Macau Business Daily, June 10, 2013 by Business Daily

MOP 6.00

April 19, 2013

Year II

Number 301

Monday June 10, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

Betting ring tied to ‘Macau-based’ websites

Page 4

Macau Legend eyes bigger Hong Kong IPO

Page 5

Raymond Tam charged over cemetery probe

Airlines rush in for extra Manila flights T

Page 5

he number of flights at the airport has recovered from the launch of direct flights across the Taiwan Strait in 2008. And more flights are coming, after Macau and the Philippines signed a new air services agreement that increases the capacity for flights between here and Manila. The Civil Aviation Authority of Macau is only waiting for low-cost Zest Airways Inc. to say when it wished to begin flights, while Cebu Pacific Inc. also said it wants the rights to additional seats. The Philippines aviation authority expects the deal to boost the country’s tourism and benefit the 17,000 Filipinos non-resident workers here.

www.macaubusinessdaily.com

More on page 3

Negotiated, ‘gradual’ public antenna solution

I SSN 2226-8294

Chief Executive Fernando Chui Sai On has pledged to strictly obey a court order to stop public antenna

Hang Seng Index

companies from illegally relaying cable television signal within 90 days. But secretary Lau Si Io warned that a solution would be “gradual” and require negotiations. In the meantime, Macau Cable TV Ltd applauds the judgement and public antennas say they are doing nothing illegal.

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ICBC Macau to benefit from China exposure The risk that Industrial & Commercial Bank of China (Macau) Ltd will experience long-term issuer default remains extremely low, Fitch Rating says. The parent company remains “committed” to support its unit here, namely by referring business from mainland China customers. Despite concerns over growing exposure to mainland assets, the ratings house believe guarantees provided by the parent will reduce bad debt risk. Page 3

Businessmen afraid of high-risk exports The government has spoken much about the city’s potential as a platform for exchanges between China and the Portuguese-speaking countries. The Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macau) has helped but the city could be doing much more, says Eduardo Ambrósio. The chairman of the International Lusophone Markets Business Association told Business Daily in an interview that businessmen here feared losing money when exporting to high-risk countries, as there was no insurance arrangement to cover any losses. Pages 6 & 7

21520

June 7

HSI - Movers Name

%Day

BELLE INTERNATIO

2.76

CHINA COAL ENE-H

0.81

LI & FUNG LTD

0.54

CHINA MERCHANT

0.40

CHINA RES ENTERP

0.39

CHINA LIFE INS-H

-1.92

CHINA RES POWER

-3.32

HONG KG CHINA GS

-3.34

CATHAY PAC AIR

-3.53

BANK OF CHINA-H

-7.95

Source: Bloomberg

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June 10, 2013

Macau Xu reappointed for HK-Macau office post Xu Ze, Beijing long-time top official for Hong Kong and Macau affairs, has been appointed as a deputy director of the State Council’s Hong Kong and Macau Affairs Office for a second time, it was announced on Saturday. Mr Xu will replace Hua Jian as one of the two deputy directors in the Beijing office, alongside Zhou Bo. The office is headed by Wang Guangya. Mr Xu, 58, served in the office from the early 1980s until 2004, when he left to become a deputy director of the Central Government’s Liaison Office here. Also leaving Macau are Li Benjun and Gao Yan, both deputy directors of the Liaison Office. Their posts are to be taken by Chen Sixi, until now a member of the Standing Committee of the National People’s Congress and a deputydirector at the Committee for Internal and Judicial Affairs, and Chou Hong, previously an assistant to the Minister of Commerce in China. Late last year, Beijing appointed Li Gang, formerly deputy director of the liaison office in Hong Kong, to be the second in command at the central government’s liaison office here.

Most households face a television blackout unless they install their own private antennas to receive free-to-air channels, or subscribe to Macau Cable TV (Photo: Manuel Cardoso)

Public antenna ruling to be upheld – govt Macau Cable TV delights in its court victory over public antenna companies Stephanie Lai

sw.lai@macaubusinessdaily.com

Bank of China to issue MOP9.1 bln of new banknotes Bank of China Ltd’s (BOC) Macau branch was authorised to issue 9.1 billion patacas (US$1.14 billion) of new banknotes, Executive Council spokesperson Leong Heng Teng said on Friday. New banknotes will be printed to meet the growing demand for money as the economy keeps growing, Mr Leong told a press conference. The Monetary Authority of Macau approved the move, he said, adding that it will not affect the stability of the city’s financial system. Anselmo Teng Lin Seng, chairman of the Monetary Authority said in February that the city’s two note-issuing banks were preparing to issue more pataca banknotes, with currency circulation growing fast. Banco National Ultramarino SA (BNU) is the other lender authorised to issue notes. The bank was not mentioned in the Executive Council’s statement. A total of 60 million notes with a face value of 10 patacas and 40 million notes with a face value of 20 patacas will be issued within this year. The remaining banknotes, with a face value of 50, 100, 500 and 1,000 patacas, will be introduced in the market gradually, over a period of five years.

Maritime Administration to become bureau, hire more staff With the Maritime Administration expanding its supervision to water resources and ferry terminal management, the government has decided a restructuring was in order. Current director Susana Wong Soi Man will remain in charge of the new Maritime and Water Affairs Bureau. It became necessary “to keep up with the rhythm of the international maritime development,” Executive Council spokesperson Leong Heng Teng said in a press conference on Friday. The bureau will also get one new department, in charge of water resources management. It will include two divisions, one focused on water technologies and another on planning and development. Last month the Maritime Administration announced it would allow a rise of 5.92 percent on the price it pays the Macao Water Supply Co Ltd to provide the city with water. In late 2011 the administration also took over the management of the Outer Harbour Ferry Terminal. A one-year-long renovation of the infrastructure is set to begin next quarter. It will include installing a baggage carousel. The new bureau will be allowed to hire a further 30 workers, taking its total to 302.

he government will strictly enforce a court order telling public antenna companies to stop illegally relaying cable television transmissions within 90 days, Chief Executive Fernando Chui Sai On has said. Mr Chui told reporters on Saturday that he had ordered the Telecommunications Regulation Bureau to work out how to ensure the television service providers obeyed the law. Secretary for Transport and Public Works Lau Si Io also told bureau director Lawrence Tou Veng Keong to “balance” the rights of Macau Cable TV Ltd and the population’s “right to receive television broadcasts”. A solution will have to be gradual and require “negotiations with the entities involved,” the secretary’s cabinet said in a press statement yesterday.

The bureau told Business Daily that it “respects the court decision” and that it would use “all feasible means” to uphold the court order. It did not say how it would enforce the order. Most households now face a television blackout unless they install their own private antennas to receive free-to-air channels or subscribe to Macau Cable. TDM News reported that the Public Utilities Concern Association had called for the government to ensure that people could watch television at reasonable cost. The Telecommunications Regulation Bureau said a “comprehensive review” of the television sector would be carried out “in line with the full liberalisation of the telecommunications market”. Macau Cable has had a monopoly of cable television services since 1999. The monopoly concession

business as usual

And my vote goes to… Pedro Cortés newsdesk@macaubusinessdaily.com

…Paul Pun Chi Meng, secretary-general of the charity Caritas Macau. This is my first chance to vote in elections to the Legislative Assembly, as I am now a permanent resident. The reasons for my choice are simple. I like Mr Pun and the way he tries to help those in need. I appreciate his attitude to life, not just because he rides a scooter – as I do, although not every day – but also because he is the kind of person that everyone should be, whether they are Catholic, Jewish, Taoist or Muslim, and whether they hail from Las Vegas or Macau or anywhere in between. That is,

he thinks more about others than about lining his own pockets. The Legislative Assembly needs voices speaking for a greater variety of sectors of society, and Mr Pun may have a different approach to the way debates are conducted. Macau’s economy has developed hugely in the past decade. Now is the moment to improve the lot of those that, unfortunately, have not benefitted from this development – those that Caritas tries to help every day – and to give voice to their needs. If I had two votes, the second would go to my friend José Pereira Coutinho. But I have only one, so it will go to Mr Pun.

expires next year. On Thursday the Court of Second Instance said the six public antenna companies were impinging on Macau Cable’s exclusive concession and breaking telecommunications laws. But the court cleared public broadcaster Teledifusão de Macau (TDM) of any wrongdoing. Macau Cable TV chief executive Angela Lam In Nie told a press conference on Friday that her company welcomed the ruling and expressed confidence that the government would enforce the court order. “The judgement has finally done justice in what Macau Cable TV has for years been fighting for,” Ms Lam said.

Respectful disagreement Macau Cable chairman Lam Ion Fun said the ruling had come “late”. “If you look at the case closely, the case is not a real problem at all,” Mr Lam said. “It happened just because there are people not doing their duty properly.” He said he was not singling out Mr Tou for criticism. “It is not just the problem of an individual, it is about the whole department,” Mr Lam said. In joint written statement issued on Friday, the six public antenna companies expressed their respect for the court’s ruling but voiced their disagreement with some of its findings. One of the public antenna companies that the judgement names is Sai Kai Electronics. The manager of Sai Kai Electronics, Yeung Ka Ke, denied that his company was breaking the law, saying it was not relaying any cable television transmissions. “The judgement is just an administrative order to the government to clarify the distinction between cable television transmissions and free-to-air ones,” Mr Yeung told Business Daily. “We are just getting 30 patacas [US$3.75] to get residences wired to receive free-to-air transmissions,” he said. “As the copyright law requires, we do not relay the transmissions of any encrypted channels. So I do not think that judgement will have any particular impact on us.” With Michael Grimes

June April 10, 19, 2013 2013

Macau

Airlines queuing up to fly from Manila A new air services agreement provides for more capacity on flights from the Philippines Vítor Quintã

vitorquinta@macaubusinessdaily.com

irlines flying between Manila and Macau will be able to bring in more passengers, now that the Macau and Philippine governments have signed a new air services agreement. The new air services agreement, signed on Thursday, also removes restrictions on the capacity of flights between Macau and other Philippine cities. Airlines are jumping at the opportunity. One Philippine low-cost carrier, Zest Air, is ready to begin flights between here and Manila and another, Cebu Pacific, is planning to add to its services to and from the Philippine capital. Zest Airways has applied to the Civil Aviation Authority of Macau to fly here from Manila three times a week, the authority told Business Daily. “Our assessment is underway” the authority said. The authority said it was waiting only for Zest Air to say when it wished to begin flights. Philippine news media quoted Cebu Pacific Air vice-president for marketing and distribution Candice Iyog as saying the carrier was seeking additional seat entitlements from Manila to Macau. At present, Cebu Pacific flies here from Manila daily, and is entitled to bring in 179 passengers on each flight. The Civil Aviation Authority of Macau said the new air services agreement increased the combined capacity of flights between Macau and Manila to 4,500 seats per week from 3,500. The agreement also removes the

Zest Air is close to beginning direct flights between Macau and Manila

limit of 10,000 seats per week on the combined capacity of flights between Macau and all other Philippine cities. The authority said it expected the air transport market between Macau and the Philippines to grow “at a favourable pace”, making this the right time to modify the air services agreement “so that the conditions are laid down to allow increased services to meet future demand”. Philippine media quoted Philippine Civil Aeronautics Board executive director Carmelo Arcilla as saying he expected the air services agreement to increase tourism and benefit the 17,000 Filipino nonresident workers in Macau. “Macau is a small but key and important market for the Philippines, being a gateway to Hong Kong and China,” Mr Arcilla said.

Passengers up Strong growth in the numbers of air travellers from Southeast Asia helped keep the number of passengers using Macau International Airport rising last month. The airport handled over 370,000 passengers last month, 13.7 percent more than a year before, Macau International Airport Co Ltd announced on Friday. But the growth last month was slower than the growth of 16 percent in the first four months of this year. The number of flights the airport handled last month was 26 percent higher than a year before, rising much faster than the number of passengers it handled. Since last Monday, passengers bound for mainland China can get there direct from the airport, passing through the Gongbei crossing, without having to go through customs twice.

Fitch maintains ICBC Macau’s rating Agency also confirms ‘stable’ outlook for the local unit of Chinese state-owned bank Michael Grimes

michael.grimes@macaubusinessdaily.com

itch Ratings says the risk that Industrial & Commercial Bank of China (Macau) Ltd will experience long-term issuer default remains extremely low. It has maintained an ‘A’ rating with a ‘stable’ outlook for the Macau unit of China’s state-owned Industrial & Commercial Bank of China. Fitch attaches the same low risk of issuer default to ICBC’s Hong Kong unit, Industrial & Commercial Bank of China (Asia) Ltd. The ratings house said in a note issued from its Hong Kong office on Friday: “Fitch views ICBC Asia and ICBC Macau as core operating entities of their Chinese parent Industrial & Commercial Bank of China (ICBC,

A/Stable), and as such considers the probability of extraordinary institutional support from the parent to be extremely high if required.” The agency added: “Fitch believes that ICBC will remain committed to support both entities with liquidity and capital for future growth. ICBC injected HK$5.6 billion [US$721.5 million] of new common equity into ICBC Asia in 2012 following an injection of HK$6.1 billion in 2011. “Furthermore Fitch expects ICBC to fully subscribe to ICBC Macau’s new issuance once existing subordinated instruments mature. Placements and certificates of deposit subscribed by ICBC remain one of the key funding sources of the two banks.”

Fitch said it thinks the growing economic integration between the two Special Administrative Regions and their “strategic importance to ICBC’s cross-regional operations and offshore renminbi business,” is likely to increase the percentage of mainland assets on the balance sheets of the Macau and Hong Kong operations. It added that increased exposure of the local units to mainland fixed assets and guarantees guaranteed by the parent, is likely to be a factor providing some mitigation of bad debt risk. “ICBC Asia’s gross mainland China exposures were prominent at 56 percent of total assets at end2012 and ICBC Macau’s on- and off-balance sheet China-related

editorial

To be continued

ust like in any good television series, the latest episode of the long-running saga of the hate triangle involving Macau Cable TV Ltd, the government and the public antenna companies ended in a cliff-hanger. In an unusually strongly worded judgement, the Court of Second Instance gave the Telecommunications Regulation Bureau director, Lawrence Tou Veng Keong, 90 days to fix the problem. If this were an episode of Kiefer Sutherland’s “24”, the countdown clock would now be ticking. Having left Macau liable to be described as a “lawless land”, as the court judgement puts it, the government must now do something. But what can it do? Will it try to stall? The court ruling is final, and cannot be appealed against, but the government can always argue that there is some kind of infirmity in the judgement. The judicial system’s backlog of work is big, but the government could hardly expect such legal quibbling to drag the matter out until Macau Cable TV’s concession ends next year. Will the government try to find a loophole? It certainly would not be the first time. Last year one of the bidders originally excluded – wrongfully, the courts say – from tendering to run the sewage treatment plant on the peninsula got a second chance. Instead of starting from scratch, the government reconvened the same committee that had made the mistake in the first place to re-evaluate the bids. Unsurprisingly, the result was the same. It is safe to assume that the government will not risk a huge public backlash by closing the public antenna companies or going around cutting the cables that carry television transmissions into most homes. That would make for a good dystopian movie: an almost total television blackout, only the wealthy being able to pay Macau Cable TV’s charges to follow their favourite soap opera. But the most likely scenario is backchannel negotiations in the style of “The West Wing”, leading to a consensus outcome that leaves everyone half-pleased. It is difficult to believe that Macau Cable TV would not be open to a compromise, considering that it took heavy losses for a decade before going to court. For its part, the government would happily keep the matter simmering until 2014, when it intends to open up the cable television market. We would not be surprised to see a compromise, with Macau Cable TV getting compensation from the government. Perhaps even getting approval to offer Internet access a few months later. After all, Las Vegas Sands Corp had to wait just one year after giving up two parcels of land in Cotai to get approval to sell rights to use its Four Seasons apartments through a co-op scheme. Stay tuned, because Macau never ceases to astound us with unexpected twists in its convoluted plot.

exposures almost doubled to 34 percent of assets in 2012. “Properties, bank deposits and parental guarantees remain key risk mitigations. About one-third of ICBC Asia’s loan portfolio is covered by ICBC’s guarantee; 18 percent of ICBC Macau,” stated Fitch. Information on the Hong Kong unit’s mainland assets is available to the public in company reports. Data on ICBC Macau’s mainland asset exposure is based on internal reports and cannot be disclosed to the public, Fitch told Business Daily. Joyce Huang, Fitch’s director, financial institutions, told us one factor in the Hong Kong unit’s greater mainland exposure was having its own mainland subsidiary called Chinese Mercantile Bank. She explained: “ICBC Asia has its own subsidiary in China with local branches, which allows it to provide onshore lending to mainland corporates [large businesses].” She added: “Exposures incurred by ICBC Asia’s mainland subsidiary increased by 50 percent in 2012 amounting to 24 percent of ICBC Asia’s China exposures. About half of ICBC Asia’s China risks are, however, still claims on other financial institutions.”

June 10, 2013

Macau Brought to you by

HOSPITALITY Unclear figures Still timid The meetings, incentives, conventions and exhibitions (MICE) industry is an important industry, meant to help diversify the economy and improve the city’s draw as a tourist destination. The Statistics and Census Service has collected and published quarterly data on the MICE industry’s activities since 2009. The results for 2010 suggested that the government’s efforts to promote the industry were paying off. The number of MICE events held here rose by 15 percent in 2010, driven up by increases in events in the fields of finance, commerce and technology, which made up two-thirds of the total. But those auspicious results have not been replicated since.

Betting ring fed Rmb80 bln to ‘Macau-based’ websites Guangdong court indicts 17 for criminal charges including opening a casino Michael Grimes

michael.grimes@macaubusinessdaily.com

In 2011 the number of MICE events dropped by more than one-quarter. The fall was especially steep in the fourth quarter of that year, when the number of events was nearly 30 percent lower than a year before. The downward trend in the number of events continued last year, although the rate of decline slowed to less than 3 percent. The number of exhibitions even rose by 20 percent. This, and a rise of 8 percent in the total number of events in the fourth quarter, raised hopes that the industry was showing early signs of recovery. The figures for the first quarter of this year dashed those hopes. The number of events was almost one-sixth lower than a year earlier, even though one more exhibition took place. The implications of the figures are complex, as exhibitions are comparatively rare events, yet are also the events that are best attended. J.I.D.

16.2 %

Annual decrease in number of meetings, Q1

eventeen people have been indicted by a Guangzhou court for allegedly operating an illegal online soccer betting network said to have funnelled more than 80 billion yuan (US$13 billion) to eight “Macau-based gambling websites”. People’s Daily Online carried the story from Global Times, an affiliated mainland newspaper. It did not name the alleged Macau websites or who was operating them on this side of the border. Shanghai resident, Shou Fei, 36, was one of 10 defendants that prosecutors charged with a crime equivalent to opening a casino, according to the indictment in Huangpu District People’s Court, said Global Times. Mr Shou said in court that he and others worked by recruiting gamblers on the mainland to join the websites. The ring provided the gamblers with accounts and passwords for the sites, where they could bet on soccer games and baccarat, the favourite game of legitimate gamblers at Macau’s live casino tables. The agents – who according to court papers acted as middlemen allowing gamblers to withdraw winnings and deposit more cash when

they lost – earned an undisclosed commission, plus one percent of the money the gamblers lost on the sites. By the time the agents were arrested in July 2012, Mr Shou had earned a profit of 11 million yuan, according to the indictment. No details were given on how money was moved back and forth across the border. Prosecutors said the 10 agents were the primary suspects in the case. Four others were in charge of recruiting gamblers. There was also an accountant, a cashier and a driver, according to the indictment.

Macau exemption According to Article 303 of the Criminal Law of the People’s Republic of China, amended on June 29, 2006, “Anyone who sets up any casino shall be sentenced to not more than three years of fixed-term imprisonment, criminal detention, or surveillance, and shall be imposed upon to a fine. If the circumstances are serious, he shall be sentenced to not less than three years but not more than ten years in prison, and shall be imposed upon to a fine.” Macau – as a Special Administrative Region of China –

is not covered by that provision of the mainland’s criminal code. But Macauslot – Sociedade de Lotarias e Apostas Mútuas de Macau Lda is the only company legally authorised in Macau to operate an online portal for betting on football and basketball. But the website is only for bets made within Macau. Macauslot does not accept ‘in running’ bets – also known as ‘in play’ bets – on predictions of incidents that might happen during televised live sport events. This is one of the most popular formats among Asian bettors. Macauslot does however accept so-called ‘Asian handicap’ wagers, whereby a lower-ranked or weaker team is given a head start (half goal or above) to even up a soccer game for betting purposes. Macauslot is part of the business empire built by former Macau casino monopolist Stanley Ho Hung Sun. In its 2011 results – only published in September 2012 – it showed a 14.6 percent dip in profits year-on-year, to just under 55 million patacas (US$6.9 million), although that was against the background of 2010 results that were swelled by soccer’s FIFA World Cup in South Africa.

June 10, 2013

Macau LT Game launches ETG product at Galaxy Macau Macau-based gaming equipment supplier LT Game Ltd has completed a multiterminal electronic table game installation at Galaxy Macau. The new installation is of a type known in the industry as ‘stadium gaming’ because of the number of player seats arranged in a horse shoe or theatre-type pattern on the gaming floor. LT Game’s latest placement has 150 terminals combining electronic betting and bet settlement with live dealers. It went live on June 1. LT Game says it has so far deployed 2,700 of its multi-game electronic table games seats in Macau.

Macau Legend IPO swells by a third Share sale target now US$787 mln – biggest tourism-linked HK offering since MGM China in 2011 Michael Grimes

michael.grimes@macaubusinessdaily.com

acau Legend Development Ltd – a casino and leisure sector investor backed by David Chow Kam Fai – is seeking to raise nearly a third more via a share offering than originally mentioned. Last week Business Daily reported Mr Chow’s firm was pre-marketing for a US$600 million (4.8 billion patacas) Hong Kong initial public offering, according to an earlier term sheet An updated document seen by both Bloomberg News and Reuters, says the company is offering 2.05 billion shares in Hong Kong at between HK$2.30 (30 U.S. cents) and HK$2.98 apiece. At the top end of the price range that could gross HK$6.11 billion, or US$787 million. Assuming last week’s figure was referring to gross proceeds and not proceeds net of arrangers’ fees, the increased figure indicates investor demand for the IPO is strong and is based on the appeal of the Macau gaming growth story. Macau Legend shares will start trading on June 27, according to the terms. Macau Legend already controls Macau Fisherman’s Wharf – next to Macau’s Outer Harbour – and the site’s accompanying Babylon Casino. It also controls The Landmark Macau hotel and its Pharaoh’s Palace Casino. Those gaming operations are under a service agreement with Sociedade de Jogos de Macau SA, the gaming concessionaire entity controlled by Hong Kong-listed SJM Holdings Ltd and founded by the city’s former gaming monopolist Stanley Ho Hung Sun.

casino venue proliferation via service agreements. When the plan for Fisherman’s Wharf’s new look was published in the Official Gazette last September, there was no mention of a second casino. Macau Legend’s IPO is on course to be the biggest tourismrelated IPO in Hong Kong since MGM China Holdings Ltd’s US$1.6 billion offering in May 2011. It’s unlikely that investors would show such enthusiasm, were gaming to be excluded. Dynam Hong Kong Co. – a unit of a Japanese pachinko hall operator – is investing US$35 million in the IPO as a cornerstone investor, the terms show. Business Daily reported on May 31 that the Dynam parent firm’s chairman Yoji Sato said during an earnings presentation it has an interest in pursuing a casino licence in Japan if the government there decides to offer one or more for tender.

Mixed performance Those with longer-term familiarity with the Macau market however will know that the track

New hotel Macau Legend plans to use about 37 percent of the IPO proceeds to finance construction of a new property called ‘Prague Harbor View Hotel’ according to the updated term sheet. Business Daily understands that will be on the Fisherman’s Wharf site. Another 30 percent will be used for the ‘Palace Hotel’, according to the document – though it’s not clear if that is a reference to the existing Pharaoh’s Palace Casino. As Business Daily first reported in September last year, it’s expected there will be a gaming element in any new hotel property. The issue is a politically sensitive one because the Macau government has publicly committed to a moratorium on

David Chow – thinking big

record of Mr Chow – a former Macau legislator – in delivering value for investors is somewhat patchy. In 2010 a group of international investors – including investment bank Merrill Lynch, Och-Ziff Capital Management Group (a U.S. hedge fund) and TPG-Axon Capital Management – took a 68 percent haircut on US$390 million worth of convertible bonds Mr Chow had raised from them on the strength of the story for Fisherman’s Wharf. After opening to a gala concert performed by the violinist Vanessa Mae on December 31 2005, the HK$2 billion waterside collection of shops, restaurants and themed architecture failed to draw crowds. At that time former casino monopolist Stanley Ho had a 51 percent stake in the venture with Mr Chow on 49 percent. Macau Legend Development Ltd, the holding business, is currently 58.3 percent owned by Mr Chow and his mother, Lam Fong Ngo. In August, SJM Holdings invested HK$480 million for a four percent stake in Macau Legend. Stanley Ho’s third consort, Ina Chan Un Chan, owns about 17.9 percent.

Raymond Tam charged for disobedience court says Judges pledge to remain immune to ‘public comment’ on controversy Vítor Quintã

vitorquinta@macaubusinessdaily.com

aymond Tam Vai Man, president of the Civic and Municipal Affairs Bureau, has been charged for disobedience, the Court of First Instance confirmed. Mr Tam, vice-president Lei Wai Nong, head of the environmental and licensing department Fong Vai Seng, and civil servant Siu Kok Kun are accused of having taken too long to deliver documents requested by the Public Prosecutions Office. The documents are related to a case linked to the perpetual lease of burial plots to a legal adviser of Secretary for Administration and Justice, Florinda Chan. In a statement released on Friday, the court revealed that in January the four defendants asked the Examining Magistracy to launch the pre-trial phase to be open and dismiss the charges. The judges eventually decided to move the case forward, a decision from which three of the four suspects appealed in April. In a verdict made on May 31, the Court of Second Instance rejected that appeal, which means the four bureau staff will have to stand trial. With the case no longer bound by judicial secrecy, the Court of First Instance decided to disclose some information in order to “clarify the public’s suspicions and doubts”. The case “is linked to public interest” and it “has recently attracted a great deal of attention from the public,” the court admitted. But the statement stressed that “public comments on this case will in no way impair the independent decision-making of the judges”. The date for the beginning of the trial has not yet been set. In 2011 the Commission against Corruption concluded that the Provisional Municipal Council – the bureau’s predecessor – breached the law in a 2001 administrative procedure for the lease of cemetery plots.

June 10, 2013 April 19, 2013

Macau Brought to you by

Financial Monitor Swift and concentrated The rates of growth of gross domestic product seemed to be slowing last year. But the figures for the first quarter of this year suggest the economy may be returning to higher rates of growth. Given what has happened in the past few years, a return to higher rates of growth, if confirmed in subsequent quarters, would be remarkable. No matter how we look at the figures, they are astonishing. At current prices, GDP more than doubled between 2009 and last year. Even taking into account that 2009 was a crisis year, such a feat is almost inconceivable in any middle-income or high-income economy. Such average rates of growth mean the economy more than doubles in size every four years, in real terms. GDP per head, at current prices, also almost doubled between 2009 and last year.

Trade guarantees needed

The various sorts of expenditure that make up GDP, looked at individually, paint a less clear-cut picture. The composition of GDP is changing. The changes suggest that rising income is not being distributed evenly. Consumption as a proportion of GDP has been decreasing. It was under 20 percent of GDP last year and roughly the same in the first quarter of this year. Public expenditure is consistently low, by world standards. Investment made up about 12 percent of GDP in the past few years. Imports as a proportion of GDP have been relatively stable. The main beneficiaries of the fast rise in wealth seem to be those that can make the most of the increasing weight of exports in GDP. J.I.D. The content of this column is the work of Business Daily’s journalists.

92.7 %

Rise in GDP per head, 2009-2012

Macau should be reaping more benefits from its role as a platform for exchanges between China and the Portuguese-speaking countries, says Eduardo Ambrósio, chairman of the International Lusophone Markets Business Association. Mr Ambrósio told Business Daily in an interview that businessmen here feared losing money when exporting to high-risk countries, as there was no insurance arrangement to cover any losses. He says the government here should do more to make sure exporters have the insurance they need. He says the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macau) has an important role to play. Without it, trade would not be doing as well as it is today, he says. Luciana Leitão

leitao.luciana@macaubusiness.com

Photo by Manuel Cardoso

Have Macau and the Forum Macau been helpful as a platform for promoting commercial exchanges between mainland China and Portuguese-speaking countries? The creation of the forum was very well timed. At the time it was the beginning of the liberalisation of the casino industry. The new casinos were starting, and Macau needed to diversify, not only into other casinos but also into other businesses. Being a territory formerly under Portuguese administration, Macau has all the

potential and advantages over others to be a platform, because of our links, a common language and the same law. It is very beneficial for the people here to have this forum to look for more opportunities in the future. Ten years ago was the right time. But can we say today that trade between these parties has increased because of Macau? I think so. Macau has always been a small place, but through Macau the Portuguese-speaking countries are a step closer to

China. As a whole, Macau has been beneficial for this platform. How do you assess the work done by the forum in the past decade? The forum is here to create opportunities between governments, to promote more business dealings with Portuguese-speaking countries and also to facilitate access to the mainland market. The Macau Forum has played this part quite well, but the Macau government could have done more to benefit Macau people. As entrepreneurs, we want to

June April 10, 19, 2013 2013

Macau Investors are still waiting for the launch of the US$1 billion (7.9 billion pataca) fund promised in 2010. The forum is at last accepting applications, but didn’t it take too long for this process to start? I really don’t understand it – but we’ve been pressing the forum all this time. For the past three years, we’ve been asking them for more information, but only now can we submit applications for financing. I think some Macau businesspeople are doing that already. Most of them are big companies based in mainland China. What kind of opportunities can it open up for businesspeople? After years of wars, there are a lot of business opportunities not only for foreign investors but also for businessmen in these African countries. We’re talking about opportunities in the construction sector: rebuilding infrastructure, hospitals and new factories. It can be highly beneficial for both parties.

do more business with Angola, Mozambique, Portugal, but Macau actually doesn’t have an insurance arrangement to cover our exports to these countries. So I have to export to Portuguese-speaking countries at my own risk. If there was any insurance company in Macau that covered export insurance, we could have many more dealings with these countries. At the moment, our dealings are very limited because there’s a high risk involved. We have to protect our interests. This does not mean African countries are not good payers. The problem is that they always have a problem with cash flow. When they place an order with us, it takes about one or two months to manufacture the products and then one or two months more until delivery. The Macau government can do more to enable Macau to export more and explore more businesses opportunities with Portuguesespeaking countries. We already speak the same language and share the same law. Why hasn’t the government done anything about it? I really don’t know. Hong Kong, Singapore, China and even Portugal offer government sponsorship and insurance schemes. They protect the interests of their exporters to high-risk countries. That does not happen in Macau. It’s a shame, because we could be doing much more than we are doing.

We want to do more business with Angola, Mozambique, Portugal, but Macau actually doesn’t have an insurance arrangement to cover our exports

This year, for the first time, the meeting that brings together businessmen from both sides will take place in East Timor. What kind of investment opportunities can be explored there? I think Timor can accommodate the delegations from the Portuguese-speaking countries and from China. I’ve been there a few times already, and I import coffee from East Timor to Macau. I know people there quite well. Timor has a good future, provided the education system is improved. Tourism is a good opportunity. For East Timor to develop its tourism industry, it has first to build a good hospital so that people are confident in going there. Together with other people, I am considering the idea of building a quality hospital in Dili. This is one of my projects. Have you heard of other businessmen in Macau seeking to plough money into East Timor? A few months ago I heard someone saying there were plans to expand the airport into a bigger and better facility. Also, two years ago, we went to East Timor with a delegation and somebody else expressed interest in building some bridges, highways and better transport facilities.

even state-owned companies – are expanding to these countries. China has started to invest in some projects in Portugal and, through Portugal, it plans to enter other European countries, and also Brazil. The forum should devote more effort to educating people and promoting real business opportunities on both sides. Some businessmen and analysts say trade relations between China and these countries would be booming regardless of Macau or the forum’s role. Do you agree? I don’t think so. As the platform leading to the Portuguesespeaking countries, many Chinese businessmen come to Macau and seek the know-how that exists here and the right people to take them into those markets. The language and the culture are very different. So Macau can spread the news and tell them which opportunities are there in these countries. It’s a win-win situation. Macau could also benefit from it, as Macau entrepreneurs could export more to these countries.

What plans does your association have for this year? We will be bringing some teachers from Portugal to teach in universities in the mainland. We are also inviting important people from various industries for seminars here. The purpose is actually to take more entrepreneurs to Portugal, as there is a lot of interest from people in Macau and China. We want to organise a delegation to go there. Portugal needs more investors, not only to buy property but to invest in the industries that are dying. Through Portugal, we can go to other European countries.

Are there many Macau investors with businesses in these countries? Not too many at the moment. As I said in the beginning, they’re not confident of getting paid for the exports. The payment is always a risk for us, and most Macau people are quite cautious and do not want to assume the risk. Actually, the government can create a fund, like the one that existed before, during the Portuguese administration, to help Macau entrepreneurs export to Angola and

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Are there any other meetings planned in other countries? I just came back from Portugal, from the meeting of businessmen of the diaspora. The idea is to invest in Portugal with a partner from Macau or mainland China. A condition for having access to the fund is that priority goes to joint-venture companies with three shareholders – one from the host country, one from China and one from Macau. I think the forum will travel to other Portuguese-speaking countries to celebrate the 10th anniversary of the forum, and at the same time they will spread the news to people who are interested. Ten years on, what should the forum’s new strategy be? They should devote more effort to promoting the teaching of the Chinese language in the Portuguese-speaking countries and to organise more Portuguese language courses in China. Portuguese is the sixth-most spoken language in the world and it’s a language that the Chinese would like to learn. There is a lot of interest in China and vice versa, with businessmen eyeing opportunities in Brazil, Angola and Mozambique. Chinese companies –

Mozambique. This fund was halted after the handover. Hong Kong and China have good systems when it comes to insurance. We can learn from our neighbours about how they invest, and how they protect those investments.

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June 10, 2013 April 19, 2013

Greater China

Fresh data highlight sluggish growth Trade figures and inflation pressure Beijing to prop up economy

he Chinese economy is grinding toward its second straight quarterly slowdown after May data provided fresh evidence of sluggish growth. Export growth tumbled, imports fell, inflation slowed and bank lending also declined, putting pressure on the government to do more to prop up growth. The National Bureau of Statistics said yesterday the mainland’s consumer inflation slowed to 2.1 percent, the lowest in three months, while producer prices fell 2.9 percent from a year earlier, the lowest since September. Economists polled by Reuters had expected annual consumer inflation of 2.5 percent and factory-gate prices to fall 2.5 percent in May. “The inflation data showed China’s economic growth continued to slow down. Q2 growth is probably even slower than Q1. In particular, the PPI data showed very weak demand,” said Jianguang Shen, chief China economist at Mizuho Securities Asia Ltd in Hong Kong. Adding to the evidence of a slowdown was separate central bank data showing that Chinese banks lent 667.4 billion yuan (US$109 billion) in new local currency loans in May, missing market expectations of 850 billion yuan and lower than April’s 792.9 billion yuan. The broad M2 money supply rose 15.8 percent in May from a year earlier, slightly below a median forecast of 15.9 percent in a Reuters poll, while China’s total social financing aggregate, a broad measure of liquidity in the economy, was 1.19 trillion yuan in May versus

2.1 %

Consumer prices rose in May from a year earlier 1.75 trillion yuan in April. The subdued inflation will enable China to keep an easy monetary stance and some see the possibility that the People’s Bank of China could cut rates later this year to reduce financing costs for struggling Chinese firms, provided that housing inflation does not flare up. “China has rising room and the possibility to cut interest rates in the second half of this year,” Mr Shen added. “The financing cost for companies is very high now and the central bank should further pursue interest rate liberalisation. China’s

fiscal policy in the second half needs to protect consumption growth and support investment.”

Exports plunge The most dramatic decline was seen in trade figures. Export growth plummeted to a 10-month low in May and imports unexpectedly fell as a crackdown on fake trade invoices exposed weakness in global demand. Overseas sales rose 1 percent from a year earlier, the General Administration of Customs said in Beijing on Saturday, down from

April’s 14.7 percent pace. The trade report reflects a government campaign to root out illegal capital inflows that had inflated figures and added to appreciation pressure on the yuan. It also underscores the challenges Premier Li Keqiang faces as overseas demand stalls while rising home prices, financial risks and overcapacity at home limit his room to boost the economy. “This shows the real state of the Chinese export situation,” said Mr Shen. The data show a “pretty depressed” picture, with weak

Xi, Obama talks tackle cybersecurity Pledge to meet again in China for second summit

The two leaders agreed to cooperate on North Korea

.S. President Barack Obama told Chinese President Xi Jinping continued “largescale theft” of U.S. property from Chinese cyberattacks is inconsistent

with the cooperative tone set during two days of talks. White House national security adviser Tom Donilon said the two leaders held extensive conversations

about cybersecurity on Saturday as they wrapped up eight hours of informal discussions at a California desert estate. Mr Obama detailed for his Chinese counterpart the damage the U.S. has suffered from widespread and continuing intrusions, saying that cybertheft would be “an inhibitor to the relationship reaching its full potential,” Mr Donilon said. Chinese State Councillor Yang Jiechi told reporters Beijing wanted cooperation rather than friction with the United States over cybersecurity. Mr Xi had told a news conference on Friday that China itself was a victim of cyber attacks but that the two sides should work together to develop a common approach. Officials unveiled the first results of the cooperative spirit, announcing an agreement to work together to reduce hydrofluorocarbons, a greenhouse gas. Mr Donilon also said the two sides found “quite a bit of alignment” on stopping North Korea’s nuclear programme. Both leaders “agreed that North Korea has to denuclearise, that neither country will accept North Korea as a nuclear-armed state and that we would work together to

deepen cooperation and dialogue to achieve denuclearisation,” he added. Mr Yang told a separate news conference that Mr Xi had told Mr Obama that China and the United States were “the same in their positions and objectives” on the North Korean nuclear issue. The U.S. president said the talks were “terrific” as he passed reporters on Saturday.

Informal summit The visit, billed as an informal “shirt-sleeve” summit by the White House, was the second meeting for the two leaders. Since taking office, Mr Obama has sought to redirect U.S. attention toward Asia after a lull in interest in the region during the Bush administration. In Mr Xi, who took office in March, White House officials see a leader with a more informal style who is more open to engagement with the U.S. Mr Xi was able to promote directly to Mr Obama his desire for a “new model of major country relationship,” in which China would be viewed as an equal global player. For this meeting, White House officials worked to set a casual tone in

June April 10, 19, 2013 2013

Greater China external demand and a yuan that has appreciated substantially against a trade-weighted basket of currencies, he added. The slowdown in May’s trade figures was partly the result of “arbitrage trade” with Hong Kong being curbed, the customs administration said in a statement. While “complicated factors” are increasing, the economy is still growing at a relatively fast pace and within a reasonable range, Mr Li said in comments published on Saturday by the official Xinhua News Agency. The premier has resisted adding stimulus to the economy as the new leadership tries to make growth more sustainable and avoid stoking financial risks.

KEY POINTS CPI, money supply, lending miss forecasts Room for easy monetary policy to help economy Export growth well below forecasts, imports fall Figures shorn of speculative elements after crackdown

Industrial output slightly weaker in May

hina’s industrial output expanded at a slightly slower pace in May while big ticket investment growth eased, the government announced yesterday, adding to the signs of weakness in the economy. Industrial production, which measures output at the country’s factories and mines, rose 9.2 percent year-on-year in May, marginally weaker than the 9.3 percent increase in April, the National Bureau of Statistics said. But the May figure matched the median 9.2 percent gain predicted in a survey of 14 economists by Dow Jones Newswires. Fixed asset investment – a key measure of government spending – increased 20.4 percent from January through May compared to the same period last year, the bureau said, slightly weaker than the figure of 20.6 percent covering the first four months of the year. The figures come amid growing concern over the outlook for China’s economy, which grew 7.8 percent in 2012, its worst performance in 13 years. “The macro data for May have

confirmed that the economy is stuck in stagnant growth again after quite a brief rebound,” Ren Xianfang, senior economist at IHS Global Insight, wrote in a commentary. “Demandside indicators are unanimously weak, with extremely weak exports growth and [a] continued slide of fixed-asset investment growth.” The producer price index (PPI), which measure the costs of goods as they leave factories and is seen as a leading indicator of price trends, fell 2.9 percent compared with a drop of 2.6 percent in April, the NBS said. “The latest PPI data indicate deflation has deepened,” Mr Ren wrote, describing falling prices at the industrial level as “poisonous” for the economy because “it hurts business profitability, damages balance sheets and thus stunts expansion.” In one potential bright spot, the NBS also announced yesterday that retail sales, China’s main gauge of consumer spending, managed a marginal acceleration in May. Retail sales rose 12.9 percent yearon year in May, the NBS said, slightly higher than April’s 12.8 percent gain.

Taiwan exports inch up in May Taiwan’s exports in May unexpectedly picked up as sales to China recovered, but a sharp drop in imports has raised concerns about further weakness in the island’s economy. Exports in May rose 0.9 percent from a year earlier, data from the Ministry of Finance showed. That compared with a fall of 1.9 percent in April and growth of 3.3 percent in March. Imports fell 8 percent in May, pointing to weakness in near-term exports as part of imports are re-exported.

Baosteel cuts July prices again Baoshan Iron & Steel Co Ltd, the country’s biggest listed steelmaker, will drop its July booking prices for the second consecutive month in response to slower demand growth, the company said on Saturday. Baosteel will cut July prices of hot-rolled coil mainly for manufacturing by 200 yuan (US$32.61) a tonne and cold-rolled coil, principally for autos and domestic appliances, by 200 yuan a tonne, the company said.

AFP

Growth in ‘reasonable range’ – Premier Li

China’s economy grew at its slowest pace for 13 years in 2012, and it has so far surprised on the downside, bringing warnings from some economists that the country would even miss its annual growth target of 7.5 percent.

Investors eye U.K.’s Sunseeker

Reuters

Retail sales rose 12.9 percent year-on year

an effort to foster a sense of personal diplomacy between the two men even as long-running international disputes undermine the relationship between the two nations. U.S. officials have accused the Chinese government of being behind a series of hacker attacks designed to steal trade secrets and potentially disable computers that operate banks, power grids and telecommunications systems. Mr Obama made clear to the Chinese that “the U.S. did not have any doubt about what’s going on here,” Mr Donilon said. “Resolving this issue is key to U.S.-China relations.” A Pentagon report in May for the first time accused China’s military of penetrating U.S. computer networks to steal sensitive data. Mr Xi rejected charges that China is responsible for anti-U.S. cyberassaults, calling for cooperation on the matter. “The Chinese government is firm in upholding cyber security and we have major concerns about cyber security,” he said. The leaders wrapped up the talks with no formal statements to the press. Their next formal discussions will probably take place in September when both leaders travel to St. Petersburg for a G20 summit. Mr Xi invited Mr Obama to visit China for a similar informal meeting and aides are working on scheduling official state visits in both countries. Bloomberg News/Reuters

Regulator issues new IPO rules

hina’s securities regulator plans to restrict share issuers and major holders from selling their stock below initial public offering price as part of new rules aimed at cracking down on fraud and protecting investors. The restrictions will be in place for two years after lock-ups end, according to draft rules the China Securities Regulatory Commission

Xiao Gang, CSRC chairman

posted on its website. Issuers must also prepare and disclose plans to stabilise share prices that fall below net asset values within five years of their debuts. The watchdog is seeking public feedback on the proposals by June 21. New CSRC chairman Xiao Gang, a former chairman of Bank of China Ltd, is extending predecessor Guo Shuqing’s campaign to combat fraud. Under the draft rules, when a company reports a net loss or a drop of more than 50 percent in profit in the same year as an IPO, the CSRC will stop reviewing any applications submitted by the investment bank that advised it. The CSRC also plans to change the IPO pricing system by letting individual investors who meet criteria set by underwriters participate in the placement process, previously limited to institutional investors, according to the draft rules. To make the IPO process more market driven, the CSRC plans to allow issuers 12 months to decide when to start trading after they receive regulatory approval for their initial sales. Companies will also be able to apply to issue bonds while their IPO applications are pending regulatory approval, the securities watchdog said, as it encourages companies to explore fundraising options. Bloomberg News

Chinese Dalian Wanda Group is in talks to buy British yachtmaker Sunseeker International Ltd in the latest example of a Chinese company snapping up a foreign luxury brand. “Sunseeker is in discussions with a third party over the sale of a majority stake in the business,” the yachtmaker said in a statement. A company source confirmed a Financial Times report that Wanda was expected to complete a 300 million pound (US$465 million) takeover by the end of the month.

Draft Taiwan casino bill delayed Legislative debate on Taiwan’s draft casino law is likely to be pushed back to August at the earliest, gaming intelligence provider GamblingCompliance reports. The draft casino bill, ready since last month and which oversees the development of casinos on outlying islands in the Taiwan Strait, has yet to be put up for debate. Julia Lee, vice president of Taiwan development for Weidner Resorts, said debate is likely to take place in August, citing legislative sources close to the process.

Lenovo to double server share Lenovo Group Ltd said it wants to double its share of the market for storage equipment and servers running corporate networks within three years and is open to using an acquisition to achieve that. The second-biggest maker of personal computers plans to expand its share of the server business to between 5 percent and 10 percent during that time, from 2.6 percent in the fourth quarter, chief executive Yang Yuanqing told Bloomberg.

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June 10, 2013 April 19, 2013

Asia

Japan needs to cut corporate tax: Hamada Lower tax, deregulation should help economic growth, says economic adviser

apan should consider lowering its corporate tax rate as a part of its growth strategy to attract more foreign investment, an economic adviser to Prime Minister Shinzo Abe said on Friday. Koichi Hamada, professor emeritus of economics at Yale University, also said the central bank should loosen monetary policy further if the yen rises further and threatens Japan’s economic recovery. “Japan’s growth strategy needs to include steps such as cutting the corporate tax rate, together with deregulation. This needs to happen not only in special economic zones but nationwide,” Mr Hamada said in an interview. On the recent sharp falls in Japanese share prices, Mr Hamada said there was no need to fret as they were a natural correction of excessively bullish bets on Prime Minister Shinzo Abe’s bold mix of fiscal and monetary stimulus.” Mr Hamada was appointed as one of Mr Abe’s two advisers last December after his Liberal Democratic Party was swept to power by a landslide lower house election victory. He does not have direct power to influence economic policy but his long-held views on monetary policy as an academic, specifically that the BOJ must pump money more aggressively to beat deflation, has strongly influenced the policies of Abe and the BOJ.

Mr Abe last week pledged to boost incomes by 3 percent annually and set up special economic zones to attract foreign businesses in the latest tranche of measures, the “Third Arrow” in his “Abenomics” strategy to spur sustainable growth. But the measures failed to impress markets that had hoped for bolder steps like cutting Japan’s corporate tax rate, a move that is advocated by some lawmakers despite resistance within the powerful Ministry of Finance as it would lower tax revenues. Mr Hamada shrugged off the views of some economy watchers that the recent stock market falls reflected reduced hopes of success for Mr Abe’s expansionary policy. He said that it was natural that some investors who harboured excessive expectations should fall by the wayside, before adding: “I don’t think the overall market trend has changed.” The economy was in recovery mode, and expectations for Mr Abe’s economic policy mix were intact, he said. The benchmark Nikkei average fell into bear market territory on Friday from a 5-1/2-year high hit just over half a month ago. And the yen recovered to as high as 95.55 to the dollar, nearly 8 percent stronger than a 4-1/2 year low hit late last month. Mr Hamada, one of two official economic advisers to Abe, said the central bank can take action should a spike in the yen make it difficult

Recent stocks’ falls due to ‘tapering off excess hopes’

for Japan to escape deflation. “The BOJ can adopt more easing measures in that case. It can use

more medicines, and I hardly see any problems.” Reuters/AFP

Officials from two Koreas hold talks Pyongyang restores official hotline with Seoul

orth and South Korea held their first official talks for more than two years yesterday, confronting decades of mutual distrust in a search for some positive end to months of soaring military tensions. The working-level discussions, which lasted less than two hours over a morning and afternoon session in the border truce village

of Panmunjom, were to set up ministerial-level talks tentatively scheduled for Wednesday in Seoul. The agenda there will focus on restoring suspended commercial links, including the Kaesong joint industrial complex that the North effectively shut down in April as tensions between the historic rivals peaked. “The overall atmosphere was…

South Korea has sent three delegates to the meeting

calm and the discussion proceeded with no major debates,” the South’s Unification Ministry spokesman Kim Hyung-seok told reporters after the morning session. The agenda, venue, date, duration of the ministerial meeting and the number of delegates were all discussed, Mr Kim said. The talks came about after an unexpected reversal on Thursday

from North Korea, which suddenly dropped its default tone of highdecibel belligerence and proposed opening a dialogue. South Korea responded swiftly with its offer of a ministerial meeting in Seoul, the North countered with a request for lower-level talks first and yesterday’s meet in Panmunjom was agreed. In a further signal of intent, North Korea on Friday restored its official hotline with the South, which it had severed in March. The two Koreas last held working talks in February 2011, and they have not met at the ministerial level since 2007. The move towards dialogue has been broadly welcomed – given the threats of nuclear war that were being flung around in April and May – but there is sizeable scepticism about Pyongyang’s intentions. “The North Korean offer has all of the hallmarks of Pyongyang’s diplomacy,” said Stephan Haggard, a North Korea expert at the Peterson Institute for International Economics. “Pyongyang is ‘sincerely’ and ‘magnanimously’ inviting the South to fix, and pay for, problems of the North’s own creation,” Mr Haggard said. It was the North’s decision to withdraw its 53,000 workers in early April that closed Kaesong. Pyonyang also wants to discuss resuming tours by South Koreans to its Mount Kumgang resort. These were suspended after a North Korean

11 11

June April 10, 19, 2013 2013

Asia Japan lawmakers push to legalise casinos

Abe hints at sales tax delay Japan’s Prime Minister Shinzo Abe said yesterday an upper house election will take place on July 21 and voiced the possibility of delaying a consumption tax hike scheduled for next year if the economy remains weak. Mr Abe also pledged a “dramatic” tax break in the autumn to encourage investment, calling it the second phase of his broad growth measures. He stressed that his basic policy was to raise the five percent consumption tax to eight percent next year and then to 10 percent in 2015. “But the economy is a living thing. We have to further improve the real economy and put it on a path of robust growth. [The tax hike] must not serve as shackles to that effort,” Mr Abe said, adding that a decision on the hike would be made after a review of economic data in the autumn.

Budget shortfall was 4.9 pct of GDP in the year ended March

India deficit hurting rupee, Moody’s says Agency kept rating outlook at stable

soldier shot dead a South Korean tourist there in July 2008. Kaesong and Mount Kumgang were both significant sources of scarce foreign currency for North Korea, which is squeezed by UN sanctions imposed over its nuclear weapons programme. There are also suggestions that Pyongyang was playing to a specific audience by proposing talks just before U.S. President Barack Obama and Chinese President Xi Jinping sat down for their crucial summit in California. “The offer was transparently timed to coincide with the ObamaXi summit, suggesting – probably wrongly – that the North is willing to do something substantive to unfreeze relations on the peninsula,” said Mr Haggard.

ndia’s wide budget deficit and moderating foreign-direct investment inflows are weighing on the rupee and constraining scope for a higher sovereign credit rating, Moody’s Investors Service said. “What we look for in terms of an upgrade is an improvement in government finances – the fiscal deficit narrowing far more than it has in the past,” Atsi Sheth, lead India analyst for sovereign ratings, said in a telephone interview. “Second is the operating environment. We see India receives less FDI.” Moody’s kept India’s rating outlook at stable even as Standard & Poor’s and Fitch Ratings cut to negative last year, taking the nation a step closer to a junk credit score. Asia’s third-largest economy is grappling with a budget gap, a record current-account deficit and decadelow economic expansion. The rupee will be a bit volatile, while “growth will probably slowly recover and there will be some risks in terms of the current-account deficit and the currency,” Ms Sheth said. “Both balance out in a way that the Baa3 rating seems the appropriate rating at this point.” The rupee is down about 5.1 percent in the past month, the most in a basket of 11 Asian currencies tracked by Bloomberg. The currency’s drop is “a reflection of the macroeconomic imbalances” such as “the high fiscal deficit” and an “operating environment that doesn’t bring in much foreign- direct

investment,” Ms Sheth said. India has a “current-account problem” that “manifests” itself in rupee depreciation, Duvvuri Subbarao, the nation’s central bank governor, said in a speech in the southern Indian city of Hyderabad yesterday. The imbalance in the broadest measure of trade widened to US$32.6 billion in the last quarter of 2012, equivalent to an unprecedented 6.7 percent of gross domestic product. Mr Subbarao said India’s sustainable level is 2.5 percent to 3 percent. The budget shortfall was 4.9 percent of GDP in the year ended March and the official target is 4.8 percent in 2013-2014. The Reserve Bank of India has previously indicated that the currentaccount gap and inflation risks are limiting the extent of monetary easing to spur expansion. While inflation has “come off the peak,” consumer-price growth still remains “quite high,” Mr Subbarao said. The success of the monsoon, which accounts for about 70 percent of India’s rains, will also be an important factor in determining monetary policy in the next three months, he said. Mr Subbarao reduced interest rates in January, March and May by a combined 75 basis points to 7.25 percent as the government pared the budget deficit to help tackle price pressures. The next monetary policy decision is due to be unveiled June 17.

Singapore’s malls top retail investment ranking

over the next two years, while those in the suburbs may have between 9 percent and 10 percent return annually over the same period, Aviva forecasts. Investors are betting on Singapore’s economy, which unexpectedly expanded last quarter as services and construction strengthened. Retail sales in Singapore’s central business district could rise 60 percent in the next five years, according to Standard Chartered Plc, while the suburbs will witness an influx of retailers with new malls being completed this year, Colliers International UK Plc forecasts. “We continue to favour suburban retail in Singapore,” Elysia Tse, senior vice president of strategy and research for Asia Pacific real estate at Aviva Investors, said. “Retail has been a very stable asset class. The suburban sector is capturing that demographic growth. There’s stable yield and a fairly reasonable growth built into it.”

Stephan Haggard, Peterson Institute for International Economics

ingapore’s shopping malls offer the best returns among AsiaPacific retail investments as economic and demographic growth boost consumption, according to Aviva Plc. Suburban retail units catering to local resident demand will offer better yields than the central shopping centres, according to Aviva Investors Asia Pte., which manages US$2.5 billion in property assets and is a unit of U.K.’s second-biggest insurer. Malls in the city state may yield an average annual return of as much as 8 percent

Pirelli seeks Asian partnerships Italian tyre maker Pirelli & C. SpA is looking for new industrial partnerships that will enable it to grow more quickly in Asia, chairman Marco Tronchetti Provera said. His comments offered the first insight into how he plans to build value for a new group of investors – two banks and a private equity fund – which joined him this week as shareholders in Camfin, the holding company that controls Pirelli. Pirelli, the world’s fifth biggest tyre maker, wants to continue to increase its revenue from moreprofitable premium tyres, as well as upping its market share in high-growth regions like Asia. It reported sales of about 6 billion euros (US$7.9 million) in 2012, of which the AsiaPacific region accounted for 7 percent. “We’re looking at how we can grow the most quickly in Asia, for example at an industrial partnership along the lines of what we did in Indonesia,” Mr Tronchetti Provera said, referring to an agreement to make motorcycle tyres with a local partner, Astra Otoparts. He said no talks were currently under way, and did not put any figure on his Asian growth target.

Bloomberg News

Japanese pension fund shifts to stocks

AFP

Pyongyang is ‘sincerely’ and ‘magnanimously’ inviting the South to fix, and pay for, problems of the North’s own creation

A group of Japanese lawmakers are close to hitting the jackpot in their bid to legalise casinos. A bill is to be submitted to parliament later this year that, if passed, would pave the way for tie-ups with big name firms to build casinos across the country, said a senior Japanese lawmaker heading the push. “Japan may be the only developed country without casinos. But we are sprinting to the finish line,” Takeshi Iwaya told AFP. A change in government and its declared aim to stoke the limp economy may give an unprecedented impetus to legalise roulette wheels and baccarat tables in the country of 128 million, analysts said. “Should casino legislation pass… the implications are huge,” brokerage CLSA said in a report. “Japan could become one of the largest gaming jurisdictions in the world, surpassed perhaps only by Macau.” CLSA estimated that just two gaming resorts in Tokyo and another in the smaller city of Osaka could generate revenues of US$10 billion annually. “Casino legislation in Japan has been discussed many times before, only to lead to disappointment,” CLSA said. “The election has given [prime-minister Shinzo Abe] a mandate to stimulate the Japanese economy through fiscal and monetary expansion, which would create a greater need for revenue for the public purse,” the research house added.

Bloomberg News

Japan’s public pension fund, the world’s biggest manager of retirement savings, said it will reduce its holdings of local bonds and buy more shares. The proportion of assets held in Japanese bonds will be cut to 60 percent from 67 percent, the health ministry said yesterday in Tokyo at a briefing to announce changes to the mid- term plan of the Government Pension Investment Fund. The weighting of local shares will be increased to 12 percent from 11 percent currently. The Health and Welfare Ministry, which oversees pensions, didn’t give a time frame for the changes. “It was a negative factor as far as bond supply and demand is concerned,” said Makoto Suzuki, a bond strategist at Okasan Securities Co. in Tokyo, one of the 24 primary dealers obliged to bid at government debt sales. GPIF’s shift toward higher-yielding assets comes as it prepares to fund retirements in the world’s most elderly population and Prime Minister Shinzo Abe tries to revive the economy through fiscal and monetary stimulus. Changes to GPIF’s asset allocation are effective from yesterday, fund official Masahiro Ooe told reporters. He declined to elaborate on the timing for completion of the portfolio changes.

June 10, 2013

Markets Hang Seng Index NAME AIA GROUP LTD ALUMINUM CORP-H

PRICE

DAY %

VOLUME

32.7

-0.6079027

39607166

2.9

9094778

BANK OF CHINA-H

3.36

-7.945205

558942109

BANK OF COMMUN-H

5.79

-0.8561644

20932866

BANK EAST ASIA

28.5

-0.3496503

3233992

BELLE INTERNATIO

11.9

2.763385

24701369

BOC HONG KONG HO

24.95

-0.3992016

12812380

CATHAY PAC AIR

13.66

-3.531073

7371057

CHEUNG KONG

103.9

-1.795841

6490128

CHINA COAL ENE-H

0.8064516

18975691

CHINA CONST BA-H

6.09

-0.9756098

285946558

CHINA LIFE INS-H

19.4

-1.921132

37973135

0.4016064

2702824

78.65

-0.8196721

14929485

-0.9009009

15771678

CHINA MERCHANT CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H

7.7

-1.028278

97472594

CHINA RES ENTERP

25.45

0.3944773

2622116

-1.075269

5276352

CHINA RES POWER

18.64

-3.319502

11630152

CHINA SHENHUA-H

25.05

-0.9881423

13365813

CHINA RES LAND

NAME

PRICE

DAY %

Volume

CHINA UNICOM HON

10.3

-0.1937984

12961936

CITIC PACIFIC

8.83

-0.3386005

9340017

CLP HLDGS LTD

NAME

PRICE

DAY %

66.95

-0.2978407

4039031

39.4

-1.253133

10959946

11.18

-1.236749

7083174

99.1

-0.8504252

5609280

POWER ASSETS HOL SANDS CHINA LTD SINO LAND CO

Volume

63.7

-0.5464481

5114967

13.42

-0.1488095

41246229

0.1821494

5864048

SWIRE PACIFIC-A

91.65

-0.9189189

1915684

ESPRIT HLDGS

11.62

-0.3430532

6941052

TENCENT HOLDINGS

299.8

-0.1332445

3289419

HANG LUNG PROPER

26.55

-0.1879699

11544370

-0.7444169

2773107

HANG SENG BK

119.1

-1.079734

2488449

WANT WANT CHINA

10.92

-1.444043

11962434

HENDERSON LAND D

46.35

0.1079914

5816711

WHARF HLDG

68.6

-0.867052

5068459

79.7

-1.055245

2388198

HONG KG CHINA GS

18.98

-3.342772

22931470

HONG KONG EXCHNG

126.4

-0.9404389

4472237

84.2

-1.462844

24034842

CNOOC LTD COSCO PAC LTD

HENGAN INTL

HSBC HLDGS PLC

79.75

-0.931677

8567471

IND & COMM BK-H

HUTCHISON WHAMPO

5.24

-1.132075

278646294

LI & FUNG LTD

11.1

0.5434783

28931562

MTR CORP

28.9

-0.8576329

5221036

NEW WORLD DEV

11.76

-1.010101

13584125

PETROCHINA CO-H

8.89

-0.4479283

56905071

PING AN INSURA-H

56.8

-0.6124234

12810552

PRICE

DAY %

Volume

25.45

-1.547389

6425069

7.7

-1.028278

97472594

SUN HUNG KAI PRO

TINGYI HLDG CO

MOVERS

1 22150

INDEX 21575.26 HIGH

22143.22

LOW

21527.65

52W (H) 23944.74 (L) 18461.17969

21520

5-June

7-June

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.52

-0.5649718

75465123

CHINA PACIFIC-H

AIR CHINA LTD-H

6.09

-0.3273322

16372417

CHINA PETROLEU-H

2.9

9094778

CHINA RAIL CN-H

7.25

-0.4120879

6908841

ANHUI CONCH-H

23.95

-1.844262

10842007

CHINA RAIL GR-H

3.81

0.2631579

10931408

BANK OF CHINA-H

3.36

-7.945205

558942109

CHINA SHENHUA-H

25.05

-0.9881423

13365813

CHINA TELECOM-H

ALUMINUM CORP-H

NAME

5.79

-0.8561644

20932866

3.66

-1.081081

39071026

32.65

-2.537313

3962654

DONGFENG MOTOR-H

11.44

-2.222222

16599583

3.99

-0.9925558

29532026

GUANGZHOU AUTO-H

7.81

-2.252816

9207046

0.8064516

18975691

HUANENG POWER-H

8.08

-1.463415

22656997

CHINA COM CONS-H

6.92

-1.142857

12530451

IND & COMM BK-H

5.24

-1.132075

278646294

CHINA CONST BA-H

6.09

-0.9756098

285946558

JIANGXI COPPER-H

15.38

-0.1298701

8913325

CHINA COSCO HO-H

3.3

0.3039514

3232852

PETROCHINA CO-H

8.89

-0.4479283

56905071

CHINA LIFE INS-H

19.4

-1.921132

37973135

PICC PROPERTY &

8.86

-1.99115

20160320

CHINA LONGYUAN-H

8.01

-1.958384

17058606

PING AN INSURA-H

56.8

-0.6124234

12810552

CHINA MERCH BK-H

14.38

0.1392758

17859960

SHANDONG WEIG-H

10.3

5544942

CHINA MINSHENG-H

8.97

-0.9933775

52532148

SINOPHARM-H

21.05

0.9592326

4715895

CHINA NATL BDG-H

7.99

-0.125

23942069

TSINGTAO BREW-H

54.35

-0.2752294

816745

15.96

0.2512563

3701905

WEICHAI POWER-H

BANK OF COMMUN-H BYD CO LTD-H CHINA CITIC BK-H CHINA COAL ENE-H

CHINA OILFIELD-H

26.9

1.318267

NAME

PRICE

DAY %

Volume

YANZHOU COAL-H

7.75

0.7802341

15757513

ZIJIN MINING-H

2.09

27569020

ZOOMLION HEAVY-H

6.63

-1.339286

25067160

ZTE CORP-H

12.3

0.3262643

1533376

MOVERS

3 10490

INDEX 10187.27 HIGH

10482.47

LOW

10161.86

52W (H) 12354.22 10160

(L) 8987.76 5-June

1853656

7-June

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

Volume

PRICE

DAY %

Volume

AGRICULTURAL-A

2.7

-0.7352941

73833499

CHONGQING CHAN-A

9.95

-3.398058

32798290

POLY REAL ESTA-A

11.52

-2.040816

58642419

AIR CHINA LTD-A

5.11

-2.10728

10750833

CHONGQING WATE-A

6.15

-2.535658

7664968

QINGDAO HAIER-A

11.99

-2.599513

9675714

ALUMINUM CORP-A

3.91

-2.005013

10997299

CITIC SECURITI-A

12.12

-4.716981

160307948

QINGHAI SALT-A

22.09

-1.559715

5417885

ANHUI CONCH-A

15.8

-2.948403

28231627

CSR CORP LTD -A

4.13

-2.364066

23526018

SAIC MOTOR-A

15.06

-1.310616

27892144

AVIC AIRCRAFT-A

11.38

0.08795075

23731115

DAQIN RAILWAY -A

6.6

-0.3021148

19143888

SANAN OPTOELEC-A

20.5

0.2935421

22713373

4.56

-1.298701

9838215

SANY HEAVY INDUS

8.84

-2.212389

53279858

NAME

BANK OF BEIJIN-A

8.66

-1.141553

20380019

DATANG INTL PO-A

BANK OF CHINA-A

2.91

-0.6825939

24941321

EVERBRIG SEC -A

13.53

-0.5147059

32816897

SHANG PHARM -A

11.95

-1.483924

10182677

BANK OF COMMUN-A

4.59

-0.6493506

50292375

GD MIDEA HOLDI-A

13.07

-0.3051106

16739439

SHANG PUDONG-A

9.35

-1.058201

72344081

BANK OF NINGBO-A

10.1

-1.463415

10443984

GD POWER DEVEL-A

2.6

-1.515152

32178050

SHANGHAI ELECT-A

3.91

-2.005013

6361212

BAOSHAN IRON & S

4.66

-1.061571

14869354

GEMDALE CORP-A

7.06

-3.945578

62365970

SHANXI LU'AN -A

15.52

-2.756892

13929027

BEIJING TONGRE-A

22.33

-3.583765

7527406

GF SECURITIES-A

13.04

-2.759135

42871376

SHANXI XISHAN-A

10.11

-1.653696

13575559

32.9

-1.497006

7791811

GREE ELECTRIC

25.46

-2.601377

17095389

SHENZEN OVERSE-A

6.11

-1.292407

30127960

CHINA AVIC ELE-A

23.89

-3.746978

5860003

GUANGHUI ENERG-A

20.04

0.3505258

18135653

SUNING COMMERC-A

5.78

-4.777595

87999544

CHINA CITIC BK-A

4.1

-2.612827

29094638

HAINAN AIRLINE-A

2.41

-2.03252

24421983

TASLY PHARMAC-A

38.64

-0.6428388

3949158

CHINA CNR CORP-A

4.36

-2.242152

26636909

HAITONG SECURI-A

11.56

-1.196581

174956775

TSINGTAO BREW-A

38.28

-1.187403

1689241

CHINA COAL ENE-A

6.32

-1.557632

7939089

HANGZHOU HIKVI-A

36.92

-1.677763

4503194

WANHUA CHEMIC-A

16.84

-0.7660577

8148409

CHINA CONST BA-A

4.74

-0.2105263

24415152

HENAN SHUAN-A

39.99

-2.344322

4818511

WEICHAI POWER-A

21.85

-2.975133

6283793

CHINA COSCO HO-A

3.27

-1.208459

8223979

HONG YUAN SEC-A

22.37

-10.01609

47528606

WULIANGYE YIBIN

22.22

-5.807546

17561869

CHINA EAST AIR-A

2.99

-0.9933775

9524288

HUATAI SECURIT-A

9.95

-1.970443

50082516

YANZHOU COAL-A

13.61

-3.269367

5186000

10.26

-1.251203

18708737

YUNNAN BAIYAO-A

-3.314917

2387818

BYD CO LTD -A

2.98

-0.6666667

63204083

HUAXIA BANK CO

CHINA LIFE INS-A

15.88

-2.03578

14551973

IND & COMM BK-A

4.17

0.4819277

57682406

ZHONGJIN GOLD

11.69

-0.9322034

11764290

CHINA MERCH BK-A

13.17

-0.07587253

68048619

INDUSTRIAL BAN-A

17.04

-1.730104

75305387

ZIJIN MINING-A

3.02

-0.330033

35265181

CHINA MERCHANT-A

12.21

-4.235294

35936529

INNER MONG BAO-A

26.5

-1.960784

17059644

ZOOMLION HEAVY-A

7.07

-1.256983

66111532

CHINA MERCHANT-A

26.88

-2.890173

14093180

INNER MONG YIL-A

27.77

-2.83415

14319950

ZTE CORP-A

12.09

-3.357314

27914039

CHINA MINSHENG-A

9.99

-0.1

120666061

INNER MONGOLIA-A

4.56

-2.978723

33555104

CHINA NATIONAL-A

10.45

-2.881041

33508057

JIANGSU HENGRU-A

27.94

0.4378429

5418376

CHINA OILFIELD-A

15.79

-1.065163

4194983

JIANGSU YANGHE-A

59.38

-7.189747

4372045

CHINA PACIFIC-A

17.93

-2.128821

18689311

JIANGXI COPPER-A

20.14

-2.042802

9695832

10.02

-2.052786

6281240 19249238

CHINA EVERBRIG-A

CHINA PETROLEU-A

6.6

-1.639344

26481187

JINDUICHENG -A

CHINA RAILWAY-A

4.88

-1.810865

16297017

KANGMEI PHARMA-A

18.05

-0.8241758

KWEICHOW MOUTA-A

196.26

-2.677774

2547838

25.05

-2.033633

8170256

CHINA RAILWAY-A

2.74

-1.792115

23980419

CHINA SHENHUA-A

20.19

-0.8349705

8924987

LUZHOU LAOJIAO-A

CHINA SHIPBUIL-A

4.52

59982923

METALLURGICAL-A

1.95

-1.515152

46890379

15.74

-3.965833

18764742

2.39

-0.8298755

11400413

CHINA SOUTHERN-A

3.37

-0.8823529

13746017

NARI TECHNOLOG-A

CHINA STATE -A

3.62

-1.362398

96454076

NINGBO PORT CO-A

3.6

-1.639344

75067684

PETROCHINA CO-A

8.28

-1.075269

14924306

CHINA VANKE CO-A

11.21

-2.436902

87652503

PING AN BANK-A

19.53

-2.980626

40200095

CHINA YANGTZE-A

7.37

-1.073826

14381163

PING AN INSURA-A

PRICE DAY %

Volume

CHINA UNITED-A

37.8

-2.148589

MOVERS

271

1 2570

INDEX 2484.16 HIGH

2565.87

LOW

2479.61

52W (H) 2791.303 (L) 2102.135

2470

5-June

23726804

7-June

FTSE Taiwan 50 Index NAME

NAME

ACER INC

23.4

-1.886792

11482272

FORMOSA PLASTIC

ADVANCED SEMICON

24.5

0.8230453

17361544

FOXCONN TECHNOLO

ASIA CEMENT CORP

37.3

1.912568

3072724

ASUSTEK COMPUTER

314.5

-2.631579

AU OPTRONICS COR

12.3

-3.90625

CATCHER TECH

154.5

-2.830189

11497498

HTC CORP

CATHAY FINANCIAL

38.75

13773941

HUA NAN FINANCIA

CHANG HWA BANK

16.65

8764786

CHENG SHIN RUBBE

90.5

1.685393

8042890

CHIMEI INNOLUX C

18.3

-1.612903

52983926

MEDIATEK INC

CHINA DEVELOPMEN

8.48 -0.3525264

27186991

MEGA FINANCIAL H

CHINA STEEL CORP

24.8

17066459

NAN YA PLASTICS

CHINATRUST FINAN

18.25

17323164

PRESIDENT CHAIN

0.5291005

8417325

QUANTA COMPUTER

17.7

-2.209945

25370854

SILICONWARE PREC

CHUNGHWA TELECOM COMPAL ELECTRON

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

69.9

0.7204611

6104339

TAIWAN MOBILE CO

111

1.834862

0.6369427

3926575

TPK HOLDING CO L

573

-2.716469

4631942

FUBON FINANCIAL

39.65

0.3797468

21031869

TSMC

108.5

0.9302326

33085685

6337852

HON HAI PRECISIO

75.2

0.2666667

37958936

UNI-PRESIDENT

0.8695652

7752949

80122279

HOTAI MOTOR CO

312

-3.703704

744770

13.3

-1.115242

51354197

UNITED MICROELEC WISTRON CORP

274

-2.491103

12760385

17.15

0.8823529

5782713

YUANTA FINANCIAL

LARGAN PRECISION

969

-1.323829

1474324

YULON MOTOR CO

LITE-ON TECHNOLO

50.4

2.857143

11460983

370

0.9549795

7109557

22.95

0.2183406

18628509

59.5

1.709402

8853029

183.5

1.101928

1014679

0.4942339

4833662

35.1

2.481752

10715880

DELTA ELECT INC

141.5

1.798561

9074240

SINOPAC FINANCIA

14.4

12164098

FAR EASTERN NEW

31.25

0.9693053

3513495

SYNNEX TECH INTL

42.65

-1.501155

6107757

FAR EASTONE TELE

72.1

0.698324

2996640

TAIWAN CEMENT

37.85

0.9333333

4251504

16.95

FIRST FINANCIAL

17.7

8459810

TAIWAN COOPERATI

7120194

FORMOSA CHEM & F

70.4

1.294964

3566874

TAIWAN FERTILIZE

76.1 -0.9114583

2510093

FORMOSA PETROCHE

79.4

2.187902

2377573

TAIWAN GLASS IND

29.2 -0.1709402

789671

MOVERS

6733872

-0.990099

9460726

15.7

0.6410256

19382679

49.85 -0.8946322

3972461

7 5680

INDEX 5605.21 HIGH

5677.87

LOW

5578.17

52W (H) 5896.71 5570

(L) 4719.96 5-June

7-June

June 10, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 40.7 40.4

60.2

20.1

59.8

20.0

59.4

19.9

40.1 39.8

Max 40.7

average 39.987

Min 39.55

Last 40.55

39.5

Max 60.15

average 59.6

Min 59.15

40.3

20.2

40.1

20.1

39.9

Min 39.35

Last 39.4

39.3

Max 20.15

average 19.95

Commodities PRICE

DAY %

YTD %

(H) 52W

96.03

1.340238639

2.486659552

100.4000015

81.5

BRENT CRUDE FUTR Jul13

104.56

0.916899913

-2.653384229

115.9300003

96.04000092

GASOLINE RBOB FUT Jul13

287.15

0.722578835

1.689213117

318.0399895

235.0999832

GAS OIL FUT (ICE) Jul13

NY Harb ULSD Fut Jul13

873

0.954032958

-4.09228234

987.5

814

3.828

0.026130128

7.467714767

4.499000072

3.256000042

289.31

0.755728913

-3.617949828

322.0499992

259.5000029

Gold Spot $/Oz

1382.97

-1.6086

-16.9118

1796.08

1322.06

Silver Spot $/Oz

21.67

-4.4343

-28.0306

35.365

20.3395

Platinum Spot $/Oz Palladium Spot $/Oz LME ALUMINUM 3MO ($) LME COPPER 3MO ($) LME ZINC

Min 19.84

Last 20

(L) 52W

WTI CRUDE FUTURE Jul13

NATURAL GAS FUTR Jul13

METALS

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jul13

1502

-1.0018

-1.0377

1742.8

1374.55

757.65

0.4042

8.2883

786.5

553.75

1940

-1.171676006

-6.415822479

2200.199951

1809 6762.25

7230

-1.431492843

-8.838734081

8422

1903.5

-1.526125194

-8.485576923

2230

1745

15050

-0.198938992

-11.78194607

18920

14561 14.79500103

ASIA PACIFIC

CROSSES

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

0.698634487

17.07500076

558.5

1.869585043

-6.877865777

665

512

WHEAT FUTURE(CBT) Jul13

696.25

-0.214976711

-12.28346457

900

664.75

SOYBEAN FUTURE Nov13

1330.25

1.876316293

2.110919209

1409.75

1177.5

126.95

-1.931247586

-15.11200267

202.1999969

125.0499954

NAME

16.31999969

ARISTOCRAT LEISU

70.76000214

CROWN LTD

Dec13

COFFEE 'C' FUTURE Jul13 SUGAR #11 (WORLD) Jul13

16.43

COTTON NO.2 FUTR Jul13

84.86

-0.303398058

-16.76798379

-0.011782727

10.39417198

23.05999947 94.19999695

World Stock Markets - Indices NAME

19.8

COUNTRY MAJOR

15.855

CORN FUTURE

Min 19.88

Last 20.05

22.2

22.1

22.0

Max 22.2

average 22.075

Min 21.9

Last 21.95

21.9

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9497 1.5558 0.936 1.3218 97.56 7.9951 7.7628 6.1332 57.065 30.63 1.2489 29.761 42.295 9886 92.652 1.23725 0.84968 8.1171 10.592 128.96 1.0299

-0.0631 0.699 0.6197 0.8084 1.5375 -0.0038 -0.0077 0.0457 -0.3768 -0.0979 -0.048 0.1277 -0.4847 0.091 1.5974 -0.1916 -0.1153 -0.8119 -1.0234 0.7134 0.0097

-8.4891 -3.8205 -2.2009 0.2123 -11.7466 -0.1488 -0.1572 1.5881 -3.6274 -0.1632 -2.2019 -2.4462 -3.05 -0.9407 -3.5887 -2.4061 -4.0321 1.2369 -0.5816 -11.9339 0

1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7664 6.3964 57.3275 32 1.2869 30.203 43.107 9982 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.9429 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9338 78.093 1.20054 0.77553 7.7018 9.6245 94.12 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

3.95

-1.985112

25.39682

4.49

2.29

VOLUME CRNCY 2204001

12.15

-0.9779951

13.87066

13.75

8.13

1392361

AMAX HOLDINGS LT

0.91

7.058824

-35

1.72

0.75

930900

BOC HONG KONG HO

24.95

-0.3992016

3.526969

21.6

12812380 44000

CENTURY LEGEND

0.31

16.98114

0.42

0.215

CHEUK NANG HLDGS

5.62

-0.7067138

-6.176958

6.74

2.8

30000

CHINA OVERSEAS

-0.9009009

-4.761906

25.6

16.362

15771678

CHINESE ESTATES

13.36

0.6024096

10.14543

14.12

7.975

540500

CHOW TAI FOOK JE

9.08

0.6651885

-27.00964

13.4

8.4

6116800

EMPEROR ENTERTAI

2.86

-3.050847

51.32275

3.05

1.14

3825000

FUTURE BRIGHT

2.41

-2.42915

98.8406

2.76

0.795

3090000

GALAXY ENTERTAIN

40.55

2.39899

33.60791

41.8

16.98

12688607 2488449

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15248.12

1.379597

16.36109

15542.4

12398.44

NASDAQ COMPOSITE INDEX

3469.215

1.318993

14.89317

3532.038

2802.38

FTSE 100 INDEX

6411.99

1.19758

8.718155

6875.62

5381.83

HANG SENG BK

119.1

-1.079734

0.3369866

132.8

100.6

DAX INDEX

8254.68

1.924604

8.437423

8557.86

6053.95

HOPEWELL HLDGS

26.8

0.9416196

-19.3985

35.3

19.523

1367633

HSBC HLDGS PLC

84.2

-1.462844

3.567032

90.7

61.1

24034842

HUTCHISON TELE H

4.03

0.2487562

13.20225

4.66

2.98

2178000

LUK FOOK HLDGS I

18.68

0.2145923

-23.44262

30.05

14.7

665206

MELCO INTL DEVEL

15.78

0.5095541

75.13873

18.18

5.12

6887122

NIKKEI 225

12877.53

-0.2052849

23.87982

15942.6

8328.019531

HANG SENG INDEX

21575.26

-1.205077

-4.774083

23944.74

18461.17969

CSI 300 INDEX

2484.16

-1.728152

-1.537564

2791.303

2102.135

TAIWAN TAIEX INDEX

8095.2

-0.01161047

5.139297

8439.15

6922.73

MGM CHINA HOLDIN

20.05

2.295918

50.99848

20.9

9.509

4881013

KOSPI INDEX

1923.85

-1.803807

-3.66541

2042.48

1758.99

MIDLAND HOLDINGS

3.18

-14.05406

3.15

1432000

S&P/ASX 200 INDEX

4737.703

-0.9091704

1.909096

5249.6

3993.8

NEPTUNE GROUP

0.209

2.955665

37.5

0.23

0.084

64315000

4865.324

-2.717276

12.70968

5251.296

3774.693

NEW WORLD DEV

11.76

-1.010101

-2.163065

15.12

8.5

13584125

FTSE Bursa Malaysia KLCI

1775.59

0.3384946

5.129815

1826.22

1568.89

SANDS CHINA LTD

39.4

-1.253133

16.05302

43.7

20.65

10959946

SHUN HO RESOURCE

1.52

8.57143

1.67

1.03

NZX ALL INDEX

950.726

-0.2299256

7.785591

998.487

755.149

SHUN TAK HOLDING

-0.4975124

-4.534608

4.65

2.56

8301473

PHILIPPINES ALL SHARE IX

4148.41

1.190357

12.15011

4571.4

3295.86

5890322

JAKARTA COMPOSITE INDEX

19.8

Currency Exchange Rates

NAME ENERGY

average 19.987

19.9

39.5 average 39.695

Max 20.1

20.0

39.7

Max 40.3

59.0

Last 59.6

-0.7444169

12.69093

22.382

12.995

SMARTONE TELECOM

SJM HOLDINGS LTD

13.32

0.4524887

-5.397727

17.38

12.5

622500

WYNN MACAU LTD

21.95

-1.126126

4.773266

26.5

14.62

3282294

HSBC Dragon 300 Index Singapor

617.56

-1.36

-0.57

STOCK EXCH OF THAI INDEX

1516.24

1.746734

8.93076

1649.77

1112.18

HO CHI MINH STOCK INDEX

527.97

1.357266

27.6122

527.97

372.39

ASIA ENTERTAINME

3.85

5.973025

36.78272

4.7647

2.2076

209382

BALLY TECHNOLOGI

56.9

1.191535

27.2646

57.49

41.74

342118

Laos Composite Index

1338.82

10.2118

1455.82

980.83

BOC HONG KONG HO

3.28

0.6134969

6.840393

3.6

2.8

398204

GALAXY ENTERTAIN

5.34

6.163022

34.50882

5.4

2.25

4950

INTL GAME TECH

17.45

0.4027618

23.14749

18.81

10.92

1969583

JONES LANG LASAL

91.08

0.2752395

8.506073

101.46

61.39

248415

LAS VEGAS SANDS

57.27

0.4208311

24.06846

60.54

32.6127

6303897

MELCO CROWN-ADR

24.33

4.915912

44.47743

25.15

9.13

3786667

MGM CHINA HOLDIN

2.57

0.7843137

38.91892

2.71

1.36

3000

MGM RESORTS INTE

14.95

2.537723

28.43642

15.95

8.83

7156546

SHFL ENTERTAINME

17.78

0.3952569

22.62069

18.57

12.35

161411

SJM HOLDINGS LTD

2.58

-0.7692308

13.27634

2.9481

1.7255

6300

WYNN RESORTS LTD

137.5

1.897139

22.23309

144.99

84.4902

1104559

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

AUD HKD

USD

June 10, 2013

Opinion

Myanmar’s moment?

Martin N. Baily

Chairman of the U.S. President’s Council of Economic Advisers under Bill Clinton, is Bernard L. Schwartz Chair in Economic Policy Development at the Brookings Institution

Richard Dobbs

Director of the McKinsey Global Institute

nterest in Myanmar (Burma) has become intense. Last month, Thein Sein became the first president of Myanmar to visit the White House in nearly 50 years, and leaders from British Prime Minister David Cameron to India’s Manmohan Singh to Japan’s Shinzo Abe have all visited Yangon. Indeed, after years of absence, foreign governments are rushing to re-open their embassies in the country. Moreover, multilateral organisations and former ministers from around the world are flocking to help the authorities make progress on their ambitious agenda, from expanding electricity provision to building their own governing capacity. Investors, too, are actively exploring opportunities. This focus is not surprising. After years of economic isolation and anaemic growth, Myanmar is one of Asia’s last largely untapped markets. Now that the country is opening up, investors are clearly hoping to establish sources of structural advantage that could last for many years. But can investing in Myanmar live up to today’s soaring expectations? There are undoubtedly major

uncertainties and risks. Investors are rightly nervous about how political reform will evolve; whether the government can maintain the fragile peace between ethnic groups; and how regulation and ownership rights will develop. Moreover, it is difficult to quantify the economy’s potential, given the paucity of reliable data; even basic indicators like population size and historical economic growth are shrouded in uncertainty.

Long journey There is little doubt that Myanmar begins its development journey from a shockingly weak starting point, as a new report from the McKinsey Global Institute (MGI) demonstrates. Indeed, Myanmar was virtually untouched by the global economy’s spectacular growth during the twentieth century. While global per capita GDP quadrupled around the world, Myanmar’s was virtually flat. Furthermore, productivity is low. A worker in Myanmar added only US$1,500 of economic value, on average, in 2010 – around 30 percent of the average of eight Asian peers. Myanmar’s GDP is now only

around 0.2 percent of Asia’s, equivalent to the size of cities such as Bristol, Delhi, or Seville. Myanmar needs a stepchange in productivity growth. Given expected demographic trends and historic labourproductivity growth, annual GDP growth could be less than 4 percent, lower than the current consensus. But if Myanmar were to boost annual labourproductivity growth from an estimated 2.7 percent to around 7 percent – a rate achieved by other Asian economies, including China and Thailand, in recent decades – 8 percent annual GDP growth would be possible. This could quadruple the size of the economy by 2030, with annual output rising to more than US$200 billion, from US$45 billion in 2010. But it is virtually inconceivable that Myanmar could achieve such acceleration in growth without large volumes of inward investment. The MGI research estimates that US$170 billion – as well as the transfer of capabilities and knowledge that typically accompany such investment – is needed between now and 2030. Thus far, much of the interest among investors has

been focused on Myanmar’s energy and mining sectors – no surprise, given the country’s large reserves of oil and gas, its 90 percent share of global jade production, and its strong position in ruby and sapphire mining. But Myanmar cannot rely on energy and mining alone. It needs growth that is balanced across sectors, providing diverse opportunities for inward investors.

Growth potential Five sectors – energy and mining, agriculture, manufacturing, tourism, and infrastructure – could account for more than 90 percent of Myanmar’s total growth and employment potential. Of these, manufacturing, which could take advantage of many companies’ desire to relocate from China and other Asian economies where wages are rising, is by far the most important. The manufacturing sector could, according to the MGI report, employ 7.6 million people and generate nearly US$70 billion of GDP by 2030 – more than triple the potential size of the agriculture sector, which currently is Myanmar’s largest. If Myanmar generates the growth and employment that

MGI believes is possible, this would help to increase the number of those with sufficient income for discretionary spending from 2.5 million today to 19 million in 2030, thereby tripling consumer spending to around US$100 billion. This would expand the market for companies selling everything from scooters and cars to electronics and financial services. There should be business opportunities, too, in housing, power, transport, and energy infrastructure. Roughly US$300 billion in infrastructure investment in these areas is required across the economy, half of which would need to be in large cities, which will expand if Myanmar diversifies out of agriculture. Today, only an estimated 13 percent of Myanmar’s population lives in large cities, but that could rise to 25 percent by 2030 – an addition of ten million people. Another US$50 billion is needed in telecommunications infrastructure if Myanmar is to make full use of digital technology to leapfrog stages of development – for example, by using mobile banking or e-commerce to avoid the cost of building physical banks and shops, and to extend health and education services to even the remotest villages. Today, Myanmar has the second-lowest level of Internet penetration of countries covered by the World Bank’s development indicators, and mobile penetration is the lowest. Myanmar faces monumental development challenges that embrace virtually every aspect of the economy. But that implies the broadest possible range of opportunities for companies and investors as well. They should proceed with caution, but with the expectation of tapping into a potentially lucrative new market. © Project Syndicate

Myanmar cannot rely on energy and mining alone. It needs growth that is balanced across sectors, providing diverse opportunities for inward investors

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

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June 10, 2013

Opinion

Spectre of another wires bond crash spooks Asia Business

Leading reports from Asia’s best business newspapers

Asahi Shimbun

William Pesek

Bloomberg View columnist

The Japanese government is set to consider a policy change that would assign patents on in-house inventions to companies instead of employees. The move is intended to bolster the competitiveness of Japanese companies, but analysts say it could backfire and spur a brain drain overseas, ending up undermining their competitive edge. The policy will likely be incorporated in the government’s growth strategy, which is expected to win Cabinet approval on June 14.

Korea Herald The sale of Woori Finance Holdings is open to foreign investors as well, South Korea’s top financial regulator said, amid the government’s stern move to wrap up the long-pending privatisation of the country’s largest banking group. Shin Je-yoon, the chairman of the Financial Services Commission, stressed that there is “no discrimination against foreign banks” concerning the sale. “We’ll announce the plan [of Woori sale] at the end of this month,” he said.

Jakarta Globe The Indonesian government is determined to stick with its self-imposed 2014 deadline for banning raw mineral exports, an Energy and Mineral Resources Ministry official said. Director general for coal and mineral resources Thamrin Sihite said the government still intended to impose the deadline of the end of 2013. “We are consistent [with the regulation]. We cannot bend the law, if anything we should protect it,” he said. Indonesian miners have less than six months left to comply.

Taipei Times HSBC Bank Taiwan aims to increase its loans to large corporations this year as current low interest rates allow them to obtain cheap long-term capital that may be used for refinancing or expansions later, commercial banking head Stanley Hsiao was quoted as saying. “I don’t think borrowing costs will drop further or stay unchanged for long,” Mr Hsiao said. Companies may want to replace existing debts with new loans that charge lower interest rates, or lock up long-term funds for business expansions when the macro-environment turns more favourable, he said.

Kim Choong-soo, Bank of Korea governor

im Choong-soo is seeing ghosts, and that should scare you. No, the Bank of Korea governor isn’t seeing ghouls or hearing things that go bump in the night. The nightmare preoccupying him involves Alan Greenspan and what traders call the Great Bond Market Massacre of 1994. Kim worries that history is about to repeat itself, potentially devastating Asian growth rates. Back in the 1990s, when he was Federal Reserve chairman, Greenspan doubled benchmark lending rates over 12 months, causing, according to Fortune magazine, more than US$600 billion in losses on U.S. Treasuries. The chaos drove Orange County, California, into bankruptcy; sank Kidder Peabody & Co.; pushed Mexico into crisis; and precipitated Asia’s 1997 meltdown as a surging dollar strained currency pegs. Now, Greenspan’s successor, Ben S. Bernanke, is under pressure to unwind the U.S. central bank’s unprecedented US$3.3 trillion balance sheet. A growing number of staff members want to scrap the Fed’s quantitative-easing experiment or at least curtail its US$85 billion purchases of debt each month. Once the “tapering” process begins, debt yields from Seoul to São Paulo will probably jump in sudden and destabilising ways.

Wreaking havoc Fed officials insist they will tread carefully, but Kim can’t help but fear that the “ghost of 1994” will again wreak havoc on bond markets. And he’s not alone. Bank of America Merrill Lynch strategist Michael Hartnett warns of a “repeat of the 1994 moment,” and

Goldman Sachs Group Inc. chief executive Lloyd Blankfein admits “I worry now” as “I look out of the corner of my eye to the ’94 period”. “We all experienced that, and we all know what happened, and I hope not to experience that again,” Kim told the Wall Street Journal last week. He wants policy makers to “find a compromise solution so that all things will happen in an orderly fashion. If not, then we are likely to face another series of difficulties.” That could be a huge understatement in Asia, where last time around, Indonesia, South Korea and Thailand were forced to seek International Monetary Fund bailouts. There are three big risks if Bernanke & Co. withdraw liquidity: higher borrowing costs, huge swings in financial markets and lower economic growth. And that’s if the Fed restores normalcy to monetary policy in an orderly, gradual and transparent way. If the process

There are three big risks if Bernanke & Co. withdraw liquidity: higher borrowing costs, huge swings in financial markets and lower economic growth

is handled clumsily, as it was in 1994, then 2014 could be a disastrous year for the world’s most dynamic region. “The markets that are particularly volatile are highyield and emerging-market debt,” says Dan Fuss, who manages the US$23.3 billion Loomis Sayles Bond Fund in Boston and is a veteran of many bond-market crashes dating back to the 1960s. “The scenario isn’t pretty.” The Fed may not move for some time. U.S. unemployment is more than 7 percent, and the risks of deflation are at least as high as those of accelerating inflation. Also, Bernanke’s Fed is far more open and communicative than Greenspan’s Kremlin-like organisation. The odds favour Bernanke telegraphing policy shifts well in advance. Yet any missteps could quickly panic markets. Sovereign-debt levels have more than quadrupled to US$23 trillion since 1994. Concerns about too much debt chasing too few buyers could amplify market swings. The world economy was a far healthier thing 19 years ago, before the euro existed, China’s economy mattered and high-frequency trading dominated the world’s bourses. Asia now holds trillions of dollars of currency reserves.

Creative management South Korea has been creative in managing giant waves of hot money emanating from zero-interest-rate policies in Frankfurt, London, Tokyo and Washington. Although that liquidity inflated property prices and fanned inflation, South Korea never lost control. The government imposed levies on banks’ financing in foreign currencies and may

impose taxes on financial transactions. For all the problems that ultralow rates cause, they also boosted gross domestic product. Asia must find ways to fill the void with looser fiscal and monetary policies of their own. The real worry, though, is full-blown financial contagion. South Korea is better positioned than many peers, thanks to a sizable currentaccount surplus. The same goes for the Philippines, Taiwan and, to a lesser extent, Singapore. The region’s fiscal weak links, notably Indonesia and India, won’t fare as well. Southeast Asian economies that didn’t use the rapid growth of recent years to retool economies – here, think Malaysia, Thailand and Vietnam – are vulnerable. Export-addicted China could be in for a rough ride. Nor will Japan be unscathed. When Bernanke followed Tokyo’s example by cutting rates to zero and beyond, he couldn’t have expected the Bank of Japan to one-up the Fed’s experiment. Bank of Japan Governor Haruhiko Kuroda would have to venture even further into uncharted monetary territory to offset a Fed reversal. Policy makers must act now and in concert to prepare for the worst. “Coordination seems to be the name of the game,” says Marshall Mays, director of Emerging Alpha Advisors in Hong Kong. “The Fed, for example, could allow the BOJ to do more of the flooding if it wished to start flattening out the monetary growth.” Everyone knows that sooner or later, the Fed will have to yank away the proverbial punchbowl. Asia can hope for Bernanke to act soberly and with caution. But the region had better be prepared for a scare, too. Bloomberg View

June 10, 2013

Closing China ex-rail chief in court on graft claims Vodafone pays no U.K. corporation tax Former Chinese Railway Minister Liu Zhijun was charged with taking 64.6 million yuan (US$10.5 million) in bribes, in a case highlighting the graft that accompanied the rollout of the world’s biggest high-speed rail network. Mr Liu was formally charged with abuse of power and bribery dating back to 1986 as his trial got under way yesterday at the Beijing No. 2 Intermediate People’s Court, China Central Television reported in a broadcast. Mr Liu championed what he called leapfrog development of a rail network that accumulated more than 2.84 trillion yuan of debt.

Vodafone Group Plc, the world’s second largest mobile phone firm, paid no U.K. corporation tax for a second year running in 2012. Vodafone said U.K. network investment and interest payments wiped out corporation tax liabilities for the year to April. It said operating profits of 294 million pounds (US$457 million) in 2012 were offset by interest payments of 300 million pounds on loans to buy 3G spectrum. The company said it was committed to “integrity in all tax matters” and that it paid 882 millions pounds in other U.K. taxes and contributions during the year.

EU says countries also accountable for ailing banks Direct recapitalisation only if public finances ‘very seriously’ at risk

EU – trying to shore up its banking system

uro-area states should only be able to seek direct help for their banking systems from the currency zone’s firewall fund if their national solvency is at risk, the European Commission said in a draft report. Otherwise, the European Stability Mechanism should lend funds to the affected nation, which would then be responsible for channelling the money to overhaul its lenders as was the case for Spain, according to the document obtained by Bloomberg News. Direct ESM aid is part of the European Union’s strategy to

shore up its banking system through common supervision and standards for dealing with failing banks. A nation with weak banks “will qualify for a direct recapitalisation only if its public finances are very seriously at risk,” said the undated report intended to accompany commission plans for centralised bank resolution in the euro area, scheduled for release in coming weeks. As the EU struggles with how to restore economic growth and overcome its sovereign debt crisis, Germany and France last week said work on a banking union to bolster

crisis prevention needs to proceed in a coordinated way, suggesting that guidelines for ESM direct aid won’t be ready mid-2013 as planned.

Direct aid EU leaders agreed last year that the ESM should be empowered to bypass national authorities and give aid directly to banks in a crisis. The step, like the broader banking union plan, was targeted at breaking financial links between banks and sovereigns. The EU should confront troubles

Portugal, Greece eye German loans to SMEs Berlin to loan US$1.32 billion to Spain’s small businesses

ortugal and Greece are interested in the same kind of support for lending to small business that Germany agreed with Spain last week, a spokeswoman for the German finance ministry said, but they will need a state financing body to qualify. Anxious to support growth and combat unemployment elsewhere in the euro zone, Berlin has laid out a scheme to grant Spanish small and medium-sized companies (SMEs) aid of roughly 1 billion euros

(US$1.32 billion). A German magazine reported on Saturday that the government wants to extend the scheme to make it easier for companies to get credit in other countries across the currency area’s crisis-stricken southern half. A spokeswoman for the German finance ministry said the measure was part of an overall strategy to promote growth and employment, especially for young people, in the countries which have been bailed out in Europe’s debt crisis.

“We must succeed in solving the acute financing problems of companies that have a robust business model and good growth prospects,” a spokeswoman for the German finance ministry said in a statement, asked to confirm the magazine report. “Portugal and Greece are interested in similar measures [to Spain],” she said. The scheme for Spain laid out this week will see German state development bank Klepper

in its financial system that led to five euro members seeking rescues, according to the undated document. “The question of who pays and assumes losses when a bank is resolved is critical,” it said. “Losses cannot be legislated away.” The 500 billion-euro (US$661 billion) ESM is expected to make as much as 60 billion euros available for bank aid, according to the draft. Taking into account other ESM lending, this would leave 210 billion euros available for new programmes, and that amount would rise to 270 billion euros by the end of this year when Spain’s bank-aid programme ends. The prospect of direct aid from the ESM will complement proposals for a Single Resolution Mechanism that will include roles for the commission, bank supervisors and national authorities. This mechanism needs its own fund, which will start out guaranteed by nations and over time be replaced by industry fees, which also would repay the fund for any losses, the report said. The common fund “should have a guarantee and/or credit line from a public backstop,” the report said. “This could match the target size of the fund the first year and be progressively reduced so as to cover only the difference between the target size of the fund and its actual size.” The EU should move ahead with all components of the banking union plan as fast as it can, the report said. To avoid delays “concluding these steps should however not be conditional on one another,” it added. The draft also said nations will be responsible for any public funds required before 2015, when EU regulators are expected to gain powers to force losses on some creditors under new “bail-in” rules. Bloomberg News

Faltbootwerft AG provide loans to state credit agency Instituto de Credito Oficial (ICO), which will pass the money on to small companies. The spokeswoman said both Portugal and Greece would need a similar agency to receive such loans. “I have already told my Portuguese colleague: ‘You can have all of that too,’” the report in weekly WirtschaftsWoche quoted Finance Minister Wolfgang Schaeuble as saying. Finance and labour ministers from France, Spain, Germany and Italy are due to meet in Rome on Friday to discuss measures to combat youth unemployment, which is at record levels across Europe. Germany, blamed by citizens in southern Europe for insisting on spending cuts and structural reforms in exchange for bailouts, is keen to shore up its image as the risk of social and political unrest grows. Reuters