Macau Business Daily, June 25, 2013 by Business Daily

April 19, 2013

June 25, 2013

Interest rate lift may ease home price rises

Year II

Number 312

Tuesday June 25, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Govt needs more data on MTEL Internet bid Page 6

Growth in tourism slowest since 2003 Page 7

Louis XIII revenues soar on build contracts Page 8

More on page 5

www.macaubusinessdaily.com

Political heavyweights shun La Scala hearing It’s a corruption trial noted more for absences than for who’s actually there. Imprisoned former official Ao Man Long and two prominent politicians were among the latest absentees yesterday at the La Scala bribes trial. Executive Council member Eddie Wong Yue Kai and Legislative Assembly member Chui Sai Cheong, brother of Macau’s Chief Executive, were missing despite a request from defendant Steven Lo Kit Sing’s lawyer. Page 4

I SSN 2226-8294

Hang Seng Index 20040

19984

19928

19872

19816

CTM to give rivals a leased line break

19760

June 24

HSI - Movers

Mobile telecommunications operators Smartone and Hutchison could see their costs decrease as soon as next month, with CTM “very close” to reaching a deal with the government to reduce leased line fees by “nearly 20 percent”. The telecom regulator had earlier this month warned the city’s major telecom firm that high fees were stunting other operators and leading to an ‘unhealthy’ market.

Name

Page 6

Macau Legend ‘may reduce’ share offer

%Day

WANT WANT CHINA

1.20

CHEUNG KONG

0.10

CHINA RES LAND

-0.21

HONG KG CHINA GS

-0.22

SUN HUNG KAI PRO

-0.31

CHINA PETROLEU-H

-4.51

WHARF HLDG

-5.28

SANDS CHINA LTD

-5.35

GALAXY ENTERTAIN

-5.72

BELLE INTERNATIO

-7.34

Source: Bloomberg

Macau Legend Development Ltd confirmed in a regulatory filing yesterday it “may reduce” the size of its global share offering due for listing in Hong Kong. A person with knowledge of the situation told Business Daily that if the offer does go ahead, the pricing is likely to be at the very bottom or below the range of HK$2.98 (US$0.38) to HK$2.30 per share. Page 8

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June 25, 2013

Macau

Political heavyweights shun La Scala hearing A Legislative Assembly member and an Executive Council member join Ao Man Long in not testifying Tony Lai

tony.lai@macaubusinessdaily.com

mprisoned former government official Ao Man Long and two prominent political figures failed to show up yesterday to testify in the trial of those accused of corruption in the grant of land for La Scala, the high-end housing project. The presiding judge, Mário Silvestre, said Mr Ao had declined to testify in the trial of those charged with bribing him, when he was secretary for transport and public works, to obtain grants of land or government contracts. Mr Ao has the right to refuse to testify, given that the Court of Final Appeal has convicted him on charges of corruption and money laundering arising from the same cases. “He can exercise this right, and there is nothing the court can do about it,” Judge Silvestre said.

Hong Kong tycoons Joseph Lau Luen Hung and Steven Lo Kit Sing are accused of paying Ao HK$20 million (US$2.5 million) to ensure the success of their bid for five plots of land near Macau airport, on which La Scala was being built. Mr Lau, boss of property developer Chinese Estates Holdings Ltd, and Mr Lo, chairman of entertainment firm BMA Investment Group Ltd, are also charged with money laundering. Mr Lo ignored questions from reporters yesterday. Mr Lau was absent from court for the fifth hearing in a row. His partner and the mother of his children, Yvonne Lui Lai Kwan, was again present. Rui Sousa, counsel for Mr Lo, had summoned Legislative Assembly member Chui Sai Cheong and

Executive Council member Eddie Wong Yue Kai as witnesses. Mr Sousa said they were “important to the trial”.

Dated development Jorge Neto Valente, also a counsel for Mr Lo’s, told reporters after the hearing: “There are references in the files to make us believe that they know facts about the airport land development in the 1990’s.” He argued that the government wanted to sell the land plots long before the 2005 tender won by Mr Lo’s company. The prosecutors allege that the two business tycoons knew about this intention in advance. Judge Silvestre said in the hearing: “The Legislative Assembly president has written a letter saying

[he] will not allow Chui Sai Cheong to attend the hearing or provide written testimony.” Mr Wong was also not allowed to testify by Chief Executive Fernando Chui Sai On. Mr Sousa called the absence of Mr Chui and Mr Wong “regrettable”. Mr Chui is an accountant and the chief executive’s elder brother. Mr Valente told reporters that Mr Wong, chairman of the Architects Association of Macau, was involved in drafting a 1995 development plan for the plots to attract buyers. It was revealed in the hearing that the plan was called “Macau International Airport Business City”. Mr Sousa claimed “some brochures and plans” had been produced and some promotional activities had been carried out abroad, namely in Taiwan. He said “a foreign party” had offered US$100 million (800 million patacas) for those five plots. Mr Neto Valente said renowned businessman Ng Fok, a shareholder in the companies that owned the plots, could testify over the 1990’s plan in future hearings. But two Jones Lang LaSalle directors and Deng Jun, former chairman of Board of Directors of Macau International Airport Co Ltd, testified that they had not heard of this plan. Some defence lawyers again argued with the presiding judge over the admissibility of certain documents.

Chui Sai Cheong, left, and Eddie Wong did not appear in court

Joseph Lau eyed plots for Cotai hotels Hong Kong business tycoon had shown interests in Macau land, witness says Tony Lai

tony.lai@macaubusinessdaily.com

he boss of Hong Kong-listed property developer Chinese Estates Holdings Ltd, Joseph Lau Luen Hung, was interested in at least two Cotai plots, the Court of First Instance heard yesterday. Mr Lau’s counsel, Leong Weng Pung, showed in court two concept plans for projects Chinese Estates wanted to develop in two separate plots in Cotai. One involved a hotel to be located close to Macau East Asian Games Dome whereas the other included a hotel and a theme park, the lawyer said. But both plans failed to be

materialised, according to Mr Leong. Both Gregory Ku Ka Ho, managing director for property services company Jones Lang LaSalle (Macau) Ltd, and Lo Hing Hung, former director for investment at Jones Lang LaSalle Hong Kong, said they were not aware of those plans. Lo Hing Hung added, however, that he knew about these vacant plots and “there is the possibility” he might have told Mr Lau about them in the past. The agent had helped Mr Lau with some Hong Kong estate investments and represented Moon Ocean Ltd,

which was later bought by Chinese Estates, to bid for five plots near the airport in 2005. Mr Lao and Steven Lo Kit Sing, chairman of entertainment firm BMA Investment Group Ltd, are accused of paying Ao Man Long, then government official, HK$20 million (US$2.5 million) to ensure the success of their bid. Mr Leong said in a hearing last week the so-called ‘friendship notebooks’ kept by Mr Ao did not link Mr Lau to the airport land. “The notebook only recorded “Big Lau/Cotai land,” he added. In three previous trials the courts

accepted as a fact that Mr Ao recorded money he received from bribes in ‘friendship notebooks’. Lo Hing Hung said both tycoons “have always been interested in developing [projects] in Macau”. He had contacted several Hong Kong businessmen, including the two defendants, about the airport land after the owners – five private companies controlled by the government – had put the plots for sale in 2005, he added. The agent said he “received no information from anyone” to contact Mr Lau and Steven Lo for the bidding.

June 25, 2013

Macau

Interest rate lift may ease home price rises Estate agent says prices could decrease in second half of year Stephanie Lai

sw.lai@macaubusinessdaily.com

U.S. bond-buying programme could be over by mid-2014, said Fed chairman Ben Bernanke

ith investors expecting an interest rate rise in the United States next year, the rapid surge in Macau’s home prices could lose steam, experts told Business Daily. The mortgage rates charged by banks here are in lockstep with interest rates in the United States thanks to the indirect currency peg between the pataca and the U.S. dollar. “The large property investment craze in Macau will be calmed by the expectations of the U.S.’s gradual trim of the bond buying [programme] and an eventual rise in interest rate in the coming year,” said Jacky Feng Wei Wei, an asset management professional and a member of the Macau Economic Association. United States Federal Reserve chairman Ben Bernanke said in a news conference last week that the central bank might start reducing its bond-buying programme this year and end it entirely in mid-2014. Such a move by the Fed would lead to an increase in interest rates, which are currently close to zero. “But there is no chance that the property price here will go down steeply,” Mr Feng said. “Instead it will just ease and stabilise,” he predicted. Jacky Shek Po Tak, director of Centaline (Macau) Property Agency Ltd, agrees. “It is possible that the expectation of a hike in interest rate may further slow the property price surge, or even lower the price level in the second half of this year,” Mr Shek said. That will depend on how gradually the United States will be trimming the scale of its bond-buying scheme

during the rest of the year, said Mr Shek, who also heads the Macau Property Evaluation Association. The gradual end of the unprecedented quantitative easing programme will depend on whether growth quickens and inflation moves up closer to the Fed’s two percent target, Mr Bernanke said last week. He also suggested that a key milestone for the Fed is whether the current 7.6 percent jobless rate in the United States falls to seven percent by this time next year.

KEY POINTS Fed planning end of bond buying Macau home costs fuelled by limited supply, high demand HK could adjust interest rates earlier than U.S.

Home prices fell slightly in April after reaching an average of 88,097 patacas (US$11,025) per square metre in April, the highest ever according to official data. Mr Feng believes that the limited property supply currently available in the city and strong investment

demand for bricks-and-mortar would still remain a price driver. Mr Shek noted that the latest Fed announcement has not caused any panic in the local property market here so far. “This year, following the housing pre-sales law and the regulation on estate agents, transactions have slowed a lot and there is already no room for the price to grow further,” he added. Following Mr Bernanke’s announcement, Hong Kong’s Financial Secretary John Tsang Chun Wah said the city may adjust its interest rate “earlier than the U.S.” if capital begins to flee. Even though the Fed has not yet raised the interest rate, investors are expecting it and that “will gradually affect Hong Kong’s property market,” Mr Tsang wrote in his blog on Sunday. “Though we did not yet notice any large outflows of capital from Hong Kong, this possibility still remains and cannot be neglected,” he noted. “Macau may not follow suit with Hong Kong’s announcement,” Mr Feng said. “Given that the in- and out-flow of hot money from Hong Kong is very fast, John Tsang needed to make a statement like that as a reminder to the public of the financial system’s security,” Mr Feng added. “But Macau’s capital flows are not as fast as in Hong Kong, and its private and public savings structure is very stable,” he said. “There is not as much of an urgency to announce a lifting of interest rate as in Hong Kong,” the asset manager said.

[Home] transactions have slowed a lot and there is already no room for the price to grow further Jacky Shek Po Tak, director of Centaline (Macau) Property Agency

There is no chance that the property price here will go down steeply; instead it will just ease and stabilise Jacky Feng Wei Wei, Macau Economic Association

with Bloomberg News

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June 25, 2013 April 19, 2013

Macau

Lower leased-line fees in July: CTM Citic Telecom’s takeover to improve telecom services in the long-term, company says Stephanie Lai

sw.lai@macaubusinessdaily.com

acau’s sole landline telecommunications operator could charge less money for allowing rival companies to use its network, starting next month. Companhia de Telecomunicações de Macau SARL (CTM) has recently reviewed its tariffs and the new pricing model is expected to take effect in July. Existing customers will see their monthly charge for leasing CTM’s network drop by “an average of nearly 20 percent” while new customers will enjoy a cut of at least 15 percent, chief executive Vandy Poon Fuk Hei said yesterday. Mr Poon said the company was “very close” to reaching an agreement in the negotiations with the government over the tariff change. CTM submitted a proposal to reduce these fees in November but the government thought the cut was not enough. It still “failed to reflect market conditions,” the director of the Telecommunications Regulation Bureau, Lawrence Tou Veng Keong, told media last month. CTM reduced its leased-line fees by between 10 percent and 40 percent in August 2010. One operator of a wireless network, SmarTone Mobile Communications (Macau) Ltd, said last month that leased-line fees were six to eight times higher here than in similar markets, such as Hong Kong.

Mr Poon reiterated that his company is still hoping to launch 4G telecom services by the end of this year or early 2014. CTM’s technology is mature enough to launch the 4G service, though the company has yet to come to terms with the government on the available spectrum for other operators, he stressed. However, Mr Tou told media he was still studying how it will issue licences to provide 4G services.

Investment coming Citic Telecom International Holdings Ltd has officially become CTM’s controlling shareholder yesterday with a 99 percent stake in the city’s major telecom operator. The Hong Kong-listed firm already had a 20 percent stake and it spent US$1.16 billion (9.27 billion patacas) in buying out Cable & Wireless Communications Plc and Portugal Telecom SGPS SA. Citic telecom chairman and new CTM president Xin Yue Jiang pledged to push forward with CTM’s plan to invest 1.2 billion patacas within three years to optimise the network quality and diversify services. All Macau households should be covered by an optic fibre ne two r k b efo r e 2 0 1 5 , h e to l d media in a briefing. The takeover will not translate into any structural changes in the

Citic Telecom paid US$1.16 bln to become the controlling shareholder of CTM (Photo: Manuel Cardoso)

CTM, Citic Telecom executive director Norman Yuen Kee Tong said. Citic Telecom will serve as a major “technical support” for the Macau firm, he added. “We are one of the top three telecommunications operators in [mainland] China and in connection with 600 fixed-line operators

worldwide,” said Mr Yuen. “Our position can help develop CTM’s fixed-line services in Macau. We can also better manage data services for companies,” he added. The executive added that Citic Telecom would a competitive edge in training CTM’s human resources compared with other competitors here.

Govt wants more info on MTEL internet bid The telecommunications market debutant would have one year to start services to rival CTM’s Vítor Quintã

vitorquinta@macaubusinessdaily.com

CTM may be on its way to losing its stranglehold on internet access

he government will ask the newcomer to the city’s telecommunications market, Companhia de Telecomunicações de MTEL Ltda, for more information about its bid to introduce competition in the internet access market.

The Bureau of Telecommunications Regulation has said MTEL applied this month for a licence to provide internet access. “Further information will be requested from MTEL for evaluation of the above application,” the bureau

said in an e-mail to Business Daily last week. The bureau said that once it had received the supplementary information, Secretary for Transport and Public Works Lau Si Io would have up to 90 days to make a decision. It said that if MTEL’s bid was successful, the company would have to start providing internet access within one year of getting its licence. This deadline could be hard for MTEL to meet, considering that it would have 18 months to ensure its landline network reached 30 percent of all households, and to sign up its first subscriber. This month MTEL chairman Michael Choi admitted that, as the government had taken longer than expected to approve its fixed-line telecommunications licence, the company had missed the opportunity to lay cables afforded by all the work on infrastructure, such as public housing and the Light Rapid Transit railway, which began last year. If MTEL takes more than one year to set up its own landline network, it

may have to lease the Companhia de Telecomunicações de Macau SARL (CTM) network if it is to launch its internet service by the deadline set. Business Daily tried to get comment from Mr Choi, but we had received no reply by the time we went to press. CTM remains the only telecommunications company that offers internet access here, even though the market was liberalised in 2000. Bureau of Telecommunications Regulation chief Lawrence Tou Veng Keong said this month that the lack of interest from other telecommunications companies in offering internet access was due to the high price CTM charged for the use of its network. “It is difficult for other companies to provide access services in competition with CTM,” Mr Tou said. His bureau told Business Daily: “Increased competition could bring about more choice, higher quality and more reasonable prices of services in the long term”.

June April 25, 19, 2013 2013

Macau

Increase in tourism slowest since 2003 The mainland becomes more important than ever to Macau’s tourism industry Vítor Quintã

vitorquinta@macaubusinessdaily.com

ore visitors came to Macau in the first five months of this year, but the growth in their number was the slowest for a decade, official data show. The number of visitors in the first five months was 11.8 million, 3 percent more than in the equivalent period last year, the Statistics and Census Service announced yesterday. The rate of growth was the slowest in any first five months since 2003. For the past decade the numbers of visitors has grown at an average pace of 27.8 percent per year. The slowdown so far this year was due to decreases in the numbers of visitors from most of the city’s main sources. Fewer visitors came from Hong Kong, Taiwan, Japan, the Philippines and India in the first five months. In May fewer than 62,000

13.6%

Year-on-year increase in visitors from Shanghai in the first five months

visitors were from Taiwan, the lowest figure in any month since the Statistics and Census Service began collecting data in 2008. In the first five months over 30 percent fewer visitors were from Japan than a year earlier. Only two of Macau’s main sources of visitors sent more than a year earlier. One was South Korea, which sent almost 192,600 visitors, 4.1 percent more. “This trend is likely to continue,” the president of the Macau Travel Industry Council, Andy Wu Keng Kuong, told Business Daily last week. “It mainly has to do with heightened tourism promotion activities following more frequent flights between Macau and that country,” Mr Wu said. In the past year Air Busan has begun flying between Macau and Busan, South Korea’s second-biggest city. The operator of Macau International Airport said in March that South Korean low-cost carrier Jin Air was planning to introduce a fifth weekly flight between Macau and Seoul in the second half of this year. Since October the Macau Government Tourist Office has organised three series of promotional events in South Korea. Macau’s other main source of

business as usual

Crystal ball

Pedro Cortés newsdesk@macaubusinessdaily.com

e have now surpassed more than half of the life expectancy of most of the current gaming concession licences and, consequently, of the sub-concessions. Nine years and some months from now there will be an entirely new picture, which may, of course, be of the same scene, showing the same six casino operators in the city. However, I do not believe things will be kept as they are now, simply because the Chief Executive by then will not be Fernando Chui Sai On, unless the Basic Law is amended. Those gaming operators that play by the rules, really helping Macau’s economic development and caring for its people and the welfare of the city, are in a better position to have their concession licences renewed or, in the event of changes in the law, to be given new gaming licences. No one can predict yet what is going to happen, but now is the time for the concessionaires to begin politely convincing government officials and the inhabitants of this city that they deserve to continue filling their shareholders’ pockets with money. A good way for them to begin would be to look carefully at the concession and subconcession contracts and fully appreciate that the operation of games of chance belongs ultimately only to the Macau Special Administrative Region, and is not an absolute right of the concessionaires. They should realise that not only must they play fair, but they must also be clean because, as it is often said, what goes around comes around. Another wise approach would be to appreciate at last that Macau is not an extension of the State of Nevada, but of the People’s Republic of China.

Fewer visitors came from Hong Kong, Taiwan, Japan, the Philippines and India in the first five months

visitors that sent more than in the first five months than a year earlier was mainland China, which sent 7.4 million, or 8 percent more. The mainland is now more important than ever to the tourism industry here, in spite of the government’s promise to lure more tourists from elsewhere. Mainlanders made up 63 percent of all visitors in the first five months. Last year they made up 60.2 percent, the highest proportion ever. Visitors from just over the border

in Guangdong were not quite as predominant as they usually are. The number from Guangdong fell by 1 percent to 3.3 million. But more visitors came from other mainland provinces or cities, notably Shanghai, which sent 230,400, or 13.6 percent more. In May over 2.3 million people visited Macau, 9.1 percent more than a year earlier. In April the city had just 0.7 percent more visitors than a year before.

June 25, 2013 April 19, 2013

Macau

Macau Legend ‘may reduce’ size of global share offer If it goes ahead, pricing likely ‘at or below’ bottom of declared price range, suggests source Michael Grimes

michael.grimes@macaubusinessdaily.com

acau Legend Development Ltd confirmed in a regulatory filing yesterday it “may reduce” the size of its global share offering due for listing in Hong Kong. A person with knowledge of the situation told Business Daily that if the share sale for the Macau-based casino services company does go ahead, the pricing is likely to be at

the very bottom or below the range of HK$2.98 (US$0.38) to HK$2.30 per share mentioned in a Hong Kong filing on June 17. “I think there’s still significant demand in the U.S. for this offering. There are institutions there that want to get exposure to the Macau gaming growth story. But it’s the meltdown in the equities markets generally that is the problem,” said the person.

Three new casino hotels planned for Fisherman’s Wharf

“If it goes ahead I think the price will be at or below the bottom of the range.” A pricing at the bottom of the band could reduce the potential of the share sale by around a quarter. A reduction of 50 percent on the HK$6.11 billion (US$787 million) target mentioned by the firm in a term sheet two weeks ago has been cited as a possibility in some reports. “That would likely leave them in the position of needing to come back to the market later,” added the person with knowledge of the situation. “For that reason they might be better to wait for an improvement in market conditions.” A second source told Business Daily: “I think it is reasonable for them to cut down the size of the offer. The problem is it will not give them enough funding for what they want to do. They will have to come back to do another round later on.” Macau Legend’s prospectus says it is seeking to build three new casino hotel properties at Fisherman’s Wharf – a site it controls on Macau peninsula – and to open them in stages between the fourth quarter of 2014 and the third quarter of 2016. Its prospectus adds the aim is to stock the third casino hotel with 117 gaming tables. The second person added: “The

figure of US$350 million I have heard mentioned for a revised offering is small nowadays in casino project terms – especially if you want to build several venues.” By way of comparison, investors in the casino property Louis XIII planned for the Cotai-Coloane border are planning to spend the equivalent of US$800 million for 66 tables and 230 hotel rooms, said Stephen Hung, chairman of Louis XIII Holdings Ltd, in March. Macau Legend didn’t say in its filing yesterday whether its share offer would be postponed or even abandoned. It referred investors to the prospectus filed a week ago on Monday. That stated the offering would lapse if the offer price is not agreed “on or before 26 June” – i.e. tomorrow – the day before the shares were originally due to start trading in Hong Kong. Another issue hanging over the Macau Legend offer is the company’s assertion it has the right to 350 new gaming tables outside the Macau government’s 5,500-table cap. It has no table quota of its own because it is not a Macau gaming concessionaire, and depends for its tables of Sociedade de Jogos de Macau SA, founded by Stanley Ho Hung Sun. The cap allows for the equivalent of only three percent annual compound growth in live dealer tables between now and 2023. Hong Kong share prices of all the Macau gaming concessionaires and sub-concessionaires fell yesterday. Galaxy Entertainment Group Ltd was down 5.72 percent to HK$37.10, while Melco Crown Entertainment Ltd slipped 4.76 percent to HK$58.00. MGM China Holdings Ltd dropped 6.52 percent to HK$18.36, and Sands China Ltd saw 5.35 percent clipped off its price, to HK$35.35. SJM Holdings Ltd saw a more modest dip of 2.94 percent to HK$17.84, while Wynn Macau Ltd dropped 3.04 percent to close at HK$20.75.

Louis XIII revenues soar on new contracts Boutique casino construction set to weigh on developer’s future results Vítor Quintã

vitorquinta@macaubusinessdaily.com

ouis XIII Holdings Ltd has seen its revenue in Macau grow more than four-fold in the past financial year thanks to more construction contracts here. But the company warned that it expects to post a loss for the current year as it begins to build a boutique casino on the Cotai-Coloane border. Louis XIII’s turnover in Macau reached HK$2.5 billion (US$322.3 million) in the 12 months ended March 31, up from just HK$555.9 million a year earlier. All of that money came from builder Paul Y. Engineering Group Ltd, of which Louis XIII has a 51 percent stake, the firm told the Hong Kong Stock Exchange. Paul Y Engineering secured new contracts worth HK$13.2 billion in Hong Kong and Macau “as a result of a significant increase in capital investment by governments and investors,” says a filing released late Sunday.

In Macau the company is doing construction works at Studio City, a gaming resort controlled by Melco Crown Entertainment Ltd. Louis XIII said it is “confident” of securing more construction contracts here in the coming years, thanks to “several large integrated resorts developments (…) launching within the next two years”. The developer posted a profit of HK$22.18 million for the last financial year, down by almost a third. The construction segment is expected to record a profit in the current financial year, which ends in March 2014, the company said in another filing. But Louis XIII predicts an overall loss in its annual budget, “mainly caused” by the construction of a US$800 million project on a 65,000 square feet (6,038 sq. metres) plot. “Upon completion the property will contribute with strong cash flows

Louis XIII is building a US$800 million boutique hotel-casino (Photo: Manuel Cardoso)

to the group,” Louis XIII said. The developer stressed that the casino set to run within the boutique project is “subject to government approval”.

A person with knowledge of the process told Business Daily in January that the government is yet to give out any permission for gaming facilities on the plot.

June April 25, 19, 2013 2013

Greater China Chinese stocks enter bear market Chinese stocks plunged, entering a bear market, and global bonds fell amid concern a cash crunch will hurt growth in the world’s second-largest economy. Commodities slumped and the dollar gained for a fourth day. The CSI 300 Index of China’s biggest companies tumbled 6.3 percent to end at 2,171.2 points, the most since August 2009, taking its decline from this year’s peak to more than 20 percent. The Shanghai Composite Index dived 5.3 percent. This was their respective worst daily losses since August 31, 2009. The Shanghai financial sub-index plummeted 7.3 percent in its worst day since November 2008.

LME woos Chinese traders as Shanghai vies for stake Investors eye access to warehouses in mainland China

Solar companies move production overseas Chinese producers try to avoid EU solar duties

Chanyaporn Chanjaroen

Mr Li plans to introduce yuandenominated commodities contracts, competing in a market that the China Futures Exchange Association valued at 95.3 trillion yuan (US$15.5 trillion) in 2012. All of it went through three Chinese exchanges that restrict access to foreigners. That included the Shanghai Futures Exchange, which handled almost US$7.1 trillion of commodity contracts last year, according to data compiled by the World Federation of Exchanges. The bourse lists gold, silver, steel, rubber and fuel oil in addition to industrial metals. The Shanghai exchange plans to open some of its existing products to foreign investors, starting with industrial metals and rubber and then gold and silver, chairman Yang Maijun said last month, without giving a timeframe. The bourse will also give overseas institutions access to delivery to warehouses inside China, subject to the approval of regulators, he said. “The competition between Shanghai and the LME will certainly increase as the SHFE looks to expand and become much bigger, more global, more international,” said Wan Ling, the Beijing-based manager for China nonferrous metals analysis at CRU, a research company.

s Europe slaps duties on US$15 billion of solar panels, their Chinese producers are preparing to counterattack with devices assembled from South Africa to Istanbul that will avoid the import taxes. Trina Solar Ltd, JinkoSolar Holding Co and Canadian Solar Inc. are among Chinese companies preparing to shift manufacturing abroad, dodging penalties imposed by the European Union in the bloc’s biggest ever anti-dumping action. China is pivoting as the EU this month set provisional tariffs on solar goods of 11.8 percent, a rate set to quintuple in August. At stake are imports from Yingli Green Energy Holding, the world’s largest panel maker, and more than 100 other Chinese makers of silicon-based panels, cells and wafers. Jinko’s yet-to-be-completed factories in South Africa and Europe could be used as “backup solutions” depending on how high the EU raises its duties, Dany Qian, the company’s global branding director, said in an interview in Munich. As Chinese and EU officials held talks in Beijing last week to head off the planned jump in duties, its companies are preparing for the worst – a years’ long battle over whether Chinese suppliers unfairly benefit from state subsidies and by dumping, or selling below cost, in the biggest solar market. Growing trade tensions between China, the largest solar products maker, and the EU threaten a relationship that generated about 434 billion euros (US$568.5 billion) of exports and imports of all kinds last year, according to European Commission statistics. Jinko is setting up plants in South Africa and Portugal that could export to Europe duty-free. Canadian Solar Inc, which has most of its operations in China, may open factories in Taiwan, Malaysia or Thailand, chief commercial officer Yan Zhuang said. China and the European Union share the will to solve the solar trade spat in talks. “Technicallevel discussions,” began in Brussels at the start of last week and are continuing in Beijing, EU Trade Commissioner Karel De Gucht told reporters. “But it is early days in the negotiation process. This kind of thing is rarely solved overnight.”

Bloomberg News

US$14.5 trln Value of metal futures traded in the LME last year

t a time when the London Metal Exchange is the closest it has ever been to entering China, the rival Shanghai Futures Exchange is looking for a bigger share of the US$20.6 trillion global market in metals futures. While the LME already handled US$14.5 trillion of trade last year, backed by a network of more than 700 warehouses in 36 locations that ensure physical delivery, Chinese regulations from 2008 mean it has no depot in the biggest metalconsuming nation. That may change because the bourse was bought by Hong Kong Exchanges & Clearing Ltd in December and chief executive Charles Li said he wants to be in the world’s second-largest economy. The LME board picked HKEx, with no existing commodities business, over bids from IntercontinentalExchange Inc., CME Group Inc. and NYSE Euronext, in part because it judged Mr Li, the former chairman of JPMorgan Chase & Co in China, the most likely to win over Chinese regulators. The Gansu, China-raised CEO is facing competition from the Shanghai bourse, which said in May it plans to give overseas institutions access to warehouses in China and add its first depots overseas. “The danger for the LME is that if they don’t get into China, Shanghai will attract an increasingly large amount of business once China opens up,” said Christopher Gilbert, a professor at Trento University in Italy who has studied commodities for four decades. “Under Hong Kong Exchanges, it’s certainly increased the chances of getting into China. They really need to have warehouses on the mainland.”

Mr Li is expanding a strategy that began before last year’s acquisition. The LME opened a Singapore office in 2010, its first in the region, and introduced Asian benchmark prices for copper, aluminium and zinc in 2011. Transactions in Asian hours accounted for 16 percent of electronic trading in three-month futures in 2012, according to the LME. A Bank of China Ltd unit was approved as the LME’s first Chinese company member last year and the bourse said June 17 it listed Taiwan as a storage point. Warehouses in China are important because they would make it easier for Chinese traders using the LME to get metal delivered locally. The LME “ideally” would eventually be able to license warehouses in mainland China, Mr Li said in his blog on June 17. HKEx’s Mr Li, who became CEO in 2010, wrote on his blog last month that he is seeking “partnerships” with Chinese exchanges as a way of getting into the mainland, without giving details. The bourse also signed a memorandum of understanding with Bank of China yesterday in Hong Kong on clearing of yuandenominated commodity products. Guo Shuqing, then chairman of the China Securities Regulatory Commission, visited HKEx in January and met with Mr Li, about a month after the US$2.2 billion LME acquisition was completed. It is the CSRC’s rules that bar foreign exchanges from registering warehouses for commodity deliveries on the mainland. The two discussed “issues of mutual interest,” the Hong Kong bourse said in a statement, without giving details. “I have to assume that the Chinese regulators gave their tacit

approval to the purchase,” said Peter Barrowcliff, the London-based global head of metals at Newedge Group, a member of the LME. “That portrays the willingness to internationalise their market. While the rules haven’t changed so far, that perhaps could set a scene for the rules to be relaxed.”

Opening up

10 10

June 25, 2013 April 19, 2013

Greater China Beijing Auto to push for overseas buys Beijing Automotive Group Co, which manufactures vehicles with Daimler AG and Hyundai Motor Co in China, started a unit to spearhead acquisitions abroad, starting with Europe. “We will do everything in our power to explore overseas markets,” Beijing Auto chairman Xu Heyi said June 22 in Beijing. “Establishment of this unit puts us at a new historical threshold.” The carmaker plans to have 2.5 billion yuan (US$408 million) of profit from abroad with a vehicle-sales target of 400,000 units by 2020. Newly established BAIC International Development Co. will be in charge of overseas acquisitions and investment as well as boosting international vehicle and parts sales, according to Dong Haiyang, president of the unit. BAIC International is seeking targets in Europe, and investment banks have found three medium-size automakers with “good brand image,” Mr Dong said at a press conference. “We want to acquire such mid-sized brands in Europe while the economy is sluggish, so we can use their facilities as a production base to expand there.” Beijing Auto is seeking an initial public offering in Hong Kong as early as this year to help expand vehicle sales more than 70 percent by 2015 from a target of 2.1 million units this year, chairman Xu said in March.

PBOC breaks silence over cash crunch Central bank warns big lenders need to help restore calm

ears of a credit crunch in China’s banking system eased yesterday as short-term interest rates fell, and the central bank said there were sufficient funds in the market but banks needed to improve their cash management and control their lending. The People’s Bank of China (PBOC) has engineered a tightening of cash in money markets as it tries to rein in excessive credit growth, especially in the lightly regulated “shadow banking” sector, seeing interest rates spike to 25 percent or higher for some deals late last week. “Panic over a liquidity squeeze appears to be fading. We are lending more money out, but I did not hear about any central bank money injection into the market,” said trader at a major state-owned bank in Shanghai. “At present, the overall liquidity in China’s banking system is at a reasonable level, but due to many changing factors in the financial markets and also because of the mid-year point, the requirements for commercial banks in liquidity

management have become higher,” the PBOC said in a statement dated June 17 and published on its website yesterday. The benchmark seven-day rate fell to 7.47 percent from 9.25 percent on Friday, its lowest since June 13. Despite the improvement in funding conditions, stocks fell sharply yesterday. China’s central bank said it might adjust monetary policy as needed, suggesting officials are more open to loosening policies as a cash squeeze risks exacerbating an economic slowdown. The PBOC said the nation should “appropriately fine-tune” its policies, according to a Sunday statement that summarized the monetary policy committee’s second-quarter meeting in Beijing. Analysts and traders said the PBOC was concerned about various activities including arbitrage, speculation, and underground lending, that it thinks are increasing leverage and financial risk without supporting the real economy. “It’s much easier to borrow money

today, but costs remain high. Our business is apparently affected, but mainly on side business, such as wealth management,” said a trader at a mid-sized commercial bank in Shanghai. “Maybe this is what the central bank hopes as the government is calling for more money to be used for real economy.” A commentary by state-run news agency Xinhua on Sunday said liquidity in the banking system was ample but that funds had been misdirected. “Many large companies are still spending heavily and making large purchases in wealth management products. There is also a lot of hot money seeking speculative investments and private lending is still widespread,” the commentary said. Goldman Sachs Group Inc. economists led by Cui Li in Hong Kong said in a report earlier yesterday that the liquidity tightening is another indication that the government’s priority is to tackle “structural problems” in the economy. Reuters

Nestle to open new factories Nestle SA, the world’s biggest food maker, said it will open two factories in China next month to tap growth in the world’s most populous nation even as the economy slows. The Swiss foodmaker will open a coffee plant in the eastern province of Shandong, and another food factory with Chinese partner Yinlu Foods Group, Roland Decorvet, the company’s Greater China chairman and chief executive, said in an interview. The company didn’t disclose the investment amount. Nestle, maker of Nescafe coffee and Maggi food seasonings, is relying on the world’s second-largest economy to boost sales as demand in other emerging markets slows. Nestle reported in April its slowest first-quarter revenue growth since 2009 as sales for its products in the Asia, Oceania and Africa region decelerate, and government austerity programs weigh on growth in Europe. “We are quite confident for the market,” Mr Decorvet said. “People still need to eat. The government clearly wants to focus on the growth of the domestic economy. The wages keep increasing; the urbanisation keeps increasing as well.” Nestle more than doubled Greater China sales last year to 5.16 billion Swiss francs (US$5.61 billion).

Lenovo eyes games to boost phone sales To offset falling PC sales and reduce its reliance on ThinkPad notebooks, Lenovo Group Ltd is adding a gaming service that the computer maker says can help it overtake Samsung Electronics Co. in smartphones in China. Lenovo Game World will include socialnetworking features, software reviews and gameplay tips when it starts in the third quarter, offering popular titles like “Fruit Ninja” for devices such as the computer maker’s Ideaphone K900 that run Google Inc.’s Android operating system. Software and services underpin chief executive Yang Yuanqing’s push to sell more handsets as demand for personal computers slides. While Lenovo’s app store has logged more than 1 billion downloads since it opened in 2010, the company is looking to Game World for an edge in the biggest market for handsets, where mobile-game sales of US$1.6 billion this year will rise about 50 percent annually for the next three years, researcher Analysys International predicts. Sales of mobile games in China will rise 55 percent to 9.6 billion yuan this year, Analysys forecast in a report last month. Users of mobile games will rise 30 percent to 280 million this year, it added.

Financial-system liquidity ‘reasonable’, says central bank

Former HK secretary convicted of housing fraud H

ong Kong’s former secretary for development Mak Chai Kwong was convicted of defrauding the government over more than HK$700,000 (US$90,233) of housing allowances

during the 1980s. Mr Mak and another former official knew they weren’t eligible for the allowance, District Court Judge Johnny Chan said in delivering his verdict yesterday. They tried “to get the government to pay for their investment,” Judge Chan said. Mr Mak was arrested last year by the Independent Commission Against Corruption just days after Chief Executive Leung Chun Ying was sworn in on July 1. Mr Leung’s popularity is near a record low as investigations continue against other former officials including the former head of the anti-graft agency. Judge Chan set August 8 for the sentencing of Mr Mak and former assistant director of the highway department Tsang King Man. The two men and their lawyers didn’t

speak to reporters after the verdict was announced yesterday. Mr Mak and Mr Tsang concealed that they had an interest in flats that they leased from each other’s wives in order to claim allowances between 1985 and 1990, according to the ICAC. Lawyers for the two men had argued that the rules on leased properties weren’t clearly defined until 1989 and cross-leasing was a common practice, according to Hong Kong English-language newspaper South China Morning Post. The prosecution told the court that the men had no explanation for not renting each other’s flats in their own names, and no reason for providing inaccurate addresses for their wives, the Post reported. Bloomberg News

11 11

June April 25, 19, 2013 2013

Asia

Rio scraps plan to shed diamonds business

S.Korea says ‘no’ to Universal, Caesars South Korean authorities have rejected preliminary casino licences for two international bidders – a Caesars Entertainment Corp and Lippo Ltd consortium, and Kazuo Okada’s Universal Entertainment Corp. The Ministry of Culture, Sports and Tourism told Reuters on Friday that both requests were rejected. No reason for the decision was given. Reuters quoted a government official saying the decision reflected concerns about Caesars’ credit rating, recently lowered by Moody’s rating agency. Mr Okada is facing probes both in the Philippines and in the United States in regards to how the company landed itself a gaming licence in Manila.

Gold miner writedowns estimated at US$17 bln Newcrest Mining Ltd’s decision to write down the value of its mines by as much as A$6 billion (US$5.5 billion) will lead to the biggest one-time charge in gold mining history. Gold companies that spent US$195 billion on acquisitions in a decade-long price boom are at risk of taking writedowns like Newcrest’s. Newcrest’s writedown, which Australia’s biggest producer said is a result of gold’s slump, is probably the largest aggregate charge announced in the industry, said Michael Elliott, sector leader for Ernst & Young LLP’s global mining practice. Taking into account Newcrest’s expected costs, gold companies will have written down assets by about US$17 billion in the past 16 months, data compiled by Bloomberg show.

Topix volume hits lowest since mid-Dec Japan’s Nikkei share average fell yesterday in choppy trade as worries about Chinese economic and financial stability soured investor sentiment, dragging down China-related stocks such as construction equipment makers and some exporters. The benchmark Nikkei, which climbed as much as 1.5 percent early in the session, ended the day down 1.3 percent at 13,062.78. Of 33 Topix subsectors, 25 were lower, with China-related stocks have the largest declines. The Nikkei China 50 index fell 1.9 percent. The Topix dropped 0.9 percent to 1,089.64 in thin trade, with only 1.63 billion shares changing hands, the lowest level since mid-December.

South Korea tops property investors list A jump in tensions with North Korea has fed a tenfold surge in overseas commercial property spending by South Korean investors, making South Korea the largest property investor so far in 2013. South Korean investors bought about US$5 billion in the first five months, a huge increase on the first half of 2012, real estate consultant Jones Lang LaSalle said. “This allocation to commercial property over such a short period of time is unprecedented for the South Koreans,” JLL said. “Tensions with the North Koreans have certainly aided the capital flight.”

Gloomy outlook – earnings estimates on RWS downed by smog

Q2 outlook for Genting Singapore up in smoke Analyst says pollution suffered by citystate likely put off gamblers at Resorts World Sentosa Michael Grimes

michael.grimes@macaubusinessdaily.com

nion Gaming Research is lowering its second quarter revenue estimates for the Resorts World Sentosa casino property in Singapore by four percent, because of the heavy smoke polluting the city-state’s air last week. It is also making the same judgement for earnings before interest, taxation, depreciation and amortisation. The environmental disaster – not experienced on such a scale in the region since 1997-98 – has been blamed on forest clearance by burning on the Indonesian island of Sumatra. “Since 18 June the air quality in Singapore has registered at least in the ‘unhealthy’ range, with three days (Wednesday, Thursday, and Friday) registering in the ‘hazardous’ category,” said Union Gaming in a note. “…we believe it is likely that VIPs – who have greater control over the timing of their leisure trips relative to mass market customers who are generally locked in to certain dates

for their vacations – are deferring trips to Singapore. Given that the end of 2Q13 is just one week away, we do not think these lost VIP trips can be recaptured this quarter,” stated Union Gaming, adding that some locals are reported to have left the city temporarily. “Our new 2Q13 revenue estimate [for RWS] is S$742 million [4.64 billion patacas] (from S$775 million) and our EBITDA estimate goes to S$351 million (from S$367 million),” stated Union Gaming. Last year casino revenues at Las Vegas Sands Corp’s Marina Bay Sands were down 3.9 percent year-on-year, while those at market rival Resorts World Sentosa, run by Genting Singapore, fell 12 percent. Last month the Singapore government said it was introducing fresh measures to combat problem gambling among locals. Reuters reported that air quality in Singapore improved significantly to “moderate” pollution levels at the weekend, as Indonesian planes water bombed the forest fires.

Suntory’s US$3.9 bln IPO priced near lower end S

untory Beverage & Food Ltd is set to raise as much as 388.1 billion yen (US$3.9 billion) in Japan’s biggest initial public offering this year after pricing near the low end of its range as volatile markets curbed demand. The Tokyo-based soft-drink unit of Suntory Holdings Ltd priced its shares at 3,100 yen each, it said in a regulatory filing yesterday. That compares with the range of 3,000 yen to 3,800 yen it announced last week for the sale of as many as 125.2 million

shares, including over allotment. Suntory is pricing the Tokyo IPO after Asian markets have tumbled on concerns global stimulus will be cut and Japan’s benchmark Topix index has dropped about 6 percent in the last two months as Prime Minister S h i n zo A b e’ s g r o wt h s t r a t e g y disappointed investors. “We decided the price on the back of a very volatile market, so it was tough for the IPO,” Suntory Beverage spokeswoman Tazuko Ikeda said by phone.

Rio Tinto Ltd has scrapped the proposed sale of its US$1.3 billion diamonds business, a setback for its plan to sell a swag of mines and company stakes to tighten operations during a global industry downturn. The world no.3 miner has at least half a dozen assets on the block, aiming to pare US$19 billion in net debt, cut costs and boost returns to shareholders, but buyers are unwilling to pay up in face of volatile commodity prices and rising debt costs. “In resource land it’s just a little bit tough at the moment,” said Paul Xiradis, chief executive of Ausbil Dexia, which owns Rio Tinto shares. “The market would have preferred for Rio to sell [diamonds]… But if you’re not going to achieve the right price, there’s no point in cutting off your nose to spite your face just to achieve an end.” Rio Tinto’s new chief executive, Sam Walsh, this month hosed down expectations for a sale of the diamonds unit, amid speculation the company was going to float the business after failing to find a buyer. “This is not market day at the bazaar. I’d be quite happy to keep it,” Mr Walsh was quoted saying in an interview with The Telegraph in London. Rio’s Diamonds and Minerals chief executive Alan Davies said there was a positive market outlook for diamonds. “After considering a number of alternative strategic ownership options it is clear the best path to generate maximum value for our shareholders is to retain these businesses,” he said in a statement yesterday. Rio’s shares fell 2.2 percent to A$51.50, close to a nine-month low, as mining stocks were pelted on worries about slowing growth in China. Rio Tinto put the diamonds arm up for sale in March 2012, soon after rival BHP Billiton put its diamonds unit on the block. BHP won the race to find a buyer last November, selling to Harry Winston, now called Dominion Diamond Corp. Reuters

Suntory Beverage last week set the widest price range for a Japan IPO of above US$1 billion in at least five years. The share sale is the country’s biggest since Japan Airlines Co’s 663 billion yen offering in September, according to data compiled by Bloomberg. Suntory Beverage is scheduled to list on July 3. The benchmark Topix index has lost 7.6 percent since May 29, when the Suntory unit gave its tentative IPO price of 3,800 yen. Suntory, a household name in Japan, sells brands such as Orangina soda and plans to use the IPO proceeds to make acquisitions and strengthen operations. The newly listed unit plans to double its sales to 2 trillion yen by 2020, it said in December. Bloomberg News

June 25, 2013

Markets Hang Seng Index PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

31.65

-2.615385

37632679

CHINA UNICOM HON

9.84

-1.796407

21442294

2.3

-4.166667

26250708

CITIC PACIFIC

7.95

-1.242236

6581389

BANK OF CHINA-H

2.99

-2.605863

594667053

BANK OF COMMUN-H

5.06

-3.065134

46820240

27.25

-0.3656307

2639228

BELLE INTERNATIO

10.1

-7.33945

29331955

ESPRIT HLDGS

BOC HONG KONG HO

23.5

-1.878914

21975338

HANG LUNG PROPER

NAME AIA GROUP LTD ALUMINUM CORP-H

BANK EAST ASIA

CATHAY PAC AIR

NAME

CLP HLDGS LTD

DAY %

66.55

-0.6716418

2107119

SANDS CHINA LTD

35.35

-5.354752

18048156

61.3

-0.8090615

3163195

-2.987421

58486930

9.61

-0.4145078

7978926

11.06

-2.469136

5548633

25.5

-1.544402

13916465

111.7

-2.36014

3073442

WANT WANT CHINA

44.4

-0.6711409

2393876

WHARF HLDG

HENGAN INTL

74.65

-0.7973422

3682658

HONG KG CHINA GS

18.42

-0.2166847

10977946

COSCO PAC LTD

-2.255639

5204014

HANG SENG BK

0.09950249

5865055

HENDERSON LAND D

CHINA COAL ENE-H

4.38

-3.736264

46859803

CHINA CONST BA-H

5.08

-2.119461

423019925

CHINA LIFE INS-H

17.92

-3.239741

59996561

CHINA MERCHANT

21.85

-2.888889

3414243

CHINA MOBILE

75.95

-1.491569

CHINA OVERSEAS

18.68

-1.580611

CHINA PETROLEU-H

5.08

-4.511278

155729917

CHINA RES ENTERP

22.55

-1.742919

4364135

18.9

-0.2111932

14220582

CHINA RES POWER

17.18

-3.483146

7174879

CHINA SHENHUA-H

-2.869757

22937817

PING AN INSURA-H

CHINA RES LAND

PRICE

POWER ASSETS HOL

12.34

CNOOC LTD

100.6

CHEUNG KONG

NAME

HONG KONG EXCHNG

115.9

-2.768456

7245380

HSBC HLDGS PLC

79.25

-1.735896

20777840

25007463

HUTCHISON WHAMPO

77.05

-1.28123

6178065

26535138

IND & COMM BK-H

4.48

-3.030303

499561131

LI & FUNG LTD

10.42

-2.067669

26128980

MTR CORP

27.45

-1.436266

3184728

NEW WORLD DEV

10.26

-1.724138

17212670

PETROCHINA CO-H

7.91

-2.466091

120706483

51.5

-2.830189

22078181

PRICE

DAY %

VOLUME

24.15

-3.206413

18202221

VOLUME

SINO LAND CO

10.1

-1.941748

8544388

SUN HUNG KAI PRO

95.5

-0.3131524

7019108

SWIRE PACIFIC-A

90.35

-0.7688083

1621509

TENCENT HOLDINGS

278.6

-2.519244

5629092

-4.233871

6794502

10.16

1.195219

23463628

-5.279503

11321821

TINGYI HLDG CO

MOVERS

0 20670

INDEX 19813.98 HIGH

20668.8

LOW

19767.49

52W (H) 23944.74 (L) 18710.58984

19760

20-June

24-June

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

2.99

-2.922078

215795553

AIR CHINA LTD-H

5.3

-2.930403

14462412

CHINA PETROLEU-H

5.08

-4.511278

155729917

ALUMINUM CORP-H

2.3

-4.166667

26250708

CHINA RAIL CN-H

6.32

-5.247376

8808011

ANHUI CONCH-H

20.45

-2.619048

16813510

CHINA RAIL GR-H

3.4

-3.68272

19281462

BANK OF CHINA-H

2.99

-2.605863

594667053

CHINA SHENHUA-H

-2.869757

22937817

BANK OF COMMUN-H

CHINA TELECOM-H

NAME CHINA PACIFIC-H

5.06

-3.065134

46820240

3.56

-2.197802

58753836

BYD CO LTD-H

-10.9589

8335160

DONGFENG MOTOR-H

10.28

-2.835539

11386027

CHINA CITIC BK-H

3.5

-3.846154

77393850

GUANGZHOU AUTO-H

7.17

-2.44898

12299293

CHINA COAL ENE-H

4.38

-3.736264

46859803

HUANENG POWER-H

7.07

-1.32534

37826388

CHINA COM CONS-H

6.18

-2.982732

32984310

IND & COMM BK-H

4.48

-3.030303

499561131

CHINA CONST BA-H

5.08

-2.119461

423019925

JIANGXI COPPER-H

13.64

-4.88145

20786124

3.28

-3.812317

10580282

PETROCHINA CO-H

7.91

-2.466091

120706483

17.92

-3.239741

59996561

PICC PROPERTY &

8.37

-3.236994

21546317

CHINA LONGYUAN-H

7.41

-5.121639

14073103

PING AN INSURA-H

51.5

-2.830189

22078181

CHINA MERCH BK-H

12.56

-4.559271

42208109

SHANDONG WEIG-H

9.5

-0.9384776

9233640

CHINA MINSHENG-H

7.22

-8.025478

193984172

SINOPHARM-H

18.6

-3.92562

10071397

CHINA NATL BDG-H

6.73

-4.267425

48456478

TSINGTAO BREW-H

51.4

-2.001907

2731250

14.08

-3.429355

5504026

WEICHAI POWER-H

23.95

-3.62173

2140559

CHINA COSCO HO-H CHINA LIFE INS-H

CHINA OILFIELD-H

NAME

PRICE

DAY %

VOLUME

YANZHOU COAL-H

5.98

-4.77707

39851993

ZIJIN MINING-H

1.49

-5.696203

64784359

ZOOMLION HEAVY-H

5.32

-5.16934

12969429

11.26

-3.264605

7628830

ZTE CORP-H

MOVERS

0 9420

INDEX 8938.63 HIGH

9417.61

LOW

8899.95

52W (H) 12354.22 (L) 8876.78

8890

20-June

24-June

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

Volume

PRICE

DAY %

AGRICULTURAL-A

2.48

-3.501946

174631476

CITIC SECURITI-A

10.09

-8.687783

133453593

QINGHAI SALT-A

17.5

-9.46715

8891418

AIR CHINA LTD-A

4.23

-6.622517

15895393

CSR CORP LTD -A

3.75

-4.822335

30813261

SAIC MOTOR-A

12.92

-4.154303

44975224

ALUMINUM CORP-A

3.29

-7.323944

18230033

DAQIN RAILWAY -A

5.83

-3.636364

53773621

SANAN OPTOELEC-A

18.6

-5.487805

16136701

ANHUI CONCH-A

12.8

-5.743741

42715398

DATANG INTL PO-A

4.85

-5.825243

20690301

SANY HEAVY INDUS

7.48

-3.234153

39363497

BANK OF BEIJIN-A

7.39

-8.198758

55383076

EVERBRIG SEC -A

10.17

-7.208029

49123376

SHANDONG DONG-A

38.5

-4.938272

7966310

BANK OF CHINA-A

2.54

-3.053435

53775204

GD MIDEA HOLDI-A

12.8

13015220

SHANG PHARM -A

10.17

-6.180812

10751580

BANK OF COMMUN-A

4.03

-4.95283

154616898

GD POWER DEVEL-A

2.23

-5.106383

81737100

SHANG PUDONG-A

7.52

-9.178744

249977361

BAOSHAN IRON & S

4.05

-2.409639

25439750

GEMDALE CORP-A

6.1

-8.408408

86382357

SHANGHAI ELECT-A

3.38

-6.371191

4921439

BEIJING TONGRE-A

21.72

-5.524141

11700816

GF SECURITIES-A

11.22

-7.425743

24524956

SHANXI LU'AN -A

12.59

-9.031792

17095073

BYD CO LTD -A

29.34

-10

11566487

GREE ELECTRIC

24.08

-4.063745

28503436

SHANXI XISHAN-A

8.41

-8.287895

16085961

12.99

-2.623445

28770278

SHENZEN OVERSE-A

5.06

-8.992806

83234293

SICHUAN KELUN-A

54.38

-2.194245

1540092

4.96

-7.116105

69541479 7154711

NAME

Volume

CHINA AVIC ELE-A

21.98

-9.99181

9558214

GUANGHUI ENERG-A

CHINA CITIC BK-A

3.58

-5.039788

32246520

HAITONG SECURI-A

9.25

-9.93184

154038119

CHINA CNR CORP-A

3.96

-5.263158

42837616

HANGZHOU HIKVI-A

34.57

-4.975261

7777432

SUNING COMMERC-A

CHINA COAL ENE-A

5.14

-4.990758

19137102

HENAN SHUAN-A

38.32

-4.367357

8623084

TASLY PHARMAC-A

37.97

-4.116162

-10

58818911

TSINGTAO BREW-A

36.24

-4.606475

2693810

39741134

WANHUA CHEMIC-A

15.94

0.1885607

17140445

CHINA CONST BA-A

3.96

-2.941176

47989123

HONG YUAN SEC-A

CHINA COSCO HO-A

3.11

-4.892966

14338957

HUATAI SECURIT-A

8.03

-6.952491

CHINA EAST AIR-A

2.54

-6.617647

13510117

HUAXIA BANK CO

8.69

-8.333333

45202123

WEICHAI POWER-A

17.86

-7.172557

11043947

CHINA EVERBRIG-A

2.74

-5.841924

146715380

IND & COMM BK-A

3.9

-2.985075

88041814

WULIANGYE YIBIN

20.2

-4.581956

22185472

CHINA LIFE INS-A

13.96

-5.484089

18716859

INDUSTRIAL BAN-A

13.89

-9.980557

230190891

YANZHOU COAL-A

9.74

-9.056956

10344191

CHINA MERCH BK-A

10.93

-6.660974

118147118

INNER MONG BAO-A

21.93

-9.641533

31525672

YUNNAN BAIYAO-A

83.7

-3.526971

3151351

CHINA MERCHANT-A

10.28

-6.375228

33390221

INNER MONG YIL-A

30.53

-3.140863

22243432

ZHONGJIN GOLD

9.82

-6.83112

17996589

CHINA MERCHANT-A

22.05

-10

25273218

INNER MONGOLIA-A

4.06

-7.093822

38077277

ZIJIN MINING-A

2.51

-6.343284

61350366

CHINA MINSHENG-A

8.51

-9.94709

249091825

JIANGSU HENGRU-A

26.14

-4.213998

12749375

ZOOMLION HEAVY-A

5.43

-5.565217

107808383

CHINA NATIONAL-A

9.13

-8.056395

51924757

11.52

-3.274559

50721256

CHINA OILFIELD-A

14.5

-4.163913

CHINA PACIFIC-A

4666475

JIANGSU YANGHE-A

56.93

-4.92652

4456061

JIANGXI COPPER-A

16.11

-8.205128

12814019

16.31

-5.885747

29305375

JINDUICHENG -A

8.2

-8.277405

8361225

CHINA PETROLEU-A

4.21

-5.393258

69930841

KANGMEI PHARMA-A

18.1

-0.7675439

33910744

CHINA RAILWAY-A

4.2

-6.040268

31705751

KWEICHOW MOUTA-A

185.62

-2.903175

4080720

24.04

-2.907916

9566839

CHINA RAILWAY-A

2.42

-4.724409

34966039

LUZHOU LAOJIAO-A

CHINA RESOURCE-A

29.6

6437890

METALLURGICAL-A

1.69

-5.586592

64757357

CHINA SHENHUA-A

17.5

-2.723735

16065337

NARI TECHNOLOG-A

13.63

-6.258597

20122811

CHINA SHIPBUIL-A

4.52

59982923

NINGBO PORT CO-A

2.06

-4.186047

14030370

26280879

OFFSHORE OIL-A

6.69

-5.907173

27261290

7.53

-4.441624

29315543

10.15

-10.01773

116667177

CHINA SOUTHERN-A

2.91

-6.430868

CHINA STATE -A

3.11

-6.325301

154471002

PETROCHINA CO-A

CHINA UNITED-A

3.22

-3.880597

106141522

PING AN BANK-A

CHINA VANKE CO-A

9.03

-8.787879

173365094

PING AN INSURA-A

34.5

-7.033145

47483705

CHINA YANGTZE-A

6.71

-1.900585

31619645

POLY REAL ESTA-A

9.53

-10.00944

145760928

CHONGQING CHAN-A

8.66

-3.777778

41286800

QINGDAO HAIER-A

10.93

-4.122807

10763367

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

ZTE CORP-A

MOVERS

289

7 2390

INDEX 2171.21 HIGH

2386.1

LOW

2171.08

52W (H) 2791.303 (L) 2102.135

2170

20-June

24-June

FTSE Taiwan 50 Index NAME ACER INC

21.5

-0.462963

6736318

ADVANCED SEMICON

24.6

0.6134969

11669291

35.15

0.2853067

ASUSTEK COMPUTER

291

AU OPTRONICS COR

10.3

CATCHER TECH

PRICE DAY %

8703470

TAIWAN MOBILE CO

FOXCONN TECHNOLO

71 -0.2808989

3578523

TPK HOLDING CO L

4709623

FUBON FINANCIAL

-3.801653

5572575

HON HAI PRECISIO

-5.504587

145835225

HOTAI MOTOR CO

152

-1.298701

4498533

CATHAY FINANCIAL

41.2

1.353014

CHANG HWA BANK

16.25

CHENG SHIN RUBBE CHIMEI INNOLUX C

68.4

NAME

0.8849558

ASIA CEMENT CORP

FORMOSA PLASTIC

4723923 9028009

-2.415459

53724378

101

70.3

0.4285714

30252379

UNI-PRESIDENT

58.2

10986452

282

0.3558719

510054

UNITED MICROELEC

12.8

1.992032

88151587

HTC CORP

238

-4.225352

13291074

1.351351

12933877

44463091

HUA NAN FINANCIA

16.3

0.3076923

6474771

YUANTA FINANCIAL

15.4

0.6535948

23818210

-2.694611

12989017

LARGAN PRECISION

940

1.952278

1478705

YULON MOTOR CO

46.95

-0.844773

2910603

91 -0.7633588

5872088

LITE-ON TECHNOLO

49.45

5299342

116633109

309

-6.363636

13302613

1.726264

38336682

MEGA FINANCIAL H

22.25

-2.412281

31809875

CHINA STEEL CORP

23.45

1.077586

30137744

NAN YA PLASTICS

58.7

2.086957

8681946

CHINATRUST FINAN

18.05

-1.09589

41069965

PRESIDENT CHAIN

193

4.043127

3407072

CHUNGHWA TELECOM

95.1

0.1052632

9178162

QUANTA COMPUTER

COMPAL ELECTRON

16.4

2.180685

18888109

SILICONWARE PREC

136.5

1.111111

5702423

0.4862237

4335083

73.5 -0.8097166

6391065

FAR EASTONE TELE

-6.952381

TSMC

-5.345912

DELTA ELECT INC

488.5

19069480

8.25

FAR EASTERN NEW

1.834862

0.2570694

15.05

CHINA DEVELOPMEN

Volume

111

MEDIATEK INC

60.8 -0.3278689

3310320

0.9668508

16298188

SINOPAC FINANCIA

13.9 -0.3584229

13996885

SYNNEX TECH INTL

40.6

-1.932367

6519867

TAIWAN CEMENT

34.6

-1.564723

18930650

16.35

0.3067485

7956699

71.1

-1.931034

5425663

-1.328273

1470792

FIRST FINANCIAL

17.3 -0.2881844

9533102

TAIWAN COOPERATI

FORMOSA CHEM & F

67.5

1.963746

4734217

TAIWAN FERTILIZE

FORMOSA PETROCHE

70.6

2.318841

5012116

TAIWAN GLASS IND

36.55

WISTRON CORP

MOVERS

2 5490

INDEX 5314.07 HIGH

5487.26

LOW

5312.64

52W (H) 5896.71 5310

(L) 4719.96 20-June

24-June

June 25, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 61.0

39.00

60.3

38.25

Max 36.8

average 36.156

Min 36.15

36.00

Last 37.1

Min 35.15

Max 60.9

average 58.368

PRICE 93.17

Min 18.24

Last 18.36

21.35

35.90

18.2

21.10

35.45

18.0

20.85

Max 18.48

average 18.075

BRENT CRUDE FUTR Aug13 GASOLINE RBOB FUT Jul13 GAS OIL FUT (ICE) Aug13

YTD %

(H) 52W

Min 17.82

Last 17.84

(L) 52W

99.98000336

86.29000092

100.27

-0.63422852

-6.175727519

115.1699982

96.70999908

274.76

-0.510555093

-2.698491395

318.0399895

238.9999866

854.25

-0.233576642

-6.02310231

983.5

816

3.774

0.079554495

5.951712521

4.499000072

3.329999924

283.32

-0.383249534

-5.613485691

322.0499992

259.5000029

Gold Spot $/Oz

1284.54

-0.9164

-22.8254

1796.08

1269.66

Silver Spot $/Oz

19.6864

-2.1672

-34.6184

35.365

19.3993

Platinum Spot $/Oz

1334.28

NATURAL GAS FUTR Jul13 NY Harb ULSD Fut Jul13

1359.74

-1.1817

-10.4108

1742.8

Palladium Spot $/Oz

669.9

-0.8657

-4.2535

786.5

553.75

LME ALUMINUM 3MO ($)

1793

-0.250347705

-13.50699469

2200.199951

1784.75 6692

LME COPPER 3MO ($) 3MO ($)

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

17.8

6818

0.70901034

-14.03353928

8422

1841.5

0.628415301

-11.46634615

2230

1745

14075

2.737226277

-17.49706917

18920

13628 14.60000038

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

15.91

0.094369299

3.278156443

16.47500038

548

-1.483146067

-8.628595248

665

512

698

-0.992907801

-13.50681537

905.75

673.75

SOYBEAN FUTURE Nov13

1261.75

-0.922654103

-3.147188639

1409.75

1186.5

COFFEE 'C' FUTURE Sep13

119.05

-0.209555742

-21.90882256

203.8499908

117.0999985

NAME

16.47999954

ARISTOCRAT LEISU

Dec13

WHEAT FUTURE(CBT) Sep13

SUGAR #11 (WORLD) Oct13

16.84

COTTON NO.2 FUTR Dec13

84.32

-0.531600709 -0.378071834

-16.05184447 7.086614173

22.8599987 89.55999756

World Stock Markets - Indices

Max 21.6

average 20.825

Min 20.6

Last 20.75

20.60

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9154 1.535 0.9357 1.309 98.36 7.9885 7.7559 6.1445 59.775 31.12 1.2811 30.173 43.875 10014 90.035 1.22488 0.85273 8.0515 10.4573 128.75 1.03

-0.7051 -0.4475 -0.1282 -0.2439 -0.4677 -0.015 0.0309 -0.1888 -0.849 0 -0.3825 -0.1193 -0.3533 -0.03 0.2477 0.0955 -0.2252 0.698 0.9486 -0.233 0

-11.7942 -5.1063 -2.1695 -0.7582 -12.4644 -0.0663 -0.0683 1.4013 -7.9967 -1.7352 -4.6601 -3.7782 -6.5413 -2.2069 -0.7864 -1.4205 -4.3754 2.0617 0.699 -11.7903 -0.0097

1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7664 6.3964 59.98 32 1.2847 30.228 44.181 10174 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.9152 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9338 79.316 1.20054 0.77553 7.7018 9.6245 94.12 1.0289

Macau Related Stocks

CROWN LTD

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.05

-1.219512

28.57142

4.49

2.29

VOLUME CRNCY 1966267

11.84

-1.497504

10.96532

13.75

8.28

1442679

AMAX HOLDINGS LT

1.2

-4.761905

-14.28571

1.72

0.75

1444875

BOC HONG KONG HO

23.5

-1.878914

-2.489628

22.6

21975338

CENTURY LEGEND

0.35

-1.408451

32.07548

0.42

0.22

5.3

-3.636364

-11.5192

6.74

2.89

2000 26535138

CHEUK NANG HLDGS CHINA OVERSEAS

18.68

-1.580611

-19.1342

25.6

16.661

CHINESE ESTATES

13.02

-0.7621951

7.342328

14.12

8.031

544500

CHOW TAI FOOK JE

8.29

-6.221719

-33.36013

13.4

8.21

10244000

EMPEROR ENTERTAI

2.53

-8

33.86243

3.07

1.32

1508000

2.3

-2.12766

89.76489

2.76

0.884

2322000

37.1

-5.717916

22.24053

44.95

16.98

40660450 3073442

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14799.4

0.2783515

12.93683

15542.4

12450.17

NASDAQ COMPOSITE INDEX

3357.246

-0.2196078

11.18499

3532.038

2810.8

FTSE 100 INDEX

6104.98

-0.1829576

3.512659

6875.62

5435.46

HANG SENG BK

111.7

-2.36014

-5.897217

132.8

102.7

DAX INDEX

7761.75

-0.3529227

1.962063

8557.86

6096.94

HOPEWELL HLDGS

24.35

-1.814516

-26.76692

35.3

19.839

1358513

HSBC HLDGS PLC

79.25

-1.735896

-2.521529

90.7

61.1

20777840

HUTCHISON TELE H

4.08

-1.210654

14.60674

4.66

2.98

940000

LUK FOOK HLDGS I

17.42

-2.024747

-28.60656

30.05

15.3

1883569

FUTURE BRIGHT GALAXY ENTERTAIN

NIKKEI 225

13062.78

-1.264916

25.6619

15942.6

8328.019531

HANG SENG INDEX

19813.98

-2.217456

-12.54778

23944.74

18710.58984

CSI 300 INDEX

2171.21

-6.30812

-13.94168

2791.303

2102.135

MELCO INTL DEVEL

14.02

-8.961039

55.60488

18.18

5.12

9836365

TAIWAN TAIEX INDEX

7758.03

-0.452696

0.7601765

8439.15

6922.73

MGM CHINA HOLDIN

18.36

-6.517312

38.27093

21.6

9.509

8602800

KOSPI INDEX

1799.01

-1.306759

-9.916629

2042.48

1758.99

MIDLAND HOLDINGS

2.84

-1.045296

-23.24324

2.8

2176000

S&P/ASX 200 INDEX

4669.144

-1.469908

0.4343743

5249.6

3993.8

NEPTUNE GROUP

0.162

-8.474576

6.578951

0.23

0.084

36540000

4445.833

-1.54005

2.991785

5251.296

3843.022

NEW WORLD DEV

10.26

-1.724138

-14.64227

15.12

8.66

17212670

FTSE Bursa Malaysia KLCI

1739.24

-0.9459806

2.977592

1826.22

1590.67

SANDS CHINA LTD

35.35

-5.354752

4.123709

43.7

20.65

18048156

SHUN HO RESOURCE

1.42

1.428573

1.67

1.03

NZX ALL INDEX

934.948

0.07364117

5.996808

998.487

755.149

SHUN TAK HOLDING

3.64

-2.673797

-13.12649

4.65

2.56

6411516

PHILIPPINES ALL SHARE IX

3686.58

-3.51818

-0.3352249

4571.4

3355.21

SJM HOLDINGS LTD

17.84

-2.937976

0.5203065

22.382

12.995

10338578

SMARTONE TELECOM

12.54

-1.415094

-10.9375

17.38

12.42

693516

WYNN MACAU LTD

20.75

-3.037383

-0.9546575

26.5

14.62

8746409

JAKARTA COMPOSITE INDEX

18.2

18.4

-0.629266212

NAME

average 18.591

36.35

-0.555011266

CORN FUTURE

Max 19.32

21.60

DAY %

WTI CRUDE FUTURE Aug13

LME ZINC

57.5

Last 58

Currency Exchange Rates

NAME

METALS

Min 57.55

18.6

Commodities ENERGY

18.5

58.2

36.80

35.00

Last 35.35

18.8

58.9

36.75

average 37.629

19.1

59.6

37.50

Max 38.95

19.4

HSBC Dragon 300 Index Singapor

590.74

-0.3

-4.89

STOCK EXCH OF THAI INDEX

1385.45

-1.074616

-0.465548

1649.77

1144.44

HO CHI MINH STOCK INDEX

489.74

-1.824232

18.37188

533.15

372.39

ASIA ENTERTAINME

3.7

8.187135

31.45353

4.7647

2.2076

404579

BALLY TECHNOLOGI

55.1

-0.4156877

23.23865

57.86

41.74

440053

Laos Composite Index

1455.82

980.83

BOC HONG KONG HO

3.02

-3.205128

-1.628662

3.6

2.85

102

GALAXY ENTERTAIN

5.16

-5.494505

29.97481

5.77

2.25

14281

INTL GAME TECH

16.24

-0.4291845

14.60833

18.81

10.92

4100561

JONES LANG LASAL

86.97

-0.7644911

3.609718

101.46

61.39

366733

LAS VEGAS SANDS

52.29

-2.951002

13.2799

60.54

32.6127

9598924

MELCO CROWN-ADR

22.49

-4.134697

33.55107

25.2

9.13

7469082

MGM CHINA HOLDIN

2.71

46.48648

2.71

1.36

200

MGM RESORTS INTE

13.81

-1.778094

18.64261

15.95

8.83

10689302

SHFL ENTERTAINME

17.88

-0.3344482

23.31034

18.57

12.35

613724

SJM HOLDINGS LTD

2.4

-6.25

5.373337

2.9481

1.7255

1100

129.69

-1.876371

15.29025

144.99

84.4902

3216696

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

WYNN RESORTS LTD

AUD HKD

USD

14 14

June 25, 2013 April 19, 2013

Opinion

A 10-step programme for India’s economy Jim O’Neill

Former chairman of Goldman Sachs Asset Management, is a Bloomberg View columnist

t’s fashionable to say the era of strong emergingmarket growth is over. As the U.S. recovers, the global cost of capital will rise, holding back investment; against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, India might seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency. I don’t think so. As a general matter, emerging-market gloom is overdone. India, in particular, could teach the pessimists a lesson. Last week, I made a quick visit to see the chief minister of Gujarat, Narendra Modi. He’d asked me to give a presentation on how India could realise its still-enormous potential. I went through points I’d first discussed in a paper I cowrote with Tushar Poddar in 2008: Ten Things for India to Achieve its 2050 Potential. It’s striking to me that, five years later, our recommendations don’t need revising. I’ll state no opinion on Modi’s chances of becoming prime minister after next year’s general election – it has been

announced that he’ll lead the opposition Bharatiya Janata Party’s campaign. He’s a controversial figure. Detractors call him a sectarian extremist. I will say this: He’s good on economics, and that’s one of the things India desperately needs in a leader.

Cultivating growth Like all Indians, Modi loves acronyms. Me too. I admire his MG-squared – minimum government, maximum governance – and P2G2 – pro-active, pro-people, good governance. That sums it up pretty well. I don’t think it’s a coincidence that Gujarat has avoided the slowdown that has almost halved India’s national rate of growth. The state just keeps on growing at double-digit rates. Long-term growth depends ultimately on just two things – the number of workers and how productive they are. India’s demographics are remarkable. The country is on track to grow its workforce by 140 million between 2000 and 2020. That increase is the equivalent of the working population of France, Germany, Italy and the U.K. combined.

Even with unspectacular growth of a little more than 6 percent a year, India’s economy could be 40 times bigger by 2050 than it was in 2000 – about as big as the U.S. economy will probably be by then (though not as big as China). But it could do so much better than that. Growth of 8.5 percent over the entire period is possible – with growth of more than 10 percent over the next

It’s all about productivity. India scores poorly on indexes of economic variables that are critical for economic efficiency

15 to 20 years not out of the question – provided it makes some changes. It’s all about productivity. India scores poorly on indexes of economic variables that are critical for economic efficiency – worse than Brazil, China and even Russia. To change that, it needs to do 10 things: 1. Improve its governance. This is probably the hardest and most important task – the precondition for the rest. Modi is right: Whoever leads the next government in 2014, India needs maximum governance and minimum government. There is no point having the world’s largest democracy unless it leads to effective government. 2. Fix primary and secondary education. There has been some progress here, but a huge number of young people still get little or no schooling. I sit on the board of Teach for All, a global umbrella organisation for groups that encourage the brightest graduates to spend at least two years teaching. Today India has about 350 teachers in these programmes. It could do with 350,000 or more. 3. Improve colleges and universities. India has too few excellent institutions. Its share of places in the Shanghai ranking of the world’s top universities should be proportional to its share of global gross domestic product – meaning 10 universities in the top 500 (it currently has just one). Make that an official goal. 4. Adopt an inflation target, and make it the centre of a new macroeconomic policy framework. 5. Introduce a medium to long-term fiscal-policy framework, perhaps with ceilings as in the Maastricht Treaty – a deficit of less than 3

percent of GDP and debt of less than 60 percent of GDP. 6. Increase trade with its neighbours. Indian exports to China could be close to US$1 trillion by 2050, almost the size of its entire GDP in 2008. But India has little trade with Bangladesh and Pakistan. There’s no better way to promote peaceful relations than to expand trade – and that means imports as well as exports. 7. Liberalise financial markets. India needs huge amounts of domestic and foreign capital to achieve its potential – and a betterfunctioning capital market to allocate it wisely. 8. Innovate in farming. Gujarat isn’t a traditional agricultural producer, but it has improved productivity with initiatives like its “white revolution” in milk production. The whole nation, still greatly dependent on farming, needs enormous improvements. 9. Build more infrastructure. I flew in to Ahmedabad via Delhi, and out via Mumbai, all in a day. I got where I needed to go – but it’s obvious how much more India needs to do. Adopt some of that Chinese drive to invest in infrastructure. 10. Protect the environment. India can’t achieve 8.5 percent growth for the next 30 to 40 years unless it takes steps to safeguard environmental quality and use energy and other resources more efficiently. Encouraging the private sector to invest in sustainable technologies can boost growth in its own right. I’ll have a lot more to say about the details as this project moves forward. For now, suffice to say that India’s potential is vast – and given the will, it can be tapped. Bloomberg View

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

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June April 25, 19, 2013 2013

Opinion Business

wires

China’s South Korean future

Leading reports from Asia’s best business newspapers

Christopher R. Hill

Former U.S. Assistant Secretary of State for East Asia, is Dean of the Korbel School of International Studies, University of Denver

China Daily China’s central bank said that the country will continue to implement the prudent monetary policy while finetuning it at the proper time. It will keep a stable and moderate growth in its credit supply as well as social financing, said the People’s Bank of China in a statement issued after a quarterly meeting of its monetary policy commission. The central bank said the national economic operation and financial sector are “generally stable” while consumer prices being “basically stable,” but it also highlighted challenges and risks.

The Age More than A$1.7 billion in foreign investment, including funding for crucial government infrastructure projects, remains in limbo due to a slow visa approval process by federal authorities. Just one “significant investor” visa has been approved, and the delays have cost the Victorian and New South Wales governments hundreds of millions in potential funds. The significant investor visa gives residence to cashed-up applicants with A$5 million or more to invest in Australia.

Taipei Times Chairman of the Straits Exchange Foundation, Lin Join-sane, said the crossstrait service trade agreement will contribute to the modernisation of the service industry and create jobs on both sides of the Taiwan Strait. The service trade agreement is a follow-up to the Economic Cooperation Framework Agreement signed in 2010. “There is still ample room for the service sectors on both sides to grow,” Mr Lin said, adding that he is convinced the new pact will help create more business opportunities in both Taiwan and mainland China.

Jakarta Post State-owned Bank Negara Indonesia aims at booking higher trade finance business this year by focusing on infrastructure projects and small and medium enterprises. Growing infrastructure projects across the country will be one of the drivers behind the increase, according to BNI vice president and trade services head Afien Juni Yahya. BNI, the country’s fourth-largest bank by assets, hopes to increase its trade finance volume by 15 percent to 20 percent to between US$25.64 billion and US$26.76 billion by year-end from 2012.

he so-called six-party talks – the on again, off again international mechanism by which the United States, China, Russia, South Korea, and Japan negotiate with North Korea over its nuclear aspirations – are often cited as an example of multilateral diplomacy. In fact, the talks have served as a platform for addressing a host of issues that range far beyond the North Korean nuclear problem, in the process nurturing interlocking, interrelated bilateral relationships in the region. For the Chinese, in particular, the talks have been an opportunity to get to know some of their neighbours better – and they have certainly helped Sino-U.S. relations. But perhaps the key bilateral relationship that has been strengthened by the six-party mechanism is that between China and South Korea. This will be on full display at the end of June, when South Korea’s new president, Park Geun-hye, visits Beijing to meet China’s new president, Xi Jinping. China and South Korea need no introduction to each other, of course – such is the burden of history in the region. But their relationship is about to change, thanks in part to the patterns of official cooperation that the six-party talks created. If the Chinese are successful in shifting away from North Korea, they have to pivot somewhere. And that place is Seoul. After all, China needs a sustainable relationship with the neighbouring Korean Peninsula.

New step The bilateral relationship has grown closer in recent decades, owing to active exploration of the Chinese market by South Korea’s large industrial conglomerates. Today, their bilateral trade dwarfs that between China and North Korea. Yet the relationship has always had a limited political dynamic. Given China’s close relationship with the North, its leaders have never warmed to South Korea’s democratically elected governments, whether left or right. But China is about to experience something new: South Korea’s soft power, personified by Park, who represents a centre-right coalition, but defies the usual political labels. Indeed, she was elected with a curious blend of support: right-wing backers of her father, Park Chung-hee, who ruled the country with an iron fist from 1961 to 1979, and many other Koreans, including some on the left, who wanted someone different from the usual blue-suited, white-shirted Korean politician. Park is tough-minded on

national security, but takes up new issues and agendas with a refreshing combination of intellectual energy and personal calm. She listens carefully and pauses before responding. Moreover, rumour has it that she is considering delivering her speech in Beijing in Mandarin. Such a performance is likely to resonate not only with China’s leaders, but also with ordinary citizens. South Korea’s soft power is well deserved and extends across Asia. Its cultural and scientific achievements

Park’s visit to China will give her country’s soft power a human face

are increasingly influential throughout the world. Even when its relations with Japan are difficult, Japanese tourists flock to Seoul to shop and tour the studios that produce the country’s extraordinarily successful television dramas. Park’s visit to China will give her country’s soft

power a human face. No new agreements or other diplomatic breakthroughs are likely to be announced during Park’s visit. The Chinese will look at her carefully, and may well be sizing her up as an immediate neighbour should North Korea persist on its current course to total isolation and oblivion. The Chinese know that Park values her relationship with the United States, but they also understand that she, like most mature South Korean leaders, desires a solid relationship with China as well – one based (unlike in centuries past) on mutual respect. China’s leaders will also be interested in her thinking on Japan, particularly given the inclinations of her father, who served as an officer in the Imperial Japanese Army during World War II. Park’s visit to China comes at a time when China’s new leadership is grappling with problems near and far. Its reluctant pivot away

from North Korea, however discernible, should not be regarded as a fait accompli; nor should it be explained away as the result of momentary frustration with the adolescent behaviour of Kim Jong-un, North Korea’s boy leader. Over the centuries, the Chinese have learned a thing or two about when a dynasty’s days are numbered. China, too, is developing in ways that will be far easier to assess in retrospect than they are today. And, if South Korea’s own recent past can be any guide, China’s economic transformation is likely to be followed by political and social changes of equally dramatic proportions. Thus, how the Chinese receive Park may turn out to be less a reflection of change in South Korea than a reflection of change in the People’s Republic – an issue that goes to the heart of China’s identity and mission in the modern world. © Project Syndicate

June 25, 2013

Closing Vodafone seals Kabel Deutschland bid

Hutchison buys Telefonica’s Irish unit

Vodafone Group Plc reached an agreement to buy Kabel Deutschland Holding AG after increasing its bid for Germany’s largest cable company to 7.7 billion euros (US$10.1 billion). Kabel Deutschland’s board is set to recommend the 87-euro per share cash offer, the companies said in separate statements yesterday. The combination will result in synergies in cost and capital spending exceeding 3 billion euros after integration costs, Vodafone said. The deal would give Vodafone access to the German company’s 8.5 million connected households and potential customers for “triple play” packages of phone, Internet and TV subscriptions.

Billionaire Li Ka Shing’s Hutchison Whampoa Ltd agreed to buy Telefonica SA’s Irish unit for as much as 850 million euros (US$1.1 billion), a year after failing to take over Ireland’s former phone monopoly Eircom Group. Hutchison’s Three Ireland, the country’s thirdlargest wireless carrier, will pay 780 million euros in cash and an additional 70 million euros upon meeting certain performance targets, the companies said yesterday. The combination with Telefonica’s O2, Ireland’s No. 2 mobile operator, will increase Hutchison’s customers to about 2 million and its wireless market share to 37.5 percent, the Hong Kong-based company said.

Central banks told to back off Governments warned to stop relying on central banks to kick-start growth

he Bank for International Settlements (BIS) says banks have done their bit to help economic recovery and now governments must do more. The Basel-based organisation – usually dubbed the “central banks’ central bank” – believes it is time to end the “whatever it takes” approach. It says it wants to see a return to “strong and sustainable growth”. Last week the U.S. central bank said it planned to stop its asset purchase programme, sparking market volatility. In its annual report, the BIS said the world’s central banks had done what they could to offset the worst effects of the sixyear long global credit crisis. But now that the world was “past the height of the crisis”, it was time for such interventionist policies to change. Central banks can’t expand loose monetary policy without exacerbating risks to world economies, the bank said. “Central banks cannot do ‘whatever it takes’ to return still-sluggish economies to strong and sustainable growth,” Stephen Cecchetti,

economic adviser and head of the monetary and economic department at the BIS in Basel, Switzerland, told reporters on a conference call. “Central banks cannot do more without compounding the risks they have already created.” By putting policy rates close to zero and expanding balance sheets central banks have given borrowers and banks time to repair their finances, though progress has been “uneven” across countries, he said. Monetary institutions must refocus on their traditional role of encouraging adjustment, while authorities must hasten reform to shore up creditworthiness. “It is others that need to act, speeding up the hard but essential reform and repair work to unlock productivity and employment growth,” Mr Cecchetti said. “Each country needs to tailor the reform agenda to maximise its chances of success without endangering the ongoing economic recovery.”

Reform call Mr Cecchetti spoke on a briefing to mark the release

Time to cut back the support, says the BIS

yesterday of the BIS’s annual report, which said that low interest rates are creating “international spillovers” that direct capital flows to fastgrowing economies that pushes up currencies. Delivering more stimulus is becoming “increasingly perilous” and puts monetary policy officials in a “delicate position,” it said. Restoring growth requires reforms to encourage capital

to shift from industries that became too big during the boom to sectors that have prospects of being more productive, according to the report. Structural rigidities in the form of price controls, exemptions from competition law for public enterprises, and similar rules will slow growth and should be liberalised, the BIS said. Progress in fiscal reform has been “uneven,” according to the report, with the biggest

Spain resists pressure on nationalised banks Government exploring all options for the sale of two lenders

pain’s economy minister said yesterday he would not be pushed into selling two nationalised banks too quickly or too cheaply as bankers press the government to act to resolve the lingering problems of its financial system. Bankers say that Spain must pump more funds into some of the lenders it bailed out last year using European Union aid and its own money if it hopes to sell them soon, with the government’s options for recovering some of the investment narrowing.

A recent governmentcommissioned report on the sector by investment bank Nomura Holdings Inc. and consultancy McKinsey & Co Inc. suggested quickly selling Catalunya Banc SA and NCG Banco SA before their assets deteriorate further, two banking sources said. Economy Minister Luis de Guindos said yesterday that the government was exploring all options for the sale of the two banks, although he said there was no rush. “The buyers always try to give the impression that things are worth less than what they are… We are convinced

that these entities have value,” Mr de Guindos told COPE radio. “We have to do it at the right moment and the process must be competitive… We have five years to do it, there’s no need to rush. I know there are some that want it to go quickly.” Barcelona-based Catalunya Banc and NCG Banco, from the northern region of Galicia, together worth less than 10 percent of the Spanish market, were among the biggest recipients of the 41 billion euros (US$55 billion) Madrid took from Brussels in aid last year.

improvements coming from countries with restricted financial market access, such as Greece, and lower improvement in nations where interest rates are below historical averages, such as the U.K. The BIS said that globally, the signs of economic recovery are imbalanced and that progress that has been made may be jeopardised by deteriorating sentiment. Bloomberg News

Fernando Restoy, deputy head of Spain’s central bank, opened the door on Friday to an asset protection scheme to speed up the sale of the banks, although he repeated the government’s view that they do not need more capital. Bankers say potential bidders are demanding guarantees against losses, or more capital, even though the banks are now mostly cleansed of the soured property assets that nearly felled them. But pumping extra funds into the banks would hinder Spain’s attempts to slash its deficit in a prolonged recession, as it faces public anger over deep public spending cuts. It would also bring the money spent on saving Catalunya Banc closer to its cost of liquidation. Under the terms of the European bailout, Spain cannot spend more on capitalising a bank than it would on winding it down. Reuters