate reached 12.1 percent in May, its highest level ever. Unemployment across the 17-countries, according to the European Union statistical agency, was just above April’s figure of 12 percent, making May’s figure the new record.

Other economic data released by Eurostat yesterday showed inflation in the euro zone rose to 1.6 percent in June, from 1.4 percent in May. June’s figure is comfortably below the European Central Bank’s target of 2 percent. The PMI survey suggested economic conditions were improving overall in the euro zone, with the reading for the bloc as a whole rising to 48.8, a 16-month high. U.K. manufacturing saw its strongest growth in two years in June. The PMI rose to 52.5 last month, its highest level since May 2011. However, Germany’s reading fell following a drop in new orders. A fall in orders pushed its manufacturing PMI reading down to 48.6 in June,

from 49.4 in May. June’s PMI reading for Spain was the first time in 26 months the index has reached 50. The figures are compiled by research firm Markit Economics, and they were hailed as a promising sign by Markit’s senior economist, Andrew Harker. “The second quarter of 2013 ended on an encouraging note for the Spanish manufacturing sector, with PMI data pointing to a rise in new business,” he said. However, the country’s manufacturing sector accounts for just 12 percent of its total economy, and Mr Harker said growth was coming from exports with little sign of improved domestic demand. AFP

Taiwan’s central bank is planning to introduce its own reference rates for the domestic yuan market, two sources familiar with the matter said yesterday, following a similar move by Hong Kong in the race to corner the offshore yuan business. Taiwan, which counts China as its largest export market, is a latecomer in developing the offshore yuan market as trade has been expanding in Hong Kong and London. One of the sources said Taiwan’s central bank will work with industry to create fixings on the yuan exchange rate and interest rate. The other source said he expects the fixings to be introduced in two to three months. Hong Kong launched a CNH Hibor fixing last week that will makes it easy to create more hedging options for those investing or trading in the Chinese currency. Even as the yuan-denominated debt or “dim sum” bond market has grown rapidly in recent months in response to growing demand from investors hungry for yuan assets, market players have had to resort to using imperfect derivatives to hedge their interest rate risk such as nondeliverable forwards and currency swaps.