Macau Business Daily, June 19, 2012

Thriller for Manila: casino recruits Filipinos

Down a peg – Yam mulls end to US dollar tie

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Year I - Number 57 Tuesday June 19, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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Learn from Luxembourg: lessons in economy

La Scala homes

It’s not over until the saleslady says W

ould-be homebuyers and real estate agents are receiving mixed messages on whether new sales are still being accepted for the La Scala project.

The government is starting moves to take back the scheme’s land. And the developer Chinese Estates Holdings announced to the Hong Kong Stock Exchange it was “temporarily” suspending both the construction work and the preselling of the residential project. Yesterday a salesperson on the La Scala sales hotline confirmed presales had been “stopped” but gave no reason. But two of the top property agencies in the city say they’ve had no formal instructions from Chinese Estates or their representatives to that effect.

The yet-to-be-built upon La Scala plot has been under threat of seizure since last month, when jailed former secretary for transport and public works Ao Man Long was convicted of accepting a bribe to push through the sale of the site.

Hong Kong-based Chinese Estates – which says it has invested around HK$2.8 billion (US$360 million) so far – has 15 days to submit a written reply to the government and could still appeal any seizure after that.

The company’s chairman faces bribery charges in Macau, but has vowed “to make a submission strongly opposing” the government’s move to take back the site located near the airport.

More on page 3

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House price bust fears are Hong Kong phooey

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espite looming corrections in Hong Kong property values, tight supply of new flats here will keep prices high for 12 months, property agents say. The average selling price of Macau housing for the first four months of 2012 was 50,645 patacas (US$6,336) per square metre.

And home rents continue to rise spurred by the arrival of extra non-resident workers, claims a report in the Chineselanguage Macao Daily News.

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No safe harbour for Yacht Club ‘tower’

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HSI - Movers

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he intense competition for Macau land is illustrated by a row over a plot granted to Macau Yacht Club.

Realgain Development Inc. is reportedly seeking investors for a 45-floor residential tower there when the scheme hasn’t even been presented to the Macau government, never mind been approved. Jorge Fão, a former member of the Legislative Assembly, says the project is unlikely to get off the ground.

Name

%Day

CITIC PACIFIC

4.31

BELLE INTERNATIO

3.75

CHINA MERCHANT

3.61

CHINA OVERSEAS

2.71

BANK EAST ASIA

2.69

SWIRE PACIFIC-A

0.00

Piped natural gas deal gets Chiu’s green light

CHINA UNICOM HON

-0.18

SANDS CHINA LTD

-0.20

IND & COMM BK-H

-0.45

N

HONG KONG EXCHNG

-4.45

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atural gas is a step closer to being piped into Macau households after Chief Executive Fernando Chui Sai On gave the nod to a distribution deal with Companhia de Gás Natural Nam Kwong Ltda.

A notice in yesterday’s Official Gazette says Mr Chui has authorised Secretary for Transport and Public Works Lau Si Io to grant the natural gas distribution concession to Nam Kwong.

The notice does not disclose the conditions attached to the public service concession.

The next step will be the signing of the concession.

Energy regulator Arnaldo Ernesto dos Santos told the news media last week that the deal would be signed this month or next and

that the supply would start nine months later.

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

But the concession may be affected by the predicament of the natural gas supplier, Sinosky Energy Holdings Co Ltd, which has made accumulated losses of 92.5 million patacas (US$11.6 million), including a loss of 43.5 million patacas last year alone.

Sinosky asked permission to raise the price of natural gas by 60 percent during the triennial review of its supply concession.

V.Q.

Source: Bloomberg

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business daily June 19, 2012

macau Shape of things to come – artist’s impression of Solaire Resort & Casino Manila

InBrief

Taxi fare hike on July 1 The taxi fare will increase by 2 patacas (US$0.25) to 15 patacas for the first 1,600 metres starting July 1, while the charges for every 230 metres onwards remain the same at 1.5 patacas, according to a notice published in yesterday’s Official Gazette. The Transport Bureau stressed that, since the last fare hike in September 2008, operational costs suffered “a significant increase,” namely on fuel prices.

Export to import – Philippines project recruiting in Macau Solaire Resort & Casino Manila seeking Filipinos with hospitality experience Associate Editor

Wage rise for police next month Police officers are likely to get a salary increase next month, after the third standing committee of the Legislative Assembly finished reviewing a government proposal. The bill could be voted on Friday because “there is urgency”, committee president Cheang Chi Keong said yesterday, quoted by Rádio Macau. The wage hike will cost the government an extra 40 million patacas (US$5 million).

Smaller constraints on air space Consensus was reached at a meeting held in Macau yesterday to remove airspace constraints within the Pearl River Delta region and establish a terminal area encompassing the Hong Kong, Macau, Shenzhen and Zhuhai airports. The meeting, organised by the group that includes civil aviation authorities from mainland China, Hong Kong and Macau, finalised the way forward on air traffic control procedures and airspace enhancements to meet future demand.

Fewer karaoke halls, bars In the first four months of 2012 the number of karaoke halls dropped by 6 from the end of last year to 61, while the number of bars decreased by 4 to 165, according to official data released by the Macau Government Tourist Office last week. In contrast, the number of tour guides increased by 39 to 1,557 and three new travel agencies opened doors.

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new casino resort being built in the Philippines is scouting for hotel and hospitality managers currently working in Macau. It’s a small but significant reversal of a trend seen since the opening of the city’s first postliberalisation casino Sands Macao in 2004. This is for Macau to be a net importer of workers from Greater China and overseas.

The man leading the reversal of the trend is Michael French, a six-year veteran of gaming resort management in Macau. He is a former senior vice president, and general manager of Melco Crown Entertainment’s VIP-focused Taipa property Altira Macau, and a former senior vice president of its sister Cotai property City of Dreams.

Mr French is now the chief executive officer of Solaire Resort & Casino Manila, a US$1 billion integrated resort being developed

by Bloomberry Resorts Corp. It will have 300 table games, 1,200 slot machines, 500 guest rooms, seven restaurants, four bars in its first phase, with a further 300 rooms in phase two.

“Service at our resort will be on par or better than our counterparts located in Macau, Singapore and Las Vegas,” says Mr French. And to achieve that he adds, it needs the best of the best. That includes Filipino nationals not only with the welcoming manner associated with the country, but with experience of other top operations.

Hospitality capital “The Philippines is known as the home of hospitality. And unfortunately a lot of these people have in the past had to go out of the country to find work in our business for certain sectors,” he explains.

“We’re reversing the process by creating luxury gaming hospitality jobs here in Manila. What we’re looking for are folks who have experience in that high-end gaming service sector. We’re looking for managers primarily.”

Mr French thinks they may be able

to attract 15 to 20 suitably-qualified Filipino nationals to return home.

They’re likely to be people who may have hit a glass ceiling – in terms of career development because of Macau’s policy of recruiting locals wherever possible in the most senior jobs, and because Chinese language skills are usually important for career progression.

“In non-gaming as well as gaming in Macau, language is so important because the customers speak Mandarin and Cantonese and so do the employees. And not many non-Chinese non-resident workers in Macau are fluent in Mandarin or Cantonese,” explains Mr French.

Career goals “Our goal is to find Filipinos working abroad who may be working as a supervisor now, that would be happy to come home as an assistant manager, and assistant managers

that would be happy to come home as a manager,” Mr French added. “That means the impact on their earnings may be negligible. They may be at the same level from an earnings point of view, but be in a higher position from a career point of view.”

The Macau recruitment drive also chimes with Philippines government policy. Under President Benigno Aquino, the national authorities have been pursuing policies designed to boost inward investment and create local jobs.

“We think that Filipinos that have acquired great skills and experience may be better off applying those skills at home than in a foreign country,” says Michael French.

Fernando V. Beup Jr, vice-consul of the Philippines Consulate General in Macau, told Business Daily: “I think this is very much indicative of what’s going on in the Philippines at the moment. National GDP is growing by about six percent annually.”

Economic takeoff

KEY POINTS US$1 billion Manila casino resort looking to recruit 1520 Filipinos at management level from Macau hospitality New resort headed by former Macau casino executive Michael French 3,072 Filipino non-resident workers in hotels and restaurants in Macau in April – 21 pct of all nonresident Filipinos Philippines Consulate says Macau and other markets will still have supply of talented Filipino labour if needed

“More and more investors are coming in to the Philippines and it is taking off economically – particularly in the areas of tourism and entertainment. That means we need to ‘re-export’ Filipinos back to the Philippines.”

But he added that if experienced workers return home it won’t deprive markets such as Macau of fresh labour.

“We have a system for replenishing the labour needs of the industry whether it’s the Philippines or abroad. We have many schools offering the know-how for our people to be employable in the hotel and hospitality industry,” he explained.

There were 14,329 Filipinos employed as non-resident workers in Macau in April, the latest available figures, according to Macau’s Human Resources Office.

Of these, around one-fifth were with hotels and restaurants. The total number of Filipinos working in the local labour market is thought to be higher. Some people have been successful in applying for residency through marriage to a permanent resident or because they have in-demand skills that cannot be supplied by existing residents.

June 19, 2012 business daily | 3

MACAU

Confusion reigns over La Scala pre-sales Estate agents have yet to receive any instruction from the developer to stop selling flats in La Scala Vítor Quintã

vitorquinta@macaubusinessdaily.com

Photo by Manuel Cardoso

W

ith the government starting the process of taking back the land that La Scala is being built on, developer Chinese Estates Holdings Ltd has announced it is temporarily suspending construction work and the pre-sale of flats in the development.

A salesperson on the La Scala sales hotline confirmed that pre-sales had been stopped, but gave no reason.

Yet it seems not everyone has got the memo.

“We haven’t received any formal instructions from the developer to halt sales,” Midland Realty (Macau) Ltd chief executive Ronald Cheung said.

“Since we’re dealing with a responsible developer, I expect them to provide some information soon.”

The sales director of Centaline Property Macau, Noel Cheung, said: “We didn’t get any formal notice from the developer.”

But she added: “Internally, our company had decided to stop selling the La Scala flats once the sentence was out.”

She was referring to the prison sentence given to former government secretary Ao Man Long after he was convicted, among other crimes, of accepting a bribe from two Hong Kong tycoons to push through the sale of the site near the airport on which La Scala is being built.

The estate agents have received no enquiries from prospective buyers.

On the other hand, Ms Cheung said: “We keep receiving calls from buyers that want to know what’s going to happen next.”

Mr Cheung said: “Buyers are mostly worried about whether they should continue making their monthly payments to the developer.”

He added: “Some have reached an agreement to delay payments.”

La Scala buyers were also “very concerned” about the stamp duty they had paid, he said.

“From my experience, it will be a difficult process to get the

La Scala’s links to corruption have frightened away prospective buyers of flats, estate agents say

money back.”

This month legal expert Carlos Duque Simões of DSL Lawyers said the government was not required to return the money.

“The bill explicitly says the stamp duty is charged, even if the transaction eventually does not happen,” he said.

Strong opposition Chinese Estates told the Hong Kong stock exchange on Sunday that it had received a notice from the Land, Public Works and Transport Bureau saying the government was starting the process of declaring invalid the grant of land for La Scala made in 2006.

The Chief Executive’s spokesperson said confirmed this on Monday.

There was no mention of the grant of extra land for La Scala made in March 2011.

Chinese Estates has 15 days to reply to the government in writing.

The Hong Kong company said it would “make a submission strongly opposing” the repossession of the land.

But it also said it might consider “entering into cancellation agreements with unit purchasers of La Scala and refund deposits received” if the land grant was declared invalid.

Chinese Estates said it had invested around HK$2.8 billion (US$360 million) in the development so far.

The company also said it was determined to get compensation from the government for any losses caused by “any unfavourable decision”.

The company’s chairman, Joseph Lau Luen Hung, and another prominent businessman, Steven Lo Kit Sing, the chairman of BMA Investment, are facing trial for allegedly bribing Mr Ao. Chinese Estates has pre-sold 304 apartments at La Scala, generating sales of HK$3.8 billion and deposits of HK$384 million.

Shares in Chinese Estates lost 1 percent of their value during trading in Hong Kong on Monday, but recovered to close 0.1 percent higher at HK$9.00. with Tiago Azevedo and Reuters

Economic diversification needs more govt flexibility City needs to mitigate the risk posed by over-reliance on gaming, experts say Xi Chen

xi@macaubusinessdaily.com

E

ven though economic diversification has been a government priority for the last few years, the government must be more flexible to set the changes in motion and mitigate the risk posed by over-reliance on gaming.

Academics from Macau and Luxembourg discussed Luxembourg’s experience in diversifying its economy and exchanged thoughts at a seminar yesterday on how Macau can learn from it.

Macau Polytechnic Institute professor Zeng Zhonglu, who specialises in gaming research, compared the city with three other small economies: Luxembourg, Malta and Iceland.

All four economies have similar populations and comparable wealth creation per capita.

Among these economies, Macau is the least diversified, as measured by certain economic yardsticks.

Mr Zeng pointed out that the city did not lose out by having fewer industries, but that the problem lay in having a structural imbalance in its economy.

He said the government was overreliant on gaming for its revenue and that this over-reliance had become more pronounced over the past 10 years.

Direct taxes on gaming revenue accounted for almost 86.9 percent of the government’s revenue in the first five months of this year, compared with about 64 percent in 2001.

Mr Zeng said this was risky.

“Macau has very limited resources in terms of land and labour.

Overdevelopment of the gaming

industry can potentially squeeze out other industries,” he said.

He said Luxembourg, in contrast, offered a good example in its economic diversification experience.

The country transformed itself from a steel producer in the 1950s to a centre for banking and finance balanced by other industries such as high added-value manufacturing, retailing, e-commerce, communications and logistics.

Luxembourg is the second largest investment fund centre in the world after the United States, a premier private banking centre in the eurozone and a premier captive reinsurance market in the European Union.

Luxembourg’s financial sector, despite being the largest contributor to its economy, accounts for only about 30 percent of government

revenue, official data show.

Academics at the seminar credited the success of Luxembourg to the government’s flexibility in regulation and legislation.

Zou Benteng, a professor at University of Luxembourg, said: “The government reacted very fast. Being a small economy, the government could focus on smaller issues and have targeted legislation.”

Mr Zeng believes Macau needs similar flexibility to mitigate the risk inherent in its economy.

He said this flexibility should encompass government sensitivity to change in the economic environment, improvement in the quality and adaptability of the labour force and enhancement of the ability of industry to innovate.

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business daily June 19, 2012

macau

Academic paper opens debate over Hong Kong dollar peg Speculation by a former Hong Kong Monetary Authority chief that the time has come to review monetary policy draws a stinging reaction José I. Duarte

jid@macaubusinessdaily.com

T

he former chief executive of the Hong Kong Monetary Authority, Joseph Yam Chi Kwong, opened a lively debate when he suggested that the time had come for removing the peg linking the Hong Kong and United States dollars.

The declaration was made in a paper published by the Chinese University of Hong Kong, called “The Future of the Monetary System of Hong Kong”.

“There is a need to address the question as to whether the monetary system of Hong Kong, as currently structured, can continue to serve the public interest of Hong Kong,” he said.

It is an extraordinary reversal of opinion from someone who was involved in the original design of the policy that guided the Hong Kong Monetary Authority for 19 years. He retired from the post in 2009.

During his tenure he was as steadfast in the defence of the policy as anyone, and led the resistance to

Joseph Yam was one of the designers of the policy and led the HKMA for 16 years, until 2009

the speculative attacks directed at the Hong Kong dollar in the wake of the Asian financial crisis in 1997 and 1998.

Mr Yam suggests the peg has become an obstacle to an effective monetary policy.

In particular, it limits the region’s

ability to fight inflation and promote employment.

“A fixed exchange rate cannot be an end in itself,” he declares.

He highlights the difficulties the current arrangement raises for inflation control. Should price stability override currency stability as the main policy aim?

Mr Yam suggests in his paper that Hong Kong may be paying a high price for stability, underlining that “inflation in Hong Kong has, at times, been uncomfortably high, and asset bubbles have been a feature of Hong Kong’s economic development”.

Apparently, this paper signals a change of heart and a new set of priorities.

Alternative policies The paper considers alternative arrangements, mainly by setting a flexible band of variation against another currency, which might include the yuan, or against a

basket of currencies.

The later approach is similar to Singapore’s approach.

But several other analysts question the approach and its implicit belief that without the peg, a different inflation control outcome would result.

They suggest the benefits of financial stability might be lost, as such a move could undermine international confidence in the city’s monetary policy and weaken its role as a financial centre.

In particular, it could stoke fears that the currency and the financial markets would become more vulnerable to political meddling.

The proposals sparked a flurry of reactions from Hong Kong officials.

Both Hong Kong’s chief executiveelect, Leung Chun Ying, and the current Financial Secretary, John Tsang Chun Wah, have reaffirmed their commitment to the maintenance of the peg.

“The linked exchange rate system has worked well over the past 30 years, and it has helped stabilise the Hong

Developer ‘touting’ Yacht Club tower flats A member of the Macau Yacht Club fears that investors may have been persuaded to buy flats on club land when those homes may never be built Vítor Quintã

vitorquinta@macaubusinessdaily.com

T

he developer of a plot granted to the Macau Yacht Club has been trying to find buyers for space in a residential a tower there even though the project has yet to be proposed to the government, club member Jorge Fão said yesterday.

Mr Fão, a former member of the Legislative Assembly, said that six months ago the developer, Realgain Development Inc, sent a booklet to a Macau real estate businessman, asking him to help find investors in mainland China.

The booklet, which Business Daily has seen, gives detailed information about the project to build a 45-floor residential building with shops and parking on a plot surrounding the Lam Mau Marina.

Architect Bruno Soares, a member of the yacht club’s finance committee, confirmed that he had prepared the design plan for Realgain in 2007, but said the project had not moved forward.

The 30-page document

says the building will have 344 homes, half of them one-bedroom flats with an area of 66 square metres each and the other half twobedroom flats with an area of 101 square metres.

The booklet says everything “is subject to final government-approved plans and documentation”.

But Mr Fão said the developers are trying to sell space in a project that is unlikely to get off the ground.

The secretary for transport and public works at the time, Ao Man Long, granted the club the plot in 2000.

In 2007 the club signed a deal with Realgain which entails Realgain paying for the construction of the clubhouse in exchange for the club asking the government to permit the construction of a residential tower on the remaining land.

But the Land, Public Works and Transport Bureau has repeatedly said it will “not accept any request to use part of the land to build a residential building”.

Mr Fão said: “I fear buyers

A tower with 344 flats has been suggested for some Macau yacht club land

might have already been duped into investing in this project.”

Another document hints that Realgain may be trying to sell not the flats themselves but shares in the company that would own them, which is registered in the British

Virgin Islands and has an office in Hong Kong.

In 2007 Realgain, represented by Alan Nam Cheung-wing, seemed willing to sell all its shares in this company for HK$250 million (US$32.2 million), even though the

company had forecast a profit of over HK$1 billion from selling the flats.

Mr Fão criticised the government for “twiddling its thumbs” even though the affair first came to light in 2010.

He called for an investigation.

June 19, 2012 business daily | 5

Photo by Manuel Cardoso

MACAU KEY POINTS The peg to the US dollar was established in 1983, when currency instability and uncertainty about Hong Kong’s future led to a strong devaluation and some businesses started trading in US dollars only The policy has been supported since then and is credited with providing stability to the financial system The conversion is set at HK$7.80 to the US dollar, with a variation band of plus or minus 5 cents The Macau government does not anticipate ‘any change’ to the pataca peg regime

Kong financial market and economy.

As such, I think there is no need to change the system,” Bloomberg quoted Mr Leung as saying.

Mr Tsang made his thoughts clear.

“Let me reiterate in no uncertain terms that I see no need, nor do I have any intention, to change the peg.”

View from home The same argument has been sustained by the Macau Mon-

etary Authority.

Approached by this newspaper for comment, the city’s de-facto central bank reiterated the points made in an answer given in May to legislator José Pereira Coutinho.

The monetary authority reaffirmed the commitment to the current policy.

It said the “stability of the monetary and financial system and … the full convertibility of the pataca” are objectives that are adequately protected by the pegging to the

Hong Kong dollar.

It also points to the “dominant place” that the Hong Kong dollar occupies here and, in particular, the fact that the majority of deposits and credit in Macau are denominated in Hong Kong dollars.

It also adds that 90 percent of the region’s currency revenue is made in either Hong Kong dollars or US dollars.

Certainly, it is recognised that the prosperity of the region depends

heavily on tourism and supplies from the mainland.

However, as the yuan is not fully convertible, pegging to the Chinese currency would have a negative impact on the “convertibility of the Macau pataca and lead to technical difficulties in the management of the foreign reserve”.

The government does not anticipate “any change to the peg regime between the Macau pataca and the Hong Kong dollar”.

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business daily June 19, 2012

macau

Ignore Hong Kong, flat prices won’t fall Despite looming corrections in Hong Kong, tight supply of new flats here will keep prices high for 12 months, property agents say Xi Chen

xi@macaubusinessdaily.com

H

ousing prices may fall by as much as 20 percent in Hong Kong in the next 12 months as a new government there will move to increase supply and cool the market, Bloomberg reported last week.

In Macau, the situation is vastly different, according to property agents.

“Prices actually declined gradually last year because of the Special Stamp Duty and we have just now caught up lost ground. There might not be huge rises in prices in the coming year, but there is not much room for prices to fall,” said the director of regional sales for Centaline Macau, Roy Ho. In the first half of last year there were 11,698 homes sold at an average price of 45,720 patacas (US$5,720) per square metre, while in the second half there were 3,771 deals at an average price of 42,467 patacas per square metre, a decline of about 7 percent in price and over 60 percent in volume.

The average price recovered to 50,645 patacas in the first four months of this year, with a total of 3,694 sales.

The government imposed a stamp duty of 20 percent on new homes sold within one year of their date of purchase last year, in an effort to curb speculation. The duty falls

MOP 50,645 Average price of housing per square metre sold in the first four months of this year to 10 percent if the home is sold within two years of its original date of purchase.

Ao, that hurts Bloomberg quoted a Deutsche Bank report that said a lack of new housing and an influx of mainland buyers were the main causes of rising prices in Hong Kong.

Hong Kong halted regular land sales in 2004 to stop falls in home prices but resumed sales in 2010.

Macau, property agents say, also suffers from a tight supply in housing, but there is no way to increase supply.

“After the Ao Man Long corruption

case, the government practically stopped giving out authorisations for new projects, which means there will be no new supply in the next two to three years,” said Ronald Cheung, the chief executive of Midland Macau.

Mr Cheung said the bill on the sale of uncompleted flats, if passed, would mean it would take even longer for new supply to hit the market.

He said the stamp duty had also hurt the second-hand housing market, leading to limited supply and pushing up prices.

Mr Ho and Mr Cheung both believe that the stamp duty has been effective in curbing sales but not in lowering prices, as it shrunk supply while demand rose.

The government’s public housing project to build 19,000 homes is no solution, according to Mr Cheung.

He said many of the flats were too small to satisfy Macau households.

is trying to discourage prices in a mature market. However, over here we are still trying to perfect our legal framework regarding property dealings,” he said.

Mr Ho said the policy changes here added to uncertainty in the market and eroded the confidence of buyers.

But he and Mr Cheung said strong economic fundamentals would help the market grow.

The average price per square metre of residential property grew by 37 percent between 2010 and last April.

In Hong Kong, property prices have surged by more than 80 percent since early 2009, making the city the world’s most expensive place to buy a home or rent an office, Bloomberg reported.

Immature market

3,694

“If you look at the [Avenida] Horta e Costa area for example, many of the buildings are over 25 years [old]. Many people need to upgrade their homes,” Mr Ho said.

He said Macau’s property market is at a different stage of development from Hong Kong’s.

“In Hong Kong the government

Homes were sold between January and April

Weather Beijing 34/23o C Changchun 27/17o C

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June 19, 2012 business daily | 7

MACAU

Labour imports push up rents The increase in the number of non-resident workers puts upward pressure on housing rents

H

ousing rents continue to rise as the increase in the number of non-resident workers leads to more demand for accommodation, according to a report in the Chinese-language Macao Daily News.

The newspaper reported that according to sources quoting Secretary for the Economy and Finance Francis Tam Pak Yuen, another 10,000 non-resident workers are expected to arrive this year.

In April 99,503 non-resident workers were living in Macau, according to official data.

The rent for a 700 square foot twobedroom flat rose from an average of 5,000 patacas (US$625) in the first quarter to over 6,000 patacas in the second.

The rent for a three-bedroom house increased from an average of 10,000 patacas to between 12,000 patacas and 13,000 patacas.

The opening of the Sands Cotai Central in April led to an influx of foreign professionals and pushed rents higher in the Cotai area and on Taipa generally.

Housing in Cotai and its vicinity already commands an average rent higher than on the peninsula, according to property agents.

The average rent has risen by 15 percent to 20 percent, agents estimate.

However, the growth is expected

to slow to below 10 percent in the second half.

Centaline Macau’s records show a 1,088 square foot flat in Nova City on Taipa was rented in April for 12,000 patacas.

A similar flat was rented for 6,500 patacas in April 2010.

On the peninsula, a 1,570 square foot flat in La Baie Du Noble was rented in March 2010 for 7,000 patacas, data from Centaline show.

For a similar flat in the same building this year, the rent is 12,000 patacas.

New housing for rent in Areia Preta in the second half will meet some of the demand and reduce the upward pressure on rents, according to agents.

However, the report said demand still outstripped supply.

The rent for a threebedroom house increased from an average of 10,000 patacas in the first quarter to between 12,000 patacas and 13,000 patacas in the second

Labour law to be revised this year

T

he government is doing research on revisions to the three-year-old labour relations law, the Labour Affairs Bureau has said in response to questions from legislator Au Kam San. The bureau said representatives of associations of employers and workers had agreed that they needed to re-examine the labour relations law this year.

It said the Standing Committee for the Coordination of Social Affairs would lead the discussions and that the bureau was taking suggestions from people from all walks of life to form a proposal for the committee to discuss.

Mr Au had called for the government to set up a court specifically for labour disputes, and the bureau agrees with the need for one.

But the bureau said it lacked enough manpower.

And with no new court building, the conditions were not adequate for a new labour court, it said.

The bureau said it would follow up cases of employers evading payment of salaries.

It said that an employer could be fined between 20,000 patacas (US$2,500) and 50,000 patacas and imprisoned for up to one year if found in breach of the labour law.

X.C.

Union Gaming hires new team members for equities unit

U

nion Gaming Advisors, a wholly owned subsidiary of Union Gaming Group, has hired three equities experts to develop its own institutional equitytrading platform.

Matthew Brown was previously responsible for coverage of top tier institutional clients at Susquehanna Financial Group, a leading trading firm based in Pennsylvania, in the United States. Kevin Debbs was head of domestic sales trading in North America for Deutsche Bank.

Michael Glynn was previously director of operations and compliance for Kellogg Partners, a broker and dealer based in New York City. Union Gaming Advisors is a member of the Financial Industry Regulatory Authority, the

largest independent regulator for all securities firms doing business in the U.S. Las Vegas-based Union Gaming Group was the first research house to offer specialist coverage of gaming industry equities traded principally in New York and Hong Kong. It has representative offices in Macau and New York as well as Nevada. The company said the additions to the equity trading team would help develop its business for corporate buy backs; reverse inquiries (where institutional investors indicate their interest in an increased or fresh allocation of shares to the underwriters of a share sale) and block sales (legal, off-market private sales of shares).

A.E.

The average rent in Macau has risen by 15 percent to 20 percent, agents estimate

8 |

business daily June 19, 2012

Greater China

China stimulus more restrained this time Fiscal and credit injections likely to be more focused and limited in size than in 2008 narrowly focused on short-term stimulus measures while neglecting long-term reforms,” said Fred Hu, a former chairman for Greater China for Goldman Sachs Group Inc. “The latest announcement by the Chinese central bank sent a positive and reassuring signal for a well-balanced policy package.”

After industrial production gains slumped to a three-year low in April and exports and imports rose less than estimated, the State Council said in a statement on May 23 it would take measures to expand demand and introduce policies to create “stable and relatively fast economic growth.”

Unsustainable stimulus

China’s previous approach to economic stimulus cannot be repeated

P

remier Wen Jiabao has an unspoken message to his Group of 20 counterparts in Mexico today: this time, don’t count on a growth bailout from China.

In the depths of the 2008 credit crunch, Mr Wen’s 4 trillion yuan (US$586 billion) fiscal injection over two years and 17.6 trillion yuan credit surge helped prop up the global economy. In China, it fueled a property bubble, stoked inflation and amassed bad debts that Fitch Ratings says weakened the banking system.

“The government is trying to strike a better balance between stabilizing growth in the short term and adjusting structure in the long term,” said Peng Wensheng, chief economist in Beijing at China International Capital Corp., who worked at the International Monetary Fund and Hong Kong’s central bank. Total stimulus this year may be less than one-third the size of the 5.4 trillion yuan fiscal and monetary firepower of 2009, Mr Peng said.

Investment is more strategically focused than the efforts that year that helped cushion everyone from Australian iron-ore exporters to General Motors Co., which saw its Chinese sales soar 67 percent as it coped with bankruptcy at home. Of some 818 billion yuan in projects recently approved, 55 percent were for clean energy or subsidies for fuel-efficient cars, according to Australia and New Zealand Banking Group Ltd. China has accelerated approvals

China plans to invest more cautiously

66 billion yuan To be used in funding for 2.3 million low-cost houses

26.5 billion yuan For eco-friendly household appliances

6 billion yuan

To stimulate sales of energy-efficient vehicles

for wind farms, hydropower plants, airports and steel mills endorsed in its five-year plan through 2015.

The government released 66 billion yuan in funding for 2.3 million low-cost houses, and will allocate a 26.5 billion yuan subsidy for ecofriendly household appliances and 6 billion yuan to stimulate sales of energy-efficient vehicles.

Policy makers have relaxed lending rules for banks and expanded loans for first-home buyers to try to support the property market without fueling the speculation that drove up house prices in 2009. A report yesterday showed that China’s home prices fell in a record 54 of 70 cities tracked by the government in May as developers cut prices to boost sales.

While the approach is boosting sales prospects local companies, it provides less help for a global economy hit by Europe’s debt crisis.

Monetary focus Monetary policy has also been deployed, this time with a twist.

The central bank cut interest rates on June 7 for the first time since 2008. Accompanying the quarterpoint cut, lenders were given greater leeway to set rates on deposits, a step that U.S. negotiators had urged as a component of needed financial deregulation in the world’s second-largest economy.

“Such reforms should allay concerns that the government, spooked by bad economic data, would be

There is no plan for stimulus on the scale of 2008 because that is “unsustainable,” the state-run Xinhua News Agency reported May 29. China’s banks are weaker in terms of capitalization compared with other emergingmarket lenders due to the stimulus provided through credit growth in 2009-10.

China’s economy grew 9.2 percent in 2009, when global GDP contracted. By comparison, Chinese expansion this year is estimated by the IMF at 8.2 percent, with world GDP up 3.5 percent. China’s contribution to global growth may fall to about 30 percent in 2012, from 36 percent last year, says Pieter Bottelier, a professor of China studies at Johns Hopkins University in Washington who formerly worked for the World Bank.

“The rate cut is an indication of greater policy engagement but not a harbinger of an ‘all in’ policy response,” said Ramin Toloui, Pacific Investment Management Co.’s co-head of emerging markets portfolio management in Singapore. “The macro impact will be moderate and we still expect growth in the mid-7 percent area for 2012.”

“Should Europe implode into a disorderly break-up – still an unlikely outcome – China has plenty of ammunition in its monetary and fiscal policy arsenal to counter the risks,” said Stephen Roach, a professor at Yale University and former nonexecutive chairman for Morgan Stanley in Asia.

“Policy makers want to engineer an era of better-quality growth based on higher consumption and lower energy-consuming and polluting production,” Jim O’Neill, chairman of Goldman Sachs Asset Management in London, wrote in a June 2 note to clients. “I think it unwise for people to expect another big infrastructure-based stimulus.”

Bloomberg

June 19, 2012 business daily | 9

GREATER CHINA

Tightening measures are cooling the market Home prices decline in record number of cities in May

Market still uncertain about future direction

C

hina’s home values fell in a record 54 of 70 cities tracked by the government in May as developers cut prices to boost sales amid housing curbs.

China has pledged to maintain its curbs on the housing market even as economic growth is slowing, prompting the central bank to cut borrowing costs for the first time since 2008 on June 7. The Housing Ministry said this month that China will steadfastly continue with its property curbs that have so far included higher down payments and restrictions on the number of homes being bought.

“China’s property market is approaching gently the bottom of its decline path and I expect we’ll see a touchdown sometime over the next three to four months,” Peter Churchouse, managing director of Portwood Capital, a Hong Kongbased property investment firm, said

in a Bloomberg Television interview.

“They’ve definitely succeeded in slowing the market down.”

Yesterday’s data compares with April, when 46 cities posted declines in new home prices.

Among the major cities, Shanghai and Guangzhou both retreated 1.6 percent in May, while Shenzhen decreased by 2.3 percent from a year earlier.

Private data also showed the home market continued to cool. May home prices fell to a 16-month low, SouFun Holdings Ltd, the nation’s biggest real-estate website owner, said on June 1.

“If the government carries on with the property measures without any fine-tuning, that will lead to a big slump on land and other asset prices,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd in a phone interview. “That will

affect the collateral prices of banks and lead to tighter credit.”

Buying inducements The eastern city of Yangzhou in Jiangsu province said last month it will offer new buyers subsidies of as much as 0.6 percent of the total value of a home, Xinhua Daily reported, citing the local finance bureau. The move followed other Chinese cities that attempted to lift local property curbs in the past year. Plans by Wuhu in Anhui province and Foshan in the south were abandoned within days of their announcements.

Lenders in Beijing started offering mortgages to first-home buyers at as much as 15 percent below the central bank’s benchmark rate after the rate cut.

“The rise in sales was mainly driven by first-time home buyers,” Liu

Yuan, a Shanghai-based researcher at Centaline Property Agency, China’s biggest brokerage, said in a report last week. “But as the central government remained firm on its stance on property tightening, it would be difficult to rely on that group of buyers for a massive home price recovery.”

About 93 percent of homebuyers in China plan to live in their purchased property, while only 7 percent are so-called speculators, Alastair Hughes, Asia-Pacific chief executive officer of Jones Lang LaSalle Inc. said in a Bloomberg Television interview last week.

“We are actually concerned about a rebound in the housing market that may prompt another round of government curbs,” Jeffrey Gao, a Shanghai-based property analyst at Macquarie Capital Securities, said before yesterday’s release.

Bloomberg

Hu wraps up visit to Denmark Beijing to help with IMF ‘firewall’ Deals worth billions signed during the three-day visit

C

hinese President Hu Jintao signed deals worth billions of euros with Denmark Saturday and got words of encouragement on his country’s bid to expand its influence in the oil-rich Arctic.

Mr Hu wrapped up his landmark three-day state visit to Denmark – the first ever by a Chinese head of state – meeting with Danish Prime Minister Helle Thorning-Schmidt and signing a raft of partnerships that included agreements on tariffs, environmental protection, cultural exchanges and agriculture.

Mr Hu has declined to speak to reporters throughout his stay in Denmark.

Danish authorities have said Mr Hu’s visit has generated some 18 billion kroner (2.4 billion euros, US$3.1 billion) in agreements, though specific details on the deals were not immediately available.

Ms Thorning-Schmidt said Mr Hu had also raised the issue of China’s bid for permanent observer status on the

China confident that emerging economies will chip in for the US$430 billion fund

Arctic Council, an intergovernmental forum promoting cooperation among eight states, including Denmark, that border the mineral-rich region.

“I see no problem in that, provided that China fulfills the conditions,” she said, without elaborating.

The talks also touched on the issue of human rights, Ms ThorningSchmidt said.

“There is no doubt that we in Denmark and the European Union are concerned about human rights in China. This is something we have discussed,” she said.

She said she had pointed to Denmark’s parliamentary decision to support a One China policy, “but we are urging China to discuss with the Tibetans in order to find solutions with them.”

China froze relations with Denmark in 2009, after two successive prime ministers welcomed Tibet’s exiled spiritual leader the Dalai Lama at the official government residence.

AFP

M

ajor emerging economies will pitch in funds at the G20 summit to complete the IMF’s planned US$430 billion firewall to protect indebted states, China said on Sunday.

China’s Vice Finance Minister Zhu Guangyao said the BRICS group of Brazil, Russia, India, China and South Africa were due to meet yesterday ahead of the start of the summit in the Mexican resort of Los Cabos.

Major European and Asian governments have already pledged around US$340 billion to the bailout fund, and Mr Zhu said: “China is confident that the IMF will realise its US$430 billion and China will pitch in.”

Mr Zhu cited the summit’s host President Felipe Calderon of Mexico as having suggested the IMF might end up with even more than the US$430 billion that it requested, but did not put a precise figure on the Chinese contribution.

The IMF has already scaled back its ambitions for a larger firewall of US$500 billion to US$600 billion, with the United States notably refusing to stump up for a fund that is seen essentially as a protection for debt-ridden Eurozone states.

But officials arriving in Los Cabos appeared confident a deal was near.

Mr Zhu repeated China’s position that the final IMF fund would not be “earmarked for any special region” but added that Beijing “supports a strong and prosperous euro and a unified Eurozone”.

AFP

10 |

business daily June 19, 2012

asia

India juggles by keeping rates steady Inflation narrows scope to bolster struggling economy

I

ndia’s central bank left interest rates and required bank reserves unchanged yesterday, defying widespread expectations for a rate cut and warning that relaxing policy could worsen inflation.

Bonds, stocks and the rupee all fell.

The Reserve Bank of India kept its policy repo rate unchanged at 8 percent and left the cash reserve ratio for banks at 4.75 percent, putting the onus on the government to take measures to revive flagging economic growth.

“Further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures,” the RBI wrote in its mid-quarter policy review.

India’s benchmark 10-year bond yield rose 9 basis points to 8.43 percent from levels before the announcement, while the new 10-year bond yield rose about 5 basis points.

Reform urged “Re-accelerating inflation, a still fragile rupee and the continued lack of action from New Delhi are limiting the RBI’s room for easing,” Richard Iley, the Hong Kongbased chief economist for Asia at BNP Paribas SA, told Bloomberg.

“Reform, not stimulus, is required to reboot India’s disappointing macro-economic performance.”

The main BSE index erased gains before the decision to fall 1.1 percent, while the rupee dropped 0.14 percent to 55.55762 against the dollar as of 11:32 am in Mumbai. The currency has tumbled about 19 percent in the past year.

“The Reserve Bank of India’s action

is clearly disappointing,” said Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai.

“Inflation remains a concern, but the slowing growth needed at least a 50-basis-point rate cut. The RBI will have to ease sooner or later, otherwise there will be further challenges to growth,” he said.

After cutting its policy rate by 50 basis points in April, the RBI had been widely expected to leave rates unchanged in June.

But global and domestic economic conditions have deteriorated sharply since then, driving expectations that India would cut both interest rates and the cash reserve ratio.

India’s March quarter economic growth of 5.3 percent was far worse than expected and the weakest annual pace in nine years. The data sparked calls from industry for immediate action to lift an economy that Standard & Poor’s says could be the first BRIC nation to lose its investment-level credit rating.

Meanwhile, April industrial output figures last week suggested little pickup in economic growth heading

into the current quarter.

The government is politically hamstrung, so is unable to drive reform and its deep fiscal deficit leaves it no room to provide stimulus spending at a time when the euro area debt crisis is weighing on the global economy, a factor

KEY POINTS Expectations had been for 25 bps cut in repo rate Decision on rates puts burden on govt to spur growth Markets tumble after decision to leaves rates on hold

set to dominate a G20 meeting in Mexico this week.

Inflation remains a concern, but the slowing growth needed at least a 50-basis-point rate cut Sujan Hajra, Anand Rathi Securities

Little headroom However, RBI Governor Duvvuri Subbarao had little room to manoeuvre after May benchmark inflation rose to 7.55 percent, below double-digits from last year but still highest among industrialised countries and the BRIC group of Brazil, Russia, India and China.

“While growth in 2011-12 has moderated significantly, headline inflation remains above levels

consistent with sustainable growth,” the RBI said.

Both China and Brazil have cut rates this year in order to support growth.

“Unless the government takes steps on fiscal adjustment, the RBI is not prepared to cut rates. Based on this document, there’s unlikely to be a rate cut in July,” said A. Prasanna, economist at ICICI Securities Primary Dealership in Mumbai.

Investors and companies have long called for India to implement pro-growth policies that would spur investment and help remove bottlenecks in the economy blamed both for restricting growth and keeping inflation high.

HSBC economist Leif Eskesen said the RBI’s decision to hold fast was

Philippine economy enjoying ‘burst of growth’ Central Bank sees economy ‘insulated’ from Europe

T

he Philippines central bank is confident its economy, enjoying its strongest burst of growth in two years during the first quarter and a falling inflationary trend, can sustain this scenario even if the eurozone economy continues to shrink, its assistant governor told Reuters in an interview.

Europe’s deepening sovereign debt crisis, weak economy and potential upheaval if Greece exits the euro area currency, will send shock waves across the world’s financial markets.

The eurozone as a whole, is the Philippines’ third largest export market after the United States and Japan, said Philippines Central Bank assistant governor Cyd Amador.

“Definitely our baseline incorporates a European slowdown, in fact a European recession,” Ms Amador said as she travelled in the United States meeting with investors as part of a larger government entourage promoting the economy.

“We are very mindful of the spillover that Europe can have on the Philippine economy. I guess the

sentiment is we are not immune by any means, but we are quite well insulated,” she said.

Ms Amador said the bank is ready with liquidity provisions should Europe’s problems create credit strains.

“We have done quite a bit of scenario stress testing,” she said.

The Philippines central bank left its key interest rate unchanged at a record low 4 percent last Thursday, confident in its forecast that inflation will come in at 3.1 percent this year, below the midpoint of the 3 percent to 5 percent target range. The inflation forecast for 2013 is 3.4 percent.

“In the past we were looking at the balance of risk [for inflation] shifting toward the upside because oil prices were gyrating quite significantly.

But because of economic slowdown, oil prices have been behaving. That removed a little bit of the upside risk on inflation,” Ms Amador said.

Economically, it is in an enviable position compared to Europe or the United States, with first-quarter

Domestic demand is expected to push the economy forward

gross domestic product growth of 2.5 percent, driven mainly by a 24 percent surge in government spending, domestic demand and an export rebound.

Domestic demand will push the economy forward, Ms Amador said, and the current inflationary

environment can handle more government spending.

“Should the government, for whatever reason decide to ratchet up infrastructure spending, again just for argument purposes, the inflation risks remain manageable,” she added.

Reuters

June 19, 2012 business daily | 11

asia

Tesco to sell Japan stake British supermarket giant Tesco Plc said yesterday it will sell half of its Japanese business to the country’s No.2 general retailer Aeon Corp for a nominal sum, ending an eightyear attempt to crack Japan’s tough retail market.

Many foreign retailers have struggled in Japan, hampered by fickle consumer tastes, a super-competitive landscape and prolonged, profit-sapping deflation. French retailer Carrefour SA and British drugstore chain Boots are among the companies to have pulled out over the past decade.

Tesco, the world’s third-largest retailer, hired Goldman Sachs last year to advise it on the sale of its Japan stores, sources said last year, after paying 32.8 billion yen (US$414 million) for the Japanese franchise in 2003.

BOJ upbeat on exports

RBI Governor Duvvuri Subbarao has little room to manoeuvre after May benchmark inflation rose to 7.55 percent

Reform, not stimulus, is required to reboot India’s disappointing macro-economic performance Richard Iley, BNP Paribas SA Sujan Hajra, Anand Rathi Securities

the right one.

“A significant portion of the slowdown in growth is because of supply constraints, and a cut in monetary policy rates or even the cash reserve ratio is not going to make much impact on growth,” he said.

Govt reshuffle On Friday, India’s ruling Congress party named Finance Minister Pranab Mukherjee as its nominee for the largely ceremonial post of president, ending a protracted political drama that had exposed the weakness of the coalition government.

With no obvious successor, Prime

Minister Manmohan Singh, 78, could take charge of finance for now, a source close to the finance minister told Reuters. As finance minister during India’s balance of payments crisis in 1991, Mr Singh was the architect of reforms that spurred accelerated growth.

“There’s hope that once the presidential election is over, and there is reshuffle at the finance ministry, the government may take some action on reforms, and on subsidies. But, the July policy of the RBI may come a little early before the government can take steps,” Mr Prasanna said.

Reuters/Bloomberg

Fernandes bets on AirAsia’s formula

The Bank of Japan yesterday raised its assessment on exports and output but warned of risks to the economy from slowing Chinese growth and fallout from Europe’s sovereign debt crisis.

“Exports are showing signs of a pickup” partly on solid U.S. automobile demand and are expected to increase moderately as overseas growth recovers, the central bank said in a monthly economic report for June.

Production is also picking up moderately and is seen posting slight quarterly increases in April-June and July-September as companies in the automobile, chemical and steel sectors begin to restock inventory, the report said.

The upbeat assessment compared with the previous month’s view that export and output growth was flat.

Parent company may sell stock in some of the units by the end of 2013

A

s AirAsia Bhd prepares to more than triple its fleet, chief executive Tony Fernandes says he wants to match the growth of his budget airline with discount hotels, mobile phones and financial services.

Tune Group, the closely held parent company of Mr Fernandes and business partner Kamarudin Meranun, may sell stock in some of the units by the end of next year, Mr Fernandes said.

Initial public offerings are also planned for AirAsia’s Indonesian budget arm and long-haul unit AirAsia X Sdn., he said. AirAsia is the world’s fastestgrowing traded airline by sales in the past five years, according to data compiled by Bloomberg.

“Tune Money and Tune Hotels have the most potential,” the Malaysian entrepreneur said in an interview. “The financial services industry is complicated, just like airlines, and we are reaching a market that they generally missed and we are utilising AirAsia’s

customer base, which is huge.”

The 48-year-old is targeting emerging wealth in Southeast Asia where an increasing number of its 598 million inhabitants can afford to travel and buy consumer goods such as mobile phones for the first time.

Mr Fernandes will relocate to Jakarta this month to focus on regional growth. He will also step down as the airline’s CEO from June 30 to be replaced by Aireen Omar, currently regional head of corporate finance and treasury, according to an exchange filing in Kuala Lumpur yesterday.

“When you’re based in Malaysia you’ll inevitably get drawn into the Malaysian operations,” he said.

“I’ll take on the regional role.”

Resilient demand Demand for budget services has so far withstood the global economic slowdown amid a protracted crisis in Europe. AirAsia’s first-quarter

profit rose while full-service carriers Singapore Airlines Ltd and Malaysian Airline System Bhd posted losses in the period, citing fuel costs. AirAsia’s passenger numbers gained 12 percent in the quarter as the region’s slowing economic growth prompted more people to opt for budget travel.

Tune Group is the holding company created in 2007 when the initial aviation business was extended to include hotels. It will eventually hold assets from movie production to Formula One racing and online financial services.

“The best use of capital is a repeating model,” said Mr Fernandes.

AirAsia aims to form five budget airline partnerships in the next two years in countries including South Korea, Vietnam and China, Mr Fernandes said. This may include the Middle East. A budget tieup with All Nippon Airways Co. is scheduled to start flights from Tokyo’s Narita Airport in August.

Bloomberg

Samsung chief vows change The new chief executive of South Korean giant Samsung Electronics stressed yesterday the need for more investment on software to maintain the company’s lead in the fastchanging technology industry.

Kwon Oh-Hyun said Samsung, which beat arch-rival Apple in the first quarter to become the world’s top smartphone maker by sales, would work harder to build “unique platforms and ecosystems” to secure an “absolute lead” in the market.

“A particular focus must be given to serving new customer experience and value by strengthening soft capabilities in software, user experience, design and solutions,” he said in an inaugural speech.

12 |

business daily June 19, 2012

MARKETS Hang SENG INDEX PRICE

Day %

VOLUME

PRICE

Day %

VOLUME

26.30

1.15

52407511

CHINA UNICOM HON

10.94

-0.18

24836098

ALUMINUM CORP-H

3.29

1.23

10301425

CITIC PACIFIC

11.62

4.31

BANK OF CHINA-H

2.90

1.05

321737948

CLP HLDGS LTD

64.35

BANK OF COMMUN-H

5.20

0.39

26455579

CNOOC LTD

BANK EAST ASIA

26.75

2.69

3361372

BELLE INTERNATIO

12.72

3.75

BOC HONG KONG HO

23.45

CATHAY PAC AIR

12.40

CHEUNG KONG

92.85 6.99

NAME AIA GROUP LTD

CHINA COAL ENE-H CHINA CONST BA-H

PRICE

Day %

VOLUME

POWER ASSETS HOL

56.60

1.16

3155290

7625680

SANDS CHINA LTD

24.90

-0.20

7841923

0.63

1962800

SINO LAND CO

11.20

1.08

8650338

15.52

2.11

82167004

SUN HUNG KAI PRO

90.40

0.22

3288940

COSCO PAC LTD

10.14

2.01

3691037

SWIRE PACIFIC-A

88.35

0.00

989195

15290074

ESPRIT HLDGS

10.24

0.99

25261918

235.20

2.17

2608036

0.64

21585175

HANG LUNG PROPER

19.24

0.94

2650000

2.48

3100976

HANG SENG BK

9.69

0.21

13745700

0.60

3479795

42.70

1.79

3987343

2.04

14915443

5.32

0.76

232781709

CHINA LIFE INS-H

19.68

2.07

56665098

CHINA MERCHANT

22.95

3.61

4452578

CHINA MOBILE

81.50

1.88

CHINA OVERSEAS

18.20

2.71

CHINA PETROLEU-H

7.08

CHINA RES ENTERP

23.55

CHINA RES LAND

NAME

NAME

TENCENT HOLDINGS

25.70

0.98

4746359

TINGYI HLDG CO

104.10

0.39

1225235

WANT WANT CHINA

HENDERSON LAND D

41.70

1.58

3328663

WHARF HLDG

HENGAN INTL

79.55

1.21

1403687

HONG KG CHINA GS

MOVERS

44

16.64

0.48

6446630

107.40

-4.45

9634123

HSBC HLDGS PLC

67.45

0.97

18472847

11996622

HUTCHISON WHAMPO

66.85

1.60

8764682

41787117

IND & COMM BK-H

4.42

-0.45

330822396

0.14

60944257

LI & FUNG LTD

15.24

0.26

7115722

HIGH

19578.13

1.95

1576665

MTR CORP

25.55

1.19

1957206

LOW

18808.4

15.74

0.13

10855339

NEW WORLD DEV

9.02

1.12

11396228

CHINA RES POWER

14.76

2.07

7239691

52W (H) 22835.03

PETROCHINA CO-H

10.58

0.57

58661208

CHINA SHENHUA-H

27.85

1.46

13900039

PING AN INSURA-H

61.95

1.56

10324496

(L) 16170.35

HONG KONG EXCHNG

4

1 19600

INDEX 19427.81

18800

14-Jun

18-Jun

Hang SENG CHINA ENTErPRISE INDEX NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

25.1

1.21

6268641

15807384

CHINA PETROLEU-H

7.08

0.14

60944257

1.23

10301425

CHINA RAIL CN-H

6.23

2.64

22.85

1.11

9574272

CHINA RAIL GR-H

3.14

2.9

1.05

321737948

CHINA SHENHUA-H CHINA TELECOM-H

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.06

0.66

118906062

AIR CHINA LTD-H

4.54

0.89

ALUMINUM CORP-H

3.29

ANHUI CONCH-H BANK OF CHINA-H

NAME

PRICE

DAY %

VOLUME

12.86

0.47

25012369

ZIJIN MINING-H

2.79

-1.06

26396100

15294042

ZOOMLION HEAVY-H

10.7

1.71

14509062

0.96

25171118

ZTE CORP-H

14.7

-2.26

8183266

27.85

1.46

13900039

5.2

0.39

26455579

3.62

0.56

46828828

15.16

0.93

3176067

DONGFENG MOTOR-H

13.24

0.61

9555819

4.1

0.24

38292243

GUANGZHOU AUTO-H

6.85

0.29

7810046

CHINA COAL ENE-H

6.99

2.04

14915443

HUANENG POWER-H

5.5

1.66

22114756

CHINA COM CONS-H

6.77

0.00

20798363

IND & COMM BK-H

4.42

-0.45

330822396

CHINA CONST BA-H

5.32

0.76

232781709

JIANGXI COPPER-H

17.44

2.11

15780889

CHINA COSCO HO-H

3.71

0.82

10739710

PETROCHINA CO-H

10.58

0.57

58661208

19.68

2.07

56665098

PICC PROPERTY &

9.1

-1.30

16861312

5.24

-0.19

3025897

PING AN INSURA-H

61.95

1.56

10324496

15

1.63

18406444

SHANDONG WEIG-H

8.1

0.00

3109645

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

CHINA LIFE INS-H CHINA LONGYUAN-H CHINA MERCH BK-H

NAME YANZHOU COAL-H

MOVERS

30

2 10000

INDEX 9818.76 HIGH

9933.71

LOW

9517.14

CHINA MINSHENG-H

7.49

2.04

59551447

SINOPHARM-H

21.15

6.71

10490063

52W (H) 12902.97

CHINA NATL BDG-H

9.19

0.22

29488880

TSINGTAO BREW-H

50.55

0.90

1467667

(L) 8058.58

11.28

-1.57

6223115

WEICHAI POWER-H

32.8

-0.91

1117127

CHINA OILFIELD-H

8

9500

14-Jun

18-Jun

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.67

0.75

51567766

DATANG INTL PO-A

5.86

0.17

10518176

SANY HEAVY INDUS

14.8

1.37

15290589

AIR CHINA LTD-A

6.11

0.99

6403239

DONGFANG ELECT-A

21.47

0.66

5992762

SHANDONG GOLD-MI

35.93

-0.14

8091397

ALUMINUM CORP-A

6.71

0.45

7533623

EVERBRIG SEC -A

14.14

1.87

7475353

SHANG PUDONG-A

8.46

-0.12

50212960

16.21

1.44

18134281

GD MIDEA HOLDING

12.52

0.32

19741731

SHANGHAI ELECT-A

5.17

1.37

9515096

GD POWER DEVEL-A

2.74

0.00

79590391

SHANXI LU'AN -A

23.34

1.08

9253025

SHANXI XINGHUA-A

38.29

0.34

3587475

NAME

ANHUI CONCH-A

NAME

NAME

BANK OF BEIJIN-A

9.54

-0.63

13523264

BANK OF CHINA-A

2.85

0.00

8637813

GEMDALE CORP-A

7.06

0.57

55890082

BANK OF COMMUN-A

4.51

-0.44

36354285

GF SECURITIES-A

31.98

1.11

5320075

SHANXI XISHAN-A

16.23

0.56

15979614

BAOSHAN IRON & S

4.45

0.45

14858306

SHENZ DVLP BK-A

15.21

0.33

19873335

6.64

2.47

28816511

15.48

1.04

1169327

GREE ELECTRIC

21.95

0.37

9469899

14.78

-0.74

15073536

23.57

1.90

3662540

GUANGHUI ENERG-A

CHINA CITIC BK-A

4.05

-0.49

16613345

GUIZHOU PANJIA-A

29.59

1.72

6779167

CHINA CNR CORP-A

4.16

0.48

17050644

HAITONG SECURI-A

10.4

1.76

33183263

SUNING APPLIAN-A

8.84

0.45

28094193

CHINA COAL ENE-A

8.35

0.12

10440240

HANGZHOU HIKVI-A

26.81

3.19

3708841

TSINGTAO BREW-A

39.86

-0.92

2404443

CHINA CONST BA-A

4.5

0.45

21878774

HENAN SHUAN-A

63.28

3.05

2958401

WEICHAI POWER-A

31.94

0.60

3122034

CHINA COSCO HO-A

4.85

0.41

5364087

HUATAI SECURIT-A

11.74

2.44

13781303

WULIANGYE YIBIN

33.5

1.45

18922546

CHINA CSSC HOL-A

23.3

0.17

4405310

HUAXIA BANK CO

9.43

-0.74

27982976

XIAMEN TUNGSTEN

48.71

-0.79

6275892

CHINA EAST AIR-A

4.04

0.25

4709232

IND & COMM BK-A

3.95

-0.75

42814420

YANGQUAN COAL -A

17.2

0.70

12546237

BYD CO LTD -A

SHENZEN OVERSE-A SINOVEL WIND-A

2.83

-0.35

21937323

INDUSTRIAL BAN-A

12.91

-0.31

40032295

YANTAI CHANGYU-A

71.75

0.86

1418978

CHINA LIFE INS-A

17.92

-0.72

8140252

INNER MONG BAO-A

44.59

0.29

36880316

YANTAI WANHUA-A

14.72

-0.74

7885455

CHINA MERCH BK-A

11.05

0.00

26305041

INNER MONG YIL-A

20.82

-4.71

130634632

YANZHOU COAL-A

21.73

0.05

4565846

CHINA MERCHANT-A

12.73

0.00

18809104

INNER MONGOLIA-A

6

-0.50

50595520

YUNNAN BAIYAO-A

56.96

-1.15

2126967

CHINA MERCHANT-A

25.28

1.24

6854745

JIANGSU HENGRU-A

28.89

1.26

3286853

ZHONGJIN GOLD

23.86

0.25

7652177

CHINA MINSHENG-A

6.14

2.16

125152553

JIANGSU YANGHE-A

140.32

1.44

1496967

ZIJIN MINING-A

25.19

0.88

10848899

CHINA EVERBRIG-A

CHINA NATIONAL-A

6.27

0.97

19059884

JIANGXI COPPER-A

17

1.49

5065791

JINDUICHENG -A

13.66

0.89

5759554

CHINA PACIFIC-A

22.2

0.23

11217684

JIZHONG ENERGY-A

17.34

0.87

13579463

CHINA PETROLEU-A

6.47

-0.31

22028289

KANGMEI PHARMA-A

14.1

0.14

18714733

CHINA RAILWAY-A

4.58

-0.22

10060052

KWEICHOW MOUTA-A

246.46

1.27

1953835

42

2.31

7057072

CHINA OILFIELD-A

CHINA RAILWAY-A

2.67

1.14

27674202

LUZHOU LAOJIAO-A

CHINA SHENHUA-A

24.06

1.05

14251744

METALLURGICAL-A

2.58

0.39

14492910

CHINA SHIPBUIL-A

5.48

-1.08

27874583

NARI TECHNOLOG-A

20.13

1.92

12834923

2.59

0.78

12735451

CHINA SOUTHERN-A CHINA STATE -A

4.65

0.22

16074667

NINGBO PORT CO-A

3.4

0.59

41939444

PANGANG GROUP -A

7.38

1.93

29507870

9.24

0.33

4.08

0.00

23526012

ZOOMLION HEAVY-A

10.71

1.81

26062608

ZTE CORP-A

14.95

1.77

23808407

MOVERS

229

50

21 2590

INDEX 2581.212

CHINA UNITED-A

3.98

0.00

32819168

PETROCHINA CO-A

12268135

HIGH

2590.18

CHINA VANKE CO-A

9.19

0.88

56613283

PING AN INSURA-A

46.12

0.13

20114887

LOW

2545.92

CHINA YANGTZE-A

6.96

-0.85

8108170

POLY REAL ESTA-A

11.99

1.65

23302782

CITIC SECURITI-A

13.59

0.97

52797357

QINGDAO HAIER-A

12.15

0.25

9496428

CSR CORP LTD -A

4.79

0.63

13541382

QINGHAI SALT-A

30.93

1.91

4107968

DAQIN RAILWAY -A

7.35

0.14

27521830

SAIC MOTOR-A

15

0.07

7157191

PRICE DAY %

Volume

PRICE DAY %

Volume

52W (H) 3140.102 (L) 2254.567

2540

14-Jun

18-Jun

FTSE TAIWAN 50 INDEX NAME ACER INC

NAME

32.1

3.88

26053086

FORMOSA PLASTIC

77.8

-1.27

7385327

26.05

1.56

15012523

FOXCONN TECHNOLO

109

0.93

16095621

37.3

2.47

6115009

FUBON FINANCIAL

29.9

3.46

ASUSTEK COMPUTER

297

2.77

3278682

HON HAI PRECISIO

86.5

AU OPTRONICS COR

12.2

2.09

31165496

HOTAI MOTOR CO

201.5

CATCHER TECH

196

1.55

16170321

HTC CORP

CATHAY FINANCIAL

29.8

1.36

11994244

HUA NAN FINANCIA

CHANG HWA BANK

15.75

0.32

9371394

CHENG SHIN RUBBE

75.3

3.29

CHIMEI INNOLUX C

12.15 7.1

CHINA STEEL CORP CHINATRUST FINAN

ADVANCED SEMICON ASIA CEMENT CORP

CHINA DEVELOPMEN

PRICE DAY % 0.76

TPK HOLDING CO L

461

1.43

5160606

20773332

TSMC

80.8

3.46

33737589

2.37

30829970

UNI-PRESIDENT

47.55

1.39

5473618

2.28

1300159

UNITED MICROELEC

12.35

0.82

45382857

371.5

0.68

9001469

WISTRON CORP

39.85

4.87

12381968

16.5

0.61

8617509

YUANTA FINANCIAL

13.7

1.48

19309990

LARGAN PRECISION

615

6.77

3202603

YULON MOTOR CO

52.9

0.76

6517454

17626806

LITE-ON TECHNOLO

37.75

1.89

4894070

1.67

27265942

MEDIATEK INC

276.5

4.34

12369818

1.43

55066137

MEGA FINANCIAL H

21.75

2.11

27808809

28.1

-0.88

16209436

NAN YA PLASTICS

56.3

-2.26

6189364

PRESIDENT CHAIN

157

2.28

1540376

83

3.88

10125907

17.25

1.47

37899051

90.7

0.67

8240858

QUANTA COMPUTER

COMPAL ELECTRON

28.4

2.16

13660001

SILICONWARE PREC

30.9

4.92

6450980

90

0.67

4953888

SINOPAC FINANCIA

11.2

0.45

17283812

FAR EASTERN NEW

29.95

2.04

12390263

SYNNEX TECH INTL

72.8

2.68

5080508

FAR EASTONE TELE

66

4.10

5492607

TAIWAN CEMENT

35.35

2.17

8734964

FIRST FINANCIAL

17.4

1.16

11058877

TAIWAN COOPERATI

17.6

0.57

3116925

FORMOSA CHEM & F

78.6

-0.13

7359359

TAIWAN FERTILIZE

68.2

2.87

4249296

FORMOSA PETROCHE

81.2

2.14

2373304

TAIWAN GLASS IND

25

2.46

5718499

TAIWAN MOBILE CO

Volume

93

CHUNGHWA TELECOM DELTA ELECT INC

NAME

MOVERS

46

4

9965244

0 5030

INDEX 5011.25 HIGH

5021.10

LOW

4859.11

52W (H) 6026.51 4840

(L) 4643.05 14-Jun

18-Jun

June 19, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXY ENTErTAINMENT

Max 19.00

Average 18.83

MELco crowN ENTErTAINMENT

Min 18.60

19.00

30.30

12.20

18.92

30.14

12.12

18.84

29.98

12.04

18.76

29.82

11.96

18.68

29.66

11.88

18.60

Last 18.66

SANDS cHINA LTD

Max 25.55

Average 25.10

Max 30.30

Average 30.00

Min 29.50

Min 24.90

Last 11.88

wYNN MAcAU LTD 14.32

17.84

25.32

14.24

17.68

25.18

14.16

17.52

25.04

14.08

17.36

14.00 Max 14.34

Average 14.25

83.81

-0.26

-15.67

111.49

77.40

BRENT CRUDE FUTR Aug12

97.6

-0.01

-7.32

124.70

95.21

GASOLINE RBOB FUT Jul12

270.08

-0.03

-0.51

332.18

246.50

852

0.06

-5.28

1045.75

810.00

2.491

0.97

-23.19

4.89

2.10

NATURAL GAS FUTR Jul12

DAY %

YTD %

(H) 52W

Min 14.02

Last 14.26

17.20 Max 17.88

Average 17.53

HEATING OIL FUTR Jul12

264.82

0.06

-6.84

331.93

256.31

1623.9

-0.20

3.77

1921.18

1478.78

Silver Spot $/Oz

28.57

-0.43

2.64

44.22

26.09

Platinum Spot $/Oz

1490.75

0.45

6.90

1915.75

1339.25

Palladium Spot $/Oz

630.11

0.42

-3.58

848.37

537.54

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

LME NICKEL 3MO ($)

1933

-1.07

-4.31

2675.25

1925.25

7510.5

1.22

-1.18

9905.00

6635.00

1904

0.63

3.20

2539.50

1718.50 15980.00

16850

1.29

-9.94

25195.00

13.955

0.25

-9.21

19.38

13.73

515.75

1.93

-12.03

673.50

499.00

WHEAT FUTURE(CBT) Dec12

659

1.19

-8.47

871.00

629.50

SOYBEAN FUTURE Nov12

1326

0.91

10.11

1400.00

1115.75

151.85

-0.10

-35.18

288.85

150.70

SUGAR #11 (WORLD) Oct12

19.95

-0.30

-12.61

26.04

19.24

COTTON NO.2 FUTR Dec12

71.57

0.77

-18.52

103.00

64.61

AGRICULTURE ROUGH RICE (CBOT) Jul12 Dec12

COFFEE 'C' FUTURE Sep12

PRICE

(L) 52W

Gold Spot $/Oz

World Stock MarketS - Indices

Last 17.24

Min 17.24

MAJORS

ASIA PACIFIC

CROSSES

1.01 1.57 0.95 1.26 79.12 7.99 7.76 6.36 55.79 31.47 1.27 29.86 42.33 9450.00 79.84 1.20 0.81 8.03 10.10 100.01 1.03

DAY %

0.35 -0.20 0.00 0.01 -0.49 0.00 0.01 0.12 -0.53 0.13 -0.07 0.15 -0.17 -0.55 -0.63 0.00 -0.18 0.07 -0.18 -0.52 0.00

YTD %

-1.16 0.90 -1.26 -2.48 -2.79 0.10 0.10 -0.98 -4.88 0.25 1.96 1.42 3.57 -4.03 -1.77 1.32 3.41 1.26 2.48 -0.35 0.01

(H) 52W

1.11 1.66 0.98 1.46 84.18 8.04 7.81 6.49 56.52 31.96 1.32 30.72 44.35 9662.00 88.64 1.25 0.91 9.42 11.68 117.74 1.03

(L) 52W

0.94 1.52 0.71 1.23 75.35 7.98 7.75 6.28 43.86 29.63 1.20 28.66 41.88 8458.00 72.06 1.01 0.80 7.85 9.84 95.60 1.03

0.939 1.524 0.707 1.229 75.350 7.982 7.753 6.277 43.855 29.630 1.199 28.661 41.879 8458.000 72.057 1.007 0.795 7.854 9.842 95.600 1.029

MACAU RELATED STOCKS (H) 52W

(L) 52W

ARISTOCRAT LEISU

NAME

PRICE 2.98

DAY % YTD % 3.11

35.45

3.25

1.88

VOLUME CRNCY 1609154

CROWN LTD

8.69

0.46

7.42

9.29

7.45

3286859

AMAX HOLDINGS LT

0.074

-1.33

-14.94

0.12

0.06

8402500

BOC HONG KONG HO

23.45

0.64

27.45

24.45

14.24

21585175

CENTURY LEGEND

0.23

-4.17

0.00

0.40

0.20

20000

CHEUK NANG HLDGS

2.98

0.00

6.43

4.36

2.30

72

CHINA OVERSEAS

18.2

2.71

40.22

18.48

9.99

41787117

CHINESE ESTATES

9

0.11

-28.00

13.68

8.30

195000

CHOW TAI FOOK JE

9

-0.11

-35.34

15.16

8.55

4123400

EMPEROR ENTERTAI

1.19

1.71

7.21

2.04

0.97

3485000

FUTURE BRIGHT

0.84

2.44

100.00

1.09

0.30

480000

GALAXY ENTERTAIN

18.66

1.08

31.04

24.95

8.69

8331752 1225235

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

12767.17

0.91

4.50

13338.66

10404.49

NASDAQ COMPOSITE INDEX

US

2872.80

1.29

10.27

3134.17

2298.89

HANG SENG BK

104.1

0.39

12.97

125.00

84.40

FTSE 100 INDEX

GB

5466.91

-0.22

-1.89

6084.08

4791.01

HOPEWELL HLDGS

20.1

0.80

1.21

24.90

18.56

320801

DAX INDEX

GE

6266.31

0.59

6.24

7523.53

4965.80

HSBC HLDGS PLC

67.45

0.97

14.32

78.85

56.00

18472847

NIKKEI 225

JN

8721.02

1.77

3.14

10255.15

8135.79

HUTCHISON TELE H

3.44

-0.58

15.05

3.71

2.35

916000

HANG SENG INDEX

HK

19427.81

1.01

5.39

22835.03

16170.35

LUK FOOK HLDGS I

15.2

1.33

-43.91

46.15

14.70

4276041

6.16

0.49

6.76

10.76

4.30

3551482

CSI 300 INDEX

CH

2581.21

0.51

10.04

3140.10

2254.57

MGM CHINA HOLDIN

11.88

-0.83

23.85

17.18

7.60

2130722

TAIWAN TAIEX INDEX

TA

7281.50

1.76

2.96

8842.17

6609.11

MIDLAND HOLDINGS

3.83

-1.29

-3.14

5.22

2.89

438000

NEPTUNE GROUP

0.1

0.00

-9.91

0.15

0.08

0

NEW WORLD DEV

9.02

1.12

44.09

11.30

6.13

11396228

SANDS CHINA LTD

24.9

-0.20

13.44

33.05

14.90

7841923

SHUN HO RESOURCE

1.13

0.00

13.00

1.32

0.82

0

MELCO INTL DEVEL

KOSPI INDEX

SK

1891.71

1.81

3.61

2192.83

1644.11

S&P/ASX 200 INDEX

AU

4136.90

1.96

1.98

4657.40

3765.90

ID

3860.16

1.10

1.00

4234.73

3217.95

FTSE Bursa Malaysia KLCI

MA

1582.73

0.22

3.40

1609.33

1310.53

SHUN TAK HOLDING

2.76

1.10

7.85

4.67

2.24

3373745

NZX ALL INDEX

NZ

772.41

0.28

5.84

806.02

700.44

SJM HOLDINGS LTD

14.26

2.00

14.03

20.71

10.08

4905534

SMARTONE TELECOM

15.04

1.90

11.90

18.50

9.80

2994000

WYNN MACAU LTD

17.24

-0.92

-11.59

27.48

14.81

7500465

ASIA ENTERTAINME

4.03

-1.71

-31.46

10.87

3.66

38248

BALLY TECHNOLOGI

46.94

1.51

18.66

49.32

24.74

674557 6940

JAKARTA COMPOSITE INDEX

11.80

25.46

WTI CRUDE FUTURE Jul12

NAME

Min 11.88

18.00

24.90

Last 24.90

Average 12.02

14.40

PRICE

CORN FUTURE

Max 12.18

25.60

NAME

LME ZINC

29.50

CURRENCY EXCHANGE RATES

GAS OIL FUT (ICE) Jul12

METALS

Last 29.95

SJM HoLDINGS LTD

Commodities ENERGY

MGM cHINA HoLDINGS

PHILIPPINES ALL SHARE IX

PH

3356.71

1.84

10.24

3518.96

2695.06

HSBC Dragon 300 Index Singapor

SI

535.03

2.27

7.80

na

na

STOCK EXCH OF THAI INDEX

TH

1161.85

-0.33

13.32

1247.72

843.69

HO CHI MINH STOCK INDEX

VN

435.59

0.58

23.91

492.44

332.28

BOC HONG KONG HO

2.97

6.07

23.90

3.15

1.81

Laos Composite Index

LO

1033.55

1.67

14.91

1107.30

876.33

GALAXY ENTERTAIN

2.4025

0.00

28.48

3.24

1.08

1400

INTL GAME TECH

14.88

-1.59

-13.49

19.15

13.12

8232319

JONES LANG LASAL

70.66

1.79

15.34

99.89

46.01

530425

LAS VEGAS SANDS

45.18

-1.12

5.73

62.09

36.08

7022263

MELCO CROWN-ADR

11.33

0.76

17.78

16.15

7.05

4471651

MGM CHINA HOLDIN

1.64

0.00

37.62

2.21

1.00

100

MGM RESORTS INTE

10.8

-2.70

3.55

16.05

7.40

13217159

13.97

1.16

19.20

18.77

7.35

444911

1.8

0.00

11.97

2.60

1.26

24900

99.53

-0.96

-9.92

165.49

95.82

1832964

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

SHUFFLE MASTER SJM HOLDINGS LTD WYNN RESORTS LTD

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business daily June 19, 2012

Opinion

How Germans botched the Spanish bank bailout Clive Crook

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Bloomberg View columnist

urope’s latest initiative to subdue its financial crisis fell apart in less than a day.

The instant response to the plan for supporting Spanish banks had been euphoric. Even as bond markets pushed the cost of Spanish public borrowing even higher, in effect declaring the country insolvent, politicians were still applauding themselves.

European Union leaders thought the plan would impress the markets because the sum committed to support Spain’s banks, 100 billion euros (US$125 billion), looked adequate – bigger, in fact, than investors expected.

The EU thought it was getting ahead of events for once.

It wasn’t. Mistakes in the deal’s design made the plan self-defeating. These errors are worth noting, because they lie at the core of the EU’s larger strategy.

The crucial thing is that the EU gave its support not directly to Spain’s banks but to Spain’s government, which would then lend it on. This had two fatal consequences. First, it added to Spain’s public debt, making its government less creditworthy.

Second, depending on how the loans are structured – a detail left vague as the rescue was announced – Spain’s new debt to the EU might subordinate existing bondholders. Curbing the risk of a faster run on Spain’s banks was good, investors presum-

ably calculated, but not good enough.

Merkel’s mess Both dangers were recognised before the deal was put together. Why then did the EU design the rescue this way? Why not simply extend direct EU support to Spain’s banks? The answer is Germany.

Chancellor Angela Merkel and her parliamentary allies insisted that Spain’s government should bear responsibility for the rescue. German taxpayers should not be directly exposed to the costs of helping Spain’s banks. On the same reasoning, Merkel has said that the Spanish rescue funds should come from Europe’s new permanent lending facility, the European Stability Mechanism, on terms that would make the new debt senior.

It’s of a piece with Germany’s whole approach. The overarching fact in this crisis is that German taxpayers feel cheated. They didn’t want the euro in the first place, suspecting it would become a transfer system that would put them on the hook for other countries’ profligacy. That, of course, is exactly what happened. To blunt this resistance, Germany’s leaders promised at the outset there would be no bailouts, and they insisted on lots of rules and mechanisms to back this up. The crisis has blown

that structure to pieces, but Merkel is still trying to keep the promise — even if the EU, and the German economy along with it, collapses as a result.

Germany’s government is in a horrible political bind. Even allowing for this, the country’s response to the crisis now borders on the unintelligible.

On a small scale, the policy simply won’t work. Spain and the other distressed economies can’t manage this crisis without help from their EU partners. The absurdity in Germany’s approach is that it concedes this – in practice though not in principle. It has already committed its taxpayers to many semi disguised channels of support. The biggest is the commitment that the ECB has made through liquidity support to euro-area banks and the balancing operations of national central banks. If the euro system doesn’t survive, enormous losses will find their way back to German taxpayers.

Faulty design The choice is no longer between bailouts and no bailouts. It is between bailouts that work and bailouts that fail. The Spanish fiasco is one example. Germany has just put its taxpayers on the line to help Spanish banks. To cloak that commitment, it built failure into the design of the rescue. The politics may be understandable. That doesn’t

The choice is no longer between bailouts and no bailouts. It is between bailouts that work and bailouts that fail

make the policy defensible.

Seen from a higher altitude, Germany’s strategy is even more perplexing. Merkel, echoing the line of previous German chancellors, says she wants closer European union. With the EU at its present state of integration, she argues, transfers to overspending governments are unacceptable. National governments need to surrender sovereignty to the European centre, she says, so that democratic accountability is restored and proper standards of governance can be maintained.

Meaning what? Perhaps she imagines that this new political union would put Germany in command. Let’s call that an idiosyncratic view of political integration. Assuming non-

Germans would be allowed to vote, Germany would be less in command than now.

It’s the profligate whose political clout would increase.

Deeper union would overwhelm the German anomaly of prudent public finance.

Merkel and her northern European allies are right that the EU’s member nations have different views and traditions on taxes, public services, redistribution, risk-sharing, public borrowing and every other aspect of public finance. They are right that these differences put limits on the scope for fiscal cooperation. It wouldn’t be fair, let’s say, to ask German taxpayers to help pay for France’s more generous health-care benefits.

On the other hand, it’s insane – dangerously insane – to see full political union as the solution to that problem. Does anybody think that political union would gently smooth away those differences? Far-right nationalism is already resurgent in many EU countries. There’s no demand anywhere, including Germany, for the kind of European Union that Merkel keeps advocating as the price for fuller cooperation. Germany’s policy on the crisis boils down to this: We can’t confront our economic calamity until we’ve agreed on a future for Europe that none of us wants.

In previous columns I’ve said what I think needs to happen: Limited, conditional and explicit debt mutualisation to restore confidence, combined with a renewed emphasis on the accountability of national governments to their voters. The first, with the emphasis on “explicit,” is the minimum requirement for avoiding a European economic catastrophe. The second accepts that the basis for a United States of Europe doesn’t exist, and that’s why the debt pooling should be limited and conditional.

The tension between the two parts is obvious. There’s no alternative but to manage it.

Union where necessary, sovereignty where possible. It’s Germany’s least-cost choice, and that’s what Merkel should be telling her voters.

Bloomberg View

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June 19, 2012 business daily | 15

OPINION

A global perfect storm wires Business Leading reports from Asia’s best business newspapers

Nouriel Roubini

Chairman of Roubini Global Economics, Professor of Economics at the Stern School of Business, New York University

Bangkok Post Declining fuel prices, strongerthan-expected growth in passenger traffic and the bottoming out of the freight market have dispelled earlier concerns about a further downturn in global aviation profitability. The International Air Transport Association (IATA) projects the industry’s net profit at US$3 billion. This will be the second year of declining returns since airline earnings peaked in 2010 at US$15.8 billion with a net profit margin of 2.9 percent. This year’s projected profit would yield a margin of merely 0.5 percent on revenue of US$631 billion.

Business Times Malaysia and Indonesia currently account for 87 percent of the world’s palm oil production and 90 percent of exports, Rabobank’s associate director, Pawan Kumar, said at the Malaysia-India Palm Oil Trade Fair. Those countries will continue to dominate the supply of palm oil in the world for at least another 10 years despite many countries having ventured into oil palm cultivation. India has earmarked about 800,000ha for oil palm cultivation. Palm trees take three to four years before they start to produce fruits.

Japan Times Japanese budget carrier Peach Aviation Ltd. is considering launching flights between Kansai airport and China, possibly this year, with Beijing, Shanghai, Hangzhou and Guangzhou as prospective destinations. The airline has short-listed the four cities because they are reachable within four hours from Kansai International Airport – a condition the airline has set for opening new routes. In May, Peach Aviation began its first international service with flights to Seoul. It will begin flying to Hong Kong in July and plans to fly to Taipei in September.

Business Line Tata Motors Ltd global sales grew 12 percent in May to 96,089 units over the same period last year. While sales of luxury sedans of Jaguar brand increased by 3 percent last month, Land Rover sales were up 42. The company said total passenger vehicles sales stood at 20,970 units in May 2012, up 6 percent from the same month last year. Commercial vehicles sales grew 3 percent to 45,025 units from the same month last year.

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ark, lowering financial and economic clouds are, it seems, rolling in from every direction: the Eurozone, the United States, China, and elsewhere. Indeed, the global economy in 2013 could be a very difficult environment in which to find shelter.

For starters, the Eurozone crisis is worsening, as the euro remains too strong, front-loaded fiscal austerity deepens recession in many member countries, and a credit crunch in the periphery and high oil prices undermine prospects of recovery.

The Eurozone banking system is becoming balkanized, as cross-border and interbank credit lines are cut off, and capital flight could turn into a full run on periphery banks if, as is likely, Greece stages a disorderly euro exit in the next few months.

Moreover, fiscal and sovereign-debt strains are becoming worse as interestrate spreads for Spain and Italy have returned to their unsustainable peak levels.

Indeed, the Eurozone may require not just an international bailout of banks (as recently in Spain), but also a full sovereign bailout at a time when Eurozone and international firewalls are insufficient to the task of backstopping both Spain and Italy. As a result, disorderly breakup of the Eurozone remains possible.

Farther to the west, US economic performance is weakening, with first-quarter growth a miserly 1.9 percent – well below potential.

And job creation faltered in April and May, so the US may reach stall speed by year-end. Worse, the risk of a double-dip recession next year is rising: even if what looks like a looming US fiscal cliff turns out to be only a smaller source of drag, the likely increase in some taxes and reduction of some transfer payments will reduce growth in disposable income and consumption.

Moreover, political gridlock over fiscal adjustment is likely to persist, regardless of whether Barack Obama or Mitt Romney wins November’s presidential election. Thus, new fights on the debt ceiling, risks of a government shutdown, and rating downgrades could further depress consumer and business confidence, reducing spending and accelerating a flight to safety that would exacerbate the fall in stock markets.

China blues In the east, China, its growth model unsustainable, could be underwater by 2013, as its investment bust continues and reforms intended

to boost consumption are too little too late. A new Chinese leadership must accelerate structural reforms to reduce national savings and increase consumption’s share of GDP; but divisions within the leadership about the pace of reform, together with the likelihood of a bumpy political transition, suggest that reform will occur at a pace that simply is not fast enough.

The economic slowdown in the US, the Eurozone, and China already implies a massive drag on growth in other emerging markets, owing to their trade and financial links with the US and the European Union (that is, no “decoupling” has occurred). At the same time, the lack of structural reforms in emerging markets, together with their move towards greater state capitalism, is hampering growth and will reduce their resiliency.

Finally, long-simmering tensions in the Middle East between Israel and the US on one side and Iran on the other on the issue of nuclear proliferation could reach a boil by 2013. The current negotiations are likely to fail, and even tightened sanctions may not stop Iran from trying to build nuclear weapons. With the US and Israel unwilling to accept containment of a nuclear Iran by deterrence, a military confrontation in 2013 would lead to a massive oil price spike and global recession.

These risks are already exacerbating the economic slowdown: equity markets are falling everywhere, leading to negative wealth effects on consumption and capital spending. Borrowing costs are rising for highly indebted sovereigns, credit rationing is undermining small and medium-size companies, and falling commodity prices are reducing exporting countries’ income. Increasing risk aversion is leading economic agents to adopt a wait-and-see stance that makes the slowdown partly self-fulfilling.

Shrinking options Compared to 2008-2009, when policymakers had ample space to act, monetary and fiscal authorities are running out of policy bullets (or, more cynically, policy rabbits to pull out of their hats). Monetary policy is constrained by the proximity to zero interest rates and repeated rounds of quantitative easing. Indeed, economies and markets no longer face liquidity problems, but rather credit and insolvency crises. Meanwhile, unsustainable budget deficits and public debt in most advanced economies have se-

verely limited the scope for further fiscal stimulus.

Using exchange rates to boost net exports is a zerosum game at a time when private and public deleveraging is suppressing domestic demand in countries that are running current-account deficits and structural issues are having the same effect in surplus countries. After all, a weaker currency and better trade balance in some countries necessarily implies a stronger currency and a weaker trade balance in others.

Increasing risk aversion is leading economic agents to adopt a wait-and-see stance that makes the slowdown partly self-fulfilling

Meanwhile, the ability to backstop, ring-fence, and bail out banks and other financial institutions is constrained by politics and near-insolvent sovereigns’

inability to absorb additional losses from their banking systems. As a result, sovereign risk is now becoming banking risk. Indeed, sovereigns are dumping a larger fraction of their public debt onto banks’ balance sheet, especially in the Eurozone.

To prevent a disorderly outcome in the Eurozone, today’s fiscal austerity should be much more gradual, a growth compact should complement the EU’s new fiscal compact, and a fiscal union with debt mutualisation (Eurobonds) should be implemented. In addition, a full banking union, starting with Eurozone-wide deposit insurance, should be initiated, and moves toward greater political integration must be considered, even as Greece leaves the Eurozone.

Unfortunately, Germany resists all of these key policy measures, as it is fixated on the credit risk to which its taxpayers would be exposed with greater economic, fiscal, and banking integration. As a result, the probability of a Eurozone disaster is rising.

And, while the cloud over the Eurozone may be the largest to burst, it is not the only one threatening the global economy. Batten down the hatches. © Project Syndicate

16 |

business daily June 19, 2012

CLOSING India eyes privatisation sales

More time for Irish debt payment Ireland’s international lenders are considering doubling the average repayment term of some of its 85 billion euro (US$107 billion) bailout to 30 years from 15, state broadcaster RTE reported, citing sources among the lenders. The move would be aimed at easing Dublin’s efforts to return to long-term debt markets before its EU/IMF bailout runs out at the end of next year. The extension would only affect loans from the European Union bailout funds, but not those from the International Monetary Fund, the broadcaster said.

India plans to sell stakes in 15 state-run firms by the end of March next year, a finance ministry official said yesterday. The government wants to raise 300 billion rupees (US$5.4 billion) to help plug a yawning gap in the fiscal budget and to boost investor sentiment following slower economic growth. The sales will include shares worth US$1.25 billion (10 billion patacas) in miner NMDC. The government plans to raise US$622 million from a stake in capital goods-maker BHEL and US$365 million from Steel Authority of India Ltd (SAIL), the official said.

Asian stocks rally on Greece’s pro-bailout vote Markets rise toward month high

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sian stocks jumped, driving the regional benchmark index toward a one-month high, after projected election victories for pro-bailout parties eased concern Greece would leave the euro. Shares pared gains after India’s central bank left interest rates unchanged.

The MSCI Asia Pacific Index climbed 1.4 percent to 115.71 as of 7:26 pm in Tokyo, paring gains of as much as 1.8 percent. About four shares rose for each that fell in the gauge, which is heading for its highest close since May 15. Over US$5 trillion has been erased from global equities since March amid concern growth is slowing in the U.S. and China, and as Europe’s debt crisis intensified.

“There’s a short-term sigh of relief,” said Belinda Allen, senior investment analyst at Colonial First State Global Asset Management in Sydney. “It removes the tail risk event that we were concerned about in terms of Greece leaving the European Union immediately. We all know there’s still a long and hard road ahead for Greece and the problems of Europe aren’t solved by this election.”

Japan’s Nikkei 225 Stock Average and South Korea’s Kospi Index advanced 1.8 percent. Australia’s S&P/ASX 200 Index rose 2 percent.

Hong Kong’s Hang Seng Index increased 1 percent, while China’s Shanghai Composite Index added

0.4 percent.

Hong Kong Exchanges & Clearing Ltd, the world’s second-largest bourse operator, slipped 4.5 percent after agreeing to pay 1.39 billion pounds (US$2.18 billion) for the London Metal Exchange.

The Sensex dropped 1.4 percent in Mumbai, erasing gains of as much as 0.9 percent, after India left interest rates unchanged at 8 percent, citing inflation.

Asian stocks rose after Greece’s pro-bailout New Democracy and Pasok parties took a majority in the 300-member parliament, according to the official projection by the Interior Ministry in Athens.

The results eased concern that Alex Tsipras’s Syriza party would take control of the Greek government and reject austerity measures needed to qualify for international aid.

Race to form coalition Greece raced yesterday to form a coalition government. “There is a categorical imperative to form the government” today [yesterday], President Carolos Papoulias said before giving a formal mandate for negotiations to conservative leader Antonis Samaras, from the New Democracy.

“The country cannot remain ungoverned for even an hour,” Mr

New Democracy party leader Antonis Samaras says there will be amendments to the conditions of an EU-IMF bailout deal

Papoulias said.

The 61-year-old Harvard-educated Mr Samaras said: “A national agreement is an imperative called for by everyone. We need to resolve the question immediately.”

He also said there should be amendments to the conditions of an EU-IMF bailout deal “so the Greek people can escape from today’s torturous reality”.

New Democracy won 129 of the 300 parliamentary seats in Sunday’s vote,

opening the path for a coalition with the third placed socialist party Pasok, which has 33 but has called for other leftist parties to be included.

“Greece’s election is a good result and will provide some short-term relief,” said Nader Naeimi, Sydneybased head of dynamic asset allocation at AMP Capital Investors Ltd. “This will put to rest for a little while the prospect of Greece leaving the euro.”

Bloomberg/AFP

Bo Xilai ‘damaged’ China’s image Zhang Dejiang says Chongqing’s achievements must be strictly separated from the scandal

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usted Chongqing Communist Party Secretary Bo Xilai brought “great damage” to China and the image of the party with his disciplinary violations surrounding the death of a British businessman, Mr Bo’s successor said yesterday.

Chongqing’s achievements should be separated from Mr Bo’s “serious disciplinary violations,” Zhang Dejiang, who replaced Mr Bo as Chongqing party secretary in March, told a party congress.

“The party insists that everyone is equal in front of law, and won’t allow anyone to be above law,” Mr Zhang said. “Officials must take the lead in compliance with the constitution and laws, and resolutely prevent and oppose any cases of abuse of power.”

The incident had also “seriously impacted” reforms and development in the rapidly growing

Zhang Dejiang replaced Bo Xilai as Chongqing leader in March

south-western city, he said.

“We must draw lessons [from the incident]... and earnestly improve our work,” he added.

Mr Zhang’s remarks underscored the political challenge posed by his predecessor’s case as the country heads into a leadership transition later this year. The party is trying

to distance itself from Mr Bo and to present his actions as an aberration and not a reflection of how the senior leadership rules China.

Mr Bo’s wife, Gu Kailai, is a suspect in the death of British businessman Neil Heywood. He hasn’t appeared in public since he was accused of disciplinary violations over the

case at the same time.

Mr Bo won national attention for cracking down on organised crime and for his “Chongqing Model” of emphasising state-led investment to ease wealth gaps between urban and rural residents. At the same time, the methods he adopted spurred allegations of police brutality and abuse of the legal system.

The first public signs of trouble for the ousted leader came in February when Chongqing’s former police chief Wang Lijun fled to the U.S. Consulate in Chengdu, where he outlined a plot of money laundering, betrayal and murder involving Mr Bo and his family. After spending a night holed up in the consulate ringed by police, Wang turned himself over to central authorities, according to the officials.

AFP/Bloomberg