Macau Business Daily, July 26, 2012 by Business Daily

Casino games

Still no gambling listed for Studio City S

tudio City – the stalled Cotai scheme in which Melco Crown Entertainment Ltd took a majority stake last year – may never need formal gazetting for gaming in order to get a casino, sources have told Business Daily. Some investors have been alarmed by the fact Studio City’s current contract with the government makes no mention of gaming. That point was reinforced yesterday when a new entry in Macau’s Official Gazette again stayed silent on a casino. It mentioned only a “fivestar hotel” and a “film studio including support facilities for tourism and recreation”. A person with experience of negotiating gaming

permission in Macau says however there are two ways of getting gaming in Macau – the concession route that involves the government granting land and gazetting it for gaming, and the service agreement route, where the land is purchased privately from a third party and where gaming permission can then be granted by Macau’s gaming regulator DICJ without the need for formal gazetting. Two sources with knowledge of the process say MPEL may opt for the latter route. It’s only a 60 percent shareholder in Studio City and was originally limited to providing a gaming licence and gaming management to the project.

I SSN 2226-8294

HANG SENG INDEX 18890

18840

More on page 3

18790

18740

July 25

HSI - Movers Name

La Scala pre-buyers can hold off payment

Non-resident workers close to record high Page 4

Morning Star steers travel agency exit Page 4

Page 7

Law firms could face new rules

Monetary Authority downbeat on economy Macau Monetary Authority has made a very conservative – even bearish – assessment for the city’s economic growth. After GDP expansion of 18.4 percent in the first quarter, the authority is now forecasting “highsingle-digit” growth for the whole of 2012, suggesting a massive drop off in economic activity beyond anything even predicted by analysts of the city’s gaming industry. Page 5 www.macaubusinessdaily.com

The Macau Lawyers Association yesterday discussed new rules preventing the unqualified becoming law firm associates and taming ‘misleading’ advertising. While those moves are welcomed, other proposals – such as tying clients to a legal practice rather than an individual lawyer – could make conflicts of interest more likely, say critics. The industry admits a clearer legal framework could make Macau more accessible for international law firms. Page 2

%Day

CHINA UNICOM HON

5.58

CHINA CONST BA-H

1.46

MTR CORP

1.15

LI & FUNG LTD

1.02

WANT WANT CHINA

1.00

SANDS CHINA LTD

-2.84

CITIC PACIFIC

-2.93

BELLE INTERNATIO

-2.98

HENGAN INTL

-3.18

CHINA MERCHANT

-4.01

Source: Bloomberg

Northern night market for tourists Millions of mainland tourists pass through Macau’s northern districts every year after crossing from Zhuhai, but very few of them linger and spend money there. A local business leader yesterday met with Chief Executive Fernando Chui Sai On and suggested ways to change that. Wong Kin Chong proposed a night market and renovation of Iao Hon park and Lin Fung Miu – Lotus Temple.

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News where it matters

Page 6

Year I - Number 84 Thursday July 26, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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business daily July 26, 2012

macau

A proposal to regulate law firms was brought forward by the board of the Macau Lawyers Association, headed by Jorge Neto Valente

New rules may open door to law firms from abroad Lawyers’ association discusses specific rules for law firms to tackle controversial practices, improve independence Vítor Quintã

vitorquinta@macaubusinessdaily.com

ew rules controlling the establishment of law firms were discussed at a meeting of the Macau Lawyers Association yesterday and could make it easier for international firms to enter the market. The association’s board put forward proposals for the regulation of law firms – something required since the revision of the statutes in 1995. If the profession approves the proposals, they will be sent to the government.

“It’s something that we lawyers have been waiting for quite some time,” said João Nuno Riquito, an expert in commercial, business and corporate law. He told Business Daily that the option for lawyers to practise as members of law firms “has been available for years and years in all civilised jurisdictions, including in mainland China”. Macau has had de facto law firms for some time but they are constituted

business as usual

Parallel parking problems Paulo A. Azevedo pazevedo@macaubusinessdaily.com

ar parking in Macau is more than just a great business deal for the investors that have been buying places all over town. The lack of vision displayed by some officials responsible for planning and development have also made parking your car an incredible nightmare. There was once a monopoly between the government and Companhia de Parques de Macau SA that saw management and construction of parking spaces performed to a regular schedule. I confess that I don’t know who currently has those responsibilities. It is not too difficult to believe this business has become even more interesting since the number of vehicles on the road has increased so dramatically in the past decade. An absence of information is not always synonymous with good news, despite what the popular saying might suggest. What I find most annoying is driving into the city, where parking spaces are even more scarce than elsewhere around Macau, and finding that most of the spaces in so-called public car parks are allocated to monthly rentals. I understand that a monthly rent secures business, while an empty spot may or may not be occupied, but how does it serve the public interest? We could ask those people in charge of managing the traffic but, then again, only if we did not know in advance that we would be wasting precious time.

like commercial companies, according to a civil law expert who works for one such firm but who asked not to be identified. He said the lack of rules had resulted in peculiar situations – for example, lawyers being associates in two different firms. Another lawyer, who also asked not to be identified, said it was “very common” for these informal law firms to have people other than lawyers as associates. The civil law expert said that this “jeopardises the honour and dignity of the profession”, and that regulation was urgently needed.

Departing partners Mr Riquito said the new rules would bring about “more strictness and demand for respect for ethics”. The proposed rules, which have been seen by Business Daily, say that only lawyers can be associates in law firms, and a lawyer can be an associate in only one firm. The rules give firms three months to fall in line, otherwise they will be considered defunct. They say the names of law firms must include the names of some or all of the partners. The civil law expert said the rules banned anything in a firm’s name that could be seen as “misleading advertising”. Mr Riquito said the rules might make it easier to curb the advertising of legal services, and also to prevent conflicts whenever a partner decided to leave a firm. For instance, if there is disagreement between the departing partner and the firm about compensation, the amount will be set by an arbitration commission made up of three lawyers. Mr Riquito believes the rules would make it easier to avert conflicts of interest. But the civil law expert disagrees. “Instead of signing a power-of-

attorney to a single lawyer, a client will sign one to a law firm. In such a small place like Macau, it seems inevitable that there clashes with the interests of other clients in the same firm,” the lawyer said.

‘Branch’ offices Nonetheless, the civil law expert said the draft laws would bring far more advantages than disadvantages. Specific rules could be a first step to fuel the interest of international law firms. In April, United States firm Dickinson Wright PLLC signed an alliance with MdME. The Detroitbased company said it wanted to “capture a piece of the legal work in the world’s largest gaming market”. The companies are contractually bound to refer each other work. They will share revenues from referrals, as permitted by the bar. The civil law expert that Business Daily spoke to was pessimistic of any substantial change. “Even if they are interested in entering the local market, any law firm would still have to be made up entirely of lawyers qualified to practice law in Macau”. But if the new rules are adopted they may help tackle dubious situations where law firms act as branches. “There as firms in Hong Kong that advertise legal services in Macau, through unidentified local firms,” said Mr Riquito. But the corporate law expert believes one important change is lacking from the proposal. “It should limit professional responsibility, which currently is a major issue”. The lawyers’ association has signed up for professional responsibility insurance with a ceiling of 2 million patacas (US$250,000). “That figure was reasonable back in 1999 but it is not longer adequate,” Mr Riquito said.

July 26, 2012 business daily | 3

MACAU Photo by Manuel Cardoso

Studio City gives back some land Still no formal gazetting for casino, but may not matter

Associate Editor

he Studio City site on Cotai has given back 10,000 square metres of land to the government according to a revised contract published in Macau’s Official Gazette yesterday. It will reduce the footprint of the site by about seven percent to 130,000 sq. ms. Industry insiders told Business Daily this could be a sign the scheme – majority owned by Melco Crown Entertainment since June 2011 – is well favoured by the government rather than ill favoured. That’s despite the fact the latest gazetting still doesn’t mention a casino or gaming. One person with experience of negotiating gaming permission in Macau said: “What the government will do with that returned land isn’t clear. It could be for a public space. It could be for utilities. It could be a gesture of goodwill. What’s important is whether it’s a gesture from a position of strength, or from a position of weakness.” One analyst spoken to by Business Daily suggests it’s the former. The Official Gazette published online yesterday continues to refer only to a “five-star hotel” of 480,000 square

metres and a “film studio” of 80,000 sq. ms “including support facilities for tourism and recreation”. Analysts generally agree that unless gaming were included in the scheme it would be difficult to achieve the rates of return sought by investors in a US$1.9 billion (15.18 billion patacas) capital project. Lau Si Io, Macau’s Secretary for Transport and Public Works, has said on several occasions publicly that the Studio City venture doesn’t have gaming permission. One analyst told Business Daily: “I don’t think anybody seriously believes that a scheme looking for a US$1 billion (eight billion patacas) debt facility wouldn’t have gaming.”

Non-issue At MPEL’s first quarter earnings call in May 2011 none of the analysts on the call asked MPEL cochairman Lawrence Ho Yau Lung whether Studio City would have a casino, despite some investors’ alarm over the topic. A second analyst told us: “The latest gazette entry mentions a five-star hotel and tourism facilities. There are other projects in Macau where that has been used as the basis for including a casino.”

And the person familiar with negotiating with the government said: “There are basically two business models that can be used in Macau if you want a casino. One is the concession model, where the applicant asks the government for public land and applies to build a casino-hotel. That’s the method used on Cotai by Sands China, by Galaxy for Galaxy Macau and by MPEL for City of Dreams. The other model is the service provider agreement model. Then all you need is DICJ [gaming regulator] approval. An example of the service provider model is L’Arc in NAPE. My understanding is that land was never gazetted for gaming. It was gazetted for a hotel. And it’s also my understanding that the Studio City land was purchased privately.” The land grant to Arc of Triumph Development Co Ltd, published in the Official Gazette in September 2009, allowed for the construction of residential units, commercial spaces and a five-star hotel but didn’t mention gaming.

Concession approach A second source with direct knowledge of the situation said MPEL had sought permission for Studio City under the mantle of

service provider in the manner of the L’Arc casino operators, rather than as concessionaire as it did for its own City of Dreams resort. MPEL is only a 60 percent owner of the Studio City scheme, with the remaining 40 percent held by a rump of original investors that were part of the New Cotai consortium. Before it took over a majority interest in the scheme in June last year, MPEL was itself scheduled to act as the gaming licence and gaming management provider for the then Macao Studio City scheme. “The original investors in Macao Studio City did have written permission from the government for gaming,” said a third source, adding “but whether that permission is still valid isn’t clear.” The returned land mentioned in yesterday’s gazetting is in the southeast corner of the Studio City site fronting the Cotai Strip and a short walk from the Lotus Bridge crossing point from and to mainland China. In the original plans for Macao Studio City, it was envisaged there would be a station for Macau’s underconstruction Light Rapid Transit System directly serving the property. No comment was available from MPEL at the time Business Daily went to press.

Official notice of three-year concession

acauslot – a monopoly provider of non-racing sports betting in Macau – has formally had its contract renewed until June 2015 according to yesterday’s Official Gazette. The company – specialising in instant lottery, soccer and basketball betting in local parlours and online within the borders of the territory – had asked for a ten-year extension Business Daily revealed last month. Nonetheless the granting of a three-year deal is a reversal of a more recent trend that saw annual renewals and gave competitors some hope that the monopoly would soon be abolished. Macauslot’s most recent one-year contract ended on June 5. It wasn’t until June 26 however that the Official Gazette indicated officials had authorisation to ink a new Macauslot deal. In the intervening period, the business continued to

take bets during the Euro 2012 soccer championships despite being technically unauthorised to do so at that time. Three legal sources with no commercial interest in challenging the firm’s monopoly told Business Daily that without a new concession being published or an executive order from the chief executive granting a temporary extension of the existing monopoly, then there were no legal grounds in that June 6 to June 25 period for allowing Macauslot’s operation. Macauslot – full name Sociedade de Lotarias e Apostas Mútuas de Macau Lda – was founded by former gaming monopolist Stanley Ho Hung Sun. The business generated gross revenues of 659.36 million patacas (US$82.5 million) in 2011 – more than half of all revenues from non-casino gaming in Macau that year. A.E.

Photo by Manuel Cardoso

Macauslot contract formally extended

4 |

business daily July 26, 2012

macau

Legal turmoil leads to La Scala freeze Buyers can delay paying next instalment but long-term future uncertain Xi Chen

xi@macaubusinessdaily.com

ransactions at the La Scala development have been suspended while the legal dramas swirl around the developers, property agents told Business Daily yesterday. Chinese Estates Holdings Ltd is the developer behind the La Scala flats, a luxury project near the Macau International Airport. The company

has agreed to permit buyers to hold off paying their next instalment, due on August 17, an agent at Centaline Property Agency Ltd said. Buyers are not able to get back the money already paid while the legal proceedings are ongoing, Midland Realty (Macau) Ltd chief executive Ronald Cheung said. “Currently there is no legislation that requires the developer to pay back buyers under such circumstances,” Mr Cheung said. He said the only option left for buyers is to try to stall any

further payments while the legal process continues. More than 300 of La Scala’s 900 flats were pre-sold, with total contract sales amounting to about HK$3.8 billion (US$489.8 million) in cash deposits with about HK$384 million received so far, Chinese Estates said in a statement to the Hong Kong Stock Exchange last month. Many of the units were sold to Macau residents. The trial of Chinese Estates chief executive Joseph Lau Luen Hung is scheduled to begin on September

17 in the Court of First Instance. Hong Kong businessmen Mr Lau and Steven Lo Kit Sing are accused of giving former Secretary for Transport and Public Works Ao Man Long a HK$20-million bribe to secure the concession of the plot where the upmarket residential complex was being built. Construction was halted last month. Mr Lau owns 75 percent of the shares of Chinese Estates, which have fallen more than 28 percent since April. They closed at HK$8.98 in Hong Kong trading yesterday.

City cracks record high for mainland workers Foreign labour force swells to near record as number of mainland workers peaks

Almost 500 mainland workers joined the construction workforce last month

Vítor Quintã vitorquinta@macaubusinessdaily.com

he number of mainland non-residents employed in Macau reached record levels last month, according to a report released by the Human Resources Office yesterday. Almost 1,150 workers from the mainland were hired last month, putting the total number of mainlanders hired above 61,800 for the first time since the office began collecting data in 2007. The number of mainland nonresident workers has been increasing since November 2010. Construction figured prominently in the report, with 483 new mainland workers, which puts the total at 13,379. They were mostly employed on the second phase of the Galaxy Macau and Wynn Cotai Resort. The Human Resources Office said hotels and restaurants hired 422

mainland workers last month, the total rising to 23,200. Restaurants have recently faced staff shortages. More than one out of every 10 job posts in restaurants was vacant in March, with close to 3,400 vacancies overall.

Labour sources The mainland is the city’s dominant source of non-resident labour, followed by the Philippines. Some 256 Filipino workers were hired last month, setting a new record of 14,803 workers from the Philippines. The number of staff hired from Vietnam was 8,885, while 682 Taiwanese were hired – another record. Authorities seem to be gradually relaxing restrictions on imported workers. Last month, 1,635 non-resident workers were hired, which is nearly double the 840 authorised by the Human Resources Office in April. The number of domestic workers,

102,557 The non-resident workforce last month

wholesale and retail trade staff and gaming, cultural and entertainment workers increased also. The number of domestic workers hired was up by 174, headcount in wholesale and retail increased by 170, and gaming, cultural and entertainment workers were up by 141 workers. Almost 102,600 foreign workers were employed in Macau last month, which although high, is still below the record of 104,300 set in September 2008. If the current trend continues, the previous benchmark could be overtaken next month. Macau Polytechnic Institute social work professor Larry So Man Yum told Business Daily last month he expects non-residents to reach between 120,000 and 130,000 in the short term. Non-residents currently account for about 30 percent of the city’s workforce. Unemployment has been about 2 percent since March.

July 26, 2012 business daily | 5

MACAU

Monetary Authority sees growth below 10 pct Economic growth this year will be less than half what it was last year but should still be respectable, Monetary Authority predicts Photo by Diamantino Santos

Tony Lai

tony.lai@macaubusinessdaily.com

he economy will grow at a “high-single-digit” rate this year, providing the external outlook does not worsen, according to the Monetary Authority of Macau. In its latest Monetary and Financial Stability Review, published yesterday, the authority sticks to the rough forecast of annual growth in gross domestic product that it made in January because, it says, the monetary and financial system remained “highly stable” in the second quarter of this year. In the first quarter the economy grew at an annual rate of 18.4 percent. The authority thinks that this year domestic demand will become as crucial for growth as external demand, as the economies of Macau’s main service export markets, particularly the mainland, remain sluggish. It expects public investment – notably in the Light Rapid Transit elevated railway, the Hong Kong-ZhuhaiMacau Bridge and the development of Hengqin Island – to keep climbing. It expects private investment in Cotai to keep rising, too. The Monetary Authority’s growth forecast is similar to the forecast that Secretary for Economy and Finance Francis Tam Pak Yuen

Private investment in Cotai projects are expected to increase in the second half of 2012

made this month. Mr Tam predicted that slower growth may increase unemployment and curb pay rises. In contrast, the Monetary Authority predicts that the jobless rate will edge down to about 2 percent this year because of an “unprecedentedly tight” labour market.

Home-cooked inflation The authority says the real estate market has “showed signs of stabilisation” since the third quarter of last year, when the special stamp duty was introduced.

It expects a “moderate decline” in the number of properties sold this year and thinks consolidation in the market “would be conducive to financial stability”. The city’s de facto central bank forecasts that the annual rate of consumer price inflation will “hover around 6 percent” this year despite the deceleration of inflation in the mainland. “The general price level of Macau is driven largely by domestic forces,” the authority says. It says housing rents and eating out or ordering in account for more than half the inflation rate.

The Monetary Authority warns that less liquidity, more non-performing loans and the exposure of the banking industry here to troubled economies abroad might impinge on the city’s financial stability. The proportion of the banking industry’s assets that are classed as liquid assets that can be used as a cushion to absorb unforeseen shocks declined to 37.3 percent in April from 43.4 percent a year before. The banks had assets amounting to 80.4 billion patacas (US$10 billion) in Europe, particularly in debtstricken Portugal, accounting for 10.6 percent of their total assets.

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business daily July 26, 2012

macau

Chief Executive Fernando Chui Sai On meets businesses owners in the city’s north yesterday

Struggling North demands urban renewal The government hopes to rejuvenate the northern part of the city with a burst of tourist attractions, creating new opportunities for low-price hotels Xi Chen

xi@macaubusinessdaily.com

wners of businesses in the Northern District voiced complaints yesterday about the lack of tourism attractions, traffic congestion and the tough economic climate. They did so in conversations with Chief Executive Fernando Chui Sai On and other senior officials, who visited shops in Centro Comercial Vong Kam. Mr Chui and his party wanted to find out first-hand what is holding back development of the area, where 40 percent of the city’s population live. The head of the Industry and Commerce Association of Macau Northern District, Wong Kin Chong, proposed the renovation of Iao Hon Park and the Temple of the Lotus to attract more tourists. Mr Wong said a night market could be established to attract visitors. The government should make the riverbank more attractive by allowing more shops there. Mr Chui said the government would do more research on the potential to attract more tourists and persuading them to linger. He said redevelopment would create opportunities for new

businesses to move into the district. The area would have a cluster of low-price hotels, in particular near the new border crossing, and the government would favour lowerprice hotels when granting land.

Squeezed out Business owners that spoke with Mr Chui blamed the usual suspects: high inflation, rising rents and the shortage of labour. “Applying to import labour is extremely difficult for small enterprises, and the government should consider giving us some breathing space in this area,” said the owner of a motor garage. The owner of a shoe shop said the government should give preferential treatment to businesses owned by residents because bigger companies from Hong Kong were squeezing out small shopkeepers. Lei Choi Hong of the Sun City Property Ltd estate agency said there were obstacles to rejuvenating the area. Ms Lei said the government could speed up urban renewal by putting northern district residents to the front of the queue for public housing. Another business owner said the narrow streets amplified traffic congestion, making it hard to get around the area. Secretary for Transport and Public

Works Lau Si Io said traffic snarls would decrease once the Light Rapid Transit elevated railway was built. He said the new border crossing was “a landmark project” and work on the Canal Dos Patos would “significantly change the

appearance of the river and make it a new tourist attraction”. The new border is planned to be open around the clock. Government officials have yet to announce a schedule for building the new crossing, which they expect to reinvigorate the area.

Elderly snubbed

group of elderly people were prevented from handing a letter to Chief Executive Fernando Chui Sai On during his visit to Centro Comercial Vong Kam yesterday. Government security men held the group back and, as Mr Chui’s party moved on, it left two elderly women screaming and weeping in its wake. The women later told reporters they could not get public housing and demanded better government pensions because, they said, nobody was taking care of them.

Weather Beijing 28/23o C Changchun 27/23o C

Harbin 29/22o C

Xian 33/24o C Shanghai 34/27o C Chengdu 31/23o C Kunming 24/18o C Haikou 33/25o C Sanya 31/25o C

Guangzhou 28/24o C

MACAU (23 July-28 July) Day

Temperature

Humidity

07/23

26/30o C

70/95 %

07/24

24/28o C

75/95 %

07/25

24/28o C

75/95 %

07/26

24/28o C

70/95 %

07/27

26/30o C

70/95%

07/28

27/32o C

65/95 %

Shenzhen 30/26o C

ASIA (today)

Hong Kong 33/26o C

Manila

TOKYO

Jakarta

31/25o C

32/25o C

32/23o C

Macau 28/24o C

Bangkok

SEOUL

K. lumpur

31/25o C

SINGAPORE

34/24o C

33/24o C

taipei

31/26o C

July 26, 2012 business daily | 7

MACAU

Morning Star exits travel industry Company flips its travel business to concentrate on property development and management Tiago Azevedo

tiago.azevedo@macaubusinessdaily.com

Stable return The net profit of the travel and tourism business fell by 71.4 percent last year to HK$3.6 million. “The travel and tourism segment, by nature, is a labour-intensive

Photo by Manuel Cardoso

orning Star Resources Ltd is disposing of its core travel business so it can invest in the property market. The company told the Hong Kong Stock Exchange on Tuesday it had agreed to sell its travel business, which includes the Morning Star (Macau) travel agency, for HK$138 million (US$17.8 million). Star Travel, Morning Star (HK) and Morning Star Traveller will be sold to Affluent Trade Ltd, an investment holding company incorporated in the Cayman Islands. Morning Star Resources says the sale will yield an investment gain of HK$124.8 million after the deduction of transaction costs and the costs of winding up another subsidiary. The company said Beijing Morning Star would wind up within 12 months of the sale of its other travel subsidiaries. The subsidiaries arrange package tours, handle airline ticketing, hotel reservations and other travelrelated services. Morning Star has 14 agencies in Macau and Hong Kong. The sale means the company is getting out of the travel business entirely. “The remaining group shall be principally engaged in the property development and property management,” Morning Star Resources told the stock exchange. It intends to use the proceeds of the sale “for general working capital of the group and as funds for propertyrelated business development.”

The 14 Morning Star travel agency branches in Macau and Hong Kong have been sold for HK$138 million

business, which is more vulnerable to the inflationary and unstable

HK$3.6 million Profit from Morning Star Resources’ travel business last year

global economy,” Morning Star Resources said. It expects the performance of its travel and tourism business “to be more heavily affected with the rising operating costs, the flat demand and growing competition”. The company expects the property business to bring in a more stable return. “Property development was one of the profitable businesses of the company, with higher operating margin than that of the travel and tourism segment,” it said. It said it was considering making long term-investments in shops and offices in Hong Kong and the mainland. Part of the net proceeds will be used “for acquisition(s)

of property(ies) as long term investments,” the company said in the statement. The company did not say if it intended to invest in the property market here. Business Daily asked Morning Star to clarify but had not received a response by the time we went to press. Morning Star stock was suspended on July 3 pending the announcement but resumed yesterday. By the close, the price of Morning Star Resources shares had risen by 5.6 percent to HK$0.15 apiece. The Hang Seng Index closed 0.1 percent lower at 18,877.3 points, declining for the third session in a row.

Central library plans due to see daylight Two years after the government dropped bids to redevelop the site of the new library, a revamped design is ready

design plan for the new central library is complete but there is no schedule for when construction might begin, Cultural Affairs Bureau director Guilherme Ung Vai Meng said yesterday. At the opening of a new public library near the Red Market yesterday, Mr Ung said the bureau was working on building plans for the old court building in Nam Van. The bureau is also talking to the Judiciary Police to have a second phase of the library built at the current headquarters of the criminal investigation police, located behind the court building. The Judiciary Police are planning to move to new headquarters in the NAPE district next year, leaving their current premises empty. Two years ago, Mr Ung said construction on the new central library would start before the

end of last year. The bureau called off the tender to design the new building in 2010, after it was revealed that the two top-ranked projects were both led by an architect who had worked for the consultancy responsible for the suggesting the building’s conversion. The Commission Against Corruption did not carry out an investigation but warned the bureau against creating “an unfair situation”. Meanwhile, Mr Ung has pledged to gradually repair damaged structures at the former Iec Long firecracker factory in old Taipa village, including the factory walls. “At the current stage we can only carry out some restoration works,” Mr Ung said. “The ownership right of the factory is a very complicated, sensitive issue.” The ownership issue has frozen a government plan to rejuvenate

Nam Van’s old court building was earmarked as the location for the city’s new central library five years ago

the factory, which is the biggest and most complete remnant of the firecracker manufacturing industry in the Pearl River Delta region. Mr Ung said there was no timeframe

to implement the plan to convert the buildings into a theme park with a teahouse, art galleries and a small auditorium. T.L.

8 |

business daily July 26, 2012

Greater china

Economy set for soft landing, IMF says Cautious but positive outlook, more economic reforms needed

hina’s economy is set for a soft landing even as global headwinds increase, the International Monetary Fund said in a report yesterday that urged further reform and currency appreciation to rebalance growth and reduce risks. The report said economic reforms so far had substantially reduced external imbalances, but at the cost of significant domestic imbalances fuelled by its investment-driven growth model. In a key change, the IMF said China’s yuan was now only “moderately undervalued”, a softening of previous language, in an annual review warning of risks to growth if investment were to slow sharply or if there was a sudden rise in non-performing loans. “Policies should continue to be geared toward achieving this year’s growth targets. In the event of a worsening of the external outlook, China has ample room to respond forcefully, using fiscal policy as the main line of defence and with emphasis on measures that support China’s mediumterm reform objectives,” the IMF report said.

Currency matters The IMF’s new language on the currency reflects a growing international consensus that the Chinese yuan is closing in on its fair value after about a decade at an artificially weak level, potentially reducing it as a political or international trade issue. “The renminbi is assessed to be

moderately undervalued, reflecting a reassessment of the underlying current account, slower international reserves accumulation, and past real effective exchange rate appreciation,” the report said. The IMF lowered its medium-term forecast for the current account surplus to between 4 percent and 4.5 percent of GDP. The IMF’s view is that the exchange rate still has a “non-trivial” way to appreciate, Markus Rodlauer, the deputy director of the IMF’s AsiaPacific department, told reporters. He did not give an exact value.

Debt risk The IMF report warned of a number of risks to the economy, specifically the question of whether banks or local governments would bear the burden of non-performing loans – many stemming from China’s 2008 stimulus package – if the economy were to slow sharply. Other recommended reforms included better pricing signals following on China’s moves to give banks more flexibility in setting interest rates, more financial investment options to avert another speculative leap into real estate, and tax changes to support a shift from investment-led to consumer-led growth. “The exchange rate issue is just one part of a package of reforms needed to rebalance the economy,” Mr Rodlauer said. Without those reforms, “it will be very likely that the current account surplus will go up again, not to where it was before but more than it was now,” he added. “Gradual

The IMF repeated its forecast from last week that China’s gross domestic product will expand 8 percent in 2012, compared with 8.2 percent seen in April, and accelerate to 8.5 percent growth in 2013, compared with 8.8 percent

predicted three months ago. Inflation will range from 3 percent to 3.5 percent for the year and slow to 2.5 percent to 3 percent in 2013, “barring further shocks to agricultural supply,” the IMF said. The organisation reiterated that the biggest external risk the country faced was a worsening of the eurozone debt crisis. A reminder of risks to growth came from China’s industry ministry which said in an unrelated statement yesterday that downward pressure was still being felt by firms from customers at home and abroad, despite signs that nine months of pro-growth policy action from Beijing was gaining traction. Beijing has followed a programme of policy “fine-tuning” since the autumn of 2011, cutting interest rates, easing rules on bank lending, fast-tracking fiscal spending and cutting taxes and red tape for business.

not expect Gome to suffer a loss and that triggered some stop-loss selling,” said Patrick Yiu, a director at CASH Asset Management. “It added to uncertainty over the company as investors cannot see

clearly how Gome can turn around as its store sales remain weak while the impact of online investment also ate into the bottom line.” Shares of Gome, which have dropped 65 percent so far this year, fell to a

KEY POINTS Yuan ‘moderately undervalued’ Risks: investment slowing, bad loans rising More fiscal spending needed appreciation will be necessary in upcoming years.”

Growth hazard

Gome shares slide on loss warning Record low reached, down 65 pct this year

hares of Gome Electrical Appliances Holding Ltd, China’s No. 2 home appliance retailer which is backed by private equity firm Bain Capital, tumbled more than 17 percent to a record low yesterday after it became the latest consumer-related company to warn of weak profits. Gome and bigger rival Suning, seen by some as China’s answer to Best Buy, have joined a host

of companies ranging from a steelmaker to the country’s biggest airline to report or flag weak earnings as growth in the world’s second-biggest economy slows. Gome said on Tuesday it would post a net loss for the first half of 2012 due to a drop in sales and losses attributable to its e-commerce business. “The market was expecting to see a sharp decline in profit but it did

Li Ka-Shing to buy U.K. gas assets A group of companies controlled by Hong Kong billionaire Li Ka Shing has agreed to buy U.K. gas company Wales and West Utilities for 645 million pounds (US$1 billion), the latest acquisition by the tycoon that will boost his gas portfolio in Britain. Mr Li has been expanding his business empire by buying into regulated infrastructure and utilities assets in developed countries, especially Britain – which is open to foreign ownership of its infrastructure assets. Blue-chip property developer Cheung Kong (Holdings) Ltd said it had formed a joint venture with Cheung Kong Infrastructure Holdings Ltd, Power Assets Holdings Ltd and the Li Ka Shing Foundation Ltd to buy the company, which is involved in the management of gas transportation assets and gas distribution in Wales and the southwest of England. Cheung Kong Infrastructure and Power Assets are controlled by Mr Li’s conglomerate, Hutchison Whampoa Ltd.

July 26, 2012 business daily | 9

greater china HK commercial rents reach for the sky Values expected to overtake New York by 2014

IMF worries about over-investment

“We can see relatively clear signs from the industry sector that the economy is stabilising,” Zhu Hongren, the ministry’s chief engineer told a scheduled news conference. China is accelerating capital spending in response to the slowdown, and the IMF said its directors expressed concern about the sustainability of “such a high level of investment in the context of weak external demand and excess capacity.” The IMF sees gross domestic investment little changed this year at 48.5 percent of GDP. IMF officials “underscored the urgency of reforms to rebalance the economy toward more consumptionled growth,” the lender said. Mr Wen said this month that “growthstabilising policies include boosting consumption and diversifying exports, but currently, what is important is to promote a reasonable growth in investment.”

ong Kong’s main shopping district is gaining on New York’s 5th Avenue for the title of world’s most expensive retail zone as rents rise by 35 percent a year, pushing chains such as H&M out to the cheaper suburbs. Swedish fashion chain Hennes & Mauritz’s first store in Asia was a 30,000 sq ft (2,800 sq m) flagship in Central, the heart of Hong Kong. But with the lease up for renewal and the rent set to double, the world’s second-largest clothing retailer will close the location next year and seek new store space elsewhere. Space has always been at a premium in Hong Kong, an island-city, like Manhattan, where developers plant high-rises on every available inch. Retail rents in prime shopping areas are rising more rapidly here than in New York, London or Paris. Average annual rent along Hong Kong’s Queen’s Road Central – where H&M’s soon-to-be-closed flagship store is located – soared to US$1,831 per square foot in March, up 35 percent from a year earlier, data from real estate brokerage Colliers International shows. On New York’s 5th Avenue, average rents rose 23 percent to US$2,633 per square foot.

Monthly rent Zara will pay for a 2,800 sq m shop in Central

Reuters/Bloomberg

record low of HK$0.62 yesterday. Bain Capital, which holds a 9.9 percent stake in Gome, said last September it was pleased with the Chinese company’s performance and intended to remain a significant stakeholder for the foreseeable

future. Gome’s shares were at HK$3.35 around that time. The retailer reported an 88 percent profit decline in the first quarter as China stopped subsidising some home appliance purchases. Larger rival Suning Appliance Co said on July 13 that it expects first-half net income to fall by as much as 30 percent because of weaker sales and higher expenses. The retailers last year benefited from a government programme, which ended on December 31, that gave shoppers as much as 400 yuan (US$63) as subsidies on purchase of home appliances. The company will report results by August 31, the company said in a filing to the Hong Kong stock exchange yesterday, without specifying the size of the projected loss. Reuters

CLSA China chairman resigned Wu Changgen, who ran the China business of Credit Agricole SA’s Asian brokerage unit, resigned ahead of Citic Securities Co’s US$1.25 billion takeover of the firm, said two people familiar with the matter. Mr Wu quit at the end of June as Citic, the biggest Chinese brokerage by market value, was in the final stages of talks to buy CLSA Asia-Pacific Markets, one of the people said, asking not to be identified because the matter is private. The banker is currently on so-called gardening leave, the person said. Citic Securities now owns 19.9 percent of CLSA and plans to buy the rest of the company for US$942 million, the company announced on July 20. CLSA chief executive Jonathan Slone declined to comment on Mr Wu’s departure. Mr Slone said in a July 23 interview that he is “very concerned” about sluggish stock market turnover globally, and the tie-up with Citic Securities will help bolster CLSA’s business in China.

Colliers estimates Hong Kong’s retail rents will overtake New York as early as 2014.

Willing to pay “Hong Kong rents are going through the roof,” said Sally MacDonald, chief executive of Australian handbag and accessories maker Oroton, which has been looking to open a store in Hong Kong but could not find the right fit at the right price. “It’s a concern because that’s a market that booms and busts and the rents are probably unsustainable,” she said. Some firms are still willing to pay for a prime location in Hong Kong, long considered the gateway to mainland China - a place to study Chinese buying habits before taking on Beijing’s bureaucratic challenges. Zara, owned by Spain’s Inditex SA, is taking over the massive space being vacated by H&M, an unusual case of a direct rival replacing a competitor. It will pay a monthly rent of HK$11 million (US$1.4 million), up from HK$5.5 million (US$709,200), according to Helen Mak, director of retail services at Colliers, which advises companies on leasing shop space. Now some global chains are bypassing Hong Kong and jumping straight into China or starting out in Southeast Asia instead. “In the past, even two years ago, you

Firms still willing to pay for a prime location

needed the store in Hong Kong in order to be successful in Shanghai,” Oroton’s Ms MacDonald said. “I think already, you can have the store in Shanghai without the store in Hong Kong and be respected.” “It is no longer essential to use Hong Kong as a stepping stone,” said Simeon Piasecki, former managing director of Marks & Spencer in Asia. “It’s not an easy place to get into.” Reuters

10 |

business daily July 26, 2012

asia

Japan exports fall as Europe, China slowdown Positive trade balance beats negative forecasts

apan’s exports fell in June from a year earlier, the first decline in four months, as a slowdown in Europe, China and other emerging markets weighed on demand for Japanese goods. The 2.3 percent annual decline in exports was slightly less than economists’ median forecast of a 3 percent annual drop, in a troubling sign for Japan’s recovery from a devastating earthquake, tsunami and nuclear disaster last year. Japan’s domestic demand, fuelled

by reconstruction and a pickup in consumer spending, has supported growth for much of this year but weakening overseas demand could slow the economy, bolstering the case for new policy steps to support growth. “Exports remain sluggish and you can’t expect much from external demand to drive the Japanese economy in the latter half of this fiscal year (to next March) when private consumption is likely to lose momentum as subsidies for lowemission cars run out of money,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute. “I don’t think the Japanese economy is sliding back into recession, but that possibility cannot be

KEY POINTS June exports down 2.3 pct year-on-year Trade balance up US$788.80 million Exports to Europe fall

Singapore revises inflation outlook

South Korean banks at risk

Bank’s capital rise to face market volatility

ingapore’s central bank boosted its paid-up capital by S$8 billion (US$6.34 billion) and withheld contributions to government coffers earlier this year amid rising volatility in financial markets, its latest annual report showed yesterday. The Monetary Authority of Singapore (MAS) also revised its 2012 inflation forecast to 4 to 4.5 percent from 3.5 to 4.5 percent. But it said core inflation – the figure it most closely watches in setting monetary policy – was moderating, indicating a possible loosening of its stance on the Singapore dollar at its next half-yearly review in October. The MAS said Singapore’s tradedependent economy was on track to grow by 1-3 percent this year but that the momentum was “clearly slowing.” The city-state’s economy grew 4.9 percent in 2011. “It [core inflation] is likely to ease further and approach 2 percent by the end of the year. This is not far from the historical average of 1.7 percent,” MAS managing director Ravi Menon said at a press conference about the annual report. Core inflation excludes accommodation and private road transport, which are determined more by government policy. On Monday, the MAS said full-year headline inflation was expected to be in the upper half of the official forecast. The MAS had paid-up capital of S$25 billion as at March 31, 2012, up from S$17 billion at the end of the previous financial year, according to its annual report. The capital increase took effect on March 29. The MAS did not hand over part of its profits to the government during

Suspicion of unfair practices investigated

the financial year, resulting in a rise in its net assets to S$35.15 billion from S$24.38 billion the year before. “This is a pre-emptive measure to strengthen the authority’s capital and reserves in the light of a volatile financial market environment,” the MAS said in the notes to its accounts. The Singapore central bank made a net profit of S$2.77 billion in fiscal 2011/12, reversing from the record loss of S$10.94 billion in the previous financial year when the strong local dollar reduced the value of reserves held in other currencies. The MAS said its profits stemmed “mainly from interest income and gains from asset disposals, offset partially by the impact from the translation of the authority’s foreign assets into the stronger Singapore dollar.” At the occasion, Mr Menon also said Singapore’s growth may fall below 1 percent should economic slumps in the U.S. and China materialize and the European crisis worsen significantly. “Growth momentum is clearly slowing,” he said. Singapore’s current growth forecast of 1 percent to 3 percent is based on assumptions that there is no recession in the U.S., no significant escalation of the euro zone crisis and no hard landing in China. Singapore’s central bank said in April it will allow faster gains in its currency to damp price pressures, diverging from most other Asian central banks that had left borrowing costs unchanged or eased monetary policy. Inflation in the island of 5.2 million people has accelerated even as gross domestic product shrank, fuelled by rising housing and private transportation costs. Reuters

outh Korean banks are facing growing legal and reputation risks over suspicions that lenders had fattened their profits in recent years through unfair practices, ratings agency Fitch said yesterday. The warning came as the head of the anti-trust agency confirmed to lawmakers that it had opened an investigation into nine banks and 10 brokerages last week after media reports raised suspicion that they may have colluded in keeping lending rates unfairly high. Share prices in banks and their holding companies fell more than 1 percent, with the sector facing its fifth losing session in six, on concerns the investigation could

hurt their profitability, or lead to punitive actions such as fines. Local media have reported that at least one civilian group was preparing for a class suit against banks but no action has been taken yet. “A growing focus on consumer protection in Korea has increased legal and reputational risks for banks, and will weigh on the longterm profitability of the sector,” Fitch Ratings said in a statement, while noting it was too early at this stage to ascertain the financial implications for individual banks. The Fair Trade Commission investigated the 19 financial companies, all local companies but Standard Chartered PLC’s local

After 8-year low, Macquarie expects better 2013

ustralia’s top investment bank Macquarie Group, whose annual profit fell to an eight-year low, reiterated it expects a better 2012/13 fiscal year, although first-quarter profit came in below the preceding three months. Macquarie said in a statement yesterday that businesses such as advisory and trading were subdued while returns in its lending, leasing and funds management units returns were broadly flat. It said operating expenses were down nearly a tenth. “Capital markets businesses continue to be impacted by weak market conditions, when compared with the subdued prior

corresponding period,” said Chief Executive Nicholas Moore. Mr Moore has shifted Macquarie’s focus from riskier banking products to annuity-style businesses such as unlisted funds and retail banking. In an update to the market ahead of the annual shareholders meeting, Macquarie said it still expects improved results for the year, provided markets do not deteriorate further. That was similar to statements last year, although it cut forecasts later in 2011, blaming weak markets. Analysts on average expect Macquarie to report net profit of A$913 million (US$934 million) for the year ending March 2013 versus A$730 million a year earlier. Analyst estimates have dropped steadily from more than A$1 billion in April. Macquarie’s advisory and trading businesses have borne the brunt of weak markets that have pushed the bank, which constantly beat estimates before the global financial crisis, to cut staff. Macquarie did not reveal staff numbers in the statement. It cut global staffing by nearly 9 percent in the 12 months to March 31. Reuters

July 26, 2012 business daily | 11

asia totally ruled out depending on developments in Europe’s crisis and slowdown in the U.S. and Chinese economy,” he said.

Trade surplus

Japanese recovery hanging on European concerns

unit, on suspicion of collusion in keeping the benchmark three-month money market rate unfairly high. The certificate of deposit (CD) rate has failed to reflect falling market interest rates for a long time, for instance staying at a uniform 3.54 percent for three months even as the same-maturity treasury bond yield fell 19 basis points.

Different patterns “We judged that the CD rate’s movements for recent several months were different from the pattern for other bond yields,” Kim Dong-soo, head of the commission, told a parliamentary committee session which was broadcast live on the Internet. The head of the country’s central bank told another parliamentary committee session that the impact would be very large if a collusion on the CD rate was confirmed, adding

there would also be an impact on the international transactions. “Derivatives transactions [involving the CD rate] amounted to 4,500 trillion won (US$3.93 trillion),” Bank of Korea Governor Kim Choong-soo said of statistics released by the country’s financial regulator recently. The country’s state audit bureau said in a report this week that banks made unfairly large profits by failing to lower lending rates in line with reductions in the policy interest rate during the 2008-2009 global crisis. The Board of Audit and Inspection neither identified individual banks nor took any punitive action on them, but called for the financial regulatory agency to toughen supervision on the business practices at banks. Fitch said these risks were negative for banks’ credit profiles, although adding such challenges would

The trade balance in June swung to a surplus of 61.7 billion yen (US$788.80 million) against a projected deficit of 135.0 billion yen as imports fell an annual 2.2 percent due to a decline in oil prices. The decline in imports was the first in 2-1/2 years and compares with the median forecast for a 1.2 percent annual increase. Japan recorded its biggest ever trade deficit of 1.481 trillion yen in January. Exports to Europe in June tumbled by 21.3 percent from a year earlier, the fastest decline since a 29.0 fall in the year to October 2009 as Europe’s sovereign debt crisis takes its toll. Exports to China, Japan’s largest trading partner, fell 7.3 percent in the year to June, the biggest decline since a 14.0 percent annual fall in February, due to lower shipments ultimately help South Korean banks to become more robust by strengthening internal controls and compliance functions.

of steel and heavy machinery. Japan’s economy is still expected to outperform most other developed nations this year thanks to solid domestic demand, but analysts have slashed forecasts for factory output as the global slowdown becomes more pronounced, according to a Reuters poll conducted earlier this month. Japan’s economy, the world’s thirdlargest, is set to grow 2.2 percent in the year to next March, according to a Reuters poll of economists, slightly slower than the 2.3 percent pace seen in a similar survey in June. China’s economy is expected to recover modestly in the third quarter after marking its slowest pace of growth in three years in the second quarter as Europe’s sovereign debt crisis weighed on exports. There are growing worries that Spain may have to seek a bailout following media reports that half a dozen regional governments could request state aid to pay off their debts. Reuters

Mortgage lenders in the country are already facing class action suits over certain charges. Reuters

Collusion may have propped up profits

IHH Healthcare jumps in first day’s trading Malaysia’s becoming Asia’s IPO capital

sia’s largest hospital operator IHH Healthcare Bhd jumped as much as 14 percent in its trading debut yesterday, as investors eager for exposure to the region’s growing healthcare sector chased the world’s third largest listing this year. IHH is the healthcare arm of Malaysia’s state investor Khazanah Nasional. IHH raised US$2.1 billion in a share sale that confirmed Malaysia’s status as Asia’s current IPO capital following the strong debut last month of plantation giant Felda Global Ventures Holdings, the world’s biggest IPO of 2012 after Facebook. The stock opened 9.6 percent above its IPO price of 2.80 ringgit (US$.88) on the Malaysian stock exchange, within the expectations of analysts who had predicted a bounce despite the backdrop of tottering global equity markets and pulled listings. Its Singapore debut also saw a 9.6 percent jump, adding some shine to the regional bourse after India’s Reliance Communications shelved a planned US$1 billion IPO by its undersea cable unit this month on jittery market conditions.

“We are quite happy with the start of our stock trading even though it is just under 10 percent premium. It shows a vote of confidence from investors towards us,” IHH Managing Director Lim Cheok Peng told reporters in the Malaysian capital. Analysts’ views are mixed on IHH’s earnings growth outlook, with some saying it could struggle to achieve synergies from its large,

complex operations extending from Malaysia and Singapore to Turkey. In contrast, TA Research said IHH’s strong earnings growth outlook and favourable geographic diversification warrants the IPO price that values it at a 20 percent premium to its peers. Nearly two-thirds of the shares were taken by big “cornerstone” investors including sovereign wealth

fund Kuwait Investment Authority and International Finance Corp, the private investment arm of the World Bank. Bank of America-Merrill Lynch, CIMB and Deutsche Bank are the lead global coordinators for the listing, with Credit Suisse, DBS, Goldman Sachs and Maybank acting as joint bookrunners. Reuters

IHH Healthcare, Asia’s biggest hospital operator, raised US$2 billion in the world’s third-largest initial public offering this year

12 |

business daily July 26, 2012

MARKETS Hang SENG INDEX PRICE

Day %

VOLUME

PRICE

Day %

VOLUME

26.65

-0.3738318

16838795

CHINA UNICOM HON

10.98

5.576923

55945877

ALUMINUM CORP-H

3.04

13438456

CITIC PACIFIC

10.62

-2.925046

BANK OF CHINA-H

2.83

0.3546099

159030439

BANK OF COMMUN-H

4.88

0.8264463

14241986

-0.5736138

1840613

BELLE INTERNATIO

13.02

-2.980626

20428884

BOC HONG KONG HO

23.25

-1.06383

7193034

CATHAY PAC AIR

12.58

-0.9448819

2707405

HANG SENG BK

106

CHEUNG KONG

98.1

-0.9090909

3641176

HENDERSON LAND D

43.5

CHINA COAL ENE-H

6.48

-1.219512

13969224

HENGAN INTL

69.95

NAME AIA GROUP LTD

BANK EAST ASIA

4.88

1.455301

246903794

CHINA LIFE INS-H

CHINA CONST BA-H

20.85

0.2403846

30396310

CHINA MERCHANT

22.75

-4.008439

3212941

87.2

0.5767013

14593254

16.98

0.2361275

22485845

CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H

6.76

-1.169591

67141264

CHINA RES ENTERP

19.16

-1.033058

2987827

CHINA RES LAND

14.74

-0.9408602

10342725

CHINA RES POWER

15.9

-2.573529

9313615

CHINA SHENHUA-H

27.15

-0.9124088

15367303

NAME

PRICE

Day %

POWER ASSETS HOL

59.25

-1.578073

3305670

6328080

SANDS CHINA LTD

22.25

-2.838428

15698725

SINO LAND CO

12.4

-1.743265

7892017

94.25 -0.05302227

3784963

CLP HLDGS LTD

64.85

1912413

CNOOC LTD

14.78

-0.2699055

77499091

9.95

-0.8964143

4095055

SWIRE PACIFIC-A

8.9

-0.6696429

7067704

TENCENT HOLDINGS

25.55

-1.541426

3613322

TINGYI HLDG CO

0.6647673

1044056

WANT WANT CHINA

2696552

WHARF HLDG

-3.183391

4704357

COSCO PAC LTD ESPRIT HLDGS HANG LUNG PROPER

HONG KG CHINA GS

17.56

-0.1137656

5996286

HONG KONG EXCHNG

101.6

0.09852217

2635483

HSBC HLDGS PLC

62.25

0.3223207

21991520

HUTCHISON WHAMPO

67.3

-1.608187

9799761

IND & COMM BK-H

4.15

0.7281553

262258386

13.86

1.020408

30400562

LI & FUNG LTD

SUN HUNG KAI PRO

MOVERS

VOLUME

-0.7250418

2001500

224.8

-0.8818342

2386310

-0.7314525

2936197

9.12

0.9966777

8920966

42.35

-1.166861

3162749

3 19260

INDEX 18877.33 HIGH

19259.36

LOW

18744.98

MTR CORP

26.5

1.145038

1884082

NEW WORLD DEV

9.51

-1.450777

12987602

52W (H) 22808.33

PETROCHINA CO-H

9.31

-1.167728

80552316

(L) 16170.35

PING AN INSURA-H

59.25

-1.16764

12938002

18740

23-Jul

25-Jul

Hang SENG CHINA ENTErPRISE INDEX PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

AGRICULTURAL-H

1.010101

75746516

CHINA PACIFIC-H

24.9

2.258727

17225489

YANZHOU COAL-H

11.1

-0.1798561

6421431

AIR CHINA LTD-H

5.24

1.353965

10569020

CHINA PETROLEU-H

6.76

-1.169591

67141264

ZIJIN MINING-H

2.29

-0.8658009

41981462

ALUMINUM CORP-H

3.04

13438456

CHINA RAIL CN-H

6.94

2.058824

21311992

ZOOMLION HEAVY-H

8.19

-3.191489

19669260

ANHUI CONCH-H

19.3

-1.22825

9217645

CHINA RAIL GR-H

3.43

1.780415

30083945

ZTE CORP-H

10.34

1.174168

6715705

BANK OF CHINA-H

2.83

0.3546099

159030439

CHINA SHENHUA-H

27.15

-0.9124088

15367303

BANK OF COMMUN-H

4.88

0.8264463

14241986

CHINA TELECOM-H

3.94

5.066667

117436080

BYD CO LTD-H

13.2

0.7633588

796242

DONGFENG MOTOR-H

10.08

15977560

CHINA CITIC BK-H

3.69

-0.2702703

27613626

GUANGZHOU AUTO-H

5.54

2.025783

2170670

CHINA COAL ENE-H

6.48

-1.219512

13969224

HUANENG POWER-H

5.48

-4.028021

22894269

CHINA COM CONS-H

6.74

-1.0279

13550349

IND & COMM BK-H

4.15

0.7281553

262258386

CHINA CONST BA-H

4.88

1.455301

246903794

JIANGXI COPPER-H

16.5

-0.1210654

6884792

NAME

3.26

-1.510574

14228986

PETROCHINA CO-H

9.31

-1.167728

80552316

20.85

0.2403846

30396310

PICC PROPERTY &

8.31

-0.5980861

13981757

CHINA LONGYUAN-H

4.65

-1.691332

8201284

PING AN INSURA-H

59.25

-1.16764

12938002

CHINA MERCH BK-H

13.7

0.7352941

20862551

SHANDONG WEIG-H

8.33

-3.252033

4122008

CHINA COSCO HO-H CHINA LIFE INS-H

CHINA MINSHENG-H

6.68

27623910

SINOPHARM-H

20.5

-2.612827

2482749

CHINA NATL BDG-H

7.17

-1.103448

43306832

TSINGTAO BREW-H

44.95

-0.5530973

1107050

CHINA OILFIELD-H

11.6

-2.356902

5422336

WEICHAI POWER-H

21.95

-1.789709

2162242

NAME

MOVERS

VOLUME

3 9360

INDEX 9217.23 HIGH

9358.69

LOW

9128.49

52W (H) 12651.92 (L) 8058.58

9120

23-Jul

25-Jul

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.45

0.4098361

21008247

DAQIN RAILWAY -A

6.03

-0.3305785

18228173

SANY HEAVY INDUS

11.63

0.1722653

11244537

AIR CHINA LTD-A

6.07

-2.724359

14420641

DATANG INTL PO-A

5.09

-1.165049

3131231

SHANDONG GOLD-MI

32.17

-0.8017268

3046491

ALUMINUM CORP-A

6.01

-0.4966887

5363442

DONGFANG ELECT-A

16.46

1.856436

12910746

SHANG PHARM -A

10.91

-1.711712

9989042

14.31

-0.2787456

7551808

EVERBRIG SEC -A

13.45

7842587

SHANG PUDONG-A

7.41

-0.6702413

47580447

ANHUI CONCH-A

NAME

BANK OF BEIJIN-A

7.3

0.6896552

6811162

GD MIDEA HOLDING

9.45

-0.7352941

12892844

SHANGHAI ELECT-A

4.29

0.7042254

2583781

BANK OF CHINA-A

2.69

0.3731343

7310273

GD POWER DEVEL-A

2.71

-1.094891

10638304

SHANXI LU'AN -A

20.2

-2.368294

7293656

BANK OF COMMUN-A

4.15

-0.2403846

27746641

GF SECURITIES-A

15.17

-1.685029

13207803

SHANXI XINGHUA-A

37.08

-0.2689618

1594726

BANK OF NINGBO-A

9.78

-0.2040816

8845281

GREE ELECTRIC

21.33

0.2820874

4809704

SHANXI XISHAN-A

14.68

-1.011463

5929664

BAOSHAN IRON & S

4.11

11743114

GUANGHUI ENERG-A

13.16

5334449

SHENZ DVLP BK-A

14.64

-1.081081

9840494

16.53

-2.247191

6136955

SHENZEN OVERSE-A

6.13

-4.368175

41307761

BYD CO LTD -A

16.3

-3.321471

4579186

GUIZHOU PANJIA-A

CHINA CITIC BK-A

3.78

5712559

HAITONG SECURI-A

9.8

-0.7092199

19975751

SUNING APPLIAN-A

6.65

-1.481481

36811133

CHINA CNR CORP-A

3.68

13937603

HANGZHOU HIKVI-A

3.321033

2743815

TSINGTAO BREW-A

35.98

-0.9361233

1410717

CHINA COAL ENE-A

7.47

-0.7968127

3553166

63.5

0.9378477

886251

WEICHAI POWER-A

23.32

-1.102629

3099289

CHINA CONST BA-A

3.87

-0.5141388

11786684

HONG YUAN SEC-A

18.22

-4.707113

19894614

WULIANGYE YIBIN

35.3

-1.479207

27222269

HENAN SHUAN-A

CHINA COSCO HO-A

4.42

-0.4504505

3833093

HUATAI SECURIT-A

10.53

-1.404494

12084436

XIAMEN TUNGSTEN

40.17

-3.344562

4869239

CHINA CSSC HOL-A

22.49

0.9425494

4302022

HUAXIA BANK CO

8.39

0.2389486

15154807

YANGQUAN COAL -A

15.08

-0.5277045

7886014

CHINA EAST AIR-A

4.14

-1.662708

10643103

IND & COMM BK-A

3.67

-0.2717391

12233453

YANTAI CHANGYU-A

61.33

-0.1465321

690001

CHINA EVERBRIG-A

2.7

10822226

INDUSTRIAL BAN-A

11.94

20847133

YANTAI WANHUA-A

13.35

-0.5216095

4211624

CHINA LIFE INS-A

19.7

-0.6555724

7627611

INNER MONG BAO-A

38.64

-1.15119

20028802

YANZHOU COAL-A

18.46

-1.17773

2022401

CHINA MERCH BK-A

9.58

-0.1042753

29141798

INNER MONG YIL-A

19.4

-0.6147541

7311003

YUNNAN BAIYAO-A

61.23

-1.812059

1562215

CHINA MERCHANT-A

11.48

-1.289768

6056504

INNER MONGOLIA-A

4.82

-1.026694

14816831

ZHONGJIN GOLD

20.95

0.04775549

3366854

CHINA MERCHANT-A

-2.50106

4966623

JIANGSU HENGRU-A

30.42

3.04878

4344624

ZIJIN MINING-A

3.69

16041330

9.11

-0.1096491

23768319

11.26

-1.745201

11142698

CHINA MINSHENG-A

5.8

39274604

JIANGSU YANGHE-A

146.44

0.9165461

1372690

ZOOMLION HEAVY-A

CHINA NATIONAL-A

5.92

-2.631579

17159512

JIANGXI COPPER-A

21.57

-0.2312673

4146414

ZTE CORP-A

CHINA OILFIELD-A

17.55

-1.238042

5431429

JINDUICHENG -A

12.47

3.143093

8638828

CHINA PACIFIC-A

22.68

-1.262516

9296653

JIZHONG ENERGY-A

14.39

-1.841746

7747400

CHINA PETROLEU-A

6.05

-0.3294893

19465812

KANGMEI PHARMA-A

15.66

1.162791

12336612

CHINA RAILWAY-A

4.81

2.558635

26925303

KWEICHOW MOUTA-A

255.55

2.474136

2617022

CHINA RAILWAY-A

2.65

1.532567

28114098

LUZHOU LAOJIAO-A

40.69

-1.904532

3891043

CHINA SHENHUA-A

21.68

-1.319982

6089828

METALLURGICAL-A

2.29

-0.4347826

7734862

2.5

-0.7936508

5962033 54214632

MOVERS

4.86

-0.8163265

20614089

4.4

-1.345291

13980797

PANGANG GROUP -A

3.71

-2.879581

CHINA STATE -A

3.18

-0.9345794

52223857

PETROCHINA CO-A

8.87

0.1128668

5753274

HIGH

2384.73

CHINA UNITED-A

3.71

69049455

PING AN INSURA-A

44.7

-0.5119074

11238948

LOW

2353.22

CHINA VANKE CO-A

9.1

-2.465166

42848478

POLY REAL ESTA-A

11.15

-2.534965

33580835

CHINA YANGTZE-A

6.47

-1.371951

8125489

QINGDAO HAIER-A

10.94

-0.9057971

4861525

CITIC SECURITI-A

12.2

-0.5704971

35222980

QINGHAI SALT-A

35.85

2.136752

14737703

CSR CORP LTD -A

4.28

-0.2331002

9879331

SAIC MOTOR-A

12.61

0.7993605

9611660

CHINA SHIPBUIL-A

20 2390

INDEX 2360.083

NINGBO PORT CO-A

CHINA SOUTHERN-A

224

52W (H) 3050.897 (L)2254.567

2350

23-Jul

25-Jul

FTSE TAIWAN 50 INDEX NAME ACER INC ADVANCED SEMICON ASIA CEMENT CORP ASUSTEK COMPUTER

PRICE DAY % 25.45

Volume

NAME

-1.926782

27436366

FORMOSA PLASTIC

22 -0.2267574

26498106

FOXCONN TECHNOLO

36.2 -0.6858711

5555572

PRICE DAY %

Volume 7476158

TAIWAN MOBILE CO

102.5

-2.843602

9615812

FUBON FINANCIAL

30.5

0.1642036

10312871

1.325758

4109090

HON HAI PRECISIO

81.9

-4.32243

66421250

9.5

-1.859504

57886947

HOTAI MOTOR CO

190

517340

CATCHER TECH

165.5

-2.071006

15485199

HTC CORP

282

0.5347594

CATHAY FINANCIAL

28.55

-1.039861

11661132

HUA NAN FINANCIA

16.55 -0.6006006

CHANG HWA BANK

15.75 -0.6309148

6537831

LARGAN PRECISION

594

CHENG SHIN RUBBE

79.1 -0.1262626

8761121

LITE-ON TECHNOLO

36.8

29630602

34.8

0.1438849

9013211

5992838

YUANTA FINANCIAL

13.05

1.162791

24213405

0.8488964

2678129

YULON MOTOR CO

1.030928

3981295

-2.774108

4223567

241

-1.026694

6925468

MEGA FINANCIAL H

23.3

0.6479482

32927858

26.5 -0.7490637

45378883

NAN YA PLASTICS

54.7 -0.3642987

6307284

COMPAL ELECTRON DELTA ELECT INC FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL

8193059

PRESIDENT CHAIN QUANTA COMPUTER

155.5

0.6472492

1577810

72.5

-2.159244

28544028

27.05

7513164

SILICONWARE PREC

28.5

1.423488

8092020

97.4

5800263

SINOPAC FINANCIA

11.75

1.293103

20062185

31.25

-2.34375

7741216

SYNNEX TECH INTL

63.3

0.4761905

5075533

66.4 -0.1503759

4245552

TAIWAN CEMENT

35.4

-2.074689

15527387

TAIWAN COOPERATI

17.7

5021049

4378850

27.05

1.310861

3109968

17.65

13918089

FORMOSA CHEM & F

76.8

1.453104

5156907

TAIWAN FERTILIZE

FORMOSA PETROCHE

83.1

0.8495146

2588420

TAIWAN GLASS IND

52185832

WISTRON CORP

MEDIATEK INC

26138992

74.6 -0.2673797

9119520

22203767

-1.729107

7487696

TSMC UNI-PRESIDENT

6232816

17133375

42991409

0.3378378

-2.262443 1.977107

-2.645503

89.1

324

-2.024291

9.2

17.05

TPK HOLDING CO L

6.9 -0.5763689

CHINATRUST FINAN

-1.030928

12.1

CHIMEI INNOLUX C

CHUNGHWA TELECOM

Volume

UNITED MICROELEC

CHINA DEVELOPMEN CHINA STEEL CORP

PRICE DAY %

0.2538071

267.5

AU OPTRONICS COR

NAME

MOVERS

6 4820

INDEX 4754.16 HIGH

4819.78

LOW

4743.44

52W (H) 5960.61 (L) 4643.05

4740

23-Jul

25-Jul

July 26, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXy ENtErtAINMENt

MELco crowN ENtErtAINMENt

MGM cHINA HoLDINGS 25.2

18.4 18.3

Average 18.140

Min 17.96

18.2

24.9

18.1

24.8

10.6 10.5

24.7

10.4

24.6

17.9

Last 18.04

10.7

25.0

18.0 Max 18.34

10.8

25.1

Max 25.2

SANDS cHINA LtD

Average 24.629

Min 24.55

Last 24.55

24.5

Max 10.74

SJM HoLDINGS LtD

Average 10.460

Min 10.34

Last 10.46

10.3

wyNN MAcAu LtD 14.2

22.5

15.4

14.1

22.3

15.3

14.0 22.1

Average 22.160

Max 22.45

Min 21.9

Last 22.25

21.9

13.8 Max 14.2

Average 14.015

Min 13.86

Commodities

METALS

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Sep12

88.77

0.305084746

-10.21543441

110.8699951

77.69999695

BRENT CRUDE FUTR Sep12

103.78

0.348095146

-1.086542127

124.1999969

88.90999603

GASOLINE RBOB FUT Aug12

279.78

-0.955819881

4.123557871

326.7099857

243.0099964

GAS OIL FUT (ICE) Sep12

891.5

0.337647721

-0.806675939

1046.5

798.5

NATURAL GAS FUTR Aug12

3.167

-0.62754942

-3.327228327

4.787000179

2.174999952

HEATING OIL FUTR Aug12

282.51

0.024784025

-0.654077434

332.949996

250.8399963

Gold Spot $/Oz

1589.7

1.0263

1.5841

1921.18

1522.75

Silver Spot $/Oz

27.0825

0.585

-2.7034

44.2175

26.085

Platinum Spot $/Oz

1393.65

-0.028

-0.061

1915.75

1339.25

Palladium Spot $/Oz

568.75

0.5125

-12.9686

848.37

537.54 1832.25

LME ALUMINUM 3MO ($)

1869

-0.479233227

-7.475247525

2675.25

LME COPPER 3MO ($)

7417

0.216187002

-2.407894737

9905

6635

LME ZINC

1797

-0.937155458

-2.601626016

2539.5

1718.5

15750

0.961538462

-15.82041689

25195

15450

15.28

0.658761528

1.663339987

13.95499992

784.75

0.835207196

33.85927505

800

499

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep12 CORN FUTURE

Last 13.9

Average 15.2

Dec12

PRICE MAJORS

ASIA PACIFIC

CROSSES

Last 15.3

Min 15.1

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

NAME

(L) 52W

3.25

1.88

1320609

8.3

-1.072706

2.595795

9.29

7.45

777751

AMAX HOLDINGS LT

0.064

-1.538462

-26.43678

0.119

0.055

1784000

BOC HONG KONG HO

23.25

-1.06383

26.3587

24.45

14.24

7193034

CENTURY LEGEND

0.234

-10

1.739129

0.38

0.204

56000

1.351351

7.142859

3.95

2.3

18000

CHINA OVERSEAS

16.98

0.2361275

30.81665

19.16

9.99

22485845

CHINESE ESTATES

8.98

-0.1112347

-28.16

13.68

8.3

23500

CHOW TAI FOOK JE

8.72

-2.351624

-37.35632

15.16

8.55

4732800

EMPEROR ENTERTAI

1.36

0.7407407

22.52252

1.84

0.97

570000

FUTURE BRIGHT

0.98

133.3333

1.09

0.3

2910000

606.75

1691.5

1115.75

COFFEE 'C' FUTURE Sep12

176.65

0.683955543

-24.58911419

288.8500061

150.0999908

CROWN LTD

SUGAR #11 (WORLD) Oct12

23.54

0.212856535

3.109943057

26.03999901

19.23999977

COTTON NO.2 FUTR Dec12

71.45

0.591299451

-18.65892532

102.25

64.61000061

PRICE

ARISTOCRAT LEISU

CHEUK NANG HLDGS

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

12617.32

-0.8186167

3.272018

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

2862.99

-0.9397436

9.897323

3134.17

2298.89

FTSE 100 INDEX

5506.63

0.1345643

-1.178152

5989.07

4791.01

DAX INDEX

6418.39

0.4378436

8.816704

7382.8

4965.8

NIKKEI 225

8365.9

-1.439546

-1.057901

10255.15

8135.79

0.9388 1.5235 0.7071 1.2043 75.35 7.9823 7.7526 6.2769 43.855 29.67 1.1992 28.764 41.57 8458 72.057 1.00749 0.77553 7.7018 9.6245 94.12 1.0288

(H) 52W

947.25

30.24704173

DAY %

(L) 52W

1.1081 1.6618 0.9972 1.4549 84.18 8.0449 7.8113 6.4474 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88861 9.3616 11.6793 114.18 1.0311

15.45454

26.22016388

-0.063714559

PRICE

(H) 52W

0.6759 -0.2123 -5.1658 -6.3112 -1.637 0.1189 0.125 -1.4636 -5.6371 -0.5359 3.052 0.3181 4.0465 -4.6172 -2.3992 1.3097 6.4532 5.1256 6.7062 4.9716 0.0194

-2.307692

0.79658606

1568.5

COUNTRY

YTD %

0.0876 0.0064 0.3841 0.4052 -0.0384 -0.0013 -0.0052 -0.0407 -0.2045 0.2207 0.159 -0.2551 -0.2492 0.0105 -0.1207 -0.0067 -0.3909 0.0052 -0.401 -0.4424 0.0097

2.54

885.75

SOYBEAN FUTURE Nov12

World Stock MarketS - Indices

DAY %

1.0278 1.551 0.9892 1.2143 78.19 7.9901 7.7577 6.3885 56.235 31.72 1.2582 30.183 42.135 9508 80.36 1.20106 0.78287 7.7376 9.7014 94.94 1.0299

MACAU RELATED STOCKS

WHEAT FUTURE(CBT) Sep12

NAME

15.1 Max 15.4

CURRENCY EXCHANGE RATES

NAME ENERGY

15.2

13.9

GALAXY ENTERTAIN

DAY % YTD %

VOLUME CRNCY

18.04

-3.11493

26.6854

24.95

8.69

13475726

HANG SENG BK

106

0.6647673

15.02984

124.3

84.4

1044056

HOPEWELL HLDGS

22.2

11.78247

24.903

18.56

860000

HSBC HLDGS PLC

62.25

0.3223207

5.508475

78.6

21991520

HUTCHISON TELE H

3.74

4.469274

25.08361

3.86

2.53

3229000

LUK FOOK HLDGS I

16.6

-0.4796163

-38.74539

46.15

14.7

1880000

MELCO INTL DEVEL

5.33

-2.380952

-7.62565

10.76

4.3

2364000

MGM CHINA HOLDIN

10.46

-2.607076

9.047462

17.183

7.6

2127856

4.1

-0.243309

3.691232

5.217

2.887

1382000

0.168

3.067485

51.35135

0.205

0.08

29205000

HANG SENG INDEX

18877.33

-0.1368551

2.402789

22808.33

16170.35

CSI 300 INDEX

2360.083

-0.669573

0.6113658

3050.897

2254.567

TAIWAN TAIEX INDEX

6979.13

-0.4169312

-1.314326

8819.929688

6609.11

MIDLAND HOLDINGS

KOSPI INDEX

1769.31

-1.372406

-3.090798

2174.73

1644.11

NEPTUNE GROUP

S&P/ASX 200 INDEX

4123.947

-0.2246426

1.661167

4602.9

3765.9

NEW WORLD DEV

9.51

-1.450777

51.91693

10.96

6.13

12987602

SANDS CHINA LTD

22.25

-2.838428

1.366739

33.05

14.9

15698725

SHUN HO RESOURCE

1.13

1.32

0.82

SHUN TAK HOLDING

2.66

-0.7462687

3.941644

4.668

2.241

1990000

JAKARTA COMPOSITE INDEX

4000.839

0.218581

4.679423

4234.734

3217.951

FTSE Bursa Malaysia KLCI

1635.09

0.1543579

6.817661

1647.94

1310.53

NZX ALL INDEX

771.85

0.02514074

5.761806

806.015

700.441

SJM HOLDINGS LTD

13.9

-1.974612

11.15077

20.711

10.079

4580000

PHILIPPINES ALL SHARE IX

3436.33

0.1039979

12.85008

3527.48

2695.06

SMARTONE TELECOM

16.06

1.261034

19.49405

18.5

9.8

1210500

HSBC Dragon 300 Index Singapor

575.46

0.52

15.94

WYNN MACAU LTD

15.26

-1.421189

-21.74359

27.48

14.807

6810699

ASIA ENTERTAINME

3.19

-5.899705

-45.7483

10.8692

3.16

110447

BALLY TECHNOLOGI

45.04

-1.659389

13.85237

49.32

24.74

501151

BOC HONG KONG HO

3.07

28.06675

3.15

1.81

500

GALAXY ENTERTAIN

2.33

24.59893

3.24

1.08

4905

INTL GAME TECH

14.69

-1.276882

-14.59303

19.15

13.12

4247426

JONES LANG LASAL

65.21

-3.36396

6.44793

93.94

46.01

626427

LAS VEGAS SANDS

38.39

-1.815857

-10.1568

62.09

36.08

10641170

MELCO CROWN-ADR

9.365

-4.730417

-2.650726

16.15

7.05

7583289

MGM CHINA HOLDIN

1.47

23.3539

2.2131

1.0025

500

MGM RESORTS INTE

9.4

-3.787103

-9.875362

16.05

7.4

15061409

15.27

0.1311475

30.2901

18.77

7.35

910644

1.85

1.648352

15.08033

2.6037

1.2624

5000

-2.125868

-15.82949

158.2244

92.02

2659366

STOCK EXCH OF THAI INDEX

1189.45

0.1524031

16.00769

1247.72

843.69

HO CHI MINH STOCK INDEX Laos Composite Index

412.91

-0.6544282

17.45414

492.44

332.28

1012.32

0.7815067

12.54753

1082.6

876.33

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

SHUFFLE MASTER SJM HOLDINGS LTD WYNN RESORTS LTD

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business daily July 26, 2012

Opinion Bungled bank bailout leaves behind righteous anger (Part I) Neil M. Barofsky

Former special inspector for the Troubled Asset Relief Program and senior fellow at New York University’s School of Law

incentive check for US$40,000, it will still be able to claim US$60,000 in credit toward meeting its obligations under the settlement.

Taxpayer pays

n the year since I stepped down as the special inspector general of the Troubled Asset Relief Program, the sadly predictable consequences of the government’s disparate treatment of Wall Street and Main Street have only become worse. As the banks amass size and power, Main Street continues to get pummelled. Part of the current economic malaise can be traced directly to Treasury’s betrayal of its promise to use TARP to “preserve homeownership.” The Home Affordable Modification Program has brought little meaningful improvement, with fewer than 800,000 ongoing permanent modifications as of March 31, 2012, a number that is growing at the glacial pace of just 12,000 per month. In June 2011, Treasury appeared to take a tentative step toward holding the mortgage servicers accountable for the widespread misconduct in the programme by pledging to withhold the incentive payments to three of the largest banks – Wells Fargo Co., Bank of America Corp and JP Morgan Chase & Co – until they came into compliance with HAMP’s rules.

Released payments Treasury couldn’t even keep this modest commitment. Although Wells Fargo had improved its performance and was awarded all of its withheld incentive payments, JPMorgan Chase and Bank of America continued to fail to meet the baseline standard. Nonetheless, in March 2012, as part of a broader settlement of the so-

called robo-signing scandal, Treasury to charity, and agreeing not to released all of the withheld payments, pursue deficiency judgments against totalling more than US$170 million. homeowners, whereby banks seek As a result, the government hasn’t to force a homeowner to pay the held any servicer responsible for difference between the balance of the widespread abuses of HAMP the loan at the time of foreclosure applicants, nor is it ever likely to do so. and what is recovered by the bank In return for what was touted as from a foreclosure sale. This sounds a US$25 billion payout, the banks good, but it should be noted that received broad immunity from these are all part of the normal future civil cases arising out of their course of business for the banks. widespread use of forged, fraudulent The remaining US$10 billion in credits or completely fabricated documents to are supposed to be scraped together through principal reductions on foreclose on homeowners. The headline number sounds “underwater” mortgages, but that doesn’t mean impressive, yet that the banks the banks only themselves had to cough up will be taking US$1.5 billion to US$10 billion provide a paltry It is clear that in losses. The US$2,000 to settlement each borrower the criminal-justice grants them wrongfully partial credit foreclosed upon, system has proved illfor reducing a few billion equipped to address the principal dollars more in on loans that penalties to the they service states, and a few the financial crisis. For but don’t own, billion to provide that, we needed effective such as those for borrower contained in refinancing. regulatory reform mortgageThe remaining b a c k e d US$17 billion, securities. however, won’t Worse still, involve payouts of they can earn money, but will be met in the form of the banks receiving additional “credits” toward the “credits” for certain activities. This settlement through taxpayer-funded includes US$7 billion that will be HAMP modifications. For example, “earned” for routine tasks related to if a servicer reduces US$100,000 the housing crisis, such as bulldozing in principal for a mortgage through worthless houses, donating homes HAMP and receives a taxpayer

As a result, the settlement will actually involve money flowing, once again, from taxpayers to the banks. Another announcement that accompanied the settlement, made by President Barack Obama during his State of the Union address, was the creation of a working group under the Justice Department’s Financial Fraud Enforcement Task Force to investigate toxic mortgage practices. This arose out of the political fallout from the government’s failure to bring any significant criminal cases related to the financial crisis. With the statute of limitations fast approaching for much of the conduct underlying the crisis, it seems increasingly unlikely that any criminal cases will be brought. It is fair to ask why more haven’t been pursued. The president, Attorney General Eric Holder, and Treasury Secretary Timothy Geithner have all answered this question by suggesting that it was greed and bad judgment, not criminal conduct, that contributed to the crisis, and a number of high-profile investigations have been closed. The answer more likely lies with the Justice Department’s lack of sophistication and the timidity that set in after it lost a high-profile case against two Bear Stearns Cos. hedgefund executives in 2009. In any event, it seems unlikely that an 11th-hour task force will result in a proliferation of handcuffs on culpable bankers. It is clear that the criminal-justice system has proved ill-equipped to address the financial crisis. For that, we needed effective regulatory reform. Instead, we got the 2010Dodd-Frank Wall Street Reform and Consumer Protection Act. My fear about the inadequacy of Dodd-Frank has only gotten worse over the past year. The top banks are 23 percent larger than they were before the crisis. They now hold more than US$8.5 trillion in assets, the equivalent of 56 percent of gross domestic product, up from 43 percent just five years ago. The risk in our banking system is remarkably concentrated in these banks, which now control 52 percent of all industry assets, up from 17 percent four decades ago. There is broad recognition that Dodd-Frank hasn’t solved the problem it was meant to address – the power and influence of banks deemed too big to fail. Bloomberg View

(For editorial reasons, this article is published in two parts. The second part will be published in tomorrow’s edition.)

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July 26, 2012 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Dying in court Peter Singer

Professor of bioethics at Princeton University and Laureate Professor at the University of Melbourne

Business Line With the Presidential elections behind, the pressure is mounting on the Government to hike diesel prices. While there is consensus on the issue within the Government, getting the allies on board is the tricky part, Petroleum Ministry feels. The Ministry is pitching for diesel price increase, as crude oil and product prices are going up and the rupee is hardening. The Ministry has, however, not fixed any definitive timeline for a proposed increase.

Jakarta Globe In a move to boost business and improve efficiency at the country’s seaports, the government has called on several arms of state port operator Pelabuhan Indonesia to set up a container terminal company. State Enterprises Minister Dahlan Iskan said four state companies had agreed to set up a container terminal facility, which is meant to boost coordination and cooperation among seaport operators in handling cargo shipment in the country’s main seaports.

Straits Times Real incomes are likely to fall this year, according to a survey of employers by the Singapore Human Resources Institute and wage consulting firm Remuneration Data Specialists. Those entering the workforce or thinking of switching jobs next year should brace themselves for a longer job hunt. Workers’ total income is projected to rise by 1.5 percent. But with inflation expected to stay as high as 4.2 percent, they will see a 2.7 percent fall in their real incomes.

Bangkok Post The Thai-built Mitsubishi Mirage was recalled after discovering malfunctioning fuel gauges in some vehicles already delivered to customers here. Cars already exported to Brunei and Japan were not affected by the recall. “We suspect the fuel quality used in Thailand will affect the parts, while the better fuel quality used in the two export countries means no such problem,” said Mitsubishi Motors (Thailand). The company yesterday issued a recall announcement affecting about 8,000 Mirage ecocars in the Thai market.

loria Taylor, a Canadian, has amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease. Over a period of a few years, her muscles will weaken until she can no longer walk, use her hands, chew, swallow, speak, and ultimately, breathe. Then she will die. Taylor does not want to go through all of that. She wants to die at a time of her own choosing. Suicide is not a crime in Canada, so, as Taylor put it: “I simply cannot understand why the law holds that the able-bodied who are terminally ill are allowed to shoot themselves when they have had enough because they are able to hold a gun steady, but because my illness affects my ability to move and control my body, I cannot be allowed compassionate help to allow me to commit an equivalent act using lethal medication.” Taylor sees the law as offering her a cruel choice: either end her life when she still finds it enjoyable, but is capable of killing herself, or give up the right that others have to end their lives when they choose. She went to court, arguing that the provisions of the Criminal Code that prevent her from receiving assistance in dying are inconsistent with the Canadian Charter of Rights and Freedoms, which gives Canadians rights to life, liberty, personal security, and equality.

Ethics and rights The court hearing was remarkable for the thoroughness with which Justice Lynn Smith examined the ethical questions before her. She received expert opinions from leading figures on both sides of the issue, not only Canadians, but also authorities in Australia, Belgium, the Netherlands, New Zealand, Switzerland, the United Kingdom, and the United States. The range of expertise included general medicine, palliative care, neurology, disability studies, gerontology, psychiatry, psychology, law, philosophy, and bioethics. Many of these experts were cross-examined in court. Along with Taylor’s right to die, decades

of debate about assistance in dying came under scrutiny. Last month, Smith issued her judgment. The case, Carter v. Canada, could serve as a textbook on the facts, law, and ethics of assistance in dying. For example, there has been much debate about the difference between the accepted practice of withholding life support or some other treatment, knowing that the patient is likely to die without it, and the contested practice of actively helping a patient to die. Smith’s ruling finds that “a bright-line ethical distinction is elusive,” and that the view that there is no such ethical distinction is “persuasive.” She considers, and accepts, an argument advanced by Wayne Sumner, a distinguished Canadian philosopher: if the patient’s circumstances are such that suicide would be ethically permissible were the patient able to do it, then it is also ethically permissible for the physician to provide the means for the patient to do it. Smith also had to assess whether there are public-policy considerations that count against the legalisation of physician assistance in dying. Her decision focuses mainly on the risk that vulnerable people – for example, the aged or those with disabilities – will be pressured into accepting assistance in dying when they do not really want it.

Inevitable conflicts There are conflicting views about whether legalisation of voluntary euthanasia in the Netherlands, and of physician assistance in dying in Oregon, has led to an increase in the number of vulnerable people being killed or assisted in dying without their full, informed consent. For many years, Herbert Hendin, a psychiatrist and suicide expert, has asserted that the safeguards incorporated in these laws fail to protect the vulnerable. He gave evidence at the trial. So, too, on the other side, did Hans van Delden, a Dutch nursing home physician and

bioethicist who for the past 20 years has been involved in all of the major empirical studies of end-of-life decisions in his country. Peggy Battin, the most prominent American bioethicist working on assisted dying and euthanasia, also took the stand. In this dispute, Smith comes down firmly on the side of van Delden and Battin, finding that “the empirical evidence gathered in the two jurisdictions does not support the hypothesis that physician-assisted death has imposed a particular risk to socially vulnerable popu-

The provisions of the Criminal Code preventing physician assistance in dying violate disabled people’s right not only to equality, but also to life, liberty, and security

lations.” Instead, she says, “The evidence does support Dr. van Delden’s position that it is possible for a state to design a system that both permits some individuals to access physician-assisted death and socially protects vulnerable individuals and groups.” (The most recent Dutch report, released after Smith handed down her judgment, confirms that there has been no dramatic increase in euthanasia cases in the Netherlands.) Smith then declared, after considering the applicable law, that the provisions of the Criminal Code preventing physician assistance in dying violate disabled people’s right not only to equality, but also to life, liberty, and security. She thus opened the door for physician assistance in dying for any grievously and irremediably ill competent adult, under conditions not very different from those that apply in other jurisdictions where physician assistance in dying is legal. The decision will almost certainly be appealed, and the final outcome seems likely to depend on the appellate judges’ interpretations of Canadian law. But Smith’s verdict on the ethics of assistance in dying – and of the facts regarding jurisdictions, like the Netherlands and Oregon, that have it – seems likely to stand for a long time to come. © Project Syndicate

16 |

business daily July 26, 2012

CLOSING France says Korean competition unfair

Libor fixing to become criminal offence

France’s industry minister yesterday slammed what he called “acts of unfair competition” by carmakers from South Korea, who have boosted their market share in Europe following a 2010 free trade deal. Within the framework of this deal, “we are justified in demanding monitoring measures which may enable us to request a safeguard clause,” Minister for Industrial Renewal Arnaud Montebourg told reporters. The European Union and South Korea signed the free trade deal in October 2010 and the agreement, the first such deal linking Asia and the world’s largest economic bloc, will eventually do away with 98.7 percent of duties.

The European Commission has proposed making interest rate fixing a criminal offence in the wake of the Libor banking scandal. Manipulating benchmark rates, such as Libor and Euribor, will be added to insider dealing as criminal offences, the Commission said in a statement. Justice commissioner Viviane Reding said the move would help “put an end to criminal activity in the banking sector”. It wants EU members to pass new laws. “Public confidence has taken a nosedive with the latest scandals about serious manipulations of lending rates by banks,” Ms Reding said. The U.K. welcomed the Commission’s announcement.

U.K. economy falls in the second quarter Prospects for recovery getting grimmer

ritain’s economy shrank far more than expected in the second quarter, battered by everything from an extra public holiday to government spending cuts and the neighbouring euro zone crisis. Finance minister George Osborne said figures released yesterday showed Britain had “deep-rooted economic problems,” adding that the slump in the second quarter was disappointing even when taking into account one-off factors that hurt. Britain’s gross domestic product fell 0.7 percent compared with the first three months, the sharpest fall since the height of the global financial crisis in early 2009, the Office for National Statistics said, showing a bigger drop than any of the economists surveyed in a Reuters poll last week had expected. Output in Britain’s service sector - which makes up more than three quarters of GDP - contracted by 0.1 percent in the second quarter after growing 0.2 percent in Q1 2012. Industrial output was 1.3 percent lower, while construction - which accounts for less than 8 percent

of GDP - shrank by 5.2 percent, its biggest drop since the first quarter of 2009. The figures confirmed that Britain remains mired in its second recession since the start of the financial crisis, with the economy shrinking for a third consecutive quarter. The broad-based slump will fuel pressure on the government to get the economy growing again after a crisis that has left many Britons poorer with rising prices and higher taxes eating up meager wage increases. However, Osborne believes he has no money left for a meaningful spending boost, having staked his reputation on a tough plan to eliminate a budget deficit, still around 8 percent of GDP. The lack of growth also puts this goal into question. Sterling hit its lowest in nearly two weeks against the dollar after the data, and two-year government bond yields hit a record low on speculation that the Bank of England may have to provide more economic stimulus than expected. The central bank has already embarked on another 50 billion

Britain still has ‘deep-rooted economic problems,’ says minister George Osborne

pound (US$77.5 billion) programme of gilt purchases with newly created money to soften a grim economic outlook, but the dismal numbers boosted speculation that it may cut interest rates later this year. “This is terrible data. Frankly there’s nothing good that comes out of these numbers at all,” said Peter Dixon, an economist at Commerzbank. “The economy looks to be badly holed below the water line at this stage. It’s a far worse period of activity than

we’d expected,” he said. Britain is due some kind of boost over the coming months as production looks set to rebound from the hit from the extra public holiday to celebrate Queen Elizabeth’s Diamond Jubilee in June, and from the ticket sales and visitors’ spending during the London Olympics that it is hoped will boost growth. But the overall outlook remains poor. Reuters

Armed conflict possible in South China Sea: ICG

ensions over competing claims in the South China Sea could escalate into conflict, with an arms build-up among rival nations raising the temperature, an international think tank warned on Tuesday. Prospects of solving the disputes “seem to be diminishing” after a recent failure by the 10-nation ASEAN grouping to hammer out a “code of conduct” that would govern actions in the sea, the International Crisis Group (ICG) said. “Without a consensus on a resolution mechanism, tensions in the South China Sea can easily spill over

into armed conflict,” warned Paul Quinn-Judge, the ICG’s programme director for Asia. “As long as ASEAN fails to produce a cohesive South China Sea policy, a binding set of rules on the handling of disputed claims cannot be enforced.” China claims sovereignty over nearly all of the sea, which is believed to hold vast amounts of oil and gas, is one of the region’s most important fishing grounds and is home to shipping lanes that are vital to global trade. The Philippines and fellow Association of Southeast Asian Nations (ASEAN) members Brunei, Malaysia and Vietnam, as well as

Taiwan, claim parts of the sea. The rival claims have for decades made the area one of the region’s potential military flashpoints, with Vietnam and China engaging in sea conflicts in 1974 and 1988 that left dozens of military personnel dead. Tensions began to escalate again last year with Vietnam and the Philippines accusing China of becoming increasingly aggressive in staking its claims to the sea. China this week triggered further anger from around the region when it announced it was planning to build a military garrison on the Paracel Islands.

On the diplomatic front, an annual meeting of ASEAN foreign ministers ended in disarray early this month when it failed to agree on a joint statement, a first in its 45-year history, because of divisions over the South China Sea. The report also noted that China and the rival claimants had continued to expand their navies and coast guards amid the dispute, due in part to domestic political pressures and rising nationalism among its citizens. This could lead to an “escalation” of incidents, including more maritime stand-offs, it said. AFP