Macau Business Daily, July 31, 2013 by Business Daily

egislator Chan Meng Kam wants the government to set up a public-owned gaming operator. Every Macau resident would have a stake in the company – and in the profits. The timing is right, he says, after Secretary for Economy and Finance Francis Tam Pak Yuen talked about reviewing the gaming licences in 2015. One expert spoken to by Business Daily believes the idea is worth discussing, as a way of better distributing the economic benefits of the gaming boom. But another believes this is just a populist measure aimed at securing more votes for Mr Chan at the upcoming Legislative Assembly election.

MOP 6.00 Vitor Quintã Number 338

Wednesday July 31, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

‘People’s casino concession’ urged by legislator

April 19, 2013

Melco ponders Taboo extension

Page 3

‘Equal treatment’ for Broken Tooth: Tam Page 4

Beijing builder wins Galaxy Macau deal

Page 5

Year II

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Caesars close to golf course sale

Incinerator gets fine overturned

U. S.-based casino firm Caesars Entertainment Corp says it is in the final stages of selling its Macau golf course. “…we’re still working through the final details,” Steven Tight, president international development for Caesars, told Business Daily yesterday. He declined to name the purchaser or the price. The firm paid US$577 million (4.6 billion patacas) for the site in 2007. Page 2

The operator of Macau’s only refuse incinerator has seen an 87,500 patacas (US$10,950) fine for excessive air pollutant emissions overturned by the Court of Second Instance. The judges said the Environmental Protection Bureau tried to dodge its obligations to supervise the plant in order to justify the fine. The court ruled that the consortium that runs the incinerator did not breach the emission standards. Page 6

More subsidies for MICE organisers The government is planning to offer even bigger subsidies for the organisers of big-scale international conventions and exhibitions that decide to come to Macau. The authorities believe the proposed scheme could attract new events and take the city’s MICE industry to a new level. The industry says the proposed scheme could be the element to attract major events that the city is still lacking. Page 3

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July 30

HSI - Movers Name

%Day

TENCENT HOLDINGS

4.00

SANDS CHINA LTD

1.97

HENGAN INTL

1.87

AIA GROUP LTD

1.53

CHINA RES LAND

1.48

CHINA SHENHUA-H

-1.08

LENOVO GROUP LTD

-1.12

CHINA MERCHANT

-1.84

HENDERSON LAND D

-1.92

CHINA COAL ENE-H

-4.91

Source: Bloomberg

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July 31, 2013

Macau Dore profits up on lower turnover Macau junket investor Dore Holdings Ltd reported profits up 79 percent for year ended March 31, 2013, on revenue down nearly 43 percent. “The decrease in the group’s revenue was mainly attributable to the more intense competition in the gaming sector in Macau,” said the Hong Kong-listed firm in a filing. Turnover of the group, which has operations at The Venetian Macao, was approximately HK$25.61 million (US$3.3 million) compared to HK$44.59 million in the same period of 2012. Its profit was approximately HK$16.48 million compared to HK$9.19 a year earlier. Basic and diluted earnings per share were 76 HK cents.

Caesars in ‘final details’ of Macau golf course sale Land permission currently only for the sporting facility, says senior executive Michael Grimes

michael.grimes@macaubusinessdaily.com

nited States-based casino firm Caesars Entertainment Corp says it is in the final stages of selling its Macau golf course. “We are in the process of selling that property and I think we’re still working through the final details,” Steven Tight, president international development for Caesars, told Business Daily yesterday. He declined to name the purchaser or the price. Caesars – previously known as Harrah’s Entertainment Inc – paid more than half a billion U.S. dollars (four billion patacas) in 2007 for the 70-hectare (175-acre) course on a prime site at the southern end of Macau’s new casino district the Cotai Strip. But in 2008 the firm was told by the Macau government it would not be allowed to turn Caesars Golf Macau into a casino project. That immediately led analysts to write down the potential value of the land. But Francis Tam Pak Yuen, Macau’s Secretary for Economy and Finance, last Wednesday said 2015 would be “the proper time” to start discussions with the gaming operators on the renewal of gaming concessions. That led to fresh speculation that one or more new operator might be allowed in to Macau, and raised the possibility that someone with stronger local political connections than Caesars might be able to get a change of use on the golf course plot. “It will be up to the buyer what he wants to do with the site,” Steven Tight told us yesterday. “Right now it is entitled as a golf course and only a golf course. If they’re interested in

Off range – Caesars close to golf course disposal

using it for other purposes, they will have to have it re-entitled,” he added. Industry sources told Business Daily that Caesars had hoped to parlay the golf course into a casino resort – possibly via a so-called service agreement with one of the six existing concessionaires and subconcessionaires or via a joint venture. But in April 2008 Macau officials said no new casino gaming licences would be approved during the lifetime of the existing ones, which expire in stages between 2020 and 2022. They also announced a moratorium on any more service agreements, although three agreed prior to that date – for New Cotai Entertainment LLC at Studio City,

for Macau Legend Development Ltd at Fisherman’s Wharf, and for land at that time controlled by the consortium that developed the One Oasis residential site on the CotaiColoane border, were apparently allowed to stand. A U.S.-based source told us: “The two funds that control Caesars became nervous with the delay and at one stage accepted preparatory moves for gaming on the [golf] site with VIP promoters under an umbrella agreement with one of the current concessionaires and subconcessionaires.” In the end it came to nothing, said the person. A person in Macau with knowledge of the process told us:

“The deal [golf course sale] is very appealing only if the buyer or buyers can get either government approval to operate casinos – which I would not bet on at all – or if they can get government approval to build high-rise condominiums. That in my view is more likely, especially if they have very good connections in the mainland government.” An analyst told Business Daily that as a golf course alone, the site was probably worth only half the US$577 million that Caesars paid. “The people that can spring higher value by getting the land use changed might possibly bump up the price if they are competing among themselves to bid,” said a second analyst.

Flower power rules for Wynn’s Cotai site US$4 bln Wynn Palace will feature massive floral sculptures and guest gondola

ynn Macau Ltd’s new Cotai casino property – which for years has carried the working title ‘Wynn Cotai’ in media reports – will in fact be called the Wynn Palace, the firm’s chairman told analysts on Monday. Regional flower wholesalers are likely to be in good cheer this week, after Steve Wynn also revealed there would be a floral theme to the whole 2,000-room property. “The theme of this hotel is flowers,

floral things. The use of flowers, of water and natural light… has been taken to a new level for our company,” Mr Wynn said. The building should be ready in time to open for Chinese New Year 2016, he added. The holiday falls on February 8 that year. The Wynn Palace will feature floral sculptures the size of “floats of the Rose Bowl Parade,” Mr Wynn told analysts on his firm’s second quarter earnings call. They would have

themes including carousel horses, peacocks and tigers, he added. The new resort will bear some similarities externally to The Bellagio in Las Vegas. The latter property was developed by Mr Wynn prior to him founding Wynn Resorts Ltd and still holds a place in his affections. As at the Bellagio, a large lake with a light-and-fire show will front Wynn Palace, Mr Wynn said. Guests will be ferried across the lake in an air-conditioned gondola, which

will have a pick up point close to a station planned on Macau’s underconstruction Light Rapid Transit system. “…they get off the light rail, the monorail, and they go into the gondola. They rise above and go around and through the lake and through the fountains and then get inserted into the building, into the retail promenade,” explained the Wynn chairman. M.G. with Reuters

July April31, 19,2013 2013

Macau Boat captain charged over fireworks collision The Public Prosecutions Office announced yesterday they would charge a fisherman boat owner and captain of manslaughter over a boat collision last September that led to three deaths. The office said the owner surnamed Chan did not to sail on the right as required, causing a collision with a cargo ship and the deaths of three mainland Chinese. The office also called for better management of the sea courses during fireworks displays. The September accident occurred as the sea courses reopened after closing for the Macau International Fireworks Competition.

More carrots dangled before MICE industry The government will subsidise certain conventions and exhibitions held in Macau Stephanie Lai

sw.lai@macaubusinessdaily.com

he government will subsidise next year “internationalstandard” meetings, incentives, conventions and exhibitions (MICE) held here, Macau Economic Services director Sou Tim Peng said yesterday. Mr Sou said the government would pay part of what event organisers spent on accommodation for event participants, rent for event premises, logistics and interpreters. A meeting of the Commission for the Development of Conventions and Exhibitions discussed the new incentives. The commission’s president, Secretary for the Economy and Finance Francis Tam Pak Yuen, said the government was still trying to define “international conventions and exhibitions”.

“For instance, an international exhibition should have a record showing it has been held regularly in three different countries before, with exhibitors from five countries,” Mr Tam said. Mr Sou said: “We hope that through this new incentive scheme we can enhance the quality and quantity of our conventions and exhibitions.” Macau Economic Services offered similar incentives last year to event organisers here and abroad. But the organiser’s “service providers – say logistics or translation for example – should be Macau-registered”, Mr Sou said. “The city is still in the preliminary stage of developing conventions and exhibitions, so it is necessary for the government to

enhance the input to support this industry,” he said. He said the new incentives would be “more attractive”. The government will subsidise up to 24 percent of the cost of renting event premises, 75 percent of the cost of transport and 50 percent of the cost of promotion.

Thinking big It will subsidise up to 30 percent of cost of accommodating event participants and 50 percent of the cost of interpreters and translators, and contribute 50,000 patacas (US$6,260) towards the cost of an opening ceremony. Mr Sou said the government would consult the MICE industry about the new incentives from

August to September. “If the scheme meets no opposition, hopefully we can put it into practice by the first half of next year,” he said. Association of Advertising Agents chairman Keyvin Bi Chi Kin, who is a member of the commission, said the incentives were meant to attract big international events, which Macau lacked. “The organisers often spend millions of patacas on these big events, so what the new scheme can cover is not really a large part of the operating costs,” Mr Bi said. “But, for certain, the new scheme will involve a larger subsidy amount than the existing one.” Mr Sou said the government had no estimate of how much the subsidies might cost it. “For that, we still need to consult the events sector and consolidate the subsidy cost later,” he said. Macau Economic Services told Business Daily it had granted nearly 40 million patacas to 81 applicants for subsidies last year. In the first half of this year the government granted 46 event organisers a total of 20.7 million patacas.

City of Dreams mulling longer run for Taboo Resort operator Melco Crown says the cabaret-style show is always packed Vítor Quintã

vitorquinta@macaubusinessdaily.com

he City of Dreams may extend the run of its cabaret-inspired stage show Taboo beyond October, resort operator Melco Crown Entertainment Ltd has said. A Melco Crown spokesperson confirmed to Business Daily that the company was considering keeping the show going. The Portuguese-language newspaper Tribuna de Macau, quoting unidentified sources, reported last week that Melco Crown was seeking to turn Taboo into a permanent show. The company said it would decide in due course. When the show was first staged, in June last year, executive director Jay Smith said the aim was to turn Taboo into a permanent feature of the Cotai resort. The initial run of two performances a week lasted until September. Several noted artists made guest

appearances, including Americanborn burlesque diva Dita Von Teese. The show reopened in Club Cubic in April, with the price of tickets reduced to between HK$580 (US$75) and HK$1,180 from the minimum last year of HK$2,000 for a high table for two. The frequency of performances later increased to five a week. Since then, Melco Crown said, the public response had been “overwhelming”, which had meant a “high show occupancy rate”. The company gave no audience figures. Club Cubic has room for 214 spectators seated at tables. The racy one-hour floor show, with an international cast of 20 performers and some sensual stage moves, was created by Franco Dragone. The Belgian producer and former Cirque du Soleil executive is also behind the resident show at the City of Dreams, The House of Dancing Water.

Taboo is performed five times a week at Club Cubic in the City of Dreams

July 31, 2013

Macau

Broken Tooth would be ‘treated equally’: Tam

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HOSPITALITY Asian affair The number of visitors seems to be on the rise again this year after a lull in growth last year. The figures for the first half of this year show our visitors came from the same places as before. The chart shows the average number of visitors that each of our 12 most important sources of visitors in Asia sent us every month. These 12 places were the source of 97.3 percent of all our visitors.

Nothing to stop convicted gangster from applying to work in Macau junket promotion, says Secretary for Economy and Finance Michael Grimes

michael.grimes@macaubusinessdaily.com

asked Mr Tam yesterday whether the government planned to make any changes to the laws or regulations covering who is allowed to work in VIP gaming, he replied: “In terms of the regulations overseeing the gaming promoters, there are not any intended changes so far,” though he added, “At the moment we don’t really have any plans to introduce changes to it [the rules] but of course we will examine our existing regulations again.”

Confusing argument

Almost 1.5 million visitors per month, or about 63 percent of the total, came from the mainland. The mainland’s predominance as a source of visitors cannot be challenged, and seems to be slowly increasing. Hong Kong was our second-biggest source of visitors. It sent us slightly over 560,000 per month, or just under 24 percent of the total. Taiwan was our next-biggest source of visitors. It sent us 3.2 percent of the total – not quite one-sixth of the number that came from Hong Kong. So about 90 percent of all our visitors came from our top three sources. South Korea sent 1.5 percent of our visitors and the Philippines sent 1 percent. No other Asian country sent more than 1 percent, although Japan came close. Together Malaysia, Thailand, Indonesia, Singapore, India, and Vietnam sent under 3.8 percent. The rest of Asia and the world beyond were the source of about 2.8 percent of all visitors. J.I.D.

0.6 %

Proportion of H1 visitors from India

Wan Kuok Koi – equal treatment

senior government official said yesterday convicted gangster Wan Kuok Koi would be treated “equally” with other applicants if he wanted to be in the “gaming promotions business” – a technical term for VIP casino gambling operations in Macau. It was precisely an association with such business in Macau that got Mr Wan – also known as ‘Broken Tooth’ Koi – a 15-year jail term for being a triad gang member and leader, money launderer and loan shark following his arrest in May 1998. He was released in December last year and indicated in a Hong Kong magazine interview a fortnight ago he would like to return to the industry as a shareholder in a “junket room”. Francis Tam Pak Yuen, Secretary for Economy and Finance said in response to a Business Daily question yesterday on the sidelines of an unrelated event in the city: “If he is preparing to be engaging in the gaming promotions business [then]

just as everyone else, you [he] can apply in accordance with the current regulations; and we will approve [consider] them accordingly under our policy.” Mr Tam added: “For every applicant, we will treat them equally and we will approve [consider] them according to our current regulations.” As we reported yesterday, two lawyers working extensively with Macau gaming law claim that’s not the issue. They say over time the government has allowed several legally fictitious entities – typically referred to as ‘VIP rooms’, ‘VIP operators’, ‘VIP promoters’, or ‘junkets’ – to enter the market for gaming promoter services aimed at high rollers. Those entities, say the lawyers, have been used in effect to circumvent the scope of the law, because they are not covered by any of the regulations. And it’s by that method Mr Wan could re-enter the industry they fear. When Business Daily additionally

A third lawyer also working extensively with Macau gaming law, told Business Daily yesterday the argument about the evolution of legally fictitious entities in Macau VIP operations was “somewhat confusing”. The person said: “I read Tuesday’s article and I find it somewhat confusing. It is not apparent what the alleged loophole is. The third lawyer added: “VIP rooms are not fictitious: they exist at least for statistics and tax purposes – they pay higher taxes. Gaming promoters are regulated: there are over 200, and suitability requirements apply, as the article correctly says.” The person added: “The allegation that someone can create a ‘VIP room’ as opposed to a gaming promoter and run gaming would be an extremely obvious breach of the criminal law, for them and for the concessionaire.” The local casino regulator, the Gaming Inspection and Coordination Bureau – also known as DICJ – said in an e-mailed statement to Business Daily yesterday that any party applying for a “junket promoter licence” would be subject to a “stringent suitability check”. The bureau said: “In accordance with the legal stipulation, any party applying for a junket promoter licence, whether it is for [an] individual junket or company junket, is subject to [a] stringent suitability check and assessment by the DICJ. For [when] applying [for a] licence for a junket company, in particular, there is a requirement that the shareholder must be registered as an individual and not a company, and these shareholders … holding five percent or greater than five percent shares will have to go through the same suitability check and assessment by the DICJ just like [as] a regular junket promoter.” With Stephanie Lai

July 31, 2013

Macau

Beijing builder wins Galaxy phase 2 deal

Boost expected from four exhibitions

angho Group Co Ltd won a contract to build the façades of the towers at Galaxy Macau’s second phase, the Beijing-based builder announced late Monday. A Macau subsidiary of the company signed a contract worth 381.9 million patacas (US$47.7 million) with resort developer Galaxy Entertainment Group Ltd. The company chaired by Chinese billionaire Liu Zaiwang told the Shanghai Stock Exchange the work is expected to take 16 months.

“It is another significant cooperation project with Galaxy Macau,” the statement said. Jangho was in charge of the curtain wall work at Galaxy Macau’s first phase. The statement did not specify what kind of work Jangho was hired for this time around. The Jangho contract accounts for just 1.9 percent of Galaxy Entertainment’s total budget for the resort’s second phase, or HK$19.6 billion, according to Business Daily calculations.

Galaxy Entertainment expects to complete the second phase by 2015, adding 500 gaming tables to the resort. Jangho signed last month a HK$497-million contract with Galaxy’s rival gaming operator Melco Crown Entertainment Ltd to build Studio City’s façade. The company was in charge of the curtain wall works at another Melco resort, City of Dreams, as well as at the Marina Bay Sands integrated resort in Singapore.

Starting tomorrow, the city will have four exhibitions being held at the same time in different venues, one of the organisers, the Macau Trade and Investment Promotion Institute, said. Irene Lau, the institute’s executive director, said in a press conference yesterday they would have 11 free shuttle bus linking the three event venues. She expects this will “bring synergy effects” and “diversify the customer bases for the exhibitions”. The Guangdong & Macau Branded Products Fair and the Macau International Beer Festival will be held in the Fisherman’s Wharf, the Asian Wedding Celebration Expo in Macau Tower and a Taiwan-Macau food exhibition in the new Macau Convention Centre near the airport. The branded products fair will also include a forum on Macau-Guangdong logistics. The Guangdong authorities revealed at the press conference that bilateral trade volume grew at “double-digits” year-on-year in this first half of 2013.

T.L.

Corporate Maintenance deal for Macau exec jets Gulfstream Beijing has been awarded approvals to carry out maintenance on Gulfstream jets registered in Hong Kong and Macau. The firm is a joint venture between United Statesbased executive jet maker Gulfstream Aerospace Corp and two subsidiaries of the mainland’s Hainan Airlines Group. The approval was granted through a joint maintenance management agreement among the Civil Aviation Administration of China, the Civil Aviation Department of Hong Kong and the Civil Aviation Authority of Macau, reports Corporate Jet Investor. “The JMM approval is welcome news for many of our Hong Kong and Macau operators who travel frequently to Beijing and nearby cities,” said Mark Burns, president, Gulfstream Product Support. “As Gulfstream Beijing grows, our goal is to add authorisations to give our customers more options for maintenance,” he added. More than 200 Gulfstream aircraft are reportedly based in the Asia-Pacific region, including in excess of 45 in Hong Kong and Macau.

Weekend Full Buffet Dinner at Terrace Restaurant, 2/F

TrailHiker 2013 set for November Sands China Macau TrailHiker 2013 will take place on Saturday, November 2. Registration for the 350 team spots for the trek – around some of the city’s greener spots – starts tomorrow on a first come first served basis, say the organisers. Interested participants can register at www.macautrailhiker.com or get registration forms from the ground floor reception counter of Macau Tower or at McSorley’s bar at The Venetian Macao. This year’s beneficiary charity is the Fu Hong Society, operating in Macau since 2003 and providing social and charitable services exclusively for local people. “To keep the friendly and enjoyable spirit of the event, only a small increase in the number of participants is allowed for 2013, despite strong demand from all quarters of the globe,” added the organiser, Macau TrailHiker Ltd. Last year the event raised the equivalent of HK$250,000 (US$32,200) for local charities. Macau Government Tourist Office and Macau Sport Development Board are active supporters of Macau TrailHiker.

Every Saturday & Sunday, from 18:30 - 21:30 hours Price: Adult MOP 338 per persons Senior & Children enjoy MOP 100 discount from adult price. Prices are subject to 10% service charge Children (5-11 year old) and seniors (65 years old or above) can enjoy a special price up to a maximum of 50% of table cover. Reservations and Inquiries: (853) 8883 5122 / 8883 5126 Email: terrace@hotelokuramacau.com 2/F • Hotel Okura Macau • Avenida de Cotai • Cotai City Macau 澳门大仓酒店 • 澳门 • 路氹城 • 路氹城大馬路

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July 31, 2013 April 19, 2013

Macau

Court overturns incinerator fine

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The judges criticise government supervision of the operator Financial Monitor of the city’s refuse incinerator Vítor Quintã

vitorquinta@macaubusinessdaily.com

Close to nothing The unemployment rate in the second quarter of this year was 1.8 percent, one-tenth of a percentage point less than in the first. The fall may seem small, but when unemployment rates are as low they have been recently, a small fall is quite an achievement. Unemployment rates below 3 percent are rare anywhere. The unemployment rate here, whether the monthly or quarterly rate, has been below 3 percent for more than three years. The last time the unemployment rate was above 3 percent was in February 2010.

The incinerator operator is off the hook for polluting the air

T As usual, the unemployment rate among men is higher than the unemployment rate among women. The unemployment rate among women is below 1.5 percent. This reflects a lower labour force participation rate among women. Generally, women leave and rejoin the labour force more often than men. The unemployment rate among men has been below 3 percent for the past eight quarters and below 2.5 percent since the beginning of last year. The unemployment rate among residents has been below 3 percent since the fourth quarter of 2011, but it is slightly higher than the general rate of unemployment. This is due to the law governing migrant workers, which means most are never counted as unemployed. If a migrant worker has no job, he or she must leave Macau, so does not belong to the labour force. The underemployment rate dropped almost continuously in the first half of the period represented in the chart, and since the middle of 2011 has been oscillating between 0.7 percent and 1 percent. J.I.D. The content of this column is the work of Business Daily’s journalists.

2.3 %

Unemployment rate among residents, Q2

he Court of Second Instance has overturned the fine of 87,500 patacas (US$10,950) imposed on the operator of Macau’s refuse incinerator for allowing the incinerator to emit excessive amounts of a pollutant. The court’s written judgement, signed on July 17, says the incinerator operator, the CCSC - Incineração de Resíduos de Macau consortium, did not breach a European Union directive on air pollutant emissions. Macau uses the EU directive as the standard because the law here sets no standard of its own. The EU directive sets a ceiling of 1 0 m i l l i g r a m s o f h y d r o g en chloride emissions per cubic metre of air. Hydrogen chloride is a highly corrosive gas. On February 17, 2011 the incinerator emitted an average of 11.1 milligrams per cubic metre, after the Environmental Protection Bureau asked the operator to dispose of 12.2 tonnes of PVC left over from the modernisation of the Taipa sewage plant. CCSC told the bureau that the incinerator had emitted an average of 11.1 milligrams per cubic metre, but said this figure did not take into account the confidence interval of 40 percent of the ceiling that the EU directive allows for measurement of the concentration of hydrogen chloride in the air. Allowing for the confidence interval brings the average down to just 6.7 milligrams, “a value below

the legal limit set by the directive”, the judgement says.

Study time The bureau fined CCSC anyway, saying that checking the accuracy of the data supplied by the incinerator operator was not its job. The court disagreed. Even though the bureau uses data provided by CCSC, “that does not mean the sanctioning body is released from the obligation to check whether the data provided are true or not”, the judgement says. “With all due respect,” the bureau should be as well-acquainted with the directive as the incinerator operator to ensure proper compliance with the contract, the judgement says. The Environmental Protection Bureau told Business Daily by email that the government respected the judgment. The bureau said it would study the judgment, then draw up an agenda for following it up. It did not say whether it would appeal against the court’s ruling. The bureau said it would “continue to effectively monitor the operations of the incinerator, as well as the company’s maintenance work on the incinerator”. The court rejected the assertion that the government was to blame for making the incinerator burn tonnes of PVC. CCSC said it had warned the bureau that PVC had an average chloride

content of 57 percent, too much for an incinerator designed to burn refuse with a maximum chloride content of between 0.75 percent and 1.07 percent.

Absolutely unfair The company said the bureau had “ignored the calls and warnings” that burning the PVC would entail the risk of increasing emissions of hydrogen chloride. CCSC said it had asked the government to divide the PVC into batches, but that all 12.2 tonnes had been delivered to the incinerator in one go. It was the bureau that “pushed the defendant into the alleged situation of breaching the limits” on pollutant emissions, the company said. The judges disagreed. Even though the bureau sent the PVC all at once, there is no evidence that the government “demanded” that it all be burned in less than three hours, the judgement says. The court upheld the contention of the Public Prosecutions Office that the PVC could have been burnt in batches over the following days. Hélder Santos, the managing director of Consulasia – Consultores de Engenharia e Gestão Lda, a member of the consortium that runs the incinerator, said the PVC “was not all burned in one day”. But Mr Santos told Business Daily that the incinerator operator was “very happy” that the court had overturned “an absolutely unfair fine” imposed by overzealous officials.

July April31, 19,2013 2013

Macau Macau Polytechnic Institute’s gaming academic committee, Zeng Zhonglu, thinks it is “worth exploring” the idea. “Currently the incomes of Macau residents cannot keep up with the pace of economic growth,” Mr Zeng told Business Daily. “This measure would somehow link some the earnings of residents with gaming growth, which has been splendid,” he said. In the past decade annual gross gaming revenue increased tenfold to 304.1 billion patacas last year, while the median monthly income of the employed population rose by 151 percent to 12,000 patacas. “It is just like holding stocks and there will, inevitably, be ups and downs,” Mr Zeng said. “But residents can benefit, at least in the near future.”

Uninterested ‘Everyone can be boss. Money given out each year,’ Chan Meng Kam’s poster says (Photo: Manuel Cardoso)

Public-sector casino operator suggested A legislator calls for a gaming company owned by Macau residents Tony Lai

tony.lai@macaubusinessdaily.com

egislative Assembly member Chan Meng Kam has proposed that the government set up a publicly owned gaming company that all Macau residents would have a stake in. Some observers Business Daily spoke to believe the idea is worth discussing. Others believe it is a populist gimmick floated with September’s Legislative Assembly elections in mind. Mr Chan has put up posters around the city in the past few days calling for “a resident-owned gaming company”. The Chinese-language poster says: “Everyone can be boss. Money given out each year.” The poster says the idea is to share the fruits of economic progress among the public “reasonably”.

Mr Chan told Business Daily: “It is a good time to talk about this after Secretary for the Economy and Finance [Francis] Tam Pak Yuen mentioned a few days ago there will be a review on the gaming concessions in 2015.” Mr Tam said last Wednesday that 2015 would be “the proper time” to discuss the renewal of gaming licences. He said the government “could negotiate a short-term contract renewable every five years or launch an open bid” for licences. The gaming concessions and subconcessions will end between 2020 and 2022. Mr Chan said the government should consider giving a licence to a company ultimately owned by Macau residents, to be run by one of the present concessionaires or a new one.

He said residents could buy s h ares in the company, or the government could invest money from the fiscal reserve. “The fiscal reserve had billions in it last year, but the rate of return on investment was only about 1 percent,” Mr Chan said. The fiscal reserve contained 98.86 billion patacas (US$12.38billion) when it was set up and had a return on investment of 1.75 percent during its first year. “The Macau economy has developed so rapidly, and there should be long-term planning of how it could better benefit all Macau residents,” said Mr Chan, who runs the Golden Dragon casino and is also a member of the Executive Council. The vice-chairman of the

However, he said the idea had “a lot issues on its execution”. An academic who is an authority on gaming, but who asked not to be identified, said the idea was nonsense, and intended only as a vote-winner in the elections. Mr Chan is running for re-election to the Legislative Assembly in September. The academic said: “Whereas Beijing asks Macau for more diversification away from gaming and steps up measures against money laundering, we, however, now think about setting up an operator wholly owned by residents. Does it make sense?” He said the casino business was a “sensitive industry” that the central government would not like anybody experimenting with. The Macau government was uninterested in “putting itself in the embarrassing position of being a regulator and a player at the same time”, he said. In the Philippines, the stateowned Philippine Amusement and Gaming Corp both runs casinos and regulates the gaming industry. Mr Chan denies that his idea is an election gimmick. “It’s not about the elections. These are two totally different things. I first proposed this idea in 2001.” An association led by Mr Chan will begin next week collecting signatures on a petition of support for his idea. He said the association was neither aiming to collect a particular number of signatures nor aiming to collect them by any particular date.

Angela Leong richest in Macau, paper says

ngela Leong On Kei, the fourth consort of gaming tycoon Stanley Ho Hung Sun, is the richest person in Macau, mainland news media have reported. The official news agency, Xinhua, said a newspaper in the central province of Hubei had estimated Ms Leong’s assets to be about 12.4 billion yuan (16.1 billion patacas). Ms Leong is an executive director of gaming company SJM Holdings Ltd. The newspaper compiled a list of the richest people in 34 cities or provinces of Greater China using data from this year’s Hurun China Rich List. Ms Leong is one of three women among the 34 entrepreneurs on the list. She is the 17th-richest on the list. She is one of only two people on the list that did not earn his or her fortune by starting in business

from scratch. “Leong On Kei’s fortune came from getting shares in Ho Hung Sun’s assets,” Xinhua said. Mr Ho disposed of most of his assets in 2011 in an agreement that put an end to a bitter dispute among his four families over the bulk of his wealth. Ms Leong, a former teacher of dance, met Mr Ho in 1986. Li Ka Shing tops the list and is the richest entrepreneur in Hong Kong, and the entrepreneur with the most assets, worth over 200 billion yuan. Tsai Eng Meng, the chairman of conglomerate Want Want Holdings Ltd, is the richest entrepreneur in Taiwan, owning assets worth 60 billion yuan. The Hurun Report first published the China Rich List in 1999. T.L.

July 31, 2013 April 19, 2013

Greater China

China provinces miss growth goals Seventeen out of 30 provinces trail first half targets

ost Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, underscoring the breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said Januaryto-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest gaps, each at 3 percentage points below a 12 percent target. One province, Qinghai, has yet to release its latest figures. The statistics highlight the risk of missing the year’s nationwide 7.5 percent expansion goal as official concern over local-government financing threatens to curb funding for investment. China’s State Council, led by Premier Li Keqiang, this month ordered an audit of government debt, underscoring dangers to the economy from local borrowing. “Local governments’ growth targets were too aggressive to begin with and heavily relied on fixed-asset investment,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “As credit conditions are no longer easy, it is actually no surprise that they cannot meet the targets.” President Xi Jinping said last month that officials shouldn’t be judged solely on their record in boosting gross domestic product, adding to signs that the government will tolerate slower expansion. The Communist Party should instead place more importance on achievements in improving people’s livelihood, social development and

Guangdong still growing ahead of targets

environmental quality, the Xinhua news agency reported on June 29. China’s provinces are known for reporting growth rates that often exceed the national pace calculated by the central government.

Officials’ incentives The combined GDP released by Chinese provinces for 2012 was 5.8 trillion yuan (US$950 billion) more than the countrywide figure published by the National Bureau of Statistics, according to the state-run China Daily.

Even with the new leadership’s statements on seeking slower, more sustainable expansion, provincial governments probably aren’t intentionally reporting figures below actual growth, said Ding Shuang, senior China economist at Citigroup Inc in Hong Kong. “For the time being I would not think local governments would deliberately underestimate their GDP numbers,” said Mr Ding, who previously worked at the International Monetary Fund. “Until a new evaluation system is introduced, I think the incentive

is still to inflate the GDP number.” All of the provinces and cities except Shanghai have growth goals higher than the central government’s target for the nation as a whole, and all reported first-half growth above the national 7.6 percent rate. China’s economy expanded 7.5 percent in the second quarter from a year earlier, the second straight deceleration, according to the statistics bureau. “That many local governments missing their GDP targets could be good for the Chinese economy,” Ms Yao said. “Missing targets may help

PBOC injects funds into money markets Liquidity injection the first since early February Pete Sweeney

hina’s central bank injected funds into money markets via open market operations yesterday for the first time since February, easing fears of another cash crunch ahead of the month end after a severe cash squeeze in June caused market panic. Market participants and investors in adjacent markets have been keeping a close eye on China’s interbank money market after the central bank allowed a credit crunch to occur in late June as a warning against risky lending practices. Short-term money rates in China have been rising steadily in recent weeks as the end of July approached and Chinese companies and banks stocked up on cash to make dividend payments and get books in order. Some economists had predicted the People’s Bank of China (PBOC) would take advantage of the pressure to engineer another end-month credit

crunch if China’s financial sector did not show signs of reining in risky lending. The central bank has never explained its reasoning for allowing rates to spike in June, and it kept traders guessing in July, letting

KEY POINTS Central bank injects cash for first time since Feb Relieves fears of another cash crunch like late June High guidance rate for 7-day contract indicates caution Money rates relax, financial equities up

maturing instruments inject fresh funds passively but otherwise taking no direct action. The injection, a 17 billion yuan (US$2.77 billion) issuance of seven-day reverse bond repurchase agreements, marked the first time the central bank had engaged in open market operations since June 20 and the first time it had issued reverse repos, which inject funds instead of draining them, since early February. China shares rebounded from a three-week closing low yesterday, led by the banking sector. The CSI300 of the leading Shanghai and Shenzhen A-share listings rose 0.6 percent, while the Shanghai Composite Index ended up 0.7 percent at 1,990.1 points. Both had closed on Monday at their lowest since July 9. Hong Kong were also lifted by the strength in the Chinese banking sector. The Hang Seng Index ended up 0.5 percent at 21,954 points

The PBOC added 17 billion yuan to the financial syste

after earlier testing chart resistance at about 22,034, a near-two month intra-day high set last Friday. The China Enterprises Index of the top Chinese listings in Hong Kong inched up 0.3 percent. However, the central bank set the seven-day reverse repo rate at 4.4 percent, much higher than the last official guidance rate of 3.35 percent, setting a relatively high floor for the market rates the contract can trade at. A dealer at a state-owned bank in Beijing said that the amount injected was small, and yet the official guidance rate was high, implying

July April31, 19,2013 2013

Greater China divert local governments’ attention toward economic rebalancing and investment efficiency.” In China, areas with slower first-half growth that trailed 2013 targets include interior provinces of Henan, Sichuan and Shaanxi; eastern Jiangsu, the second-largest regional economy; and northern Hebei, which surrounds the capital of Beijing. Some provinces and cities reported faster growth that was also ahead of targets. Guangdong, the biggest regional economy, said it expanded 8.5 percent in the first half, above the 8 percent goal and last year’s 7.4 percent January-to-June pace. First-half growth in the financial centre of Shanghai accelerated to 7.7 percent from 7.2 percent, compared with a reduced 7.5 percent target for 2013. Beijing expanded 7.7 percent, up from 7.2 percent though below an 8 percent goal. “One possible explanation is the service industry appears to be becoming more important in the coastal cities, those more developed regions,” Citigroup’s Mr Ding said. Beijing and Shanghai may be less affected by the investment slowdown and are seeing higher consumption and an aging population, he said.

July official PMI seen dipping Activity in China’s vast manufacturing sector may have contracted in July for the first time in 10 months, a Reuters poll showed, signalling a protracted slowdown in the world’s second-largest economy as demand at home and abroad sags. The median forecast of 12 economists polled by Reuters this week showed China’s official Purchasing Managers’ Index (PMI) likely fell to 49.9 in July from 50.1 in June. A reading below 50 indicates contraction. The data will be out tomorrow. The last time the official PMI showed a contraction was in September last year, when the reading was 49.8.

Beijing Enterprises to buy China Gas stake

Bloomberg News

Local governments’ growth targets were too aggressive to begin with and heavily relied on fixed-asset investment Yao Wei, Societe Generale

Housing sales in the first half jumped 46 percent on-year

Mainland cities eye more property curbs Administrative measures to have ‘negative impact’ on sales, analyst says

the central bank wants to ensure the market is sufficiently liquid but that cash is relatively expensive. “The (high rate) could also serve as a signal that the era of ultra loose and easy money is over and liquidity has to be appropriately priced,” wrote Wee-Khoon Chong, economist at Societe Generale in Hong Kong, in a research note to clients. Even so, money rates showed signs of easing, with the volume-weighted seven day repo contract opening down slightly. Interest rates for 1 day repos and 14-day repos also fell. Reuters

Beijing Enterprises Holdings Ltd said it will pay HK$8.22 billion (US$1.1 billion) to its state-owned parent for a stake in China Gas Holdings Ltd, a supplier of natural gas to 184 Chinese cities. The company will pay HK$7.80 a share to Beijing Enterprises Group for 22.01 percent of China Gas, Hong Kong-based Beijing Enterprises Holdings said yesterday in a statement. That’s 12 percent less than Monday’s closing price of China Gas. “With this investment in China Gas, the company expects to strengthen its market position in the China natural gas industry,” Beijing Enterprises said. “The company and China Gas can mutually benefit from the synergies created by their collaboration.”

hinese cities seeking to cap home-price gains below income growth may need to tighten property curbs as the nation’s slowing economic expansion makes their targets more difficult to meet. Hangzhou, the capital city of the eastern province of Zhejiang, will tighten approvals of pre-sale permits in the second half and may raise down payments for second homes to make sure its price-control target is met, according to a report by Today Morning Express, a Chineselanguage newspaper affiliated with the provincial government. China’s economy slowed for a second quarter as the pace of factory output weakened, adding to risks that the government will miss its expansion target and cutting income growth excluding inflation to 6.5 percent in the first half, from 9.7 percent a year earlier. That leaves less room for the 35 provincial-level cities that have set annual home-price targets this year, mostly capping increases at local income growth. “The home-price problem facing the Hangzhou government in the second half isn’t an isolated case, and therefore we expect more secondand third-tier cities to tighten price controls,” Luo Yu, a Shanghai-based analyst at advisory firm CEBM Group, wrote in an e-mailed report. “The use of administrative measures such as pre-sale permits and price registration will have a negative impact on housing supply and sales.” The bigger, first-tier cities such as Beijing, Shenzhen and Guangzhou, where home-price gains have been

among the biggest this year, have already been rejecting pre-sale permits for projects whose target selling prices are deemed too high by local officials. Guangzhou plans to cap land prices at 145 percent of the auction’s starting price, Xinhua news agency reported last week, citing local draft rules. Home prices in Guangzhou led gains among 70 cities the government tracks, with an increase of 16 percent last month from a year earlier, the biggest for the city since the methodology changed in 2011. Prices in Hangzhou rose 7.1 percent, according to data from the National Bureau of Statistics. Hangzhou’s new-home price gains last month were “very close” to its urban income growth, the newspaper report said, citing a municipal government meeting analysing halfyear economic conditions. Income by the city’s urban residents increased by 6.5 percent in the first half, compared to last year’s 7.4 percent, according to its statistics bureau. Cities including Hangzhou, Xuzhou and Hefei have tightened lending by local housing providence centres, set up by the government and funded by residents and their employers, after strong home sales this year strained their resources, the China Business News reported yesterday without citing anyone. China’s housing sales in the first six months jumped 46 percent from a year earlier as the property market recovered after the central bank cut interest rates last year to stem an economic slowdown. Bloomberg News

HTC warns of revenue slump Taiwan’s HTC Corp said it expects revenue to fall as much as 30 percent in the third quarter compared to the previous three months, far below analysts’ forecasts, citing fierce competition in the mid to high-end smartphone markets. “Our overall gross margin has been impacted by a relatively higher cost structure, lack of economy of scale and certain provisions needed to facilitate the clearance of aging products,” it said in a statement. HTC said it expects revenue this quarter of T$50 billion (US$1.7 billion) to T$60 billion. It reported revenue of T$70.7 billion in the previous quarter and T$70.2 billion a year ago.

Yanzhou Coal sees first half loss Yanzhou Coal Mining Co Ltd, China’s fourth-largest producer of the fuel, reported a preliminary first-half net loss of about 2.35 billion yuan (US$383 million) because of exchange-rate losses and declining coal prices. The company apologised that the results were worse than it forecast in April and said future projections will be more scientific and accurate, according to a Hong Kong Stock Exchange filing. Yanzhou forecast on April 25 that first-half net income would drop 75 percent from last year’s 4.91 billion yuan. Power-station coal in China fell to a four-year low, a range of 560 yuan to 575 yuan a metric ton, on July 28.

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Greater China exports to China last year deriving from commodities. As China’s economy has cooled, commodity prices have slid. Iron ore has slumped 17 percent since reaching a 16-month high in February. Ore for immediate delivery at Tianjin port in China traded at US$132.10 a dry metric ton on July 25, down from US$158.90 reached on February 20, according to The Steel Index Ltd, a gauge for iron ore prices. A growth rate in China of 5.9 percent in 2014 would lead metal prices to fall as much as 30 percent, while oil prices may drop as much as 20 percent, according to an estimate by Nomura in a July 23 report.

Grey swan

China growth risk models signal Likonomics anxiety Steep slowdown may drag on global economic recovery Shamim Adam

copper price collapse of more than 60 percent, zinc cut by up to a half and oil down to US$70 a barrel. That’s the fate facing world commodity markets should China’s growth dip to 3 percent in the next three years – a scenario economists at Barclays Plc are now examining. They’re not the only ones building models based on a steep decline in growth in the world’s second-biggest economy. Nomura Holdings Inc estimates a one-in-three chance of a sharp drop by the end of 2014, and Societe Generale SA sees a “non-negligible risk” of less than 6 percent growth this year and an outside chance of 3 percent average expansion for this half and next. Premier Li Keqiang’s efforts to rein in a record credit boom, avert a property-price bubble and strengthen environmental protections risk deepening China’s slowdown and adding to drags on the global economic recovery. “This is a very delicate thing they’re trying to do because to slow gradually is very difficult, partly because it’s a self-enforcing mechanism and it can become a vicious cycle,” said Andrew Polk, an economist in Beijing with the Conference Board, a New York-based research group, who sees average growth of 5.5 percent over the next five years. “There’s a distinct possibility that the slowdown could get out of control and the risk of a policy misstep cannot be discounted.”

Short-term pain Barclays analysts Sudakshina Unnikrishnan and Jian Chang outlined a growth risk scenario in their July 5 report brought on by slowing industrial production and growing risks of financial stress due to build-up of debt by companies and local governments. They also point to the implementation of Likonomics – a term describing the market-reform policies of China’s premier – as possibly inflicting short-term pain on the economy even as it sets growth on a healthier long-term trajectory. China’s growth slowed for a second straight quarter to 7.5 percent in

April-to-June, extending the longest streak of expansion below 8 percent in at least two decades. Manufacturing weakened further in July, according to a preliminary survey of purchasing managers, signaling that the nation’s slowdown hasn’t ended. The Chinese government in March set a 2013 growth target of 7.5 percent and has a goal for an average 7 percent expansion during its current five-year plan that runs through 2015. China hasn’t grown less than 7.6 percent since 1990. With growth already heading for a 23-year low, a hard landing would batter commodity markets, hurting mineral exporters like Australia, Brazil and South Africa, and miners such as BHP Billiton Ltd and Rio Tinto Group, that have begun to slow expansion. “It is incumbent on those countries to undertake their own structural reforms so that they aren’t completely reliant on commodity exports,” said Mr Polk, referring to the world’s main commodity producers. “Australians talk about this all the time, that they are overly reliant on China and the export trade, and haven’t done enough to diversify their own economy. It will hurt them.” “I don’t know if the world is ready

KEY POINTS China hasn’t grown less than 7.6 pct since 1990 Analysts building models based on steep decline in growth Hard landing would shave 1.5 points off global expansion – Societe Generale Growth below 6 pct would lead metal, oil prices down – Nomura

for China’s growth below 7 percent but it’s not realistic to think of a country growing at 10 percent, even 8 percent for decades in a row,” said Orville Schell, director of the Center on U.S.-China Relations at the Asia Society in New York. “The Chinese economy too is mortal and ultimately will be subject to the same kinds of cyclical growth as every other economy.”

Commodity thirst Mr Li said recently that policymakers’ bottom line for growth is 7 percent. The government announced support measures on July 24 in the form of accelerated rail construction in the country’s central and western regions, and tax breaks for small companies. “They certainly want enough growth to maintain social stability and prevent the economy from a more serious shortfall,” said Stephen Roach, former chief economist at Morgan Stanley. Mr Roach, who is now a senior fellow at Yale University’s Jackson Institute of Global Affairs, said he’s “not in the hard landing camp”. The notion of a soft or hard landing is “simplistic,” said Jim O’Neill, the former Goldman Sachs Group Inc economist who coined the term BRIC. China is “adjusting in the right direction” and this can be gauged by studying the relationship between real retail sales and industrial production, which he said he watches every month,” he said. “It is reasonable that they can achieve 7.5 percent growth this year and indeed this decade,” Mr O’Neill said in an e-mail. “At 7.5 percent this is equivalent to the U.S. growing by 4 percent in terms of world contribution, so any further Chinese slowing would be big.” China’s thirst for commodities has made it the world’s biggest buyer of industrial metals and the largest energy consumer. It used 646 million metric tons of steel in 2012, more than twice the rest of the Asia region combined. In recent years it has ousted the U.S. as the top trade partner for Brazil and Chile, with almost 90 percent of the US$41 billion of Brazilian

Nomura estimated in a July 23 report that a Chinese growth rate of 5.9 percent in 2014 would trim 0.3 percentage points from world economic growth, while Societe Generale estimated in a report this month that 1.5 points would be shaved off global expansion in the first year of a hard landing. While Barclays said a scenario in which quarterly growth drops “briefly” to 3 percent at some point in the next three years was “increasingly likely,” its baseline view is for 7.4 percent growth this year and next. Even if growth did slow that much, “the economy would bounce back rapidly afterwards,” the report said. Nomura’s baseline forecast for 2014 is 6.9 percent growth. There is a one-in-three chance that GDP will drop below 5 percent for four consecutive quarters starting at or before the fourth quarter of 2014, said Zhang Zhiwei, chief China economist in Hong Kong. Recent economic data suggests the slowdown is continuing, casting doubt on whether the government will achieve its annual growth target. “China is a grey swan, not a black one, because a hard landing won’t be totally unexpected and there may be a recession sooner or later,” said Alaistair Chan, a Sydney-based economist for Moody’s Analytics. “If that happens, it’s not going to be pretty for commodity exporters in the short run.” Bloomberg News

I don’t know if the world is ready for China’s growth below 7 percent but it’s not realistic to think of a country growing at 10 percent, even 8 percent for decades in a row Orville Schell, Center on U.S.China Relations at the Asia Society

They certainly want enough growth to maintain social stability and prevent the economy from a more serious shortfall Stephen Roach, Yale University’s Jackson Institute of Global Affairs

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July April31, 19,2013 2013

Asia

RBI says rupee stability is priority Central Bank holds rates in push to stem currency plunge Suvashree Dey Choudhury and Tony Munroe

ndia’s central bank left interest rates unchanged yesterday as it supports a battered rupee but said it will roll back recent liquidity tightening measures when stability returns to the currency market, enabling it to resume supporting growth. While bond markets cheered, the rupee resumed its decline as some investors worried that India will struggle to defend the currency without increasing rates or further tightening liquidity. As expected, the Reserve Bank of India left its policy repo rate at 7.25 percent but struck a dovish tone as it cut its growth forecast for Asia’s thirdlargest economy to 5.5 percent for the fiscal year, from 5.7 percent previously. It held bank’s cash reserve ratio at a record low of 4.00 percent. The RBI said liquidity tightening steps taken two weeks ago to defend the rupee “will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation”. While the benchmark 10-year bond yield dropped as much as 13 basis points to 8.03 percent, the rupee extended its falls to 59.83 per

KEY POINTS Central bank leaves repo rate at 7.25 pct Says pro-growth stance can resume when rupee stabilises Cuts India GDP growth forecast to 5.5 pct Bond yields, swap rates fall after policy statement

India panel approves Jet Etihad deal J

et Airways (India) Ltd won approval from India’s investment panel to sell a stake to Etihad Airways PJSC, the first share sale by a local carrier to a foreign airline after the nation eased ownership rules. Jet’s plan to sell a 24 percent stake to Etihad was approved by the Foreign Investment Promotion Board, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi. The deal will need approvals from India’s finance minister and Cabinet Committee on Economic Affairs, a government official said, asking not to be named pending a formal announcement. The agreement with Abu Dhabi-

Rupee weakens as RBI guides for return to pro-growth stance

dollar from 59.55 before the decision, putting it close to its level when the RBI implemented emergency measures on July 15. “Markets will test the RBI again – we are going to test 60 soon – and possibly this will provoke new RBI measures,” said Dariusz Kowalczyk, senior economist ex-Japan Asia, Credit Agricole CIB, Hong Kong. “The Bank’s credibility is at stake now that it is targeting primarily the currency.”

‘Classic trilemma’ The rupee fell to a record low 61.21 to the dollar on July 8, when it was down about 10 percent since the start of 2013. Many economists expect the rupee to remain under pressure until New Delhi finds ways to attract inflows. India is weighing options including an overseas bond issue and increasing

based Etihad will help Jet raise 20.6 billion rupees (US$347 million) of funds for fleet expansion and paring debt after six years of losses caused by a price war and high fuel costs. Etihad will gain access to a market where air travel is forecast by CAPA Centre for Aviation and SITA to triple to 452 million by 2020. “This deal is progressive for air transportation in the South Asian region and will have an impact on the global aviation business,” Mark D. Martin, chief executive officer of Dubai-based Martin Consulting LLC, said. “There will be challenges that will take about 9-12 months to iron out after which they can focus on improving market share and optimising the synergies.” The Indian carrier will need government approvals for any future change in shareholding agreement, the official said. Etihad will have two representatives on Jet’s board, he said. Shares of Jet slump 1.46 percent to 405 rupees in Mumbai trading yesterday. Bloomberg News

interest rates on deposits held by non-resident Indians (NRIs). “I do not think the RBI will reverse the current tightening steps [while] the rupee remains around the 60 to a dollar level. Only the issue of NRI bonds or an extended period of loosening from the Fed can reverse the rupee’s fortunes,” said Anjali Verma, economist at PhilipCapital in Mumbai. The last policy statement of RBI Governor Duvvuri Subbarao’s five-year tenure, unless it is extended, repeated a call on the government to take urgent steps to bring down a current account deficit that hit a record 4.8 percent of GDP in the last fiscal year. “It should be emphasised that the time available now should be used with alacrity to institute structural measures to bring the CAD down to sustainable levels,” Mr Subbarao said. However, New Delhi has struggled to implement measures to attract

Firms say N. Korea’s offer forward-looking

outh Korean businessmen with plants in the shuttered North-South industrial estate of Kaesong suggested yesterday that Pyongyang had made some tangible concessions in negotiations to reopen the complex. In a statement urging both governments to resolve the issue as soon as possible, the association representing the 123 South Korean firms in Kaesong said the North’s proposal at the sixth round of talks last week had been “forward-looking”. “We judge that most of the agenda of the [South Korean] government has been reflected in the North’s proposal,” the association said. The statement was issued after South Korea on Sunday proposed a

foreign corporate investment, and with elections due by May, Prime Minister Manmohan Singh’s weak coalition government has limited room for pushing through further reforms. The current account gap makes India especially vulnerable as global investors move away from emerging markets in anticipation of a winding down of loose U.S. monetary policy. “Most external vulnerability indicators have deteriorated, eroding the economy’s resilience to shocks,” Mr Subbarao said. Turkey, Brazil and Indonesia have all raised rates to counter capital outflows. “India is currently caught in a classic ‘impossible trinity’ trilemma whereby we are having to forfeit some monetary policy discretion to address external sector concerns,” Mr Subbarao said. Reuters

“final” round of talks, suggesting it would pull the plug on any further negotiations if the current deadlock could not be broken. The North had not responded as of yesterday. The main sticking point is the South’s insistence that the North provide a binding guarantee that it would not close the complex again in the future. The North has rejected the demand, arguing that ultimate responsibility for Kaesong’s closure lay with the South. At the sixth round of talks, the North reportedly suggested the two sides insulate Kaesong against political surges and that the two sides refrain from any activity harmful to the smooth running of the complex. While the South’s business owners suggested this was progress of sorts, their statement backed Seoul’s stand on the need for assurances from Pyongyang. “The North must give an unconditional guarantee against a recurrence [of the shutdown],” the statement said. AFP

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Asia Mongolia: Rio puts expansion on hold Rio Tinto Group has put on hold a more than US$5 billion underground expansion of its giant Oyu Tolgoi copper mine in Mongolia, after the government said parliament would need to approve financing for the project. The delay marks the latest bump in the road for the global miner at one of its biggest projects, which started exporting copper from an open pit mine at the site this month, after two last-minute hiccups in securing government approval. Rio already needed Mongolian government approval for the financing for Oyu Tolgoi’s second phase. It did not give a reason on Monday for the request for a green light also from the country’s parliament. Mongolia has raised concerns about the costs of the Oyu Tolgoi expansion and the potential that rising costs will delay when it starts receiving its share of profits. Mongolia’s parliament will sit again from October. “The Mongolian Parliament is currently in summer recess and the parliamentary approval process may take some time to work through,” Rio Tinto said in a statement. It said given the current uncertainty, including continued discussions with the government on a range of other issues, all funding and work on the underground development would be delayed until these matters were concluded and a new timetable agreed.

S.Korea industrial output gains South Korea’s industrial output rebounded in June after suffering a slight decline in May, data showed yesterday, matching expectations and adding to recent signs of recovery in Asia’s fourth-largest economy. Industrial output rose by a seasonally adjusted 0.4 percent in June from the previous month, following a revised 0.1 percent fall in May, Statistics Korea data showed. May’s revised reading was better than a preliminary 0.4 percent fall. On an annual basis, industrial output fell 2.6 percent in June after a revised 1.3 percent fall in May, the data showed. South Korea’s industrial output closely mirrors its exports, as the country is home to some of the world’s biggest manufacturers of cars, ships and smartphones. South Korea’s current account showed a surplus of US$7.24 billion in June, down from a record high in May due to a slight dip in exports, separate state data showed yesterday. Asia’s fourth largest economy last posted a current account deficit back in January 2012 and the June figure took the cumulative surplus for the first half of this year to US$29.7 billion.

SK Telecom Q2 net profit jumps South Korea’s top mobile operator SK Telecom Co Ltd said yesterday that second quarter net profit surged nearly 300 percent thanks to robust earnings at its new chip-making affiliate and growth in new-generation services. The firm said in a statement that net profit for April-June amounted to 467.7 billion won (US$420.4 million), up 288 percent from 120.6 billion won a year ago. On-year operating profit surged 33.2 percent to 553.4 billion won and sales rose 3.9 percent to 4.1 trillion won. Robust earnings of SK Hynix – the world’s number two memory chipmaker which became part of the SK group last year – helped boost earnings, SKT said. SK Hynix reported a record second-quarter operating profit of 1.1 trillion won last week. Rapid growth of its fourth-generation long-term evolution services also contributed to the brisk earnings, SKT said, adding that about 11 million people – more than 40 percent of its total subscribers – have made the upgrade. South Korean wireless operators have spent heavily to promote 4G services to accommodate a growing number of smartphone users demanding faster speeds to download videos or play games.

Japan suffers industrial output drop June’s 3.3 pct on-month fall is first in five months Tetsushi Kajimoto and Kaori Kaneko

apan’s factory output fell by the most in more than two years in June although the labour market improved, a sign Prime Minister Shinzo Abe’s pro-growth policies are bearing fruit but still have far to go to establish a durable recovery. The first fall in industrial production in five months largely reflected manufacturers trying to avoid inventory build-up, and they forecast a brisk pick-up in July. The best levels of unemployment and job availability since 2008 augur well for the private spending that Mr Abe has sought to trigger through aggressive monetary and fiscal stimulus since he took office in December. The batch of data serves as the six-month scorecard for the prime minister, who is seeking to strike a balance between reviving growth and fiscal consolidation, while facing a tough decision on whether to go ahead with a planned sales tax hikes from next year. The 3.3 percent month-onmonth fall in industrial output was the largest since March 2011, when a massive earthquake and tsunami ripped through Japan’s northeast coastal areas, Ministry of Economy, Trade and Industry data showed yesterday. It missed forecasts of a 1.8 percent fall in a Reuters poll due to lower production of cars amid decline in demand at home and abroad. Output of semiconductors also decreased, reflecting weakening demand for smartphones in Asia.

Inflation still gives RBA scope to ease, Stevens says A

ustralia’s central bank governor Glenn Stevens said second-quarter inflation data suggests there’s still room to lower interest rates if required and that he wouldn’t be surprised if the currency dropped further. “Recent inflation data do not appear to have shifted” the Reserve Bank of Australia’s assessment that the outlook for prices may “afford some scope to ease policy further if needed to support demand,” he said yesterday in the text of a speech in Sydney. “The recent decline in the exchange rate seems to make sense from a macroeconomic perspective. It would not be a major surprise if a further decline occurred over time.” The Australian dollar dropped as traders added to bets the RBA will reduce the benchmark rate

Manufacturers expect output to rise 6.5 percent in July and fall 0.9 percent in August. “I think there is no change in the trend that production is expected to stay on a steady recovery as June trade data was good, benefits from the yen’s weakness are appearing and domestic demand is solid,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.

Tax hikes Data on the labour market showed the jobs-to-applicants ratio rose to 0.92 in June from 0.90 in May, meaning jobs were available for more than 9 out of 10 job seekers. This marks the strongest demand for workers in five years. The unemployment rate fell to 3.9 percent in June, its lowest since October 2008. However, wage earners’ household spending unexpectedly fell 0.4 percent in June from a year earlier, compared with a median estimate for a 1.0 percent increase, suggesting rapid gains in private consumption may be moderating slightly. “We see positive numbers emerging including a drop in the jobless rate, which is one example,” Finance Minister Taro Aso told reporters, saying a decision on whether to raise the sales tax as planned next April would be taken in the autumn. “Certainly the mood is looking up,” he said. There are signs Mr Abe is rethinking the sales tax hike out of

concern it could derail a nascent economic recovery. Japan’s prime minister has ordered a study of alternatives for implementing the tax hikes, including introducing them more gradually, government sources have said. Mr Aso said the final decision would be made after a summit of the world’s 20 major economies in early September, when Japan is expected to show a credible fiscal plan to fix public debt, with revised April-June GDP data due on September 9 also a factor. Japan’s economy grew at an annualised 4.1 percent rate in the first quarter, led by firm private consumption and a pickup in exports, posting the fastest growth among major economies. Reuters

KEY POINTS Manufacturers see output rising in July, falling in August Economy still on track for solid recovery Labour data show robust jobs market Decision on sales tax hike after G20 summit – govt

Governor Glenn Stevens gives modest outlook

by a quarter percentage point at next week’s meeting, adding to 2 percentage points of reductions since November 2011. The RBA had left the cash rate unchanged at a recordlow 2.75 percent for the past two meetings as the currency slid 12 percent last quarter, easing pressure on the economy. “An August rate cut would appear more likely than not,” Adam Boyton, chief economist for Australia at Deutsche Bank AG in Sydney, said in a research report after the speech. “The speech sketches a ‘modest’ outlook for the economy.” The Aussie dollar fell more than half a U.S. cent after his comments, hitting a two-week low of US$0.9085 and taking losses for the day to more than 1.2 percent. Consumer prices data out last week

showed underlying inflation ran around 2.4 percent in the second quarter, well within the RBA’s long-term target band of 2 percent to 3 percent. Mr Stevens played down concerns that rising home or asset prices might stand in the way of a cut, saying that low rates were intended to nudge investors toward taking slightly more risk. “There are clearly signs of policy working in this respect, though not, to date, by so much that we see a serious impediment to further easing, were that to be appropriate from an overall macroeconomic point of view,” he said. “Business capital spending outside the resources sector has been subdued; housing investment likewise has been on the low side,” Mr Stevens added. “There is ample scope for both to rise.” Reuters

13 13

July April31, 19,2013 2013

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

Max 40.55

average 40.283

Min 39.85

Last 40.35

40.6

62.0

40.4

61.8

40.2

61.6

40.0

61.4

39.8

21.7

21.6

Max 61.9

average 61.718

Min 61.25

61.2

Last 61.6

21.5

Max 21.7

average 21.541

Min 21.4

21.4

Last 21.7

19.5

41.8

21.6

19.4

41.5

21.4

19.3 41.2

Max 41.7

average 41.5

Min 40.95

Last 41.5

40.9

Max 19.5

average 19.411

Commodities

Min 19.18

Last 19.48

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

COUNTRY MAJOR

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

WTI CRUDE FUTURE Sep13

103.98

-0.545193687

10.9475032

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

107.35

-0.093066543

1.016279289

114.3699951

96.65000153

GASOLINE RBOB FUT Aug13

301.79

0.179253112

8.487310375

316.3199902

264.1299963

GAS OIL FUT (ICE) Sep13

912.5

-0.300464354

0.523271826

980

832.5

NATURAL GAS FUTR Sep13

3.456

-0.460829493

-3.946637021

4.517000198

3.349999905

301.27

-0.11604005

0.520503153

320.449996

273.759985

Gold Spot $/Oz

1322.33

-0.9965

-20.555

1796.08

1180.57

Silver Spot $/Oz

19.621

-2.4927

-34.8356

35.365

18.2208

Platinum Spot $/Oz

1433.08

-0.2624

-5.5787

1742.8

1294.18

Palladium Spot $/Oz

736.35

0.8215

5.244

786.5

566.88

LME ALUMINUM 3MO ($)

1795

0.027862914

-13.41051616

2200.199951

1758

LME COPPER 3MO ($)

6878

0.233168173

-13.27701425

8422

6602

LME ZINC

1846

-0.485175202

-11.25

2230

1779

13705

-1.046931408

-19.66588511

18920

13205

15.955

0.726010101

3.570269393

16.47500038

14.60000038

476.75

0.739566825

-20.50854523

665

471.25

657

0.844205679

-18.58736059

905.75

648

SOYBEAN FUTURE Nov13

1219.5

-0.040983607

-6.390328152

1409.75

1186.5

COFFEE 'C' FUTURE Sep13

121.45

0.247626909

-20.33453591

196.75

117.0999985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

NY Harb ULSD Fut Aug13 METALS

3MO ($)

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

Dec13

WHEAT FUTURE(CBT) Sep13

SUGAR #11 (WORLD) Oct13

16.93

COTTON NO.2 FUTR Dec13

0.059101655

85.02

0.365954433

-15.60319043

22.54999924

7.975615951

89.55999756

World Stock Markets - Indices NAME

19.1

Max 21.6

average 21.433

Min 21

21.0

Last 21.6

Currency Exchange Rates

NAME ENERGY

21.2

19.2

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15521.97

-0.2369073

18.45089

15604.22

12471.49

NASDAQ COMPOSITE INDEX

3599.14

-0.3881638

19.19601

3624.538

2810.8

FTSE 100 INDEX

6598.38

0.5812278

11.87847

6875.62

5605.589844

DAX INDEX

8329.92

0.8583332

9.425815

8557.86

6596.21

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9062 1.5335 0.9301 1.3273 98.16 7.9888 7.7556 6.1315 60.16 31.25 1.2686 29.956 43.39 10265 88.953 1.23452 0.86553 8.1382 10.6027 130.29 1.0301

-2.0536 -0.3574 -0.2688 -0.1054 -0.3566 0.01 0.0168 0.0147 -1.2301 -0.256 -0.1813 -0.0835 -0.2074 0.0974 1.7357 -0.1571 -0.2507 0.0934 0.1292 -0.2533 -0.0097

-12.6807 -5.1991 -1.5805 0.6293 -12.2861 -0.0701 -0.0645 1.6162 -8.5854 -2.144 -3.7206 -3.0812 -5.4967 -4.5981 0.4204 -2.1903 -5.7895 0.9744 -0.6819 -12.8329 -0.0194

1.0625 1.6381 0.9899 1.3711 103.74 8.0111 7.7664 6.3811 61.2125 31.65 1.286 30.228 44.181 10330 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8999 1.4814 0.9022 1.2134 77.13 7.9818 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.77907 7.7531 9.6926 94.93 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.31

1.891253

36.82539

4.49

2.29

VOLUME CRNCY 2990827

12.59

17.99438

13.75

8.33

1081009

AMAX HOLDINGS LT

1.1

-2.654867

-21.42857

1.72

0.75

256225

BOC HONG KONG HO

24.45

0.204918

1.452281

22.85

7102418

CENTURY LEGEND

0.35

32.07548

0.42

0.22

CHEUK NANG HLDGS

6.14

1.153213

2.504178

6.74

30000 11487655

CHINA OVERSEAS

0.456621

-4.761906

25.6

17.28

CHINESE ESTATES

16.82

2.436054

38.67112

16.86

8.272

472949

CHOW TAI FOOK JE

9.85

0.2034588

-20.81993

13.4

7.44

3028200

EMPEROR ENTERTAI

2.61

1.162791

38.09524

3.07

1.35

245000

FUTURE BRIGHT

2.08

71.61346

2.76

0.993

2820000

GALAXY ENTERTAIN

40.35

1.12782

32.94893

44.95

18.1

8548883

HANG SENG BK

118.6

-0.1683502

-0.08424343

132.8

106.7

909529

HOPEWELL HLDGS

24.9

-0.4

-25.11278

35.3

21.616

960448

HSBC HLDGS PLC

87.35

-0.2853881

7.44157

90.7

64.65

11593401

HUTCHISON TELE H

4.46

0.4504505

25.2809

4.66

2.98

4064000

LUK FOOK HLDGS I

22.5

0.896861

-7.786884

30.05

16.88

1054000

MELCO INTL DEVEL

14.98

-0.1333333

66.25971

18.18

5.43

3577000

21.7

63.42479

9.679

1266834

NIKKEI 225

13869.82

1.527619

33.4255

15942.6

8488.14

HANG SENG INDEX

21953.96

0.4750997

-3.102624

23944.74

19076.78906

CSI 300 INDEX

2189.388

0.6166445

-13.22118

2791.303

2023.171

TAIWAN TAIEX INDEX

8163.55

0.977797

6.027012

8439.15

7050.05

MGM CHINA HOLDIN

KOSPI INDEX

1917.05

0.9032102

-4.005908

2042.48

1770.53

MIDLAND HOLDINGS

3.1

0.6493506

-16.21622

2.68

660000

S&P/ASX 200 INDEX

5047.242

0.018132

8.567353

5249.6

4212.7

NEPTUNE GROUP

0.174

1.754386

14.47369

0.23

0.131

6430000

4611.869

0.6855633

6.838164

5251.296

3978.078

NEW WORLD DEV

11.48

-0.5199307

-4.492516

15.12

9.38

9542449

FTSE Bursa Malaysia KLCI

1795.28

-0.1945763

6.295632

1826.22

1590.67

SANDS CHINA LTD

41.5

1.965602

22.23858

43.7

22.25

9552156

SHUN HO RESOURCE

1.44

0.6993007

2.857145

1.67

1.03

10000

NZX ALL INDEX

971.953

-0.5033423

10.19213

998.487

780.38

SHUN TAK HOLDING

3.31

-1.488095

-21.00239

4.65

2.62

12617500

PHILIPPINES ALL SHARE IX

4085.74

10.45586

4571.4

3411.69

SJM HOLDINGS LTD

4197672

JAKARTA COMPOSITE INDEX

HSBC Dragon 300 Index Singapor

616.62

0.01

-0.72

STOCK EXCH OF THAI INDEX

1461.77

0.5150315

5.017491

1649.77

1183.34

HO CHI MINH STOCK INDEX

488.54

0.586794

18.08184

533.15

372.39

Laos Composite Index

1321.6

0.2320749

8.794253

1455.82

1003.17

19.48

2.418507

9.760963

22.382

13.311

SMARTONE TELECOM

12.4

-11.93182

17.38

12.28

399000

WYNN MACAU LTD

21.6

3.597122

3.102622

26.5

15.98

3684937

ASIA ENTERTAINME

4.23

1.196172

50.28336

4.7647

2.2076

153066

BALLY TECHNOLOGI

70.63

0.0708416

57.97361

71.53

41.74

253155

BOC HONG KONG HO

3.13

1.9544

3.6

2.99

1000

GALAXY ENTERTAIN

5.2

1.364522

30.98237

5.77

2.37

5000 1650961

INTL GAME TECH

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

18.39

-0.1628664

29.78123

20.25

10.92

JONES LANG LASAL

94.4

-1.932267

12.46128

101.46

61.39

263865

LAS VEGAS SANDS

54.85

-0.2001456

18.82582

60.54

34.0781

3071557

MELCO CROWN-ADR

23.84

0.2944889

41.56769

25.2

9.62

1539625

MGM CHINA HOLDIN

2.78

50.27027

2.85

1.36

9015

MGM RESORTS INTE

15.96

0.1254705

37.1134

16.5

8.83

4072583

SHFL ENTERTAINME

22.75

-0.3067485

56.89655

23.08

12.35

627565

SJM HOLDINGS LTD

2.48

8.885781

2.9481

1.8043

2150

131.27

0.2214078

16.69482

144.99

86.7893

1427555

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

NAME

AIA GROUP LTD

36.5

1.529903

35244874

CHINA UNICOM HON

ALUMINUM CORP-H

2.47

-2.755906

12268000

CITIC PACIFIC

BANK OF CHINA-H

3.26

0.617284

230549934

BANK OF COMMUN-H

5.05

0.1984127

27438867

BANK EAST ASIA

29.1

0.5181347

3058458

BELLE INTERNATIO

11.56

1.225919

12665295

BOC HONG KONG HO

24.45

0.204918

7102418

HANG LUNG PROPER

14.2

1.139601

2133978

HANG SENG BK

CATHAY PAC AIR CHEUNG KONG CHINA COAL ENE-H CHINA CONST BA-H CHINA LIFE INS-H CHINA MERCHANT CHINA MOBILE

109.5 -0.09124088

2773792

4.07

-4.906542

53737861

5.75

0.5244755

197952492

18.44

23008498

-1.840491

2498161

83.25 -0.06002401

PRICE

DAY %

VOLUME

11.36

15784490

8.57

-0.3488372

5414040

CLP HLDGS LTD

64.35

1898442

CNOOC LTD

14.12

0.4267425

33327479

10.9

1867468

12.74

3.915171

13859718

25.1

1.414141

11311738

118.6

-0.1683502

909529

HENDERSON LAND D

48.55

-1.919192

2957181

HENGAN INTL

84.45

1.869723

1151573

COSCO PAC LTD ESPRIT HLDGS

HONG KG CHINA GS

19.92

1.116751

7557561

HONG KONG EXCHNG

120.8

-0.2477291

2155210

HSBC HLDGS PLC

87.35

-0.2853881

11593401

10692125

HUTCHISON WHAMPO

88.2

0.7424329

9343075

0.456621

11487655

IND & COMM BK-H

5.09

0.5928854

192383234

5.75

0.174216

58796466

LI & FUNG LTD

10.5

-0.1901141

18615758

CHINA RES ENTERP

24.2

0.8333333

1531758

MTR CORP

28.95

-0.1724138

CHINA RES LAND

20.6

1.477833

8172000

NEW WORLD DEV

11.48

-0.5199307

CHINA RES POWER

18.32

-0.7583965

8600400

PETROCHINA CO-H

9.22

0.8752735

58351440

CHINA SHENHUA-H

22.8

-1.084599

17759751

PING AN INSURA-H

50.05

0.502008

5478423

CHINA OVERSEAS CHINA PETROLEU-H

NAME

PRICE

POWER ASSETS HOL

DAY %

69.45 -0.07194245

SANDS CHINA LTD

41.5

VOLUME 1612233

1.965602

9552156

SINO LAND CO

11.08

0.1808318

3700287

SUN HUNG KAI PRO

103.3

-0.2895753

2686456

92.1

-0.4862237

2827675

TENCENT HOLDINGS

363.6

4.004577

6616581

TINGYI HLDG CO

19.44

1.25

1588000

WANT WANT CHINA

10.56

11199181

67.2

-0.7385524

3121818

SWIRE PACIFIC-A

WHARF HLDG

MOVERS

22020

INDEX 21953.96 HIGH

22018.01

2192410

LOW

21766.1

9542449

52W (H) 23944.74

(L) 19076.78906

21760

26-July

30-July

14 14

July 31, 2013 April 19, 2013

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

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15 15

July April31, 19,2013 2013

Opinion

What the world’s middle wires classes are really protesting Business

Leading reports from Asia’s best business newspapers

Straits Times The Singapore dollar has hit a 15year high against the Malaysian ringgit, a currency movement which will bring cheer to Singaporean shoppers across the Causeway. Malaysian workers employed in Singapore are also expected to benefit after the Singdollar rose to fetch 2.5479 ringgit (US$0.79) yesterday – the highest since early 1998, during the turmoil of the Asian Financial Crisis. The Singdollar is benefitting from its status as a relative safe haven currency compared to others in the region.

Ruchir Sharma

Author of ‘Breakout Nations,’ is head of emerging markets and global macro at Morgan Stanley Investment Management

Wall Street Journal Airlines from Asia to the Middle East are building big stakes in Virgin Australia Holdings Ltd, making it one of the world’s most coveted airline investments and prompting expectations of a takeover bid. Virgin Australia offers a rare acquisition target for foreign investors angling for a piece of the action in Australia, which restricts foreign ownership of domestic carriers with international flights to 49 percent. Virgin, however, is fair game because last year it spun off its small international flights unit to enable it to attract foreign investment.

Times of India India’s Prime Minister Manmohan Singh, who brainstormed with the country’s top industrialists on Monday, promised more reforms to take the economy out of the choppy waters. Official sources said Mr Singh also vowed to unveil an “actionable plan” within a month. The prime minister office tweeted that Singh had assured his council that the government will take new measures to boost growth and sentiment. The government acknowledged regulatory bottlenecks and said it would do its best to resolve the thorny issues.

China Daily Half of China’s state-owned enterprises’ profits will come from their overseas operations in the next five years, compared with less than 38 percent at present, according to the state-owned assets watchdog. The target can be achieved through better allocation of resources, choice of market, brand-building and industrial upgrading, rather than asset acquisitions, experts say. “We will focus on the structure of corporate profits when we evaluate central SOEs’ international operations in the next few years,” said Liu Nanchang, director of the Performance Evaluation Bureau of the Stateowned Assets Supervision and Administration Commission.

till-smouldering protests from Egypt to Brazil have set off a race among scholars and journalists to identify the roots of this summer of discontent in the emerging world. Each major theory starts at the bottom, with the protesters on the street, and notes a common thread: young, Twitter-savvy members of a rising middle class. In this telling, the protests represent the perils of success, as growing wealth creates a class of people who have the time and financial wherewithal to demand from their leaders even more prosperity, and political freedom as well. This is a plausible story, often well told. Yet it is a bit too familiar to be fully persuasive. The middle class has indeed been at the vanguard of protests since the French Revolution. It has played an important role in Turkey, Brazil and Egypt since May and in earlier outbreaks of unrest in a half-dozen other emerging countries since 2011. But bourgeois rage can only explain so much. The middle class has been rising for many decades; in the last 10 years, rapid economic growth has spread with rare uniformity across most nations in the emerging world. So why are protests erupting now, and in only a scattered selection of emerging countries?

Middle middle The middle class was not rising particularly fast in the countries recently hit by protests. According to data from the Brookings Institution, in 20 of the largest emerging nations, the middle class has grown over the last 15 years by an average of 18 percentage points to comprise a bit more than half the population. Brookings defines “middle class” individuals as those who can spend US$10 to US$100

a day, which should capture all the people who are newly ready to mobilise in protest. However, since 2010, protests have broken out in countries where the Brookings data identify the middle class as growing most rapidly, such as Russia, and least rapidly, such as India.

Today, as growth slows, many populations are losing patience with leaders who are not adapting to a tough postcrisis world

The biggest protests have struck in countries where growth of the middle class is near the average: Egypt (14 percent), Brazil (19 percent), Turkey (22 percent). There is also no clear link between the protests and dashed middle-class fortunes. Since 2008, the average growth rate in emerging nations has slowed to 4 percent from 8 percent, so virtually every new middle class has cause for disappointment. Some protest-stricken nations have seen particularly severe slowdowns, including Brazil recently and Russia before it. But others were growing faster than their emerging-world peers, including Turkey and even

Egypt before the fall of Hosni Mubarak in 2011. So why are these nations among the cauldrons of middle-class rage? Maybe the place to start searching for a common thread is not in the streets but in the halls of power. Among the 20 largest emerging nations, the ruling party has now been in power for slightly more than eight years on average, or roughly double the average 10 years ago. Of the nine countries where the ruling party has held office for longer than eight years, there have been significant protests targeting the national leadership in at least six: Argentina, Brazil, Turkey, Russia, South Africa and India. Of the 11 countries in which the ruling party has been in office for less than eight years, there have been major protests in only one: Egypt. And in Egypt, liberals protested against the Muslim Brotherhood for bringing back the economic stagnation and political autocracy of the previous leadership – in essence, a revolt against the character of the old dictatorship. Now, with Islamists challenging the military “coup,” the middle class feels caught in the same conflict that has long haunted Egypt.

Boring heroes These are revolts against the ancient regimes, revealing the peril of staying in power too long, a familiar risk since the days of Louis XVI. Often, even successful leaders have gotten complacent or overconfident, failing to enact reforms fast enough to sustain a balance of growth across different regions and classes. Eventually, enough people get fed up with the old regime that the population turns on even the giants of post-war

economic development, such as Suharto in Indonesia or Mahathir Mohamed in Malaysia. In the end, wrote Ralph Waldo Emerson, every hero becomes a bore. It’s not clear why so many older regimes are in power now, but the last decade was a great one for emerging economies, with rapid growth in virtually all 150 developing countries. That gave many ruling parties the momentum to stay in office. Today, as growth slows, many populations are losing patience with leaders who are not adapting to a tough postcrisis world. In Brazil, the Workers’ Party has been in power for 10 years, and under President Dilma Rousseff follows the statist approach to development set by her predecessor, even as falling commodity prices depress growth in a commoditydependent economy. Similarly, in Russia, protests erupted in 2011 and 2012 against Vladimir Putin and his party, motivated in part by the failure to diversify its oil-focused economy after 13 years in power. In Turkey, the issue is the overconfidence of a ruling party that is pushing the same model that has produced strong growth for the last 10 years. In South Africa, the mine strikes that first flared in 2010 remain a simmering threat to the 20-year reign of the African National Congress. In India, protests against corruption and mishandled rape cases have given voice to deep frustrations with the nine-year rule of the Congress-led coalition government. The potential for these protests to reignite depends, at least in part, on whether people have the power to change old regimes. In genuine multiparty democracies such as India and Brazil, upcoming elections provide that opportunity. But in countries such as Russia and South Africa, where there is no clear alternative to the ruling regime, the risk of protests recurring is much greater. If protests have been erupting primarily against older regimes, the reverse is also true: New regimes are getting a free pass from the rising middle class. In Mexico, the Philippines, Nigeria and even Pakistan, relatively fresh leaders are using their political capital to push needed reforms. In these countries, the young, the educated, the newly prosperous have no reason to tweet their friends and hit the streets. For now, they are content to watch politics unfold on TV. Bloomberg View

July 31, 2013

Closing ANA swings to loss on fuel costs

Barclays shares hurt by cash call

ANA Holdings, which owns Japan’s All Nippon Airways, has swung to a loss for the April-to-June quarter. The company blamed rising fuel costs, because of the weak yen, and the impact from the global grounding of Boeing 787s earlier this year. ANA posted a net loss of 6.6 billion yen (US$67 million) compared with a profit of 668 million yen in the same period a year earlier. The company said the bigger blow came from the rise in the cost of fuel. “The primary reason for the increase in operating expenses was a rise in fuel costs due to the weakening of the yen,” the company said.

Barclays Plc, the U.K.’s secondlargest bank by assets, will issue 5.8 billion pounds (US$8.9 billion) in new shares as part of a move to plug a 12.8 billion pounds capital shortfall created by new regulatory demands. The bank will also issue 2 billion pounds of bonds that are turned into shares or wiped out if the bank gets into trouble. Investors will be offered one new share for every four they already own for 185 pence, 40 percent less than Monday’s closing price. The size of the share sale is much larger than analysts had expected. Barclays’ stock were falling 7 percent yesterday.

Beijing vows to keep growth steady

Euro zone business sentiment hits 15-month high

Says growth must remain in a ‘reasonable range’

hina’s politburo, the country’s top decision-making body, pledged yesterday to keep economic growth stable in the second half by fine-tuning policies, while pressing ahead with reforms and restructuring, the official Xinhua news agency said. A meeting of the body, presided over by President Xi Jinping, was the first since official data showed economic growth slowed to 7.5 percent in the second quarter from 7.7 percent in the first three months of 2013. Yesterday’s comments were the latest in series by top leaders affirming their policy stance for the world’s second-largest economy, which has slowed in nine of the past 10 quarters. “The central authorities will continue to coordinate the multiple tasks of stabilising growth, restructuring the economy and promoting reforms,” Xinhua said, citing a statement released after the politburo meeting. China’s economy faces “extremely complicated domestic and international conditions”, the leadership concluded, according to Xinhua. Top leaders have made clear they will accept a slowdown in growth to push attempts to

restructure the economy away from dependence for growth on exports and manufacturing, and towards one driven by consumption and services. However, they have indicated that annual growth should not be allowed to slip below 7 percent. “We should grasp the direction, intensity and rhythm of macrocontrols to keep the economic performance within in a reasonable range,” the politburo said. While the statement reaffirmed current fiscal and monetary policies, it said that “based on changes in the economic situation, we will pre-emptively fine-tune policies in a timely way and increase financial support for the real economy.”

Expensive urbanisation The government will also push “human-centred” urbanisation and promote stable and healthy development of the real estate sector, it added. China plans to bring 400 million people to its cities over the next decade. The country will steadily loosen its rigid residence registration, or hukou, system that keeps people from getting access to basic welfare services outside their official residence area. The cost of settling China’s rural

workers into city life could be about 650 billion yuan (US$106 billion) a year, the equivalent of 5.5 percent of fiscal revenue last year, a government think-tank said yesterday. The figure is based on the assumption that 25 million people a year settle in cities, with the government spending the money on making sure they enjoy the same benefits in healthcare, housing and schools that city residents have, the Chinese Academy of Social Sciences (CASS) said. “I think the biggest obstacle for turning rural migrant workers into urban citizens is the cost issue,” Wei Houkai, a researcher at CASS, told a news conference, adding that to achieve equality of treatment could take until 2025. Millions of migrant workers from the countryside and smaller towns work in China’s big cities, often in low-paid manual work, but lack access to education, health and other services. The State Council has pledged to increase investment in affordable housing for poor families. It has also announced policies to support smalland medium-sized enterprises as well as efforts to speed up development in energy-saving industries and the telecoms sector. Reuters

Economic morale in the euro zone reached a 15-month high in July as sentiment improved in the currency bloc’s four largest economies, underpinning Europe’s chances of a gradual exit from nearly three years of economic downturn. The single currency bloc of 17 countries is stuck in the longest recession in its history and the chance of a swift recovery are limited by record high joblessness and stringent austerity measures. But in a positive sign, the European Commission said yesterday its economic sentiment index rose to 92.5 points in July – its highest since April 2012 – from 91.3 points in June, though slightly lagging market expectations of an improvement to 92.6. Separately, the euro zone’s business climate index – which measures the phase of the business cycle – improved to -0.53 points in July from -0.67 in June, also the best reading in 15 months.

Spanish recession eases in Q2 Spain’s recession eased in the second quarter, official data showed yesterday, raising hopes the euro zone’s fourth largest economy may finally be on the road to recovery. Gross domestic product shrank by 0.1 percent in the three months ending June as booming exports helped to offset weak domestic demand, compared to a 0.5 percent contraction in the first quarter, data from the national statistics institute showed. The improved data came just days after the country reported that unemployment rate had fallen for the first time in two years. Earlier July, Spain also posted strong export figures that helped narrow its trade deficit sharply. “The recovery is underway,” Spain’s secretary of state for the economy, Fernando Jimenez Latorre, said during an interview with radio Onda Cero. “I think we have left the worst of the crisis behind us and this trend, this change in inflection will be maintained in the coming quarters according to our estimates.”

IMF approves US$2.3 bln aid for Greece

China urbanisation cost could top US$106 bln a year

The International Monetary Fund approved a further 1.7 billion euros (US$2.3 billion) in funds for Greece’s bailout programme after completing the fourth review of the cashstrapped euro zone state. Greece last week adopted the last piece of legislation its international lenders required to release the next batch of rescue loans, after two months of wrangling over unpopular measures to overhaul the economy. The total funds from the IMF, the European Commission and the European Central Bank comprise 5.8 billion euros. The IMF also confirmed lenders would modify Greece’s September target for how much money it needs to get from privatising state firms, after Athens struggled to sell natural gas distributor DEPA in June. The European Union said Greece would now need to make only 1.6 billion euros from privatisations, down from 2.6 billion euros. But Athens will now have to recoup that money in 2014 to ensure it stays on course to lower its debt.