Macau Business Daily, Jun 12th, 2012

Hotel rooms doubling soon

BNU to build its SME business

Page 7

Pages 8 & 9

Year I - Number 52 Tuesday June 12, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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Slowing giant China growth cools

www.macaubusinessdaily.com

The big squeeze

Shop rents rocket in old town H

ong Kong-style leaps in shop rents in popular Macau tourist spots could soon mean only Hong Kong and foreign chain stores can afford to trade there say local businesses.

Senado Square is an iconic location – part of the city’s UNESCO World Heritage area and a sharp contrast to the rest of the Pearl River Delta’s increasingly homogenised shopping-mall-and-tower-block skyline. But Macauowned family businesses may soon become the exception in the old town rather than the rule, because of unprecedented rent rises eating into the profits of lower-margin service industries such as snack shops.

In high foot-traffic areas such as San Ma Lou and Senado Square, rents have risen by 20 percent to 30 percent per year in the past two years say merchants.

In Rua de São Domingos and Rua da Palha, traders say

they are paying more than 200,000 patacas (US$25,000) a month on average.

Leitaria I Son, a family-run business in the area making milk-based desserts and trading for five generations, is among those considering moving. Other shopkeepers told Business Daily that if they are forced to relocate to lowerrent areas, foot traffic to their shops is likely to fall by two-thirds.

The number of commercial property transactions rose by more than 50 percent to 180 in April while the value increased by 28.7 percent to 1.1 billion patacas according to data released yesterday by the Statistics and Census Bureau. Both figures are the highest since June 2011.

Macau doesn’t however keep official statistics on the average price per square metre of its stores.

More on pages 2 & 3

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HANG SENG INDEX

Supplier of natural It’s official: trippers love gas wants 60pct gambling price rise The city’s natural gas supplier, Sinosky Energy (Holdings) Co Ltd, has asked for the gas price to be raised by 60 percent, and to be given an assurance that its distribution deal will be signed soon.

Arnaldo Ernesto dos Santos, director of the Energy Sector Development Office, told reporters on Sunday that the company had submitted a request to increase the price when its concession contract had come up for review.

A 15-year contract was awarded to Sinosky in 2006 to supply natural gas for electricity generation and to build a liquefied natural gas terminal.

The contract allows the gas supply price to be reviewed every three years.

The proposed price would increase the cost of 1 kilowatt of the electricity that it is used to generate from 0.70 pataca (US$0.09) to 1.00 pataca, Mr Santos said.

He said the parties were discussing the price increase and would try to keep the price at “a reasonable level” to ease the financial burden on residents.

Sinosky has made an accumulated loss of 92.5 million patacas since it began operations, making a loss of 43.5 million patacas last year alone.

The company blamed this on the appreciation of the yuan, which it said had pushed up the price of the gas it imports.

Mr Santos said the natural gas distribution deal would be signed this month or next, with the supply starting nine months after that.

The gas supply network is expected to cover all of the city in five years, including the new University of Macau campus on Hengqin Island and the Seac Pai Van public housing complex.

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Casino operators have known it privately for years and industry experts thought they knew it from anecdotes. Now research from the University of Macau proves it. Gamblers in Macau are among the most passionate and high spending in the world. More than one-in-ten mass-market respondents to questions on gambling behaviour said they had staked or were willing to stake between 20,001 patacas and 50,000 patacas per Macau trip.

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June 11

HSI - Movers Name

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Great expectations for Nova Park sales The first of the three blocks included in Nova Park, the fourth phase of the Nova City housing project, went on pre-sale yesterday evening after a three-hour public showing on Saturday attracted hundreds of viewers. Real estate agents expect the 120 flats to be sold for 5,000 patacas to 6,000 patacas, higher than the average for Taipa in April.

%Day

ESPRIT HLDGS

6.66

CHINA UNICOM HON

6.55

COSCO PAC LTD

6.50

CHINA LIFE INS-H

6.13

CHINA MERCHANT

5.32

BANK EAST ASIA

0.79

BELLE INTERNATIO

0.77

CHINA CONST BA-H

0.76

IND & COMM BK-H

0.70

WANT WANT CHINA

-0.75

Source: Bloomberg

Brought to you by

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business daily June 12, 2012

macau

Rents threaten survival of shops in prime areas High rents are changing the face of the city’s busiest streets as many merchants can no longer afford them Xi Chen

xi@macaubusinessdaily.com

R

ising rents have pushed traditional shops and cafes to the brink of extinction in the city’s prime areas.

In high foot-traffic areas such as San Ma Lou and Senado Square, rents have risen by 20 percent to 30 percent per year in the past two years.

Many merchants can no longer afford the rents and have had either to close or to move away.

Café B+, on the second floor of a building close to the São Domingos Market, closed last month.

The owner of a neighbouring stall told Business Daily that the rent was too high for the business to be profitable.

The café was paying about 60,000 patacas (US$7,500) a month.

Even that is low for businesses in the area.

According to shop staff in Rua de São Domingos and Rua da Palha, most are paying more than 200,000 patacas a month, on average.

The owner of a second-floor shop

close to the Ruins of St Paul, currently vacant, is asking 260,000 patacas a month for an area of around 1,100 square feet (102.2 square metres).

Cafes and traditional restaurants in particular are under pressure to remain profitable, with even some well-established outlets concerned about the future.

Leitaria I Son, a family-run business, makes milk desserts that are well known among tourists.

Its main store, between two jewellery shops in San Ma Lou, has had its profits eroded by the high rent, fifth-generation owner Lo Tong Yui said.

Mr Lo would like to buy the space but he said the owner had no intention of selling.

“We are slightly profitable, but most of our revenue goes into rent,” he said.

“In few years’ time, if the rent is too high, we will need to move.”

Profit imperative

MOP2.3 M Rent for a 7,512 square foot shop in Rua de São Domingos

The two neighbouring jewellery shops paid about 380,000 patacas and 400,000 patacas a month in rent, Mr Lo said.

The dessert shop pays less, but the rent still made it hard, he said.

He believes that the tourism boom has benefitted only a few streets.

“Fewer than 30 percent of the current traffic would come to my store if I move off the main tourists’ streets,” he said.

With soaring rents in high foot-traffic areas such as Senado Square, even shops owned by foreign retailers are feeling the pinch

Retailing space market buzzes The number and combined value of commercial property sales surged in April to their highest since June 2011 Kelsey Wilhelm

Photo by Manuel Cardoso

kelsey.wilhelm@macaubusinessdaily.com

A

fter rising to a record level in March, the average value of sales of commercial premises slipped to 6.37 million patacas (US$796,700) in April – but this was still the second-highest figure since the Statistics and Census Service began collecting data in 1999.

And the number of shops sold rose by more than half to 180 in April.

Together they fetched 1.1 billion patacas, 28.7 percent more than the total value of sales in March.

The figures for the number of shops sold and their combined value were the highest since June 2011.

However, it is difficult to say whether shops are becoming more expensive, because, unlike homes, offices or industrial premises, there are no statistics on the average price per square metre of retailing space.

In the property market as a whole, sales increased in April – usually a peak season – for the third consecutive month.

The number of sales was 2,476, 42.5 percent more than in March, but fewer than a year before.

The number of sales has

Sales of shop premises rose by more than half in April

now been lower than a year before for the past eight months, hinting that the market is cooling.

“Compared with before, of course the transactions have slowed down, but it’s not bad,” Noelle Cheung, sales director of Centaline Macau, told Business Daily.

She pointed out that in April 2011 there had been 5,272 sales, the most since 2001.

Healthy outlook The number of office sales tumbled by 48.1 percent

in April to just 41. The combined value of office sales dropped to less than 220 million patacas from almost 300 million patacas.

“The supply in the market is not much,” Ms Cheung said. “Now more and more users need office units. I believe it’s very healthy, the price is stable and is going to increase slowly”.

The number of home sales jumped by 48 percent in April to 1,824. The combined value of home sales rose by 80 percent to 8.3 billion patacas.

Home sales accounted for

91.8 percent of the value of all property sold in April, an unusually large proportion.

The government expects the supply of housing to remain high.

The Land, Public Works and Transport Bureau said yesterday that in the first quarter of this year 86 private housing developments had been completed or had been under construction.

Of those completed, 14 were on the peninsula and three on Taipa.

Of those under construction,

56 were on the peninsula and 13 on Taipa or Coloane.

The developments will contain over 10,000 homes and have about 11,000 parking spaces.

The government has approved five new private housing projects and is considering a further 232.

If approved, these could provide over 31,000 flats, about 18,000 with two bedrooms and about 13,000 with three or more bedrooms.

Of these projects, 176 will be on the peninsula, 25 on Taipa and 31 on Coloane.

June 12, 2012 business daily | 3

MACAU retailer in Largo de São Domingos said higher and higher rents meant the shop had to sell more.

If an employee fails to meet a monthly sales quota, he or she will have to work overtime to make the extra sales.

For the past two weeks the shop has

KEY POINTS Rents in prime areas have risen by 20 percent 30 percent per year Cafes and traditional restaurants in particular are under pressure

Photo by Manuel Cardoso

Shops try to boost sales to cover rent rises

Small retailers are also feeling the pinch.

The Chinese-language Macau Daily News reported that a souvenir shop close to the Ruins of St Paul would perhaps close when its lease finishes at the end of the year – again,

because of the high rent.

The newspaper quoted the shopkeeper as saying the monthly rent had been only about 1,000 patacas when she had started and that now it was hundreds of times that sum.

Her rent has risen more than 20 times over the years.

Senado Square is being taken over by foreign retailers, particularly those from Hong Kong.

A member of staff in a Hong Kong

been looking for four more staff.

According to transaction records made available by Centaline Macau, 7,512 square feet of commercial space in Rua de São Domingos was rented in March for 2.3 million patacas per month and 1,500 square feet of commercial space in San Ma Lou was rented for 155,000 patacas.

The records show that in January 5,400 square feet of commercial space in San Ma Lou was sold for 98 million patacas and 1,800 square feet of commercial space there was sold for 31 million patacas.

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business daily June 12, 2012

macau

Hoteliers double down InBrief on rooms soon Macau-HK talk cooperation

Officials from the two SARs, including the Hong Kong Financial Secretary, John Tsang, are meeting in Macau for a twoday meeting that ends today. “The highlevel meeting provides a platform for the two places to review the progress and future direction of cooperation on various fronts and explore new areas of collaboration,” the Hong Kong authorities said. A Macau government spokesperson confirmed the meeting but declined to give any further details.

Tibet eyes Macau air link Chinese authorities have agreed on Thursday to encourage airlines to establish more routes linking the capital of Tibet autonomous region, Lhasa, with Macau, Hong Kong and Taiwan, as well as several southeast and west Asian countries. According to state news agency Xinhua, Li Jun, deputy director of the Civil Aviation Administration of China, said applications for new routes will be encouraged in order to boost air passenger volume.

Regional polices talk illegal bets The police forces of Macau, Hong Kong and Guangdong province have pledged to strengthen communication, cooperation and boost joint operations on cross-border crime, namely to tackle illegal sports betting. On June 8, the day when the European Football Championship began, about 60 officers from the three sides met in the MSAR to improve cross-border safety, including human and drugs trafficking and Internet fraud.

The number of hotel rooms is expected to double in a matter of years, with a batch of new projects in the pipeline Xi Chen

xi@macaubusinessdaily.com

A

s many as 11 hotels were under construction at the end of the first quarter and another 21 are in the approvals pipeline, official data show.

The 32 properties are expected to provide 23,000 rooms and 13,000 parking spaces, according to a statement released by the Land, Public Works and Transport Bureau.

The city’s inventory of hotel rooms stands at about 22,000 rooms across 95 properties. If the new additions are approved, the number of hotel rooms will double to about 45,000.

The 11 properties currently being built will add another 9,791 rooms.

There are 640 rooms in the eight hotels being built on the Macau peninsula. The other three projects are in Cotai and will provide 9,151 rooms.

Together the hotels have an area of 66,000 square metres.

The city’s biggest hotel, the 3,863room Sheraton Macao Hotel in Cotai is scheduled to open on September 20.

Wynn Macau announced earlier this month the construction of an integrated resort in Cotai with a 2,000-room five-star hotel.

The 21 planned projects could provide as many as 14,000 hotel rooms.

About 2,260 rooms will be supplied

The 3,863-room Sheraton Macao Hotel in Cotai is expected to open this autumn

by the 15 hotels planned for the peninsula; on Taipa, two hotels will offer another 817 rooms; one project on Coloane is scheduled to have 384 rooms; and the bulk of the rooms, 10,502 of them, will be in three Cotai hotels.

There are currently more than 14,000 rooms in five-star hotels and about 1,400 rooms are in twostar hotels and guesthouses.

In the last annual survey carried out by hotels.com, Macau had the eighth most expensive average room rate in the world. The average room rate was HK$1,601

(US$206.40) last year, 9 percent more than the year before.

The city placed ahead of Hong Kong, which had an average room rate of HK$1,270.

Government Tourist Office director João Manuel Costa Antunes has said the city could have as many as 50,000 hotel rooms in the next five years.

He was quoted by Bloomberg last month as saying the city could handle the added capacity because occupancy rates averaged about 85 percent and vacancies were rare at weekends.

Air Macau starts filling planes The number of passengers carried by Air Macau grows by 15 percent this year

T RadioShack expands into China RadioShack Corp is taking a minority stake in a joint venture that will open small-format stores in Macau, Hong Kong, Taiwan and in mainland China, with the first location set to open in Shanghai next month. Cybermart, an affiliate of Hon Hai Precision Industry Co Ltd, will own a 51 percent stake in the venture. RadioShack will contribute US$2.94 million (23.5 million patacas) upfront.

he number of passengers flying Air Macau has increased by 15 percent so far this year, the airline’s chief executive, Zhu Song Yan, has said.

Mr Zhu told the Portuguese-language newspaper Jornal Tribuna de Macau on Friday that Air Macau “made money” in the first three months of this year, but gave no figures.

Air Macau is trying to consolidate after two consecutive years of making a profit, and one of its main goals is to attract more passengers from abroad to keep its business expanding.

The chairman of Air Macau Co Ltd, Zheng Yan, told our sisterpublication, Macau Business magazine, that the flag carrier is now considering ways to do more

New Macau eyes more AL seats After being re-elected as New Macau Association president on Sunday, Jason Chao said they would again try to elect four legislators in 2013. The association now has two vice-presidents, with Lei Kuok Keong joining Scott Chiang.

Speaking to media, Mr Chao confirmed that the association would likely present two electoral bids. He believes the odds of getting four Legislative Assembly seats, one more than in 2009, are better thanks to the political reform, that added two seats for directly-elected legislators.

business electronically, which may include an application for smart phones for passengers to buy tickets.

The company expects more profit this year, though Mr Zheng admits this will be a challenge. “[The] overall aviation industry is not very good,” he said.

The airline made a profit of 231.9 million patacas (US$29 million) in 2010, breaking a fiveyear losing streak.

It made a profit of around 250 million patacas last year.

“With this we had enough to cover all the losses accumulated since 2005,” Mr Zheng said.

The company had accumulated losses of almost 600 million patacas by the end of 2008, giving

it a net asset value of minus 107.3 million patacas.

To increase its services Air Macau intends to take back the last two planes it wet-leased to its parent company, Air China Ltd. It wet-leased several planes to Air China in 2008 because the global financial crisis meant it could not fill them.

As business picks up, the company is now taking back its leased planes one by one.

Air Macau will begin flying to Tokyo daily next month and may come up with a new long-term plan for its routes this year.

The full interview with Mr Zheng is published in this month’s edition of Macau Business.

City of Dreams’ new show is Taboo

Former world champion gymnast Elena Gatilova in Taboo

The new Franco Dragone show to be performed at City of Dreams on Cotai is called Taboo, the casino resort operator Melco Crown Entertainment said yesterday. The cabaret-style performance aimed at adults will include Elena Gatilova, a former world champion gymnast known as Lucky Moon; and what’s described as the only female sword-swallowing performance artist from Finland, known by the stage name Lucky Hell. Jennlee Shallow, a mezzo-soprano who took part in a world tour of the musical Lion King and award-winning flamenco dancer and choreographer Fabien Thomé are also in the cast. The show is described as a “limited run production” for the summer only and will have its premiere at Club Cubic, City of Dreams’ nightclub venue, at a date yet to be announced. Franco Dragone Entertainment Group, a Belgium-based company, already stages the highly successful The House of Dancing Water show in a purpose-built theatre at City of Dreams.

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business daily June 12, 2012

macau

A tale of two cities Visiting gamblers reveal habits in new survey Associate Editor

Mass-market fun – only one in six say they’re in Macau to gamble

M

ore than one-in-ten respondents to questions on gambling behaviour contained in a University of Macau visitor survey said they had staked or were willing to stake between 20,001 patacas (US$2,500) and 50,000 patacas per Macau trip. The lower figure is more than five times the average gambling budget for visitors to Las Vegas (equivalent to 3,739 patacas) recorded in 2010.

The results were contained in the Macao Visitor Profile Study 2011, produced by the university’s Institute for the Study of Commercial Gaming and reported in the June edition of our sister publication Macau Business magazine.

And among 3,303 interviewees willing to discuss their gambling results, exactly half reported the complete loss of their original stake money. That’s statistically consistent with the results produced by baccarat, which is roughly an evens game for players and accounted for 91.4 percent of all gross gaming revenue in 2011 according to government statistics. Nearly 90 percent of those responding to the gambling

questions said they had played table games. There was however some tables-to-slots crossover, with just under 31 percent of respondents saying they had played electronic games.

It’s not the first time Macau visitors have been asked about their gambling habits. Governmentbacked visitor surveys have also included questions on gaming budgets under the general heading of spending. But it’s the first year the university has done a detailed visitor profile including a segment of questions specifically on gambling behaviour.

aside 5,000 patacas or fewer.

That’s still a third more than the average gaming spend in Las Vegas in 2010.

But only 16.5 percent of all Macau visitors responding to the survey described the main purpose of their trip as casino play. That pattern has also been seen in governmentproduced visitor surveys. Davis Fong Ka Chio, the institute director, says visitors generally give a “universally acceptable answer”.

Gaming spend Of 7,314 questionnaires that were completed in the survey by people departing from Macau, 45.3 percent said they had been gambling.

The study results also suggest however the still-lopsided nature of wealth distribution on the Chinese mainland, from where 57 percent of the survey respondents originated.

Of the 1,785 interviewees willing to discuss their gaming budget, 62.4 percent said they had set

They may say gambling is not their primary purpose when, in truth, it is.

Among 1,785 interviewees that were willing to discuss their gaming budget, the average spend was 15,257 patacas, with the median 5,000 patacas. A total of 12.1 percent of respondents to the topic said they had a budget of between 20,001 patacas and 50,000 patacas.

The study averages are unlikely to be skewed significantly by the high rolling volumes of VIP players.

The interviews were conducted at four main entry and exit points for mass-market customers: Macau Maritime Ferry Terminal at the Outer Harbour, Pac On Temporary Ferry Terminal at Taipa, Macau International Airport and the Border Gate at Gongbei.

“We believe that our study captured mostly mass-market visitors but not the VIP visitors.

We will need to conduct other studies,” says Amy So Siu Ian, coordinator of the Hospitality & Gaming Management Program at the university and one of the study authors.

A. E.

Source: Macao Visitor Profile Study 2011

Weather Beijing 29/17o C Changchun 24/15o C

Harbin 27/13o C

Xian 34/18o C Shanghai 30/22o C Chengdu 30/21o C Kunming 24/16o C Haikou 34/27o C Sanya 33/28o C

Guangzhou 30/24o C

MACAU (11 June-16 June) Day

Temperature

Humidity

06/11

27/31o C

65/95 %

06/12

26/29o C

70/95 %

06/13

25/28o C

75/95 %

06/14

25/28o C

75/95 %

06/15

25/29o C

70/95 %

06/16

26/30o C

65/95 %

Shenzhen 33/25o C

ASIA (today)

Hong Kong 30/25o C

Manila

TOKYO

Jakarta

31/26o C

31/26o C

22/18o C

32/23o C

Macau 29/25o C

Bangkok

SEOUL

K. lumpur

33/28o C

SINGAPORE

27/21o C

35/26o C

taipei

31/24o C

June 12, 2012 business daily | 7

MACAU

Nova Park sales begin BNU bets on SME growth A Nova Park block hits the market at prices expected to be higher than the average for homes in Taipa recently Xi Chen

Photo by Manuel Cardoso

xi@macaubusinessdaily.com

After a crowded showing, pre-sales of homes in Taipa’s Nova Park began yesterday

H

omes in Nova Park, the fourth phase of the Nova City housing project, went on sale yesterday evening, according to Centaline Macau sales agent Simon Zhou.

Expectations were high after the developer held a public showing of its model flat at the Macau Tower on Saturday.

The showing, scheduled to last three hours, attracted hundreds of viewers, who queued to get in.

The homes, next to Nova City, will face the Taipa central park, which will open in July.

Nova Park will comprise three blocks containing 620 flats ranging in size from 556 square feet (51.7 square metres) to 1,936 square feet.

It will also have a few flats of between 3,636 square feet and 4,028 square feet on the top floors.

One block of 120 flats was due to go on sale first, according to Mr Zhou, comprising mostly two-bedroom flats of around 1,100 square feet each.

Mr Zhou said the estimated price per square foot was about 5,000 patacas (US$625.7) to 6,000 patacas, given that second-hand flats at Nova City were selling for about 4,600 patacas per square foot.

This estimate, the equivalent of 53,800 patacas to 64,600 patacas per square metre, is higher than the average of 52,750 patacas per square metre for homes in Taipa in April.

Deadline to beat Mr Zhou said 17 agencies were involved in the sale and 300 prospective buyers had shown interest in the 120 flats.

MOP5,000-6,000 Estimated price per square foot of space in Nova Park

“Most potential buyers are locals who want to move into the flats, such as young couples or residents upgrading their homes,” he said.

There will be a phase five after Nova Park, which is supposed to be a multi-purpose building comprising a hotel, a shopping mall and homes.

The developer of the project is Nova Taipa Urbanizações Ltda, a wholly-owned subsidiary of Shun Tak Holdings Ltd. Nova Taipa is also behind One Central, Nova Taipa Gardens and Taipa Hills Memorial Gardens.

Nova Taipa expects to sell all the flats in the three Nova Park blocks that have not yet begun to be built before the government enacts a bill to restrict the sale of uncompleted flats.

The bill, still in the Legislative Assembly, would prohibit developers from selling a flat that exists only as part of floor plan unless the foundations and basement of the building containing it were complete.

Developers would also have to obtain sales permits from the government.

Despite positive results, BNU wants to revamp its strategy by 2014 and increase SME business

B

anco Nacional Ultramarino (BNU) has unveiled a plan to boost its competitiveness by 2014, focusing on the small and medium enterprises and merchants segment, the bank’s chief executive said.

In an interview with Macau Business magazine, Pedro Cardoso said BNU has created a new, dedicated team for this segment that is now trying to increase business levels with existing customers “both in lending as well as in the deposit areas”.

“Like in the retail business area … we are still well below our potential business levels with existing customers,” Mr Cardoso said.

But that will only be the first step for the bank celebrating the 110th anniversary of its operations in Macau, he added. “Then we have a long list of potential customers to address in the future.”

Even though BNU saw its business grow by 13 percent last year, the bank’s chief executive believes the transformation plan is “absolutely needed” for the company to face “quite a challenging environment”.

Macau’s low interest rates meant that the bank’s net interest rate has dropped by 10 percent in 2011, he said.

In addition, some financial institutions “tend to focus on market share and not so much on profitability”, Mr Cardoso

BNU’s transformation plan is ‘absolutely needed’, says chief executive P. Cardoso

bemoaned. “It is very hard to see anywhere in the world … a banking sector with such low net interest margins.”

To tackle the challenges, BNU wants to increase the number of products and services sold to each customer “On average, we sell only 2.4 products and services to each customer. That is well below international standards, which in developed countries stands above four products,” the executive said.

The bank also expects to open four to five more branches in the next two years.

The full interview with Mr Cardoso is published in this month’s edition of Macau Business.

V.Q.

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business daily June 12, 2012

GREATER CHINA

China industrial output below expectations Cut in interest rates signals government concern with economic growth

C

hina’s inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth that galvanised policymakers last week into taking their boldest action yet to combat a sharpening slowdown.

A flurry of data over the weekend explained China’s surprise cut in interest rates on Thursday – its first since the global financial crisis – by showing the extent of the domestic economy’s weakness.

The rate cut followed a number of measures designed to get money flowing back into the economy.

Beijing could offer more support if needed to combat risks from the euro zone debt crisis, which claimed Spain this weekend as the fourth country to seek financial support, and to promote stability in a year of leadership change, analysts said.

“Monetary policy should continue to lean towards loosening,” said Wang Jun, an economist at the government-backed think tank China Centre for International Economic Exchange.

Premier Wen Jiabao and other policymakers appeared to be jolted by dire economic figures for

April, released a month ago. In recent weeks they have approved languishing investment projects and launched a number of reforms to allow private investment into sectors previously dominated by the state.

Thursday’s quarter point rate cut briefly lifted financial market sentiment, although that gave way to suspicions that the timing of the reduction meant May’s data would be worse than expected. The suspicions were right.

Industrial output rose 9.6 percent in May from a year ago, below expectations and further entrenching concerns the world’s second-largest economy faces its worst slowdown in years.

Retail sales were short of expectations, growing at their slowest pace since February 2011, while investment in the likes of real estate, infrastructure and factories increased at its weakest year-todate pace in close to a decade.

Consumer price inflation eased to 3.0 percent, below expectations and the lowest level since the middle of 2010.

Producer prices fell 1.4 percent from a year ago, marking the third straight month of producer

price deflation.

“The slide in PPI... points to considerable sluggishness in domestic manufacturing activity,” said Xianfang Ren, economist at IHS Global in Beijing.

Slowing down China’s economic expansion is widely expected to dip below

9.6 % China’s industrial output rose in May 8 percent year on year in the second quarter. That would mark the sixth consecutive quarter of lower growth and reflect the sort of pace seen during the trough of the global financial crisis in the winter of 2008/09. Full-year growth is expected to drop to 8.2 percent, the lowest level since 1999, a Reuters poll showed in

May. The government has set a growth target of 7.5 percent for 2012.

Indications abound of a slowdown in the real economy. Crude refinery runs fell 0.7 percent in May from a year earlier, the second straight month of decline and power generation growth was sluggish at just 2.7 percent

EU emissions deadline approaching

Chinese airlines expect their government to retaliate if penalties are imposed Turbulence ahead for air travel industry

C

hinese airlines will snub a mid-June deadline for submitting carbon-emissions data to the European Union and anticipate that any fines or bans would be met with retaliatory measures.

The China Air Transport Association “expects that the Chinese government will impose similar penalties on European airlines swiftly after any EU action,” secretary general Wei Zhenzhong said yesterday in an interview in Beijing. The group, whose members include China’s big three state-

controlled carriers, hopes a trade dispute can be avoided, he said.

The European Commission has already given Chinese and Indian airlines an extra two and half months to submit 2011 emissions data as it tries to avoid a trade spat with the world’s two most-populous countries. The Asian nations have led multinational opposition to the addition of intercontinental flights to a European-run emissionstrading system because of concerns about cost and sovereignty.

Chinese airlines want the EU to delay the start of the emissions

June 12, 2012 business daily | 9

GREATER CHINA

InBrief

Trade trends China still faces a grim trade outlook, and “if lucky” it will be able to achieve its annual target of 10 percent growth in exports and imports combined this year, Commerce Minister Chen Deming said in remarks published yesterday.Despite slowing growth at home and abroad, Chinese export and import growth both surprised on the upside in May, with exports rising 15.3 percent and imports up 12.7 percent last month from a year earlier. Exports grew 8.7 percent in the first five months from a year earlier, while imports rose 6.7 percent.

VAT delayed

All eyes on the economy as most indicators cool down

after its weakest pace in three years in April.

Signs of the domestic economy’s struggle explains Beijing’s heightened concerns. The fall in consumer inflation to well below the official 2012 target of 4.0 percent, meanwhile, gave policymakers room to cut rates, analysts said.

A cyclical drop in pork prices, a staple meat in China, has helped bring inflation down, although fresh vegetable prices remain stubbornly high.

These are key price indicators for policymakers, always sensitive to social stability and more so this year when the Communist Party will select a new leadership.

Reuters

levies and instead wait for a global system to be devised through a United Nations aviation body, Mr Wei said before the International Air Transport Association annual meeting in China’s capital. Other countries opposed to the EU plan have also backed letting the International Civil Aviation Organisation regulate emissions worldwide.

EU stands firm The EU has repeatedly said it will not give up the curbs on emissions

from the aviation sector, which became part of the bloc’s legislation in 2008. Airline carbon-dioxide discharges in Europe doubled over two decades and international organizations failed to enact pollution curbs.

“All this retaliation talk isn’t in anyone’s interest,” said Isaac Valero-Ladron, climate spokesperson for the European Commission, the EU regulatory arm. “It would be much wiser to spend all this energy to get a global deal in ICAO.” The Commission said last month there had been “systematic nonreporting” of emissions data to and from Europe by 10 airlines based in India and China. Other carriers serving the region met a March 31 deadline, it said. The airlines weren’t obliged to hand in permits for 2011 emissions.

China is also looking at setting up its own emissions system, Mr Wei said. The EU law allows an exemption for overseas airlines from the cap-and-trade system on incoming flights if the home government introduces similar measures.

When asked about the possible effect on Toulouse, France-based aircraft manufacturer Airbus SAS from the emissions row, Mr Wei said any reductions or delays in plane orders would reflect “commercial decisions” and the wider travel market.

Bloomberg

Aggressive monetary easing expected Economist says more interest rate cuts possible

China will delay the expansion of its value-added tax beyond the eastern financial hub of Shanghai until early October, the Shanghai Securities News reported yesterday.

The newspaper said last month the expansion would be launched in late May or early June, with 10 cities and provinces on the waiting list. China started levying a value-added tax on sectors including transportation and selected services industries early this year in Shanghai to replace a business tax under pilot reforms.

C

hina may cut benchmark interest rates up to two more times this year as part of “aggressive” easing to counter the nation’s slowdown, said Ding Shuang, a Citigroup Inc. economist.

“China’s economy is still on a downward trend,” Ding, who formerly worked for the People’s Bank of China, told Bloomberg Television in Hong Kong yesterday.

“We do not see a clear turning point yet, and policy support is very much needed in order to stabilise growth.”

The expansion this quarter may be “very weak” at 7 percent to 7.5 percent, Mr Ding said after the government announced data for industrial production, inflation, fixed-asset investment and exports over the past two days. Betterthan- forecast trade growth in May may not be sustained as a likely recession in the European Union restrains demand, he said.

The central bank last week cut rates for the first time since 2008 in what Mr Ding said was a “very strong signal of more aggressive policy easing.”

Overseas shipments climbed 15.3 percent in May from a year earlier, the customs bureau said yesterday.

Bloomberg

Eastern cutting debt China Eastern Airlines , one of China’s top three carriers, aims to cut its debt-to-assets ratio to below 70 percent by the end of 2015 from its current 81 percent, its chairman said yesterday, amid a new round of capital injections by the government to support the country’s aviation industry. The company plans to reduce debt by raising funds from the market, through capital injections, and from its own profits, said Liu Shaoyong, speaking on the sidelines of the International Air Transport Association’s annual meeting.

CSR prudent over deals CSR Corp., China’s biggest trainmaker by market value, is unlikely to act on proposed acquisitions in Europe this year because of concerns about the region’s economy and the future of its single currency.

“The debt crisis in Europe is still developing and I think there is a risk of the economy getting worse,” chairman Zhao Xiaogang said in an interview in Beijing. “I want to stay calm and watch for a while.”

10 |

business daily June 12, 2012

asia

Asia stocks regain their footing Shares rise as China trade surprises, Spain seeks bailout Jonathan Burgos and Yoshiaki Nohara

China’s rising imports and exports boosted prospects for shipping lines

A

sian stocks rose, with the regional benchmark index on course for its biggest gain in almost five months, as China’s trade data beat estimates and investors speculated a bailout for Spain’s banks will help ease Europe’s debt crisis.

China Cosco Holdings Co. jumped 11 percent in Hong Kong as China’s rising imports and exports boosted prospects for shipping lines. Canon Inc., a camera maker that gets about 31 percent of sales from Europe, rose 3.5 percent in Tokyo.

“The bailout will keep companies that borrow from Spanish banks from going down all together,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co. “In China, overseas demand is stronger than expected.”

The MSCI Asia Pacific Index climbed 1.9 percent to 113.59 at 5:45 pm in Tokyo, heading for its biggest advance since January 17. More than six stocks rose for each that fell in the measure. The gauge rose for the first time in six weeks last week as policy makers in the U.S., Europe and China signalled they would take steps to stimulate growth.

Japan’s Nikkei 225 Stock Average increased 2 percent and South Korea’s Kospi Index rose 1.7 percent. The Nikkei Volatility Index retreated 8.2 percent, while the Kospi 200 Volatility Index sank 4.6 percent. Australian markets were closed for a holiday.

China’s Shanghai Composite Index added 1.1 percent as the mainland consumer prices increased the least in two years in May and industrial

output and retail sales trailed estimates, adding pressure for more stimulus after the first interest-rate cut in three years.

Hong Kong’s Hang Seng Index jumped 2.4 percent, with the HSI Volatility Index sliding 8.9 percent, the most since March 27.

‘Monetary measures’ “Growth in China has slowed from last quarter but I think policy makers will ensure that more fiscal and monetary measures will be available in order to lift the economy back up again,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Asia Ltd. Chinese lenders and developers rose.

Agricultural Bank of China Ltd, the world’s third-largest lender, gained 2.3 percent to HK$3.11. China Overseas Land & Investment Ltd, the biggest mainland developer listed in Hong Kong, climbed 2.9 percent to HK$16.92.

The mainland’s shipping companies gained as a separate government report showed China’s exports climbed 15.3 percent in May to a new record. Imports rose 12.7 percent compared with expectations for a 5.5 percent gain.

Cosco jumps China Cosco, the world’s largest operator of dry-bulk ships, climbed 11 percent to HK$3.84. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, jumped 11 percent to HK$1.93.

Futures on the Standard & Poor’s

KEY POINTS Overseas demand in China stronger than expected Bailout for Spanish banks improves sentiment Hong Kong’s Hang Seng Index jumped 2.4 percent Chinese shipping operators, lenders and developers rose

500 Index advanced 0.9 percent yesterday. The gauge added 0.8 percent on Friday on optimism that weekend discussions among European finance officials would result in a bailout for Spain.

Companies linked to Europe gained after Spain requested as much as 100 billion euros (US$125 billion) of bailout funds after weeks of escalating concern that bad loans at the nation’s banks might overwhelm public finances.

“Without a bailout, Spain would have had a serious liquidity issue,” said Baring Asset’s Mr Do. “In the short term, it’s relief for Spain and for Europe but it’s not the end solution.”

Index down Canon rose 3.5 percent to 3,240 yen in Tokyo. Esprit Holdings Ltd, a clothier that counts Europe as its biggest market, increased 6.7 percent to HK$13.46 in Hong Kong. Hutchison Whampoa Ltd, which operates ports in Spain and Germany, added 3.1 percent to HK$64.45.

The MSCI Asia Pacific Index dropped 2.1 percent this year through June 8, compared with a 5.4 percent advance by the S&P 500 and a 1.1 percent drop by the Stoxx Europe 600 Index.

Stocks in the Asian benchmark are valued at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to Bloomberg data. A number below one means companies can be bought for less than value of their assets.

Sumco gained 14 percent to 790 yen. It reported operating profit of 2.9 billion yen (US$36 million) for the three months through April 30, beating analysts’ estimates of 1 billion yen.

Olam International Ltd jumped 8.3 percent to S$1.76 in Singapore, heading for its biggest advance since October 27, after the commodity supplier announced a buyback of as much as 10 percent of its outstanding shares.

Bloomberg

June 12, 2012 business daily | 11

asia

Olympus declines as it mulls selling shares

InBrief Seoul considers supplementary budget

Japanese camera maker dropped 4.1 percent

O

lympus Corp., the Japanese camera maker that admitted to a US$1.7 billion accounting fraud, fell the most in a month in Tokyo trading after saying it may consider selling shares in the market to raise capital.

Olympus dropped 4.1 percent, the biggest decline since May 7, to 1,244 yen (US$15.6) on the Tokyo Stock Exchange. Japan’s benchmark Nikkei 225 Stock Average rose 2 percent.

The company is considering fundraising measures that may include a strategic alliance or selling shares in the market, as it seeks to boost its capital ratio to more than 30 percent by March 2017, president Hiroyuki Sasa said after the market closed last Friday.

Olympus needs to shore up capital after writing down the value of assets because of a 13-year accounting fraud exposed by former president Michael Woodford.

“The company needs to boost capital and form an alliance to rebuild itself,” Makoto Sengoku, a Tokyobased market analyst at Tokai Tokyo Securities Co., said yesterday. Mr Sasa’s comment about selling shares in the market was “triggering the drop” in trading yesterday, he said.

Olympus, the world’s biggest maker of endoscopes, may post net income of 7 billion yen (US$88 million) this

fiscal year, it said in a statement on Friday. That compared with the 25 billion yen average of four analyst estimates compiled by Bloomberg.

Operating profit may be 50 billion yen for the year ending March 31, compared with the 63.4 billion yen average of analyst estimates.

The Tokyo-based camera maker also said it plans to eliminate 2,700 jobs by March 2014. Olympus had 39,727 employees, including contract workers, as of March 2011, according to Tsuyoshi Oshima, a company spokesperson.

Most of the jobs being cut are in overseas manufacturing, Mr Sasa said on June 8. The company will close a plant in the Philippines this year and will reorganise others, it said in the statement.

Olympus has said it received alliance offers from several companies including Sony Corp., Panasonic Corp., Terumo Corp. and Fujifilm Holdings Corp.

Sharp rise In contrast to Olympus, Sharp Corp. rose to its highest in a month after saying Foxconn Technology Group, which has agreed to invest in the Japanese television maker, will start buying its panels earlier than it had planned.

The shares rose 8.2 percent to 424 yen, their highest since May 2, as of the close on the Tokyo Stock Exchange. The stock was the secondbest performer on Japan’s benchmark Nikkei 225 Stock Average.

Foxconn’s flagship Hon Hai Precision Industry Co. will start buying from Sharp’s TV panel unit next quarter, three months earlier than planned under an agreement in March, Sharp President Takashi Okuda, 58, told reporters. The large LCDmaking operation, in which Foxconn Chairman Terry Gou is investing, will be removed from Sharp’s balance sheet next month, said Mr Okuda, who took charge in April.

Japan’s largest maker of liquidcrystal displays turned to Foxconn, a Taiwanese assembler of electronics including Apple Inc.’s iPad, for 133 billion yen (US$1.7 billion) in investments after posting a record annual loss in the year ended March 31. Preparations for the investment by the Taipei-based company are in the “final stage” and awaiting regulatory approval, Mr Okuda said.

The two companies will also collaborate on selling smartphones in China and are considering selling the LCD unit to investors in a public offering, he said, without giving a target date.

Bloomberg

Japan calls for tougher insider trading rules Penalties in Japan appear more restrained in contrast to the high-profile cases elsewhere

J

apan’s securities watchdog flexed its muscles by fining a foreign financial institution for insider trading for the first time, but punishments overall remain modest by global standards, sparking calls for tougher laws to deter a practice that has gone unchecked for years.

Since March, the Securities and Exchange Surveillance Commission (SESC) has sought fines against three investment firms in a total of four cases brought so far in its probe into insider trading ahead of public share offerings, a near endemic problem in Japan.

The latest case, unveiled last Friday, showed a more aggressive side of the SESC. The regulator slapped U.S. broker-dealer First New York Securities with a US$185,000 fine, its harshest penalty yet.

But critics say the penalties are still too lax. The first three cases featured very small fines against the asset management firms that traded on inside information and the broker employees that tipped off their clients remained exempt from prosecution under Japanese law.

“We have to consider harsher punishments. The current penalties are way too light,” said Shinsuke Amiya, a legislator in the ruling Democratic Party and member of a working group formed to look at strengthening insider trading regulations.

Mr Amiya, a former vice chairman of

South Korea’s government may consider a supplementary budget later this year, depending on how the euro zone handles its economic crisis, President Lee Myung-bak said yesterday. Legislators from Mr Lee’s ruling conservative party have started calling for a supplementary budget, although the president told reporters that the economic situation in South Korea at present did not warrant extra spending. “I think we will consider that [a supplementary budget]... after June or July, depending on how the euro zone responds to the current crisis,” Mr Lee said.

Malaysia’s industrial output grows Malaysia’s industrial production growth quickened in April as rising demand spurred an increase in output of manufacturing and electricity.

Production at factories, utilities and mines gained 3.2 percent from a year earlier after rising a revised 1.5 percent in March, the statistics department said yesterday. Manufacturing output climbed 5.7 percent in April from a year earlier, quickening from a revised 2.6 percent increase in the previous month. Manufacturing sales rose 5.3 percent in April from a year earlier, accelerating from a revised 4.4 percent gain in March, the statistics department said in a separate report.

Temasek buys stake in Ivanhoe Mines The Securities and Exchange Surveillance Commission has sought fines against three investment firms

Merrill Lynch in Japan, said he wants to consider rules that would strip offenders of their operating licences and the establishment of a new fining system to complement to the modest one already in place.

Under an administrative penalty system introduced in 2005, the SESC levied fines of 50,000 yen (US$630) and 80,000 yen in two cases against an asset management unit of Sumitomo Mitsui Trust Holdings, and 130,000 yen in a third against Japanese hedge fund Asuka Asset Management.

The fines were tiny because they were based on the estimated commission from investors in those funds and not on the profit made, sparking criticism that they would do nothing to deter insider trading and could even be counterproductive by showing how small the potential punishment is.

Tougher punishments are possible if the SESC escalates cases to criminal charges, but it does this in only a handful of the most egregious cases each year because it requires a higher burden of proof and coordination with public prosecutors.

Michio Matsui, president of online

broker Matsui Securities, said he would like to see the industry’s selfregulating body, the Japan Securities and Dealers Association, fill that gap with severe punishments of its own.

“The fines we’ve seen are missing a few zeros. It’s not until there are penalties severe enough to threaten the health of the firm that you’ll see individuals really weighing the risks of their actions,” Mr Matsui said.

The penalties in Japan appear all the more restrained in contrast to the high-profile cases regularly brought by regulators in Britain and the United States, where offenders can face multi-million dollar fines and incarceration.

Timothy Blakely, a Hong Kong-based partner at Morrison & Foerster LLP and an expert on U.S. insider trading laws, says holding individuals accountable with strict legislation is a key component of an effective regulatory regime.

“And I think for those penalties to be effective they have to develop in a way that run to both the tippee, or the person who is trading, and the tipper as well,” Mr Blakely said.

Reuters

Singapore state investor Temasek Holdings has taken a 5.5 percent stake in Canada’s Ivanhoe Mines valued at US$426 million, according to a regulatory filing. Temasek bought 40.855 million shares of the Vancouverbased firm, the Singapore investor said in a filing to the U.S. Securities and Exchange Commission on June 8.

Ivanhoe is an affiliate of mining giant Rio Tinto. Temasek, which has about 36 percent of its assets in financials, has been slowly increasing its investments in resources firms. In April it bought shares of PetroChina Co’s unit Kunlun Energy Co Ltd.

Thai govt to release rice stocks Unmilled rice stocks held by the Thai government have jumped to a record 15 million tonnes, Commerce Ministry data showed yesterday. “We are in talks with Thai exporters to sell around 300,000-500,000 tonnes of rice from government stocks,” said Manat Soiploy, from the Ministry of Commerce. “Definitely prices will fall as supply is rising, not only because of the government’s plan to sell some of its stocks, but also because supply from the new crop in Thailand and Vietnam is rising,” said Chookiat Ophaswongse, a honorary president of the Thai Rice Exporters Association.

12 |

business daily June 12, 2012

MARKETS Hang SENG INDEX NAME AIA GROUP LTD ALUMINUM CORP-H BANK OF CHINA-H

NAME

PRICE

Day %

VOLUME

11.06

6.55106

46645155

11.2

1.818182

2596443

SANDS CHINA LTD

CLP HLDGS LTD

63.65

1.272872

1929861

CNOOC LTD

14.64

3.68272

58230920

9.99

6.503198

5954718

PRICE

Day %

VOLUME

26.05

1.956947

26627466

CHINA UNICOM HON

3.27

4.807692

16795139

CITIC PACIFIC

NAME

PRICE

Day %

55.3

1.46789

2563128

25.95

3.180915

11225612

SINO LAND CO

10.8

3.646833

19731210

SUN HUNG KAI PRO

88.2

1.262916

3774286

SWIRE PACIFIC-A

84.65

2.606061

1053833

231.4

4.895739

3597008

19

1.604278

2261784

9.24

-0.7518797

11313176

44

2.206736

28105299

POWER ASSETS HOL

2.8

1.449275

272711204

BANK OF COMMUN-H

4.93

1.02459

24873610

BANK EAST ASIA

25.4

0.7936508

1294757

BELLE INTERNATIO

13.08

0.770416

19108875

ESPRIT HLDGS

13.46

6.656101

7149300

TENCENT HOLDINGS

BOC HONG KONG HO

21.95

1.385681

11728160

HANG LUNG PROPER

25.55

1.590457

8067205

TINGYI HLDG CO

101.4

1.552328

1213590

WANT WANT CHINA

41

2.756892

3258644

WHARF HLDG

76.4

2.550336

1758768

COSCO PAC LTD

CATHAY PAC AIR

12.3

1.151316

2655584

HANG SENG BK

CHEUNG KONG

90.4

2.668938

3386333

HENDERSON LAND D

CHINA COAL ENE-H

6.74

2.743902

21487300

CHINA CONST BA-H

5.32

0.7575758

292619534

CHINA LIFE INS-H

18.7

6.129398

56223067

CHINA MERCHANT

22.75

5.324074

3108281

CHINA MOBILE

79.25

1.92926

9220255

CHINA OVERSEAS

16.92

2.919708

22066101

IND & COMM BK-H

CHINA PETROLEU-H

7.19

1.697313

69539796

LI & FUNG LTD

CHINA RES ENTERP

23.4

1.518438

1953922

CHINA RES LAND

15.32

2.818792

10952881

CHINA RES POWER

14.78

0.9562842

CHINA SHENHUA-H

25.95

2.97619

HENGAN INTL

MOVERS

48

HONG KG CHINA GS

16.34

1.239157

9274152

HONG KONG EXCHNG

110.8

4.33145

4405703

HSBC HLDGS PLC

64.85

2.936508

15718697

HUTCHISON WHAMPO

64.45

3.12

4723625

4.29

0.7042254

291537567

14.98

4.317549

10909546

HIGH

18978.88

25

0.8064516

2234168

LOW

18499.82

NEW WORLD DEV

8.79

3.533569

10927509

8298616

52W (H) 22835.03

PETROCHINA CO-H

10.38

2.56917

54891804

14513746

PING AN INSURA-H

59.15

3.680982

13492239

(L) 16170.35

MTR CORP

1

VOLUME

0 18980

INDEX 18953.63

18490

7-Jun

11-Jun

Hang SENG CHINA ENTErPRISE INDEX NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

23.7

4.867257

8723303

19130011

CHINA PETROLEU-H

7.19

1.697313

69539796

ZIJIN MINING-H

4.807692

16795139

CHINA RAIL CN-H

6.14

3.716216

19142360

ZOOMLION HEAVY-H

22.1

1.609195

11237821

CHINA RAIL GR-H

3.03

3.061224

17694672

ZTE CORP-H

2.8

1.449275

272711204

CHINA SHENHUA-H

25.95

2.97619

14513746

CHINA TELECOM-H

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.11

2.302632

165637238

AIR CHINA LTD-H

4.91

3.151261

ALUMINUM CORP-H

3.27

ANHUI CONCH-H BANK OF CHINA-H

NAME

4.93

1.02459

24873610

3.51

3.235294

38960770

15.28

0.5263158

3626256

DONGFENG MOTOR-H

13.28

1.065449

16020747

CHINA CITIC BK-H

3.87

0.5194805

36503478

GUANGZHOU AUTO-H

6.7

2.603369

3119217

CHINA COAL ENE-H

6.74

2.743902

21487300

HUANENG POWER-H

5.38

-0.3703704

31629725

CHINA COM CONS-H

7.14

3.930131

12350607

IND & COMM BK-H

4.29

0.7042254

291537567

CHINA CONST BA-H

5.32

0.7575758

292619534

JIANGXI COPPER-H

16.86

3.945746

13902070

CHINA COSCO HO-H

3.84

11.30435

40450081

PETROCHINA CO-H

10.38

2.56917

54891804

CHINA LIFE INS-H

18.7

6.129398

56223067

PICC PROPERTY &

8.73

3.928571

20040807

CHINA LONGYUAN-H

5.16

0

9648027

PING AN INSURA-H

59.15

3.680982

13492239

CHINA MERCH BK-H

14.22

0.9943182

11859762

SHANDONG WEIG-H

7.94

0.5063291

2565126

BANK OF COMMUN-H BYD CO LTD-H

NAME YANZHOU COAL-H

MOVERS

38

DAY %

VOLUME

12.34

4.222973

11873436

2.74

3.007519

36962414

10.18

1.394422

31850593

15.1

6.039326

4352375

1

1 9620

INDEX 9574.8 HIGH

9610.65

LOW

9347.36

CHINA MINSHENG-H

7.35

3.375527

27796861

SINOPHARM-H

18.04

1.805869

1763628

52W (H) 12902.97

CHINA NATL BDG-H

9.07

1.910112

23913485

TSINGTAO BREW-H

50.2

1.006036

1745444

(L) 8058.58

11.08

4.528302

6046404

WEICHAI POWER-H

31.8

2.250804

1832841

CHINA OILFIELD-H

PRICE

9340

7-Jun

11-Jun

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.62

-0.3802281

101420992

DAQIN RAILWAY -A

7.33

0.5486968

27209741

SANY HEAVY INDUS

14.63

2.307692

20256672

AIR CHINA LTD-A

6.21

-1.27186

12644764

DATANG INTL PO-A

5.31

-0.1879699

4771478

SHANDONG GOLD-MI

36.68

1.888889

16196457

ALUMINUM CORP-A

6.72

2.283105

6773308

DONGFANG ELECT-A

21.45

1.036269

5374294

SHANG PUDONG-A

8.34

0

71644862

ANHUI CONCH-A

16.4

1.736973

21448492

EVERBRIG SEC -A

14.14

3.438186

9477889

SHANGHAI ELECT-A

5.32

0.9487666

7669882

BANK OF BEIJIN-A

9.37

0.4287245

17193368

GD MIDEA HOLDING

12.3

0.8196721

23674322

SHANXI LU'AN -A

25

4.51505

14386106

BANK OF CHINA-A

3.02

0.6666667

31208415

GD POWER DEVEL-A

2.64

0

61106834

SHANXI XINGHUA-A

74.56

-0.7322594

1492302

BANK OF COMMUN-A

4.51

0.2222222

35541196

GEMDALE CORP-A

7.05

3.982301

86035862

SHANXI XISHAN-A

16.75

2.383863

13741744

BAOSHAN IRON & S

4.58

-0.4347826

15472068

GF SECURITIES-A

31.74

2.618817

6590797

SHENZ DVLP BK-A

14.79

-0.1350439

26550911

21.43

1.660342

19132995

SHENZEN OVERSE-A

6.59

5.948553

63144649

SINOVEL WIND-A

15.26

1.530273

765611

8.69

1.995305

42456083 3225758

NAME

NAME

NAME

7.95

2.713178

9721030

GREE ELECTRIC

22.94

0.5699255

2491482

GUANGHUI ENERG-A

15.52

2.239789

16037381

CHINA CITIC BK-A

3.97

-0.5012531

35042874

GUIZHOU PANJIA-A

31.97

6.31859

7793092

SUNING APPLIAN-A

CHINA CNR CORP-A

4.14

1.222494

23389849

HAITONG SECURI-A

10.5

3.143418

54257688

TSINGTAO BREW-A

38.59

1.31268

CHINA COAL ENE-A

8.54

1.425178

5153821

HANGZHOU HIKVI-A

52.01

3.646871

2173819

WEICHAI POWER-A

32.16

1.005025

3378575

CHINA CONST BA-A

4.45

0

17852087

2.94

1.030928

15122237

WULIANGYE YIBIN

32.19

-1.105991

18433676

CHINA COSCO HO-A

4.87

3.837953

14088343

HENAN SHUAN-A

60

0.03334445

1988875

XIAMEN TUNGSTEN

47.32

1.763441

10903314

CHINA CSSC HOL-A

31.33

1.919323

5169519

HUATAI SECURIT-A

11.67

3.641208

28920487

YANGQUAN COAL -A

17.64

3.278689

12044696

CHINA EAST AIR-A

4.13

-1.900238

21429509

HUAXIA BANK CO

9.37

-0.1066098

26057305

YANTAI CHANGYU-A

90.5

0.5779062

1437174

CHINA EVERBRIG-A

2.82

0.7142857

17444698

IND & COMM BK-A

4.17

0.2403846

56448236

YANTAI WANHUA-A

14.73

2.93501

8272598

CHINA LIFE INS-A

16.8

1.941748

6241510

INDUSTRIAL BAN-A

12.58

-0.2379064

47924893

YANZHOU COAL-A

21.51

2.331113

3261214

10.95

0.2747253

34551784

INNER MONG BAO-A

45.76

1.915367

52350367

YUNNAN BAIYAO-A

54.83

0.23766

3187859

BBMG CORPORATI-A BYD CO LTD -A

CHINA MERCH BK-A

HEBEI IRON-A

CHINA MERCHANT-A

13

2.281668

9489386

INNER MONG YIL-A

22.87

1.464064

6486215

ZHONGJIN GOLD

23.51

1.642888

10290142

CHINA MERCHANT-A

25.89

3.56

7414257

INNER MONGOLIA-A

6.18

0.4878049

41368405

ZIJIN MINING-A

4.11

0.982801

31397542

CHINA MINSHENG-A

6.05

-0.4934211

114511163

JIANGSU HENGRU-A

27.24

0.9636768

1768615

ZOOMLION HEAVY-A

10.89

1.775701

55167897

JIANGSU YANGHE-A

134.4

-1.176471

2084028

ZTE CORP-A

14.77

2.783577

19517445

JIANGXI COPPER-A

24.94

1.879085

5694216

CHINA NATIONAL-A

6.26

2.454992

15635372

CHINA OILFIELD-A

17.19

2.872531

5446992

CHINA PACIFIC-A

20.5

1.99005

13681132

JINDUICHENG -A

13.72

2.38806

4946655

CHINA PETROLEU-A

6.52

1.085271

27850995

JIZHONG ENERGY-A

18.34

3.733032

12824564

CHINA RAILWAY-A

4.46

1.826484

13820085

KWEICHOW MOUTA-A

235.55

-1.435267

3306123

CHINA RAILWAY-A

2.62

1.550388

24868783

LUZHOU LAOJIAO-A

39.81

0.2770781

4131713

CHINA SHENHUA-A

24.18

0.7919967

10840225

METALLURGICAL-A

2.58

0.78125

14570114

2.56

1.185771

11419282

CHINA SHIPBUIL-A

5.48

0.7352941

27870385

NINGBO PORT CO-A

CHINA SOUTHERN-A

4.68

0

34457332

PANGANG GROUP -A

7.6

-5.472637

95168473

9.21

1.097695

MOVERS

266

26

8 2580

INDEX 2558.265

CHINA STATE -A

3.37

3.058104

89186901

PETROCHINA CO-A

13946179

HIGH

2579.43

CHINA UNITED-A

4.03

3.069054

81581001

PING AN INSURA-A

42.33

2.992701

19408352

LOW

2521.7

CHINA VANKE CO-A

9.2

3.139013

88912938

POLY REAL ESTA-A

14.07

3.228173

36146545

CHINA YANGTZE-A

6.86

1.030928

8073321

QINGDAO HAIER-A

11.9

1.709402

5846053

CITIC SECURITI-A

13.48

2.587519

58020835

QINGHAI SALT-A

30.52

2.107728

3521415

CSR CORP LTD -A

4.72

1.505376

16063383

SAIC MOTOR-A

14.93

2.330363

14297791

PRICE DAY %

Volume

PRICE DAY %

Volume

52W (H) 3140.102 (L) 2254.567

2520

7-Jun

11-Jun

FTSE TAIWAN 50 INDEX NAME ACER INC

30.3

2.364865

9437341

ADVANCED SEMICON

25.6

-1.727447

49217558

ASIA CEMENT CORP

36.4

1.251739

ASUSTEK COMPUTER

NAME FORMOSA PLASTIC

75.5

1.615074

7257206

FOXCONN TECHNOLO

107

4.901961

3754944

FUBON FINANCIAL

29.2

NAME

PRICE DAY %

Volume

TAIWAN MOBILE CO

93.9

0.3205128

12981939

TPK HOLDING CO L

440

-2.222222

3644789 5254866

2.097902

14264597

TSMC

80.4

3.209243

37084219

UNI-PRESIDENT

47.1

1.508621

5275195

UNITED MICROELEC

12.1

0.8333333

33540445

293

2.090592

6649904

HON HAI PRECISIO

83.8

2.570379

24849688

11.95

6.222222

51331494

HOTAI MOTOR CO

191

2.96496

656961

CATCHER TECH

193

2.116402

11112925

HTC CORP

347

-1.420455

32014756

WISTRON CORP

37.75

1.752022

10689117

CATHAY FINANCIAL

29.2

2.097902

8490896

HUA NAN FINANCIA

16.15

0.9375

6044539

YUANTA FINANCIAL

13.45

3.461538

17771571

CHANG HWA BANK

15.4

0.6535948

7266669

LARGAN PRECISION

573

2.139037

1072384

YULON MOTOR CO

51.9

3.8

8077057

CHENG SHIN RUBBE

71.6

0.1398601

2616108

LITE-ON TECHNOLO

36.9

2.642559

2918117

CHIMEI INNOLUX C

11.8

3.508772

25707928

MEDIATEK INC

258

1.574803

3730195

CHINA DEVELOPMEN

7.17

0.9859155

36118791

MEGA FINANCIAL H

21.3

2.403846

19552833

CHINA STEEL CORP

28.3

1.071429

13173912

NAN YA PLASTICS

53.2

3.501946

5999904

CHINATRUST FINAN

16.9

1.501502

20097207

PRESIDENT CHAIN

154.5

0

1437275 9359402

AU OPTRONICS COR

91

0.886918

6345732

QUANTA COMPUTER

81.3

5.584416

COMPAL ELECTRON

CHUNGHWA TELECOM

28.7

-2.214651

16025757

SILICONWARE PREC

30

3.092784

8124083

DELTA ELECT INC

85.5

3.636364

10217207

SINOPAC FINANCIA

10.95

2.336449

21402564

FAR EASTERN NEW

29

0

8784360

SYNNEX TECH INTL

69.8

3.869048

3910224

FAR EASTONE TELE

66.6

0.3012048

2526855

TAIWAN CEMENT

34.45 -0.1449275

8290287

17.05

1.791045

9500583

TAIWAN COOPERATI

17.4

0.8695652

3571462

FORMOSA CHEM & F

FIRST FINANCIAL

75.5

2.303523

5337691

TAIWAN FERTILIZE

68.3

1.035503

1272834

FORMOSA PETROCHE

80.1

2.168367

1186240

TAIWAN GLASS IND

26.75

0.5639098

2170846

MOVERS

48

1

0 4900

INDEX 4900.09 HIGH

4903.41

LOW

4783.42

52W (H) 6208.01 4780

(L) 4643.05 5-Jun

7-Jun

June 12, 2012 business daily | 13

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

MElCo CrowN ENtErtAINMENt

MGM CHINA HolDINGS

19.5

12.3

31.7 31.5

19.4

31.3

12.2

31.1

19.3

30.9

12.1

30.7

19.2

30.5 Max 19.5

Average 19.32

Min 19.18

last 19.5

19.1

SANDS CHINA ltD

Max 26.15

Average 25.9

Max 31.65

Average 30.97

Min 30.4

Min 25.75

last 25.95

14.4

26.1

14.3

26

14.2

25.9

14.1

25.8

14.0

25.7

Min 12.08

last 12.28

Average 14.07

WTI CRUDE FUTURE Jul12

85.35

1.486325803

-14.11752868

111.4899979

77.40000153

BRENT CRUDE FUTR Jul12

100.66

1.196340605

-4.705102717

125.6100006

94.34999847

GASOLINE RBOB FUT Jul12

271.42

1.079994041

-0.018418241

332.1799994

246.4999914

GAS OIL FUT (ICE) Jul12

859.75

2.168746286

-4.419121734

1045.75

810

2.257

-1.826881253

-30.40394696

5.016000271

2.095999956

HEATING OIL FUTR Jul12

DAY %

YTD %

(H) 52W

Min 13.96

18.8 18.7 18.6 18.5

last 14.08

Max 18.88

Average 18.73

270.05

1.062834475

-5.002286559

331.9299936

256.3099861

1593.66

0.0163

1.8372

1921.18

1478.78

Silver Spot $/Oz

28.6763

0.6228

3.0225

44.2175

26.085

Platinum Spot $/Oz

1445.25

0.8548

3.6393

1915.75

1339.25

Palladium Spot $/Oz

620.95

1.1566

-4.9809

848.37

537.54 1955.75

LME ALUMINUM 3MO ($)

1985

-0.401404917

-1.732673267

2675.25

LME COPPER 3MO ($)

7295

-2.66844563

-4.013157895

9905

6635

LME ZINC

1868

-2.14772132

1.246612466

2539.5

1718.5

3MO ($)

LME NICKEL 3MO ($)

16925

1.988550768

-9.540352753

25195

15980

14.22

1.209964413

-7.482108003

19.375

13.72500038

601.75

0.627090301

-8.998109641

795

551

WHEAT FUTURE(CBT) Jul12

637.75

1.190003967

-7.067395264

881.75

592.25

SOYBEAN FUTURE Nov12

1339

0.487804878

11.18953706

1400

1115.75

158.35

0.603557814

-32.40128068

288.8500061

156.0999908

SUGAR #11 (WORLD) Jul12

20.37

1.951951952

-9.707446809

27.02999878

18.8599987

COTTON NO.2 FUTR Dec12

70.14

0.3720664

-20.15027322

107

64.61000061

AGRICULTURE ROUGH RICE (CBOT) Jul12 Jul12

COFFEE 'C' FUTURE Sep12

PRICE

(L) 52W

Gold Spot $/Oz

MAJORS

ASIA PACIFIC

CROSSES

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

last 18.78

Min 18.56

YTD %

0.5244 0.6333 0.6925 0.6951 -0.088 -0.0038 0.0052 0.0173 -0.162 0.095 0.4147 0.2342 1.0139 -0.2338 -0.599 0.0167 -0.0445 -1.1342 -1.1517 -0.8077 0

(H) 52W

-2.3607 0.1866 -1.5635 -2.7544 -3.3308 0.1039 0.1199 -1.165 -4.4648 -0.1266 1.4633 1.2913 2.1792 -3.6238 -1.0933 1.2996 2.9639 1.2724 2.781 -0.6183 0.0097

(L) 52W

1.1081 1.6618 0.9772 1.4578 84.18 8.0449 7.8113 6.4909 56.515 31.96 1.3199 30.716 44.35 9662 88.637 1.24736 0.90835 9.4168 11.6817 117.74 1.0311

0.9388 1.5235 0.7071 1.2288 75.35 7.9823 7.7529 6.2769 43.855 29.63 1.1992 28.661 41.879 8458 72.057 1.00749 0.79505 7.8544 9.8423 95.6 1.0288

(H) 52W

(L) 52W

ARISTOCRAT LEISU

NAME

PRICE 2.87

1.056338

30.45454

3.25

1.88

2611511

CROWN LTD

8.13

-2.751196

0.4944357

9.29

7.45

4568449

AMAX HOLDINGS LT

0.077

-2.531646

-11.49425

0.124

0.06

3448000

BOC HONG KONG HO

21.95

1.385681

19.29348

24.45

14.24

11728160 0

CENTURY LEGEND

World Stock MarketS - Indices

DAY %

0.9968 1.5572 0.953 1.2604 79.56 7.9913 7.7581 6.3692 55.545 31.59 1.2779 29.893 42.905 9410 79.299 1.20118 0.8094 8.032 10.0719 100.28 1.03

MACAU RELATED STOCKS DAY % YTD %

VOLUME CRNCY

0.23

0

0

0.405

0.204

3

0

7.142859

4.53

2.3

0

CHINA OVERSEAS

16.92

2.919708

30.3544

17.86

9.99

22066101

CHINESE ESTATES

8.99

0

-28.08

13.68

8.3

158038

CHOW TAI FOOK JE

9.06

0.8908686

-34.91379

15.16

8.55

5351400

EMPEROR ENTERTAI

1.16

0.8695652

4.504503

2.04

0.97

2010000

FUTURE BRIGHT

0.82

1.234568

95.2381

1.09

0.3

534000

GALAXY ENTERTAIN

19.5

5.633803

36.9382

24.95

8.69

16446001 1213590

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

12554.2

0.748257

2.755383

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

US

2858.42

0.967849

9.721898

3134.17

2298.89

HANG SENG BK

101.4

1.552328

10.03798

125

84.4

FTSE 100 INDEX

GB

5508.72

1.354902

-1.140639

6084.08

4791.01

HOPEWELL HLDGS

20.2

0.7481297

1.711981

24.903

18.56

356243

DAX INDEX

GE

6258.95

2.089933

6.113576

7523.53

4965.8

HSBC HLDGS PLC

64.85

2.936508

9.915254

79.6

56

15718697

NIKKEI 225

JN

8624.9

1.958091

2.005249

10255.15

8135.79

HUTCHISON TELE H

3.42

0.5882353

14.38127

3.71

2.33

2175042

HANG SENG INDEX

HK

18953.63

2.439097

2.816693

22835.03

16170.35

LUK FOOK HLDGS I

15.58

4.283802

-42.50923

46.15

14.82

5160067

MELCO INTL DEVEL

6.28

0.8025682

8.838822

10.76

4.3

1735251

CSI 300 INDEX

CH

2558.265

1.344357

9.059945

3140.102

2254.567

MGM CHINA HOLDIN

12.28

3.020134

28.0213

17.183

7.6

3048400

TAIWAN TAIEX INDEX

TA

7120.23

1.722658

0.680845

9053.39

6609.11

MIDLAND HOLDINGS

3.79

0.7978723

-4.148837

5.217

2.887

335721

NEPTUNE GROUP

0.1

0

-9.909911

0.153

0.08

0

NEW WORLD DEV

8.79

3.533569

40.41533

11.389

6.13

10927509

SANDS CHINA LTD

11225612

KOSPI INDEX

SK

1867.04

1.710575

2.262099

2192.83

1644.11

S&P/ASX 200 INDEX

AU

4063.695

-1.092229

0.1758761

4657.4

3765.9

ID

3866.213

1.068797

1.157013

4234.734

3217.951

FTSE Bursa Malaysia KLCI

MA

1578.41

0.4959825

3.114857

1609.33

NZX ALL INDEX

NZ

772.099

0.1578711

5.795929

806.015

JAKARTA COMPOSITE INDEX

PHILIPPINES ALL SHARE IX

12.0

18.9

13.9 Max 14.32

PRICE

NAME

Average 12.18

wyNN MACAU ltD

26.2

NAME

CORN FUTURE

Max 12.3

CURRENCY EXCHANGE RATES

NATURAL GAS FUTR Jul12

METALS

30.3

SJM HolDINGS ltD

Commodities ENERGY

last 31.6

PH

3371.1

1.079125

10.70791

3518.96

25.95

3.180915

18.22323

33.05

14.9

SHUN HO RESOURCE

1.13

-4.237288

13

1.32

0.82

0

1310.53

SHUN TAK HOLDING

2.87

2.135231

12.14756

4.668

2.241

2877719

700.441

SJM HOLDINGS LTD

14.08

1.294964

12.59014

20.711

10.079

16468792

SMARTONE TELECOM

14.62

0

8.779765

18.5

9.8

418659

WYNN MACAU LTD

18.76

2.738226

-3.794872

27.48

14.807

10969982

ASIA ENTERTAINME

4.12

-1.435407

-29.93197

10.8692

3.66

48801

BALLY TECHNOLOGI

46.24

1.248084

16.88574

49.32

24.74

271906

2695.06

HSBC Dragon 300 Index Singapor

SI

514.52

-1.63

3.66

na

na

STOCK EXCH OF THAI INDEX

TH

1154.76

2.454086

12.62436

1247.72

843.69

HO CHI MINH STOCK INDEX

VN

432.5

-0.09240009

23.0266

492.44

332.28

BOC HONG KONG HO

2.74

0

14.30061

3.15

1.81

3100

Laos Composite Index

LO

1006.77

-0.8352623

11.93049

1113.06

876.33

GALAXY ENTERTAIN

2.43

0

29.94652

3.24

1.08

53500

INTL GAME TECH

13.84

-0.2881844

-19.53489

19.15

13.12

1892876

JONES LANG LASAL

70.63

0.6412083

15.29547

99.89

46.01

203072

LAS VEGAS SANDS

46.13

0.9630116

7.95694

62.09

36.08

9470508

MELCO CROWN-ADR

11.96

0.5042017

24.32433

16.15

7.05

3635778

MGM CHINA HOLDIN

1.64

0

37.61931

2.2131

1.0025

100

MGM RESORTS INTE

11.39

1.605709

9.204215

16.05

7.4

7875417

SHUFFLE MASTER

14.53

4.909747

23.97611

18.77

7.35

1004985

1.79

0

11.34799

2.6037

1.2624

338

104.21

1.529618

-5.68377

165.4931

95.82

1300668

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

SJM HOLDINGS LTD WYNN RESORTS LTD

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CVV2/CVC2

14 |

business daily June 12, 2012

Opinion

Germany, not Greece, should exit the euro

Business

wires Leading reports from Asia’s best business newspapers

Business Standard

Red Jahncke President of the Townsend Group International, a business consulting firm

Germany’s lead. If they left, they would lose the trade advantages offered by the newly depreciated currency, and would have to bear all the costs and complications of reintroducing their own money.

The cheaper euro, of course, would be bad for foreign investors holding eurodenominated assets. On the bright side, the losses would be simultaneous in timing, spread evenly across creditors, and more moderate in the southern European countries than they would be in a euroexit scenario.

Vital interest

A

ll the debate about the pros and cons of a Greek exit from the euro area is missing the point: a German exit might be better for all concerned.

Unless Europe’s leaders take some kind of radical action, such as adopting and executing some of the many reform ideas they have floated, the currency union is headed for disintegration.

The problems of Greece, Ireland and Portugal have spread to Spain, the fourth-largest economy in the euro area. Italy is probably next. The other members of the currency union can’t afford to bail them all out.

Further loans will serve only to exacerbate the fundamental problem of too much debt and add to the growing enmity between the strong northern tier and its wards to the south.

Without healthy economic growth – and Europe is now back in a recession – multiple countries will have to restructure their sovereign debts. Greece’s agonising two-year restructuring experience suggests that doing several more would be extraordinarily difficult, if not impossible.

A Greek exit from the currency union would make the situation even worse. There is no mechanism to decide, or deal with, whichever nation might be next, and even that presumes that exits could be managed.

The more terrifying prospect is that the other afflicted countries might exit in an uncontrollable

panic, complete with bank runs, failures and general disarray.

The accompanying repudiation of hundreds of billions of euros in debt would overstrain the European financial system, even Germany’s. The global economy would be paralysed as everyone wondered which domino would be next to fall.

German exit What, then, might a German exit do? With integration and multiple restructurings so unlikely and withdrawal of the weak members so fraught, it might actually be the best of all available options.

A single, powerful nation would have the best shot at executing a relatively swift exit that would be over before anyone could panic. No agonising over who exits and who doesn’t.

Stripped of its German export powerhouse, the euro would depreciate sharply, but would not become a virtually worthless currency, as, for example, any re-issued Greek drachma surely would. With the euro devalued, a Greek exit and devaluation would be relatively pointless.

So, no contagion or bank runs.

With new exchange rates making all the non-euro financial havens prohibitively expensive, and with the threat of forced conversion into devalued national currencies removed, depositors in southern Europe would lose their impetus to run.

Germany’s exit would provide

immediate benefits to all the remaining euro-area nations.

The currency depreciation would radically improve their trade competitiveness – exactly what many observers have said the weaker nations in the south need most. The euro area’s balance of payments would improve, providing sorely needed funds to service its external debt. The benefits would accrue to the euro area

Unless Europe’s leaders take some kind of radical action, the currency union is headed for disintegration

as a whole, as opposed to serial exits at the weak end of the spectrum, which would crush one weak nation after another, with each exit increasing pressure on the next candidate.

Other relatively strong euroarea nations, such as the Netherlands, would probably pause before following

Certainly, there are problems not purely related to currency, including Spain’s real-estate bust and its impact on Spanish banks.

Here the devalued currency might bring fresh foreign investment.

Nevertheless, governments might have to bail out certain European banks struggling with bad assets or whipsawed somehow by the euro’s devaluation. Collective support might be required for Greece and others. Germany would still have reason to assist: its exit from the euro would not diminish its vital interest in the survival and success of the European economy.

While polls suggest that most Germans would be happy to have their old currency back, Germany would not escape unscathed. Its exports would contract as the new exchange rate made German goods much more expensive abroad.

It would be vilified for violating the orthodoxy of Europe’s post-World War II drive toward integration.

Nevertheless, such a bold move might stave off disaster today, and it wouldn’t necessarily signal the end of the European project. Famously, American revolutionaries “ran away to fight another day,” and they ultimately won. The U.S. Constitution succeeded brilliantly after the first attempt at union, the Articles of Confederation, failed.

Indeed, a German exit today might set the stage for a strong reunion tomorrow. Having learned their lessons and come to terms with economic reality, the nations of the euro area might do a better job of integration the second time around.

The Indian ministry of commerce and industry would soon relax land-related norms for Special Economic Zones (SEZs) to arrest the slackening pace of growth in these tax-free zones. In a major amendment to the policy, enacted in 2006, for the first time the government will change the minimum land requirement across all sectors. It will reduce the threshold limit for each sector-specific SEZ, in the wake of severe constraints faced by the developers in acquiring huge tracts of contiguous land.

Korea Times Samsung Electronics is promoting its own mobile chatting system called “ChatON”. The company is positive about the application as it is the top mobile phone maker.

The decision to put ChatON on its latest Galaxy S3 smartphone comes after Chief Operating Officer (COO) Lee Jay-yong ordered management to boost the company’s capability to better handle software-related systems.

The mobile messenger was developed and released last year in October as part of the firm’s plan to expand its portfolio.

Business Times Singapore’s non-oil domestic exports (NODX) rose 3.2 percent in May, accelerating from a downwardly revised 1.7 percent gain in April, as electronics and pharmaceuticals shipments increased, trade agency International Enterprise Singapore said on Monday.

But on a seasonally adjusted month-on-month basis, NODX fell 2.1 percent in May compared to a 6.4 percent expansion in April. Electronics exports rose 3.9 percent in May from a year earlier, while pharmaceutical shipments edged up 0.3 percent after April’s 7.1 percent year-on-year.

Viet Nam News Vietnam had 16 million 3G subscribers benefiting from widearea wireless voice messages, mobile Internet access, video calls and mobile TV by the end of May. The figure represents a 20 percent increase over December 2011, according to the Ministry of Information and Communications.

Mobile operators in the last three years have installed 33,700 3G BTSs (Base Transmission Stations) nationwide, providing wireless broadband internet access to 91 percent of the country.

Bloomberg View

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June 12, 2012 business daily | 15

OPINION

The broken legs of global trade Jagdish Bhagwati

Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations

In fact, such templates now extend beyond conventional trade issues (for example, agricultural protection) to vast numbers of areas unrelated to trade, including labor standards, environmental rules, policies on expropriation, and the ability to impose capital-account controls in financial crises.

The U.S.-led public-relations blitzkrieg of euphemism has already begun, with U.S. Assistant Trade Representative Wendy Cutler describing the latest PTA, the Trans-Pacific Partnership, as a “high standard” agreement. Other American officials have taken to calling PTA’s “trade agreements for the twenty-first century.”

Who could possibly be against the twenty-first century?

What is disturbing is the way in which some trade economists in Geneva and in Washington have capitulated to such propaganda, and regard capitulation by the WTO as a way to “salvage” and reshape the organisation. The WTO, like a village during the Vietnam War, must be destroyed in order to be saved.

DSM under fire

Pascal Lamy

T

he Doha Round, the latest phase of multilateral trade negotiations, failed in November 2011, after ten years of talks, despite official efforts by many countries, including the United Kingdom and Germany, and by nearly all eminent trade scholars today.

While trade officials in the United States and the European Union blamed the G-22 developing countries’ excessive demands for the failure of earlier negotiations in Cancún in 2003, there is general agreement that

this time it was the U.S. whose unwarranted (and unyielding) demands killed the talks. So, now what?

The failure to achieve multilateral trade liberalisation by concluding the Doha Round means that the world lost the gains from trade that a successful treaty would have brought. But that is hardly the end of the matter: the failure of Doha will virtually halt multilateral trade liberalisation for years to come.

Of course, multilateral trade negotiations are only one of

three legs on which the World Trade Organisation stands.

But breaking that leg adversely affects the functioning of the other two: the WTO’s rulemaking authority and its disputesettlement mechanism. The costs here may also be large.

Until now, preferential trade agreements (PTAs) among small groups of countries coexisted with multilateral, nondiscriminatory trade-liberalisation rounds. As a result, the rules that govern trade, such as anti-dumping duties and countervailing duties to offset illegal subsidies, were in the domain of both the WTO and the PTAs. But, when there was a conflict, WTO rules prevailed, because they conferred enforceable rights that extended to all WTO members, whereas PTA-defined rights extended only to the PTA’s few members.

Power games So, while powerful, “hegemonic” countries like the U.S. managed to impose their own rules on weaker partners in the PTAs that they helped to proliferate, big emerging economies like India, Brazil, China, and South Africa insisted on rejecting such demands when

It is up to major emerging economies and like-minded developed countries to establish their own template, one that adheres to trade objectives and discards what special-interest lobbies

made as part of multilateral trade rounds like Doha.

Now, however, with the era of multilateral trade rounds and system-wide rules behind us, the PTAs are the only game in town, and the templates established by the hegemonic powers in unequal trade treaties with economically weaker countries will increasingly carry the day.

Unfortunately, this insidious attack on the second leg of the WTO also extends to the third leg, the dispute-settlement mechanism. The DSM is the pride of the WTO: it is the only impartial and binding mechanism for adjudicating and enforcing contractual obligations defined by the WTO and accepted by its members.

It gives every member, big or small, a platform and a voice.

Once PTA-based DSMs are established, however, adjudication of disputes will reflect asymmetries of power, benefiting the stronger trade partner.

Moreover, third countries will have little scope for input into PTA-based DSMs, though their interests may very well be affected by how adjudication is structured.

Given that the U.S. has abandoned any pretence of leadership on world trade, it is up to major emerging economies and like-minded developed countries to establish their own template, one that adheres to trade objectives and discards what special-interest lobbies in hegemons like the U.S. seek to foist on PTAs. This is exactly what India has done with the EU, which is now stripping such features out of its proposed PTA. Other countries – Brazil, South Africa, and China among the major emerging economies, and Japan and Australia among the developed countries – should back such “garbagefree” PTAs as well. That just might be an adequate rebuff to the rise of PTAs whose main objective is to serve hegemonic interests alone – perhaps even sufficient to get the multilateral approach back on track. © Project Syndicate

16 |

business daily June 12, 2012

CLOSING OECD sees weakness spreading

Cyprus hints at bailout

There are signs that the economies of India and China are starting to falter, the latest report from the Organisation for Economic Co-operation and Development showed yesterday. The OECD said its composite leading indicator (CLI) for China, which provides a measure of future economic activity, slipped to 99.1 from 99.4 in April. The CLI for India also showed signs of weakening, dropping to 98.0 from 98.2. “The assessment for China and India has changed significantly since last month. For both countries, the CLIs point towards economic activity below longterm trend,” the OECD said.

Eurozone member Cyprus strongly hinted yesterday it may have to apply for an international bailout before the end of this month, both for its banks and its general coffers. “The issue is urgent.

We know the recapitalisation of the [island’s] banks must be completed by June 30, and there are a few days left,” Finance Minister Vassos Shiarly told journalists. Cyprus is under growing pressure to apply for aid to salvage its secondlargest lender Cyprus Popular Bank, bowed by its exposure to debt-crippled Greece, ahead of a regulatory deadline of June 30. Mr Shiarly said this would be a comprehensive package.

Chinese banks told to review risk Clampdown on trade financing could reduce business Carrie Ho

CBRC is concerned about possible defaults given the economic slowdown

C

hina’s banking regulator has told banks to assess loans to credit guarantee firms and step up checks on the sector, sources who have seen the documents told Reuters yesterday.

The China Banking Regulatory Commission (CBRC) was cracking down on the credit guarantee industry after a series of incidents exposed how participants were misusing client funds as well as being involved in the shadow banking sector.

Separately, Shanghai-based banks were told to conduct a risk review of loans to major customers by reassessing the

value of collateral and identifying their source of repayments.

“From our understanding, the government is trying to stabilise the banking system before injecting more liquidity with future monetary-easing policies,” a compliance officer with a Shanghaibased foreign bank said.

Data released by the Chinese central bank yesterday showed banks made a higher-than-expected 793 billion yuan (US$125 billion) new loans in May. Banks in Shanghai were also told to clamp down on “firms participating in fictitious trades to secure loans,” the CBRC said - a move which

could hurt commodities imports, especially copper.

Over the past year, many Chinese firms have turned to importing commodities to secure cheap financing. An importer uses a letter of credit to buy copper, and then uses the raw material as collateral to obtain a bank loan. Finally, it lends the money to other companies in the shadow banking market.

The circulars, sent to banks in May, underscored how the CBRC is concerned about possible defaults given the economic slowdown and rising risks in the shadow banking sector.

Copper deals Sources said Shanghai-based banks will need to prepare a report by end-June which should list proposals for them to reduce exposure gradually to risky customers or projects, including trade financing deals, property loans, off-balance sheet banking products and shadow financing.

“Although copper was not specifically highlighted by regulators, we know that they will scrutinise copper financing deals thoroughly, given the metal’s popularity as collateral,” said a credit analyst with an international bank in Shanghai.

Copper inventories at bonded warehouses in Shanghai have exceeded 500,000 tonnes, out of which 90 percent is used for financial arbitrage rather than to satisfy real demand, analysts and trading sources said.

While the clampdown on trade financing could reduce banks’ business, analysts said total exposure to such financing plays was manageable. They represented just 0.04 percent of China’s loan balance in March, Bank of America Merrill Lynch has said.

While some copper traders have stopped financing trades, others said they would continue until the government released more detail on how it will step up scrutiny into such deals.

“Some friends in the industry have stopped financing activities for now and have asked me to do the same.

But we will see if the government follows up with a total ban on new financing deals or with other more drastic measures,” a Shanghaibased copper trader said.

“A total crackdown on fictitious financing trades is hard to enforce as it is hard to prove which trade is not legitimate since even the dodgy ones will have basic documentary proof,” said the compliance officer at the foreign bank.

Reuters

Airline industry profits to plunge in 2012 IATA warns global profits will more than halve this year owing to surging oil prices and the eurozone crisis

G

lobal airlines braced yesterday for Europe’s debt crisis to worsen during the year, warning it would wipe out the benefit to the industry of cheaper fuel prices.

The International Air Transport Association (IATA) left its 2012 global airline profit forecast unchanged at US$3 billion, masking a widening gap between regions as only North and South America saw their profit outlook improve.

The Geneva-based grouping of some 240 airlines regularly issues forecasts for an industry whose activities are seen as a barometer of indicators such as business confidence and trade.

Director general Tony Tyler told IATA’s annual meeting in Beijing that

business was improving for American carriers, many of whom have been keeping a tight lid on capacity.

“The rest of the world is seeing reduced profitability. For European carriers, the business environment is deteriorating rapidly resulting in sizable losses,” Mr Tyler said.

IATA almost doubled its forecast for European airline industry losses in 2012 to US$1.1 billion, from its previous forecast of a US$600 million loss released in March.

“While the forecast is built on the market’s expectation that the sovereign debt crisis in the eurozone will intensify, the risk of more severe economic weakness in the event of a broader eurozone banking crisis could easily wipe out industry profits,” IATA said in a statement.

European carriers may suffer losses of US$1.1 billion this year

On the positive side for airlines, traffic has been stronger than expected and the cost of fuel has fallen, while cargo traffic shows signs of bottoming out from a twoyear slump.

In the United States, planes are flying virtually full, which although uncomfortable for passengers has pushed up fares.

The eurozone, however, stands in the

way of wider growth, Mr Tyler said.

Airline industry profits have roughly halved for two years in a row after peaking at US$15.8 billion in 2010.

Last year they stood at US$7.9 billion, according to IATA. The forecast equates to a profit margin of 0.5 percent, a level the industry warns could easily evaporate in the event of a new upset.

Reuters