Macau Business Daily, 20 June, 2012

Year I - Number 58 Wednesday June 20, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

Twentysomethings fuel homes demand

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Bank op profits down 6pct in April

Economy

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Make city budget air hub: travel boss W

ithout a significant increase in the frequency and coverage of its air links, Macau will find it hard to become a world centre of tourism and leisure, a travel industry leader said yesterday.

Andrew Drysdale, chairman of the Pacific Asia Travel Association, said the answer was to turn the city into a hub for budget airlines.

There is going to be “an explosion of low-cost carrier operations” in the Asia-Pacific region in the next two to five years, and the city’s aviation industry should take part in it, he stated. PATA expects budget-fare airlines in the AsiaPacific region to double market share – from 15 percent to 30 percent.

But a potential obstacle is Air Macau’s 25-year monopoly concession for civil air services in the city – gazetted by the former Portuguese administration in 1995. Until it expires in 2020, all other carriers based in Macau have to pay for sub-concession rights from Air Macau. That has affected how quickly new routes can be set up by outsiders, and the economics of running them.

João Manuel Costa Antunes, the director of the Macau Government Tourist Office, said the authorities have no intention of ending Air Macau’s concession earlier, but will discuss setting up possible new routes with the flag carrier soon.

Officials may face La Scala inquiry Page 7

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More on pages 2 & 3

HANG SENG INDEX

Airport pays old loan, still makes loss

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acau International Airport Co Ltd (CAM) has used its new injection of capital to pay off a 1994 loan it took to build the aviation hub – thus also removing associated interest charges from its balance sheet. But the business is still making a loss despite the 1.95 billion patacas (US$244 million) raised earlier this month from the remaining shareholders.

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June 19

The bad news bears: Macau and realpolitik

HSI - Movers Name

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he possibility of the city becoming a political football between the U.S. and China – in a year when both countries face transitions in leadership – may carry market risk for the gaming industry. “The key risk to our Macau thesis remains a heightened level of negative publicity from Macau, which we fear may stoke unnecessary policy response from China,” says Jon Oh of CLSA Asia-Pacific Markets.

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Keep Outer Harbour terminal says public

%Day

HONG KONG EXCHNG

2.33

SANDS CHINA LTD

2.21

NEW WORLD DEV

1.55

LI & FUNG LTD

1.44

TENCENT HOLDINGS

1.36

HONG KG CHINA GS

-1.32

CNOOC LTD

-1.42

ESPRIT HLDGS

-1.95

BELLE INTERNATIO

-2.20

CHINA OVERSEAS

-3.30

Source: Bloomberg

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A

public consultation voted by nearly three to one to keep Macau’s crowded but convenient Outer Harbour Ferry Terminal open. Currently around 15 million of the city’s estimated 28 million annual visitors arrive via the facility. It started operating in 1993 when Macau had only 7.8 million visitors annually. The public poll also looked at uses for the ‘Zone B’ reclamation area near Macau Tower.

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business daily June 20, 2012

macau City advised to go beyond gambling Macau needs to be better positioned in the tourism market.

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acau should entice tourists with more than just gambling, a report by a Pacific Asia Travel Association (PATA) task force urges.

The report, released yesterday, also recommends improvements in transport to and from the city and improvements in the city’s workforce.

It lists 10 suggestions for the city’s long-term development as a global tourism and leisure centre.

The director of the Macau Government Tourist Office, João Manuel Costa Antunes, told reporters that the government would take a closer look at the report and consider some of its ideas in making policy.

The report says the city should position itself as a hub with both Chinese and Portuguese cultures, with elements of gaming, leisure, history and business events.

It proposes that Taipa focus on gaming, the peninsula on its heritage and Coloane on eco-tourism.

Secretary for Social Affairs and Culture Cheong U said he wanted to turn the 12 old homes in Avenida do Coronel Mesquita into exhibition rooms and museums to complement historical sites such as the Kun Iam Temple in the Mong-Ha district.

The PATA chairman, Andrew Drysdale, said the government should not close the Outer Harbour Ferry Terminal but improve ferry services to and from Hong Kong International Airport to bring more visitors to Macau.

The director of the Maritime Administration, Susana Wong Soi Man, told public broadcaster TDM that it was difficult to increase the frequency of ferries between Hong Kong International Airport and Macau as there were not enough berths at the airport pier.

Stewart Moore, an academic and member of the association’s task force, warned that in Macau “the quality or quantity of the human resources was not enough to sustain tourism development.”

He suggested adjustments to Macau’s immigration policy and recommended education and training programmes for workers.

The PATA report calls for the setting up of a management body, with representatives from the public and private sectors, to regulate the tourism industry.

It advises using the meetings, incentives, conventions and exhibitions industry as a platform for regional development in the Pearl River Delta and for improving tourism quality standards.

T.L.

Airport told: go downmarket The Pacific Asia Travel Association says Macau should improve its aviation industry and aim to become a hub for budget airlines Tony Lai

tony.lai@macaubusinessdaily.com

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he development of air services is the key to turning Macau into a world-class centre for tourism and leisure, according to report released yesterday by a Pacific Asia Travel Association (PATA) task force.

The task force called for a comprehensive, long-term plan for the city’s tourism development.

Association chairman Andrew Drysdale told a press conference that the city should “increase its access to the rest of the world” beyond its three main markets – mainland China, Hong Kong and Taiwan – through the aviation industry.

“Without significant increase in the frequency and complexity of the air service, Macau will have difficulty in becoming a world centre of tourism and leisure,” he said.

The latest official data show that mainlanders accounted for 60 percent of the city’s 9.3 million visitors in the first four months of this year, while Hong Kong and Taiwan people accounted for about 30 percent.

The PATA report says the present

aviation policy is “liberal, fostering open skies” and provides a free market for the aviation business, although it says Air Macau’s exclusive position as city’s only airline is “unusual”.

Mr Drysdale thinks Air Macau has not seized all available opportunities to bring its services to a new level, but that this should be left to discussions between the government and the airline.

Air Macau has a monopoly on commercial flights to and from the airport until 2020.

The director of the Macau Government Tourist Office, João Manuel Costa Antunes, said the government had no intention of ending its concession early.

He said: “The airline has tried to expand its market to the rest of Asia, besides acting as an intermediary between Taiwan and mainland China, which was its key role in the past, before the beginning of direct flights between the two sides in 2008.”

The carrier has regular flights to Bangkok and Singapore, and charter flights to the Philippines.

Air Macau chairman Zheng Yan told Macau Business magazine that the airline might consider services to Thailand, Vietnam, Cambodia, Malaysia and Indonesia.

China’s Gatwick Mr Drysdale said there was going to be “an explosion of low-cost carrier operations” in the Asia-Pacific region in the next two to five years, and that the city’s aviation industry should take part in this change.

He expects budget airlines in the region to double their share of the air travel market to 30 percent.

He said Macau’s airport could be a Chinese centre for low-cost carriers, instead of competing directly with Hong Kong International Airport, which he describes as “a huge and efficient aviation hub”.

The PATA report suggests the Macau government can learn from how London’s Gatwick Airport – a hub for budget airlines – has complemented London’s Heathrow Airport, the main airport in Britain.

Low-cost carriers usually look for airports “within striking distance of

June 20, 2012 business daily | 3

MACAU

Airport repays in the nick of time Most of the air traffic originates outside of Macau.

The main problem is that we don’t have enough people to fill those aircrafts on the

Macau’s airport is being advised to follow the example of London’s Gatwick Airport and become a hub for lowcost carriers.

main hubs but far enough to allow for low cost of operations and rapid transit of the aircraft”, and Macau’s airport fits the bill, the report says.

The chief executive officer of local private jet operator Jet Asia “strongly” believes that the idea could fly. But, John Galati added, Macau needs to tackle a chronic issue: the lack of outbound passengers.

“Most of the air traffic originates outside of Macau. The main problem is that we don’t have enough people to fill those aircrafts on the way back,” he told Business Daily.

One way to solve the issue would be to attract more passengers from neighbouring southern China but Mr Galati warns that other airports such as Guangzhou and Zhuhai “are getting more and more efficient”.

“The only way for Macau to distinguish itself from other airports is entertainment,” he said.

The president of the Macau Civil Aviation Authority, Simon Chan Weng Hong, told reporters this month that he was optimistic about the development of budget airlines in the city through regional cooperation.

Mr Antunes said the small size of the airport had not made it any less attractive as a destination for lowcost carriers.

The government has plans to expand the airport to give it an annual capacity of 15 million passengers by 2030. Its present annual capacity is 6 million passengers.

Mr Drysdale proposes that the government improve ferry services between Macau and Hong Kong International Airport to bring more international travellers to the city.

After a capital injection, the airport company has repaid a 1.95-billionpataca loan but it still has debts Vítor Quintã

way back

vitorquinta@macaubusinessdaily.com

John Galati, Jet Asia chief executive officer

acau International Airport improve the company’s overall Co Ltd (CAM) has fully financial performance and repaid the syndicated corporate value,” it said. loan of 1.95 billion patacas The company said that in the (US$244 million) it took out for past few years it “has been able to the construction of the airport, the make profits before the deduction company announced on Monday. of loan interest and non-cash The money came from an issue of depreciation expenses”. new shares, completed last month, CAM posted a loss of 15.1 million through which the two main patacas for 2011, which was due shareholders injected 1.95 billion mainly to loan interest payments patacas of new capital. and over 200 million patacas in Over two-thirds of the capital came depreciation costs. from the government, and Stanley The company acknowledges that it Ho Hung Sun’s Sociedade de is not yet free of debt.

Turismo e Diversões de Macau SA “In order to put the airport in (STDM) provided the rest. operation, it became necessary to None of the minor shareholders secure loans from the shareholders,” took up the offer of new shares. the company said.

The minor shareholders include “CAM will continue to study feasible businessman Ng Fok with about 2 solutions to the remaining loans lent percent and STDM by shareholders.” founder Mr Ho with The company also 1 percent. said there might The government be changes at the is paying over 1.3 airport in view billion patacas of the upcoming for new nonexpiry of various voting, redeemable sub-concession preference shares, contracts, including but will not raise the business aviation its stake. centre and ground The Civil Aviation handling contracts.

Authority of Macau “CAM has been Loan repaid said this month strategically that the new shares planning for their by Macau were meant only to future business raise funds to repay models most suitable International CAM’s long-term for local conditions bank loans. and actual needs,” Airport Co Ltd The repayment of the company said. the 1994 bank loan Menzies Macau has was due this month. been the only ground handler at the The repayment ”has relieved airport for the past 17 years. the company from the burden of Its contract ends in 2013, but its the loan interest, creating better exclusive monopoly ended in 2010, conditions for new development of and CAM has said it will invite bids the Macau International Airport,” for ground handling work from CAM said in a press release. other companies. “[The share issue] has taken The STDM group and Turkish account of the interests of all the group Çelebi Aviation Holding have shareholders and can effectively both shown interest.

Without significant increase in the frequency and complexity of the air service, Macau will have difficulty in becoming a world centre of tourism and leisure Andrew Drysdale, Pacific Asia Travel Association chairman

KEY POINTS Better access needed outside Greater China Air Macau monopoly is ‘unusual’ – PATA Macau could be Chinese centre for low-cost carriers

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1.95 billion patacas

City lacks outbound passengers, says industry veteran

15 million Macau’s airport passenger capacity by 2030

CAM has pledged to look for a ‘feasible solution’ to paying back loans from shareholders

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business daily June 20, 2012

macau Brought to you by

HOSPITALITY Caring for guests

Bad publicity may spark China policy response: analyst Concern city becoming an ideological football in East-West tussle Associate Editor

The number of hotel guests has risen in line with the rise in the number of arrivals and the growth in the supply of rooms. As most of the facilities are five-star hotels, it is not surprising that the biggest proportion of guests stay in those hotels. The number of guests parallels the availability of rooms in each category of hotel. Fewer stars means fewer rooms means fewer guests. Three-star and two-star hotels saw the number of their guests decline in the past year. Hotels in the other categories saw rises of more than 13 percent. The biggest rise was in the number of guests staying in guest houses, which increased by more than 25 percent.

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Gathering clouds – concerns Macau becoming an ideological battleground

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2012

Fewer than half of guests have their accommodation arranged by travel agencies.

In all categories except four-star hotels, fewer than half the guests are brought in by travel agencies. In the past year about one-third of all guests in the top hotels had their stays arranged by travel agencies. But the most interesting trend is that the proportion of guests brought in by travel agencies declined by between 6 percent and 7 percent in the top three categories of hotel but increased in the lower categories.

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

This increase was particularly big in the case of guesthouses. They saw the proportion of guests brought in by travel agencies jump to 14.2 percent in 2012 from 5.4 percent in 2011. These figures suggest that more things are happening in this sector than just the huge increase in the number of five-star rooms and their guests.

J.I.D.

he possibility of more negative media stories emerging about Macau in the coming days and weeks has been raised as a market risk in an investment analyst’s report.

“The key risk to our Macau thesis remains a heightened level of negative publicity from Macau, which we fear may stoke unnecessary policy response from China,” says Jon Oh of CLSA AsiaPacific Markets in his latest report on Asia and U.S. gaming titled ‘Embracing the new reality’.

Mr Oh doesn’t specify what the ‘policy response’ might be, but a constant nagging doubt in analysts’ minds is that any scandal or media report that casts Macau in a particularly bad light – especially during a year when China’s national leadership is in transition – might provoke some kind of political response in order to play to Chinese domestic and world opinion. That could involve a threat to the pipeline of VIP players and the cross-border movement of funds that feed their enormous bets.

Sentiment regarding Macau hasn’t been helped by a recent series of negative stories with their foundations in litigation conducted in the United States. The most recent in the Wall Street Journal on June 8, has evidential links to a ‘wrongful termination’ suit brought by former Sands China CEO after his July 2010 dismissal.

US$300m question The story said Sands China external advisor Leonel Alves in 2009 sent an

e-mail to Mr Jacobs mentioning an offer by an unnamed Beijing contact to help Sands with two issues in exchange for a US$300 million (2.4 billion patacas) payment. The first was Macau government roadblocks to its efforts to sell apartments in The Four Seasons Macao.

Mr Alves last week described the WSJ story as “nonsense” and LVS said in a statement: “At no time has there ever been any suggestion that the company made any improper payments or received any improper benefits”.

Contract claim The second issue allegedly raised in the e-mail was litigation

by Taiwanese company Asian American Entertainment alleging that Sands’ parent Las Vegas Sands Corp. had breached an October 2001 contract under which the firms were to make a joint bid for a Macau gaming licence. As Business Daily reported on Monday, that lawsuit – claiming US$375 million in damages when it was originally brought in the U.S. – can in likelihood now be heard in Macau after a Nevada judge’s ruling.

“The lawsuits we’re seeing in Macau are for the most part pretty typical of the suits that the Americans see whenever there is a successful venture,” I. Nelson Rose, a professor at Whittier Law School and visiting professor at the University of Macau, told Business Daily recently.

But industry sources in Macau express concern that under the cover of existing lawsuits the city could become a battleground for ideological struggles that have their

roots far away and have very little to do with making Macau a better and ethically cleaner place. Those tussles cover U.S. domestic politics and Chinese domestic politics and also the geopolitical scrap between free market capitalism/cronyism on one side and state capitalism/ cronyism on the other. Macau – as the ultimate East-meets-West experiment; one started long before the Las Vegas casino firms came to town – sits right in the middle of this minefield.

As constitutionally and legally part of China but not quite China, and without the cover of robust rule of law afforded to neighbouring Hong Kong, Macau is arguably politically isolated, they say.

That means foreign powers can on occasion push Macau around without causing a diplomatic incident with China.

That arguably occurred in the case of local finance house Banco Delta Asia and its alleged links with North Korea exposed during the U.S. administration of George W. Bush.

And with Macau’s previous welldocumented form for gamblingrelated crime and corruption, it’s a tempting scapegoat; a senior industry source told Business Daily.

The person told us: “It’s right for people to raise legitimate questions about the way casinos, governments and individuals conduct their business in Macau. But we should also be aware that some people may have an agenda that is nothing to do with making Macau a better or cleaner place, and everything to do with advancing ideological or personal goals.”

June 20, 2012 business daily | 5

MACAU

Demographic changes fuel housing demand Changes lead to higher demand for housing, while supply lags behind, an estate agency says Xi Chen

xi@macaubusinessdaily.com

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emographic forces add to demand for housing, according to an estate agency. Many of the city’s people are aged between 20 and 30 and, predictably, many wish to marry and start a family, and so want a home. In the 2011 Census, 21 percent of the population were aged 20 to 29.

Analysing the city’s property market in a press conference yesterday, Midland Macau estate agents said demand greatly outstripped supply.

Midland Macau attributes the limited supply to slower approval of new projects since the Ao Man Long corruption scandal and the Special Stamp Duty on the resale of new housing, which has reduced the amount of money in the market.

Many buildings are ageing – 75.5 percent of the buildings in the city are more than 15 years old – according to Midland Macau data.

However, compared with a decade ago, there are at least 20,000 more people in their twenties, many of whom wish to buy a home once they marry and start a family, Midland Macau says.

Official statistics show there were over 1,000 weddings in the first quarter of this year, exceeding the average of about 800 in the last two years.

The city has also seen an increase in its birth rate in the past year.

All these demographic factors lead to rising demand for housing, Midland Macau says.

An influx of imported labour, a rising average income and an extremely low unemployment rate also create extra need for housing: people want to improve their standards of living once they are earning more, the estate agency says.

Midland Macau suggests

Many of the city’s people are between 20 and 30 years of age, and many wish to buy a home once they marry and start a family

that the Special Stamp Duty be imposed only on those homes resold within one year of being originally purchased, and not those resold within two years.

But the government could raise the duty above 20 percent, the estate agency says.

It hopes the government will postpone the enactment of the bill regulating the sale of

unfinished homes until next year – in consultation with the Legislative Assembly – as it believes the new law would make the supply of housing even tighter.

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business daily June 20, 2012

macau

Bank profits drop in April

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The banks fail to keep up the blistering pace of profit growth they achieved in the first quarter

Budget’s mismatches

Vítor Quintã

vitorquinta@macaubusinessdaily.com

Photo by Manuel Cardoso

The government budget deserves more attention than we usually give it. Its importance springs mainly from two features. One of these features is its size. In most modern economies the budget is big enough to affect the performance of the economy, even without factoring-in its policy measures. The other feature is its allocations.

These are probably the only true expression of the policies, intentions and expectations of the government. So the budget’s contents are worth scrutiny and monitoring by most economic agents. Of course, we have to assume that a budget bears a reasonable relation to reality. In the case of Macau’s budget, that is quite an assumption.

The combined operating profits of the city banks reached 1.69 billion patacas in the first four months of 2012

To start with, as the chart shows, there is a big difference between the expectations implicit in the budget and the actual revenue In the past three years actual current revenue exceeded the budgeted amount by a considerable margin. The differences were 32 percent in 2009, 83 percent in 2010 and 57 percent in 2011. These percentages denote a huge underestimation of tax receipts, principally from taxes on gambling. They imply growth expectations that bear no relation to reality. In that sense, as a reference for economic agents, the budget is useless.

Actual revenue collection in the first five months of this year gives some hope, however. If it is a guide to the whole year, the gap between the budget and reality may be narrowing. But that does not solve the problems inherent in some of the more detailed revenue forecasts. Compared with the two preceding years, the difference between what the budget envisages and the actual collection of direct taxes from January to May narrowed to about 8 percent this year from more than 20 percent in 2010. But most of this revenue is from taxes on gambling.

That makes it difficult to understand how the estimates for direct and indirect taxes are lower than the actual revenue the year before, when the government declared a growth estimate of 10 percent.

J.I.D.

A

fter posting galloping growth in its combined operating profits for the first quarter of this year, the banking sector saw profits fall in April, data from the Monetary Authority show.

The data show that the combined operating profits of the city’s 29 banks amounted to 434 million patacas (US$54.3 million) in April, almost 6 percent less than a year before.

This was in marked contrast to their performance in the first quarter,

when their combined operating profits were almost 50 percent higher than a year before.

Despite April’s fall, the combined operating profits of the banks in the first four months of the year were still 30 percent higher than a year before at 1.69 billion patacas.

The sector’s non-performing loans increased for the third consecutive month in April to 1.14 billion patacas, 8.8 percent more than in March, but 11.6 percent less than a year before.

Only half of all bank lending is to residents, but residents account for almost two-thirds of all debt overdue for more than three months, or 750.4 million patacas worth.

Still, overdue loans account for only a tiny slice of the sector’s outstanding lending of 355.9 billion patacas.

The capital adequacy of the banks has been generally stable for the past 10 years between 14 percent and 18 percent, well above what is required

by Basel III rules.

Plastics firm posts Q1 loss M

acau plastics manufacturer Deswell Industries Inc made a loss of US$713,000 (5.7 million patacas) in the first quarter of this year, the company announced on Monday.

It made a net profit of US$91,000 in the fourth quarter of 2011 but made a loss of US$653,000 a year before.

The company said the first-quarter loss this year was due mainly to lower revenue and a narrower gross margin.

Revenue was US$12.2 million, 23.7 percent less than a year before, while its gross profit margin narrowed to 11.6 percent from 15.3 percent.

“Our sales were affected primarily by weakening worldwide demand.

We continue to see a challenging environment, especially in Europe and the U.S.,” said Franki Tse, Deswell’s chief executive.

“The seasonal effect of labour supply was also an issue, given the Chinese

New Year in late January,” he said.

Deswell made a net loss of US$1.5 million in the year ended March, having made a net loss of US$8.1 million in the year ended December.

However, the company announced a dividend of US$0.05 per share and a special dividend of US$0.10.

Deswell’s Nasdaq-listed stock rose by 8.5 percent to close at US$2.81 on Monday.

V.Q.

Weather Beijing 32/23o C Changchun 27/18o C

Harbin 29/18o C

Xian 35/21o C Shanghai 28/22o C Chengdu 31/20o C Kunming 24/17o C Haikou 31/24o C Sanya 33/26o C

Guangzhou 34/26o C

MACAU (18 June-23 June) Day

Temperature

Humidity

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24/29o C

70/95 %

06/19

25/30o C

70/95 %

06/20

26/30o C

75/95 %

06/21

26/30o C

75/95 %

06/22

26/30o C

70/95 %

06/23

26/31o C

65/90 %

Shenzhen 36/27o C

ASIA (today)

Hong Kong 30/25o C

Manila

TOKYO

Jakarta

32/25o C

32/26o C

30/17o C

31/25o C

Macau 32/25o C

Bangkok

SEOUL

K. lumpur

31/26o C

SINGAPORE

30/19o C

34/25o C

taipei

30/25o C

June 20, 2012 business daily | 7

Photo by Manuel Cardoso

MACAU

Pan-democrat legislators filed a motion to probe the land deal

Assembly mulls La Scala probe Legislators will debate a motion to investigate the land grant for La Scala, but are likely to reject it Vítor Quintã

vitorquinta@macaubusinessdaily.com

T

he Legislative Assembly will vote on Friday on the creation of a committee to inquire into whether Secretary for Transport and Public Works Lau Si Io lied about last year’s La Scala land grant.

This committee would conduct hearings and issue summonses to testify, according to a motion

tabled by assembly members Ng Kuok Cheong and Paul Chan Wai Chi on June 1.

The government approved in March 2011 the grant of extra land to the developer of La Scala, a residential project linked with cases of alleged corruption arising from the conviction of former government secretary Ao Man Long.

Mr Lau’s staff said last month they had asked the Commission Against Corruption whether the grant of the plots of land was connected to Mr Ao and had received a reply that

Visitors to Macau may be able to enjoy a wider range of activities soon, Ambrose So told an investors’ conference

So’s vision sees no Vegas M

acau will not become an Asian version of Las Vegas and its economy will diversify away from gambling to become a global tourism and leisure centre, according to SJM Holdings Ltd chief executive Ambrose So Shu Fai. Mr So told an investors’ conference in Beijing last week that China’s five-year plan envisaged a global tourism role for Macau, and sought to transform the city into a world tourism and leisure centre and to promote the diversification of its economy.

“I foresee an evolution of Macau’s tourism brand – from today’s dominant features of casino resorts

and heritage sites, to a destination associated with a diverse range of tourism and leisure activities and integrated to a greater degree with the surrounding region,” he said.

He said that as Macau integrated its transport and communications with the mainland’s, visitors would be able to enjoy a wider range of activities.

He emphasised the importance of Macau remaining unique as it develops.

“Macau is not an Asian version of Las Vegas. Its growth and change has followed a different track and will continue to diverge significantly from Vegas – both for important cultural and geographic reasons,” he said.

X.C.

“did not include information on any criminal case”.

But the Commission Against Corruption said it had “explicitly stated that the plots were involved in an ongoing investigation”.

Members of the assembly belonging to the New Macau Association accused Mr Lau’s legal adviser of lying to the assembly and said that the land grant “might involve criminal responsibility”.

Another member, José Pereira Coutinho, backs the creation of an independent committee of inquiry,

but said that it should include only directly elected legislators.

However, the motion to establish a committee of inquiry is unlikely to be approved.

Legislator Gabriel Tong Io Cheng said the corruption case “really is a judicial question” and that it should not be brought before the assembly.

Other members share this view.

During this session of the assembly the Pan-democrats have tabled motions to hold hearings on other controversial issues, but all have been rejected.

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business daily June 20, 2012

Greater China

HK’s wealth, mind the gap Chasm widens as city ages, industries fade Marco Lui and Patrick Boehler

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ong Kong’s wealth gap, the biggest in Asia, widened in the decade to 2011 as the city’s population aged and employers demanded more highskilled workers.

The city’s Gini coefficient, an income inequality measure, gained to 0.537 in 2011, from 0.525 in 2001, a report from the Census and Statistics Department said on Monday. The gap is wider than in Canada, the U.K., the U.S., Australia and Singapore, the department said.

The Gini coefficient index ranges from zero to one, with a reading of zero meaning income equality, and one indicating complete inequality.

Singapore’s coefficient rose to 0.482 in 2011 from 0.456 in 2001, according to the report.

The finding highlights the importance of oneoff relief measures amidst an inflationary environment Raymond Yeung, Australia & New Zealand Banking Group Ltd The average income of the poorest 10 percent of Hong Kong’s population fell to HK$2,170 in 2011

party. “That’s why during his administration the rich and poor disparity problem deteriorated to such a large extent. He failed to improve the livelihood of the people in Hong Kong, especially the poor.”

Thousands took to the streets on the Labour Day holiday, demanding that Mr Leung address a wealth gap exacerbated by a surge in housing prices. Property prices have advanced more than 80 percent since the start of 2009, according to data compiled from Centaline

Property Agency, making Hong Kong the world’s most expensive place to own a home.

China leads in boosting IMF’s ‘firewall’

goal of US$600 billion.

“There is concern that the firewall available may not be adequate to deal with contagion,” Indian Prime Minister Manmohan Singh told leaders at the summit on Monday.

“The resources currently expected to be mobilised by Europe and the IMF are less than was estimated a year ago, and the crisis is actually more serious.”

The report highlights the challenges that incoming Chief Executive Leung Chun Ying faces when he takes office July 1 after pledging to aid low-income earners and increase housing supply. To counter the widening gap, the city’s outgoing leader Donald Tsang has offered rebates on tax, rents and utilities, as well as handed out cash to citizens.

“Mr Tsang just trusts and believes in his funnelling” of benefits, said Albert Chan Wai Yip, a lawmaker from the People Power

Poorest group The average gross household income of the poorest 10 percent of Hong Kong’s population fell to HK$2,170 (US$280) in 2011 from HK$2,590 in 2001, according to the report. The comparable income for the richest 10 percent advanced to HK$137,480 a month

Lender received funding commitments of US$456 bln

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merging-market nations including China and Brazil formalised funding pledges to the International Monetary Fund, helping to almost double its lending power to protect the world economy from Europe’s debt turmoil.

With the addition of new pledges from 12 nations that also includes Russia, India and South Africa, the Washington-based lender said it now has received funding commitments of US$456 billion, up from the roughly US$430 billion it said it had secured in April. The temporary contributions will add to the US$380 billion the IMF currently has available for lending.

“Countries large and small have rallied to our call for action,”

IMF managing director Christine Lagarde said in a statement on the sidelines of a Group of 20 summit, adding that the new contributions would only be used as “second line of defence” after existing resources are depleted.

G-20 leaders have gather in the Mexican beach resort of Los Cabos for a two-day summit dominated by the financial crisis in the 17-country euro region just as Spanish borrowing costs soar to a euro-era record. Canada and the U.S. abstained from pitching in for the IMF, despite calls by German Chancellor Angela Merkel for the rest of the world to do more.

“It’s going to be the first time the fund is capitalised without the

U.S., which reflects the importance of emerging markets,” Mexican President Felipe Calderon said last Saturday.

Pledge amounts The meeting’s host said Mexico would contribute US$10 billion to the fund, matching pledge amounts made by Russia, India and Brazil.

China said it will provide US$43 billion, while South Africa, Colombia, Malaysia, New Zealand and the Philippines were among nations offering smaller amounts.

The second replenishing of the IMF’s coffers in three years, while marking a victory for Ms Lagarde, falls short of her initial fundraising

BRICS pressure After meeting on Monday, leaders from the so-called BRICS group – Brazil, Russia, India, China and South Africa – said in a statement that their contribution was based on the expectation that IMF members follow through “in a timely manner” on a 2010 pledge to give them a bigger say in how the IMF is run.

That includes an increase in their voting rights to better reflect their growing weight in the world economy. The changes aren’t yet

June 20, 2012 business daily | 9

GREATER CHINA to resolve “social and economic conflicts” highlighted by Chinese Premier Wen Jiabao.

We have to follow the American monetary policy, which doesn’t suit the needs of Hong Kong Cyd Ho, vice chairwoman of Hong Kong’s Labour Party

Hard life “Life has gotten harder,” said Chu Sai-Chuen, a 59-year-old on social security. “Clothes, food, housing and transport, everything is expensive.” Rice prices have more than doubled from 2001, while the cost of vegetables has more than tripled, Mr Chu said.

About one-fifth of the seven million residents in Hong Kong earn less than half the median income in the city, according to Leung Chuen Suen, a lecturer at the department of Applied Social Sciences at the Hong Kong Polytechnic University.

“The industrial base in Hong Kong has been deteriorating,” said Albert Chan. “You can hardly see any major industry in Hong Kong other than finance and property. Because of this industrial base change in the past twenty years, the middle class and the working class couldn’t catch up with the high-end earners.”

Chinese banks extended US$124.7 billion in fresh loans in May

The fast-tracking of infrastructure projects is seen as creating loan demand in mainland China

Social relief

from HK$122,740.

“Restructuring of the economy leading to a shift in demand from the traditional low-skilled workers to high-skilled high-income workers was one of the key factors behind the widening income disparity,” the government said. The number of households with retirees had also increased, it said.

To help low-wage workers, Mr Tsang implemented a statutory minimum salary of HK$28 per hour on May 1 last year in an attempt

Bankers expect more policy easing

Including tax and social benefits, the Gini coefficient would have stayed unchanged last year from the 0.475 in 2006, the government said in the report. In 2001, it was 0.470.

“The finding highlights the importance of one-off relief measures amidst an inflationary environment,” said Raymond Yeung, a Hong Kong-based economist at the Australia & New Zealand Banking Group Ltd. Hong Kong’s currency peg to the U.S. dollar, in place for 29 years, may also be worsening economic inequality by importing inflation and limiting policy options, according to Cyd Ho, the vice chairwoman of the Labour Party.

The city’s interest rates track those in the U.S., which has helped to fuel the property boom.

“We have to follow the American monetary policy, which doesn’t suit the needs of Hong Kong,” said Ms Ho. The U.S. Federal Reserve has said it would hold borrowing costs near zero through late 2014. Consumer prices may climb 3.5 percent this year, compared with 5.3 percent in 2011, according to a forecast by the government published on May 11.

The government would continue to assist ordinary people and to “closely monitor” the situation, according to the statement.

Bloomberg

G

rowing numbers of Chinese bankers expect Beijing to ease monetary policy further in the third quarter to spur flagging economic growth, although more households think consumer prices will rise, according to a quarterly survey by the People’s Bank of China published yesterday.

The survey showed that 32.4 percent of bankers believe monetary policy will be relaxed. That was 25.7 percentage points higher than in the previous survey, which measured expectations for the second quarter.

It also showed 35.6 percent of residents expected consumer prices to rise in the third quarter, 4.2 percentage points higher than in the previous survey, which could limit the room for more policy easing.

However, consumers are more willing to spend, indicating that Beijing’s fresh incentives to encourage purchases of energyefficient automobiles and home appliances are starting to work.

Chinese banks have quickened the pace of lending, with an index measuring loan approvals hitting 47.8 percent in the second quarter, the highest reading since 2010, according to the quarterly survey.

However, an index measuring overall loan demand fell to the lowest since at least 2009, reinforcing weakness in the world’s second-largest

Ten largest commitments Japan – US$60 billion Germany – US$54.7 billion China – US$43 billion France – US$41.4 billion Italy – US$31 billion Spain – US$19.6 billion Netherlands – US$18 billion Britain – US$15 billion Saudi Arabia – US$15 billion South Korea – US$15 billion ‘Countries have rallied to our call for action,’ IMF managing director Christine Lagarde said on the sidelines of the G-20 summit

in place because some nations including the U.S., the largest IMF member nation, haven’t yet ratified the changes in their legislatures.

“Emerging economies are bailing out Europe” and deserve a seat a the decision-making table, Jasmine Burnley, a spokeswoman for aid

group Oxfam International, said in an e-mailed statement. “It’s outrageous that a country the size of Belgium has more voting weight at the IMF than South Africa or Argentina.”

Bloomberg/AFP

economy, which is widely expect to grow at its slowest rate in more than three years.

Chinese banks extended 793 billion yuan (US$124.7 billion) in fresh loans in May, up from 682 billion yuan in April and stronger than 720 billion yuan expected by the financial markets, suggesting the government’s fast-tracking of infrastructure projects was creating loan demand as opposed to there being a pick-up in broader economic activity.

China lowered interest rates on June 7, its first such move since the depths of the global crisis, on top of three cuts in banks’ required reserves ratio to pump money into the economy.

It is expected to cut the rate by another 100 basis points in the rest of 2012, according to the latest Reuters poll.

The central bank’s survey in the second quarter also showed that export order index climbed to 48.8 percent, up from 46.9 percent in the first quarter. However, another index measuring corporate expectations on export orders slipped to 50.9 percent versus 52.1 percent in the previous quarter.

Reuters

Beijing sees June growth rebound China’s commerce minister said the mainland’s economy is heading for a rebound this month following government measures to support growth, adding to signals of confidence among officials that the slowdown is ebbing. “I personally think that the June situation is turning for the better,” Chen Deming told reporters on Monday in Los Cabos, Mexico. With a “pretty obvious” downward trend the past two months, policy makers took steps to shore up consumption, he said. Mr Chen added that China’s goal of 10 percent growth in trade this year is “still possible” if the European debt crisis can be contained in the second half. Firsthalf trade gains “may be a bit less than 10 percent,” he said. The world’s most populous country has to “start our own consumption so that domestic markets can help offset some impacts from global trade,” Mr Chen said.

Bloomberg

10 |

business daily June 20, 2012

asia

Myanmar to implement minimum wage Govt to reduce state role in several important industries

M

yanmar will embark on a “second wave of reforms” that will include tentative privatisation and a law on the minimum wage, President Thein Sein said yesterday, indicating no let-up in the country’s rapid economic overhaul.

“From this year onwards, we are working on a second wave of reforms which will focus especially on the development of the country and the public’s welfare,” said the former general, who has presided over the managed float of Myanmar’s currency and other unprecedented reforms since taking office last year.

An eagerly awaited foreign investment law would be enacted in the next parliamentary session, expected next month, while the government was also drafting laws on industrial zones and a minimum wage.

The government vowed to triple gross domestic product per capita by fiscal 2015/16, Mr Thein Sein said in a televised speech billed by official media as a “state of the union address” on his impoverished country’s reform process.

In the wake of sectarian riots in northwest Myanmar that killed 50 people and displaced 30,000, he also vowed to “continue to work on national reconciliation, national

peace and stability and the rule of law, and the safety of the public”.

Mr Thein Sein, whose quasicivilian government replaced a military junta that he was a member of 15 months ago, spoke of reducing the state role in several important industries, including telecommunications, electricity, energy, forestry, education, health and “financial matters”.

“The privatisation that is in the second wave of government reforms does not mean we are going to break them up and sell them,” he said.

The president said the government’s budget alone would not be enough to achieve its goals and highlighted the need for more foreign help in terms of aid, grants, loans and expertise to reduce poverty and boost the economy.

Cautious investment However, he cautioned that Myanmar would “choose the type of investment that does not hurt the environment and social economy”.

His remarks were strikingly similar to those of the wildly popular Aung San Suu Kyi, who has returned to Europe for the first time since 1988, when she left her family life in Britain and found herself thrust into Myanmar’s fight against dictatorship, mostly from the

confines of her Yangon home.

Mr Thein Sein’s businesslike address is unlikely to take attention away from Ms Suu Kyi’s five-nation tour, on which she has met heads of state, attended a star-studded concert and received a standing ovation in Oslo where she delivered her acceptance speech for the Nobel Peace Prize she won in 1991 while in detention.

KEY POINTS Govt wants to loosen state control of key industries Calls for more foreign aid and expertise Investment law to be enacted ‘soon’

Mr Thein Sein cancelled his appearance at a World Economic Forum in Bangkok early this month, prompting speculation that he feared being upstaged by Ms Suu Kyi, whose attendance marked her first visit outside Myanmar in 24 years.

The president yesterday alluded to recent street protests over chronic power outages by acknowledging that the popular demand for

Central banks stand ready: BOJ chief Japan’s banking system ‘remains sound,’ says central bank governor

C

entral banks are working closely together to ensure they are ready to pump in liquidity if Europe’s debt crisis jolts markets, Bank of Japan governor Masaaki Shirakawa said, suggesting that they were not letting their guard down with the Greek election having failed to ease concerns about the future of the euro zone.

Mr Shirakawa stressed that Europe’s sovereign debt crisis remains the primary risk to Japan’s economy, as it boosts appetite for the safe-haven yen, hurts exports to the region and could potentially destabilise the banking system.

“As we experienced after the [collapse of] Lehman Brothers, once financial system stability falls apart it has a very severe impact on the global economy, as well as on Japan’s economy,” Mr Shirakawa told a parliamentary session yesterday.

“We central banks are ready to cooperate closely in providing liquidity to markets” when necessary, he said.

Market cheers over a narrow victory for supporters of Greece’s international bailout deal in a weekend election were overshadowed quickly by worries over Spain’s banking system, keeping policymakers jittery over a potential global market turmoil.

Mr Shirakawa said Japan’s banking system remained sound and relatively immune from the effect of Europe’s debt crisis, which in fact has kept Japanese bond yields low as risk-shy overseas investors sought

readiness to ease again if risks to Japan’s recovery heighten.

But the BOJ has recently been having trouble meeting its asset-buying targets in some of its auctions, a sign it was force feeding cash to markets already awash with excess funds.

Anaemic demand

Masaaki Shirakawa says the central bank’s ultra-loose policy may have made markets over-reliant

the relative safety of JGBs. But he warned of complacency, saying that the central bank’s ultra-loose policy may have made markets over-reliant on its fund supply and vulnerable to possible wild swings in the future.

The BOJ eased monetary policy in February and April via an increase in its asset-buying programme, under which it buys assets ranging from government bonds and private debt.

Central bank officials have stressed

Japanese politicians criticising the central bank are under the mistaken impression that the nation’s economy is like India’s, where robust demand is supporting growth, a former central bank official said.

“India looks a lot like Japan did 40 years ago” when demand was so strong that investment would propel an expansion, Shosaku Murayama, 62, who oversaw economic research at the Bank of Japan from 1998 to 2001 and currently heads iPS Academia Japan, Inc., said in an interview.

“In those cases, raising capital is what can hold things back so as long as you loosen that, the economy automatically gets better.”

Japan can no longer rely on looser credit to spur growth because companies don’t want to invest, Mr Murayama said.

Committing to a low-interestrate policy over the past 20 years hasn’t been that effective, he said, and Japan’s public debt burden has swelled over time because fiscal policy has been used to support the economy.

Reuters/Bloomberg

June 20, 2012 business daily | 11

asia

Insurance giants jostle for Southeast Asia share Life insurance premiums in emerging Asia to grow 9.6 pct this year

T

Myanmar’s President Thein Sein (left) vowed to triple gross domestic product per capita by fiscal 2015/16

electricity outstripped the supply from the country’s mainly hydroelectric sources.

He announced the formation of a national energy committee to investigate alternative energy sources such as natural gas, much of which Myanmar now sells to neighbouring Thailand.

His speech was short on politics, but in a veiled reference to the recent sectarian riots between Buddhist

Rakhine and Muslim Rohingya, he warned of “incitement” and urged the public to “work in a united manner for the country’s development”.

Mr Thein Sein did not touch upon the fate of hundreds of political prisoners who remain behind bars, of whom Ms Suu Kyi on Saturday called for the “earliest, unconditional release”.

Reuters

GVK to sell stake in Singapore arm Company in talks with potential buyers

he race to win a bigger slice of Southeast Asia’s insurance market is heating up as AIA Group, Manulife and Prudential PLC compete for mid-size acquisitions in the region totalling up to US$1 billion, sources said.

The three insurance groups as well as France’s AXA and Canada’s Sun Life have submitted initial bids for the Malaysian life insurance joint venture between CIMB Group and Aviva, a deal estimated to be worth at least US$400 million, the sources, who had direct knowledge of the matter, said.

The moves come against the backdrop of a US$7 billion auction for ING’s Asian insurance business as some foreign insurers exit the region to focus on their core markets, while some larger ones and new entrants try to gain bigger exposure to Asia.

“Many of the recent opportunities have been driven by distressed sellers, whether because of government bailouts, the impact of Basel III or lack of focus and investment resulting in underperformance,” said Anna Tipping, a partner at law firm Norton Rose, who specialises in insurance.

AIA and Manulife are also in the running for ING’s Asian insurance business, while Prudential is seen as a strong contender to buy Thai Thanachart Bank Pcl’s insurance operations in a deal worth about US$500 million, sources have said.

The fundamentals appear compelling.

Life insurance premiums in emerging Asia are forecast to grow 9.6 percent this year and 8.7 percent next year, compared with the world average of 3.1 percent and 3.7 percent in the two years, respectively, according to estimates by Swiss Re. That projected growth comes after the life insurance market grew 15.4 percent annually over the last 10 years, far exceeding the global growth rate of 5.7 percent per annum over that period, according

to estimates by Credit Suisse late last year.

And Southeast Asia accounts for less than 0.25 percent of the world’s insurance market share, according to research by Norton Rose, with insurance penetration low in Indonesia, Malaysia and Thailand.

Indonesian attraction Easy foreign ownership rules are also creating greater interest for foreign insurers, analysts said.

Malaysia allows foreign insurers to take as much as 70 percent stake in domestic insurers, while foreign insurers can buy up to 80 percent of an Indonesian insurer.

Indonesia, which has a life insurance penetration of only 1.3 percent, is attracting interest from foreign players including Swiss, Japanese and Korean insurers.

Indonesia’s capital market regulator Bapepam-LK has said it will not change foreign ownership cap norms in the insurance sector despite the central bank’s planned move to cap ownership in banks at maximum 40 percent.

“We see tremendous interest from many foreign investors, even from U.S. pension funds who are keen to invest in the sector given the current regulatory situation and the underpenetrated market,” said Julian Noor, executive director at the Indonesian General Insurance Association.

Last year Japan’s largest property and casualty insurer, MS&AD, bought a 50 percent stake in PT Asuransi Jiwa Sinarmas, the life insurance unit of Indonesian conglomerate Sinar Mas, for about 67 billion yen (US$825 million).

PT Panin Financial, controlled

by Indonesia’s powerful financier Gunawan family, is also planning to sell up to a 40 percent stake in its life insurance business in a deal worth about US$200 million that is attracting Japanese bidders.

Indian developer to sell a minority stake in GVK Coal Developers

I

ndia’s GVK Power and Infrastructure is seeking to raise US$500 million to US$600 million by selling a stake in its Singapore arm and is in talks with Government of Singapore Investment Corp for a potential deal, two sources with direct knowledge of the matter said.

The Indian developer of airports, power projects, roads and mines will sell a minority stake in GVK Coal Developers (Singapore) Pte Ltd, the sources said, adding that a deal may be a precursor to a Singapore listing of the unit that holds coal assets in Australia.

The sale will help fund the huge capital spending needed to develop the mines in Australia and reduce debt linked to the US$1.26 billion purchase last year.

GVK Power is looking to sell a

stake in GVK Coal Developers as soon as possible, Group CFO Issac George said on Monday, declining to identify prospective investors or the potential size of a deal.

“There are people who have approached us, who have shown tremendous amount of interest,” he told Reuters.

A spokeswoman with the Singapore sovereign fund declined to comment.

GVK acquired the Australian assets to secure long-term coal supplies for the group’s power projects in India and to meet demand in other regional markets.

Shares in GVK Power rose as much as 4.8 percent yesterday, beating a 0.3 percent gain in the broader Mumbai market. Still, the group’s market value of US$384 million is only a fraction of what it was three years ago.

AIA Group is trying to expand its Asian insurance business

Reuters

12 |

business daily June 20, 2012

MARKETS Hang SENG INDEX NAME

PRICE

Day %

VOLUME

POWER ASSETS HOL

57.15

0.97

2814426

2820190

SANDS CHINA LTD

25.45

2.21

8587364

0.85

1977175

SINO LAND CO

11.24

0.36

5718058

15.30

-1.42

53570546

SUN HUNG KAI PRO

90.00

-0.44

3913316

COSCO PAC LTD

10.20

0.59

5024702

SWIRE PACIFIC-A

88.75

0.45

1027629

10111118

ESPRIT HLDGS

10.04

-1.95

17798966

238.40

1.36

4564813

0.85

11426548

HANG LUNG PROPER

25.60

-0.39

5443470

TINGYI HLDG CO

19.28

0.21

3682000

12.44

0.32

2860979

HANG SENG BK

103.30

-0.77

1311380

WANT WANT CHINA

9.73

0.41

9592288

92.60

-0.27

2021875

HENDERSON LAND D

41.80

0.24

2617319

WHARF HLDG

42.50

-0.47

2761186

6.92

-1.00

12613906

HENGAN INTL

79.15

-0.50

1856198

PRICE

Day %

VOLUME

26.30

0.00

18077707

ALUMINUM CORP-H

3.32

0.91

9285224

BANK OF CHINA-H

2.91

0.34

228763699

BANK OF COMMUN-H

5.19

-0.19

17535492

BANK EAST ASIA

27.10

1.31

2595750

BELLE INTERNATIO

12.44

-2.20

BOC HONG KONG HO

23.65

CATHAY PAC AIR CHEUNG KONG

AIA GROUP LTD

CHINA COAL ENE-H CHINA CONST BA-H

5.30

-0.38

193307132

CHINA LIFE INS-H

19.66

-0.10

19294327

CHINA MERCHANT

23.15

0.87

2086478

CHINA MOBILE

82.40

1.10

CHINA OVERSEAS

17.60

-3.30

CHINA PETROLEU-H

7.04

CHINA RES ENTERP

23.35

CHINA RES LAND

NAME

PRICE

Day %

VOLUME

CHINA UNICOM HON

10.82

-1.10

23658492

CITIC PACIFIC

11.76

1.20

CLP HLDGS LTD

64.90

CNOOC LTD

HONG KG CHINA GS

NAME

TENCENT HOLDINGS

MOVERS

23

16.42

-1.32

8914233

109.90

2.33

7797744

HSBC HLDGS PLC

66.90

-0.82

18053654

13350711

HUTCHISON WHAMPO

66.40

-0.67

3483899

32454354

IND & COMM BK-H

4.43

0.23

287257763

-0.56

43534209

LI & FUNG LTD

15.46

1.44

12737644

HIGH

19578.13

-0.85

1472361

MTR CORP

25.80

0.98

1936788

LOW

18924.09

15.70

-0.25

10271615

NEW WORLD DEV

9.16

1.55

11314269

CHINA RES POWER

14.74

-0.14

5446296

52W (H) 22835.03

PETROCHINA CO-H

10.56

-0.19

40130645

CHINA SHENHUA-H

27.85

0.00

10898034

PING AN INSURA-H

61.95

0.00

7246286

(L) 16170.35

HONG KONG EXCHNG

23

3 19600

INDEX 19416.67

18800

15-Jun

19-Jun

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

DAY %

VOLUME

24.90

-0.80

6162760

CHINA PETROLEU-H

7.04

-0.56

43534209

ZIJIN MINING-H

9285224

CHINA RAIL CN-H

6.27

0.64

11474000

0.88

6645000

CHINA RAIL GR-H

3.13

-0.32

19166180

2.91

0.34

228763699

CHINA SHENHUA-H

27.85

0.00

10898034

CHINA TELECOM-H

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.05

-0.33

77205010

CHINA PACIFIC-H

AIR CHINA LTD-H

4.55

0.22

11548983

ALUMINUM CORP-H

3.32

0.91

ANHUI CONCH-H

23.05

BANK OF CHINA-H

5.19

-0.19

17535492

3.60

-0.55

24759109

15.38

1.45

2667751

DONGFENG MOTOR-H

13.26

0.15

5985439

CHINA CITIC BK-H

4.09

-0.24

32246005

GUANGZHOU AUTO-H

6.87

0.29

4525142

CHINA COAL ENE-H

6.92

-1.00

12613906

HUANENG POWER-H

5.58

1.45

29025275

CHINA COM CONS-H

6.78

0.15

16574520

IND & COMM BK-H

4.43

0.23

287257763

CHINA CONST BA-H

5.30

-0.38

193307132

JIANGXI COPPER-H

17.86

2.41

13785288

CHINA COSCO HO-H

3.71

0.00

6918178

PETROCHINA CO-H

10.56

-0.19

40130645

19.66

-0.10

19294327

PICC PROPERTY &

9.03

-0.77

16364394

CHINA LONGYUAN-H

5.30

1.15

3690255

PING AN INSURA-H

61.95

0.00

7246286

CHINA MERCH BK-H

14.86

-0.93

14246576

SHANDONG WEIG-H

8.45

4.32

4101000

BANK OF COMMUN-H BYD CO LTD-H

CHINA LIFE INS-H

NAME

PRICE

DAY %

VOLUME

12.58

-2.18

15423378

2.81

0.72

14303119

ZOOMLION HEAVY-H

10.84

1.31

12652224

ZTE CORP-H

14.82

0.82

3260320

YANZHOU COAL-H

MOVERS

20

3 10000

INDEX 9800.23 HIGH

9933.71

LOW

9574.02

CHINA MINSHENG-H

7.12

-0.56

23104726

SINOPHARM-H

21.35

0.95

6262585

52W (H) 12902.97

CHINA NATL BDG-H

9.16

-0.33

22152391

TSINGTAO BREW-H

46.60

-7.81

49146810

(L) 8058.58

11.32

0.35

3631500

WEICHAI POWER-H

32.85

0.15

1487062

CHINA OILFIELD-H

17

9500

15-Jun

19-Jun

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

DONGFANG ELECT-A

21.36

-0.51

3969151

SANY HEAVY INDUS

14.35

-3.04

27196919

4956309

EVERBRIG SEC -A

13.79

-2.48

10041611

SHANDONG GOLD-MI

36.05

0.75

8645117

-1.19

4829154

GD MIDEA HOLDING

11.67

-3.31

30983238

SHANG PUDONG-A

8.49

0.35

47008304

-0.37

9128229

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.67

0.00

62349031

AIR CHINA LTD-A

6.10

-0.16

ALUMINUM CORP-A

6.63 16.15

ANHUI CONCH-A

NAME

NAME

GD POWER DEVEL-A

2.74

0.00

67071595

SHANGHAI ELECT-A

5.13

-0.77

5593711

6.83

-3.26

49763165

SHANXI LU'AN -A

22.91

-1.84

5222159

BANK OF BEIJIN-A

9.54

0.00

12492705

GEMDALE CORP-A

BANK OF CHINA-A

2.85

0.00

10540719

GF SECURITIES-A

31.85

-0.41

3916370

SHANXI XINGHUA-A

37.30

-2.59

3252899

BANK OF COMMUN-A

4.52

0.22

23677459

GREE ELECTRIC

21.65

-1.37

6920056

SHANXI XISHAN-A

16.04

-1.17

10102106

BAOSHAN IRON & S

4.42

-0.67

9338012

GUANGHUI ENERG-A

14.54

-1.62

17254751

SHENZ DVLP BK-A

15.25

0.26

14992460

29.11

-1.62

3415998

6.54

-1.51

23915405

15.89

2.65

4675140

23.21

-1.53

2073095

GUIZHOU PANJIA-A

CHINA CITIC BK-A

4.07

0.49

10907687

HAITONG SECURI-A

10.25

-1.44

30033818

CHINA CNR CORP-A

4.19

0.72

37018811

HANGZHOU HIKVI-A

26.68

-0.48

4470319

SUNING APPLIAN-A

8.71

-1.47

19463856 10371599

BYD CO LTD -A

HEBEI IRON-A

SHENZEN OVERSE-A SINOVEL WIND-A

CHINA COAL ENE-A

8.28

-0.84

7926833

2.88

-0.35

11850153

TSINGTAO BREW-A

38.95

-2.28

CHINA CONST BA-A

4.51

0.22

17612176

HENAN SHUAN-A

63.90

0.98

2581771

WEICHAI POWER-A

31.62

-1.00

2287751

CHINA COSCO HO-A

4.81

-0.82

3229388

HUATAI SECURIT-A

11.52

-1.87

9282649

WULIANGYE YIBIN

33.06

-1.31

11367493 9443787

CHINA CSSC HOL-A

23.23

-0.30

4353099

HUAXIA BANK CO

9.45

0.21

23290654

XIAMEN TUNGSTEN

47.25

-3.00

CHINA EAST AIR-A

4.03

-0.25

6459816

IND & COMM BK-A

3.94

-0.25

35917475

YANGQUAN COAL -A

16.92

-1.63

9613431

CHINA EVERBRIG-A

2.83

0.00

23138551

INDUSTRIAL BAN-A

12.91

0.00

47694722

YANTAI CHANGYU-A

71.66

-0.13

1050234

17.82

-0.56

5681796

INNER MONG BAO-A

43.59

-2.24

34148305

YANTAI WANHUA-A

14.82

0.68

14697534

21.15

1.59

57527305

YANZHOU COAL-A

21.42

-1.43

2437973

YUNNAN BAIYAO-A

58.55

2.79

3412346

CHINA LIFE INS-A CHINA MERCH BK-A

10.99

-0.54

33400224

INNER MONG YIL-A

CHINA MERCHANT-A

12.53

-1.57

12775819

INNER MONGOLIA-A

5.81

-3.17

63352054

CHINA MERCHANT-A

24.29

-3.92

8694337

JIANGSU HENGRU-A

28.64

-0.87

1959908

ZHONGJIN GOLD

24.03

0.71

9348816

CHINA MINSHENG-A

6.21

1.14

111866708

JIANGSU YANGHE-A

138.65

-1.19

945140

ZIJIN MINING-A

4.06

-0.49

23041391

16.84

-0.94

3047979

ZOOMLION HEAVY-A

10.39

-2.99

32479333

ZTE CORP-A

14.89

-0.40

11096616

CHINA OILFIELD-A

JIANGXI COPPER-A

25.19

0.00

10848899

13.58

-0.59

3780811

16.94

-2.31

13717963 16511627

21.90

-1.35

12121690

JINDUICHENG -A

CHINA PETROLEU-A

6.42

-0.77

28353342

JIZHONG ENERGY-A

CHINA RAILWAY-A

4.54

-0.87

10061449

KANGMEI PHARMA-A

14.06

-0.28

CHINA RAILWAY-A

2.65

-0.75

19683168

KWEICHOW MOUTA-A

243.70

-1.12

1729994

41.60

-0.95

4782294

CHINA PACIFIC-A

CHINA SHENHUA-A

23.86

-0.83

6310132

LUZHOU LAOJIAO-A

CHINA SHIPBUIL-A

5.40

-1.46

18376764

METALLURGICAL-A

2.56

-0.78

11909663

CHINA SOUTHERN-A

4.66

0.22

15260655

NARI TECHNOLOG-A

19.53

-2.98

13916765

2.57

-0.77

6823206 23807919

CHINA STATE -A

3.37

-0.88

35444915

NINGBO PORT CO-A

CHINA UNITED-A

3.95

-0.75

25807904

PANGANG GROUP -A

7.24

-1.90

9.19

-0.54

MOVERS

53

232

15 2590

INDEX 2558.621

CHINA VANKE CO-A

9.06

-1.41

31268850

PETROCHINA CO-A

6239867

HIGH

2590.18

CHINA YANGTZE-A

6.87

-1.29

11235267

PING AN INSURA-A

45.96

-0.35

20279128

LOW

2545.92

CITIC SECURITI-A

13.40

-1.40

36331070

POLY REAL ESTA-A

11.73

-2.17

34207903

CSR CORP LTD -A

4.84

1.04

35696162

QINGDAO HAIER-A

12.17

0.16

11980405

DAQIN RAILWAY -A

7.37

0.27

13081784

QINGHAI SALT-A

31.18

0.81

4447850

DATANG INTL PO-A

5.80

-1.02

4019725

SAIC MOTOR-A

14.69

-2.07

9291002

PRICE DAY %

Volume

PRICE DAY %

Volume

52W (H) 3140.102 (L) 2254.567

2540

15-Jun

19-Jun

FTSE TAIWAN 50 INDEX NAME

NAME

ACER INC

32.70

1.87

26550029

FORMOSA PLASTIC

ADVANCED SEMICON

26.10

0.19

10262545

FOXCONN TECHNOLO

ASIA CEMENT CORP

37.35

0.13

3101992

FUBON FINANCIAL

ASUSTEK COMPUTER

298.00

0.34

2891735

AU OPTRONICS COR

12.00

-1.64

34901763

CATCHER TECH

NAME

PRICE DAY %

79.40

2.06

7958686

TAIWAN MOBILE CO

107.50

-1.38

7964660

TPK HOLDING CO L

29.70

-0.67

12835595

HON HAI PRECISIO

86.30

-0.23

24108436

HOTAI MOTOR CO

197.50

-1.99

665813

Volume

93.50

0.54

462.00

0.22

5675095 3440852

TSMC

80.50

-0.37

28910805

UNI-PRESIDENT

47.50

-0.11

4585613

UNITED MICROELEC

12.35

0.00

12074575

198.00

1.02

11181055

HTC CORP

386.00

3.90

11312178

WISTRON CORP

39.30

-1.38

6630782

CATHAY FINANCIAL

29.30

-1.68

10112190

HUA NAN FINANCIA

16.45

-0.30

3255257

YUANTA FINANCIAL

13.40

-2.19

13552759

CHANG HWA BANK

15.70

-0.32

3495419

LARGAN PRECISION

609.00

-0.98

2497400

YULON MOTOR CO

53.40

0.95

5150509

CHENG SHIN RUBBE

74.90

-0.53

7008641

LITE-ON TECHNOLO

37.75

0.00

3961882

CHIMEI INNOLUX C

12.05

-0.82

18596760

MEDIATEK INC

274.50

-0.72

6648437

7.02

-1.13

34782215

MEGA FINANCIAL H

21.60

-0.69

17364500

CHINA STEEL CORP

28.25

0.53

12268913

NAN YA PLASTICS

56.50

0.36

4593930

CHINATRUST FINAN

17.40

0.87

27033590

PRESIDENT CHAIN

159.00

1.27

2253480

CHUNGHWA TELECOM

90.90

0.22

5665108

QUANTA COMPUTER

81.80

-1.45

4796966

COMPAL ELECTRON

28.45

0.18

4697518

SILICONWARE PREC

30.35

-1.78

4665686

DELTA ELECT INC

88.80

-1.33

9027331

SINOPAC FINANCIA

11.00

-1.79

10951633

FAR EASTERN NEW

30.00

0.17

6367434

SYNNEX TECH INTL

72.20

-0.82

1601699

FAR EASTONE TELE

65.90

-0.15

2080477

TAIWAN CEMENT

35.30

-0.14

4543903

FIRST FINANCIAL

17.30

-0.57

5389269

TAIWAN COOPERATI

17.45

-0.85

1825858

FORMOSA CHEM & F

79.20

0.76

4569824

TAIWAN FERTILIZE

67.60

-0.88

1970836

FORMOSA PETROCHE

82.80

1.97

1731429

TAIWAN GLASS IND

25.10

0.40

2681981

CHINA DEVELOPMEN

MOVERS

20

28

2 5030

INDEX 5010.48 HIGH

5021.10

LOW

4879.37

52W (H) 6026.51 4840

(L) 4643.05 15-Jun

19-Jun

June 20, 2012 business daily | 13

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

Max 19.22

Average 18.98

MELcO crOwN ENTErTAINMENT

Min 18.68

19.30

30.10

12.00

19.16

30.06

11.94

19.02

30.02

11.88

18.88

29.98

11.82

18.74

29.94

11.76

18.60

Last 19.00

SANDS cHINA LTD

Max 25.60

Average 25.27

Max 30.05

Average 30.02

Min 29.95

Min 24.80

11.70

wyNN MAcAu LTD 14.4

17.68

25.28

14.3

17.56

25.12

14.2

17.44

24.96

14.1

17.32

14.0 Max 14.44

Average 14.25

83.09

-0.22

-16.39

111.49

77.40

BRENT CRUDE FUTR Aug12

95.41

-0.67

-9.40

124.70

94.44

GASOLINE RBOB FUT Jul12

264.56

-0.57

-2.55

332.18

246.50

GAS OIL FUT (ICE) Jul12

839.50

-0.24

-6.67

1045.75

810.00

2.67

1.14

-17.82

4.89

2.10

260.99

-0.30

-8.19

331.93

256.31

1629.13

0.46

4.10

1921.18

1478.78

HEATING OIL FUTR Jul12 Gold Spot $/Oz Silver Spot $/Oz

DAY %

YTD %

(H) 52W

Min 14.06

Last 14.42

17.20 Max 17.80

Average 17.59

28.80

1.00

3.47

44.22

26.09

1486.75

-0.05

6.62

1915.75

1339.25

Palladium Spot $/Oz

629.42

0.15

-3.68

848.37

537.54

LME ALUMINUM 3MO ($)

1929.00

-0.21

-4.50

2675.25

1915.25

LME COPPER 3MO ($)

7510.00

-0.01

-1.18

9905.00

6635.00

LME ZINC

1880.00

-1.26

1.90

2539.50

1718.50

16650.00

-1.19

-11.01

25195.00

15980.00

14.13

0.57

-8.07

19.38

13.73

538.75

0.89

-8.10

673.50

499.00

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jul12 Dec12

WHEAT FUTURE(CBT) Dec12

679.00

0.97

-5.69

871.00

629.50

SOYBEAN FUTURE Nov12

1361.00

1.62

13.02

1400.00

1115.75

COFFEE 'C' FUTURE Sep12

151.55

0.03

-35.30

288.85

150.10

SUGAR #11 (WORLD) Oct12

19.87

-0.60

-12.97

26.04

19.24

COTTON NO.2 FUTR Dec12

72.26

0.56

-17.74

103.00

64.61

World Stock MarketS - Indices COUNTRY

PRICE

DAY %

DOW JONES INDUS. AVG

US

12741.82

NASDAQ COMPOSITE INDEX

US

2895.33

FTSE 100 INDEX

GB

DAX INDEX

PRICE

(L) 52W

Platinum Spot $/Oz

MAJORS

ASIA PACIFIC

CROSSES

Last 17.60

Min 17.20

NAME

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

(H) 52W

(L) 52W

3.25

1.88

1211376

CROWN LTD

8.71

0.23

7.66

9.29

7.45

4403889

AMAX HOLDINGS LT

0.08

1.35

-13.79

0.12

0.06

2606000

BOC HONG KONG HO

23.65

0.85

28.53

24.45

14.24

11426548

CENTURY LEGEND

0.23

0.00

0.00

0.40

0.20

0

CHEUK NANG HLDGS

3.00

0.67

7.14

4.36

2.30

145000

CHINA OVERSEAS

17.60

-3.30

35.59

18.48

9.99

32454354

CHINESE ESTATES

8.98

-0.22

-28.16

13.68

8.30

115500

CHOW TAI FOOK JE

9.27

3.00

-33.41

15.16

8.55

10764739

EMPEROR ENTERTAI

1.18

-0.84

6.31

2.04

0.97

2820000

FUTURE BRIGHT

0.86

2.38

104.76

1.09

0.30

1494000

4.29

13338.66

10404.49

11.14

3134.17

2298.89

HANG SENG BK

5537.32

0.84

-0.63

6084.08

4791.01

GE

6276.44

0.45

6.41

7523.53

4965.80

NIKKEI 225

JN

8655.87

-0.75

2.37

10255.15

8135.79

HANG SENG INDEX

HK

19416.67

-0.06

5.33

22835.03

16170.35

CSI 300 INDEX

CH

2558.62

-0.88

9.08

3140.10

2254.57

TAIWAN TAIEX INDEX

TA

7273.13

-0.11

2.84

8842.17

PRICE

GALAXY ENTERTAIN

DAY % YTD %

VOLUME CRNCY

19.00

1.82

33.43

24.95

8.69

9215012

103.30

-0.77

12.10

125.00

84.40

1311380

HOPEWELL HLDGS

20.30

1.00

2.22

24.90

18.56

380837

HSBC HLDGS PLC

66.90

-0.82

13.39

78.85

56.00

18053654

HUTCHISON TELE H

3.53

2.62

18.06

3.71

2.35

3032000

LUK FOOK HLDGS I

15.76

3.68

-41.85

46.15

14.70

6270000

MELCO INTL DEVEL

6.29

2.11

9.01

10.76

4.30

742000

MGM CHINA HOLDIN

11.86

-0.17

23.64

17.18

7.60

2191400

6609.11

MIDLAND HOLDINGS

3.82

-0.26

-3.39

5.22

2.89

332000

NEPTUNE GROUP

0.10

0.00

-9.91

0.15

0.08

357500

NEW WORLD DEV

9.16

1.55

46.33

11.30

6.13

11314269

SANDS CHINA LTD

8587364

KOSPI INDEX

SK

1891.77

0.00

3.62

2192.83

1644.11

S&P/ASX 200 INDEX

AU

4123.33

-0.33

1.65

4657.40

3765.90

ID

3880.82

0.54

1.54

4234.73

3217.95

FTSE Bursa Malaysia KLCI

MA

1594.98

0.77

4.20

1609.33

NZX ALL INDEX

NZ

776.53

0.53

6.40

806.02 3518.96

(L) 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

32.27

0.78

10.48

(H) 52W

-0.61 0.72 -1.53 -2.73 -2.53 0.09 0.10 -0.94 -5.38 0.51 2.31 1.40 3.47 -3.60 -2.05 1.31 3.49 1.79 2.74 0.18 0.01

-2.35

-0.20

0.22

YTD %

0.55 0.05 -0.17 -0.17 0.22 0.00 0.01 0.04 -0.29 0.25 0.35 -0.02 -0.09 0.45 -0.34 0.00 0.22 0.52 0.16 0.38 -0.01

2.91

(L) 52W

3364.26

DAY %

1.01 1.57 0.95 1.26 78.91 7.99 7.76 6.35 56.08 31.39 1.27 29.86 42.37 9408.00 80.07 1.20 0.81 7.99 10.08 99.48 1.03

ARISTOCRAT LEISU

(H) 52W

PH

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

MACAU RELATED STOCKS

YTD %

PHILIPPINES ALL SHARE IX

Last 11.86

25.44

WTI CRUDE FUTURE Jul12

JAKARTA COMPOSITE INDEX

Min 11.72

17.80

24.80

Last 25.45

Average 11.80

14.5

PRICE

NAME

Max 12.00

25.60

NAME

CORN FUTURE

29.90

CURRENCY EXCHANGE RATES

NATURAL GAS FUTR Jul12

METALS

Last 30.00

SJM HOLDINGS LTD

Commodities ENERGY

MGM cHINA HOLDINGS

25.45

2.21

15.95

33.05

14.90

SHUN HO RESOURCE

1.15

1.77

15.00

1.32

0.82

24000

1310.53

SHUN TAK HOLDING

2.76

0.00

7.85

4.67

2.24

1719750

700.44

SJM HOLDINGS LTD

14.42

1.12

15.31

20.71

10.08

5473123

SMARTONE TELECOM

15.00

-0.27

11.61

18.50

9.80

3287000

WYNN MACAU LTD

17.60

2.09

-9.74

27.48

14.81

8786092

ASIA ENTERTAINME

4.07

0.99

-30.78

10.87

3.66

62217

BALLY TECHNOLOGI

47.09

0.32

19.03

49.32

24.74

433734 2200

2695.06

HSBC Dragon 300 Index Singapor

SI

537.46

2.74

8.29

na

na

STOCK EXCH OF THAI INDEX

TH

1171.69

0.71

14.28

1247.72

843.69

HO CHI MINH STOCK INDEX

VN

431.08

-1.04

22.62

492.44

332.28

BOC HONG KONG HO

3.00

1.01

25.15

3.15

1.81

Laos Composite Index

LO

1025.07

-0.82

13.97

1107.30

876.33

GALAXY ENTERTAIN

2.40

0.00

28.48

3.24

1.08

1400

INTL GAME TECH

15.08

1.34

-12.33

19.15

13.12

3265991

JONES LANG LASAL

71.46

1.13

16.65

99.89

46.01

203332

LAS VEGAS SANDS

45.11

-0.15

5.57

62.09

36.08

8893668

MELCO CROWN-ADR

11.48

1.32

19.33

16.15

7.05

4033317

MGM CHINA HOLDIN

1.50

-8.54

25.87

2.21

1.00

1000

MGM RESORTS INTE

10.91

1.02

4.60

16.05

7.40

6640362

SHUFFLE MASTER

13.85

-0.86

18.17

18.77

7.35

379058

1.80

0.00

11.97

2.60

1.26

9000

100.33

0.80

-9.20

165.49

95.82

1714995

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

SJM HOLDINGS LTD WYNN RESORTS LTD

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business daily June 20, 2012

Opinion

Inequality: It’s even worse than we thought Michael Kinsley

T

Editor and columnist at Bloomberg View

he current debate about rich and poor – the 1 percent versus the 99 percent – is a bit misleading because the evidence usually is data about income, not wealth. Looking at wealth would make the comparison even starker.

There are some nice deals to be had in the income tax code these days, but most wealth accumulates and passes from generation to generation with no tax at all. Warren Buffett (who has selflessly taken on the role of all-purpose tape measure in these matters) is worth US$45 billion or so. Do you think that all of that US$45 billion, or even most of it, has appeared on any Form 1040 on its way to the cookie jar? Even at the special, low 15 percent rate the U.S. insanely confers on capital gains?

Unlikely. Much of that US$45 billion is unrealised capital gains – increases in the value of Buffett’s stock that have never been cashed in, and therefore have never been taxed.

I’m not saying that unrealised capital gains should be taxed (although it’s a thought). I’m just noting that you only pay income tax when an investment is liquidated, and very wealthy people don’t have to liquidate until they actually need to

spend the money.

For most of the very rich, this time is never. When you die, any unrealised capital gains disappear for tax purposes. Your heirs, if and when they sell, pay taxes only on any increase in value since they got the money. And there is no estate tax at the moment on estates of US$5.12 million or less.

Really skewed The Federal Reserve released new numbers on Monday.

Unsurprisingly, wealth distribution is even more skewed than income distribution. In 2010, the median family had assets (including their house but subtracting their mortgage) of US$77,300. The top 10 percent had almost US$1.2 million, or more than 15 times as much.

But the headlines – and rightly so – went to the dismal fact that household wealth has been sinking for all categories of Americans. As I said, the net worth of the median family in 2010 was US$77,300. In 2007, the net worth of the median family was US$126,400.

That’s a drop of almost 40 percent in just three years. (All these numbers are corrected for inflation.)

Characteristically taking the

longer view, the New York Times led with the fact that household savings were back to where they had been in the early 1990s, “erasing almost two decades of accumulated prosperity.”

Most of the lost household net worth of recent years is due to the drop in housing prices.

This is comforting, in a way, because the price of land and things built on land – and what, ultimately, is not? – are different from the price of other goods and services.

Let me tell you about my favourite economist, an indulgence I allow myself every couple of decades. (The last time was 1989, pre-hyperlink, unfortunately.) He was an American named Henry George, who died in 1897 at the age of 58.

If you took economics in college, there might have been one sentence about him in your textbook. He once ran for mayor of New York. (Fancy that. He lost.)

George would look at our present situation and ask: in what sense were we richer three or four years ago, when the exact same housing stock sold for up to twice as much? In what sense are we poorer now?

Land is special because, as Realtors like to remind us, they aren’t making any more of it.

This means that you can get rich owning land without doing anything productive with it. (Henry George: “You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground. …”) The natural increase in

Land is special because they aren’t making any more of it. This means that you can get rich owning land without doing anything productive with it.

The natural increase in population will do the trick

population will do the trick.

Tuna fish This is also true, to varying degrees, of other investments.

It is true to some extent of any product that can’t be easily and quickly reproduced. It is somewhat true of houses, once they are built. (As Tolstoy didn’t write, “Cans of tuna fish are all alike, but every house is a house in its own way.”) But it is especially true of land.

My Bloomberg View colleague Clive Crook claimed recently to be a “supply-side liberal.” So was Henry George. He was as concerned about income equality as the most bleeding-heart liberal and as concerned about economic growth as the noisiest supply-side conservative.

George’s solution to everything was to eliminate all taxes on working, saving and investing, and to put the entire tax burden on unproductive land, which can’t escape the tax by moving.

There are problems with this idea. But it’s provocative.

I don’t have room to do George justice, but take a look at his masterwork, “Progress and Poverty.” For an economics tract, it’s actually a fun read.

And, yes, you’re responsible for it on the final exam.

Bloomberg View

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June 20, 2012 business daily | 15

OPINION

In Europe we distrust wires Business Leading reports from Asia’s best business newspapers

Jakarta Globe Bank Indonesia said foreign investors planning to enter the national banking industry will have to help develop the economy and therefore should channel their credits to the productive sector, providing working capital or investment. The central bank will carefully monitor to see whether their credits are being channelled to sectors that impact the national economy. Foreign banks should no longer only provide consumer loans. Many countries prohibit foreign banks from entering the retail/consumer sector as well as microfinance.

Korea Herald Samsung Electronics’ new chief executive Kwon Oh-hyun officially took office on Monday by encouraging his employees to enhance the firm’s competitiveness amid the era of rapid change in the electronics industry. He asked workers to show strong market and technology leadership for flagship projects, most likely pointing to the smartphone and television businesses. He also said they must decrease the gap with its outperforming firms by securing product competitiveness and keeping a close market watch for its nurturing projects.

Business World Officials from Cebu Pacific, Zest Airways, Inc. and new entrant AirAsia Inc. said they are keen on mounting flights to the Southeast Asian neighbour, whose elections in April have persuaded Western governments to ease sanctions like trade and investment embargoes. Regulators last week said Myanmar had asked for an air rights negotiation. The Philippines has no existing air rights in Myanmar. Last April, the country concluded air talks with South Korea following last year’s agreements with Malaysia, Sri Lanka, Papua New Guinea, and Vietnam.

Business Recorder Distributors of consumers and pharmaceutical products has urged the government to exempt all registered distributors, dealers and wholesalers from 0.5 percent withholding tax (WHT) introduced in the federal budget for 2012-13 and imposed it on nonregistered entities. Addressing a press conference on Monday, the chairman of All Pakistan Consumer & Pharmaceutical Products Distributors Association said that registered distributors were already paying tax and this additional levy will jeopardise their business. The purpose of this tax is to broaden tax net and document the economy.

Ana Palacio

Former Spanish foreign minister and former Senior Vice President of the World Bank

F

or decades, critics of the European Union have spoken about a democratic deficit. I never accepted that reproach of the EU and its institutions, but I do see a new and dangerous deficit within the Union – a trust deficit, both among governments, and among the citizens of various member countries. Indeed, if today’s euro banknotes included a motto, as dollars do, it could well be, “In Europe We Distrust.”

This lack of trust has brought the eurozone to the cusp of implosion, and is calling into question the very future of European unity. The arc of EU history seems to be bending to catastrophe – the sort of periodic European disaster that integration was intended to prevent. Grandiloquent as it might sound, the disintegration of the euro and the disarray that would engulf the European project, not to speak of the global repercussions, would unleash comparable devastation.

But few official pronouncements, let alone policies, are addressing Europe’s deficit of trust and credibility. The current crisis has exposed the original lacunae and widening cracks in the compact between Europe’s citizens and EU institutions, between Europe’s north and south, and between its peoples and its elites.

Indeed, a dangerous emotional discourse has emerged, reflecting – and feeding – the worst stereotypes of the “lazy South” and the “despotic North.” It is indicative that the latest Pew Research Survey in late May reveals unanimity about who the least hardworking Europeans are: southerners, especially Greeks. Likewise, polls and elections signal the ascent of populists across Europe, while financial markets’ vulture-like behaviour stems from the cynical calculation that the EU lacks the wherewithal to restore its credibility.

market, welfare provisions, and how its autonomous regions function top the national agenda (though unfortunately only at the insistence of the European Commission and Germany).

But restoring trust and credibility requires more than southern discipline. Northern Europe must hold up its side of the bargain. Germany, in particular, must acknowledge that, far from being an innocent victim, its economy is the eurozone’s biggest beneficiary – and has been since the euro’s inception. That, together with the counterfactual – the economic calamity that would befall Germany following a collapse of the euro – implies a unique obligation to maintain it.

German Chancellor Angela Merkel has been a favourite target of opponents of austerity for some time now, and it is understandable that, after months of being a bystander to the EU’s painful inability to govern, Germany has reluctantly – indeed, insufficiently – taken charge.

Austerity and trust That, after all, is the point of Europe’s straightjacket of austerity, which hampers its growth prospects, and thus makes little sense in economic terms. The ultimate aim of austerity is precisely the restoration of trust – among northern Europeans that the money transferred to troubled economies will not be squandered, and among the peoples affected by painful spending cuts that their efforts are recognised and supported.

Speaking from the heartland of the troubled South, I can attest to the fact that the need for austerity has been the leitmotif of Spanish Prime Minister Mariano Rajoy’s government, a course that gained explicit popular support in the recent elections. Reforming Spain’s cajas (savings banks), labour

Lack of trust is calling into question the very future of European unity. The arc of EU history seems to be bending to catastrophe – the sort of periodic European disaster that integration was intended to prevent

Looking ahead, as the threat of disintegration looms larger, the need for German leadership will be even greater. But, once the crisis has passed, EU institutional reform will be a critical element in restoring trust.

Prosperity and rhetoric The EU’s supposed democratic deficit is a corollary of the “technocratic imperative” that has emerged as a favourite scapegoat in the ongoing European drama.

According to this view, European integration was flawed from the outset, more than six decades ago, because it was conceived and developed as an elite project. But, for as long as the European project delivered prosperity, no one bothered to question its rationale.

Today, however, the EU is the last point of reference as far as prosperity is concerned. According to the Pew survey, EU favorability is down almost everywhere since 2007, having dropped 20 points in the Czech Republic and Spain, 19 points in Italy, and 14 points in Poland.

If EU institutions are to regain trust and relevance, they need to articulate concrete policies and deliver on issues that bear directly on

citizens’ interests – youth unemployment, urban planning, health care, bio-tech research, energy conservation, transport, and aging. All of these issues were an integral part of the EU’s ambitious Lisbon Strategy (which in 2000 promised to make Europe the world’s most competitive economy by 2010), and all were quickly hijacked by national political agendas. That cannot be allowed to happen again.

In fact, there is nothing inevitable about the euro’s failure. The dismal image that Europe projects to the world nowadays does no justice to reality. Europe has the world’s healthiest and most educated population, its largest economy, and huge stores of soft power, owing also to its commitment to human rights and democratic values.

And yet Europe is facing a calamity. Discipline and morality may well be key to reinforcing trust and credibility to Europe’s social fabric – a point that northern Europeans never tire of making. But, unless all Europeans accept responsibility for saving the euro – and, with it, the EU – everything else is shallow rhetoric. © Project Syndicate

16 |

business daily June 20, 2012

CLOSING Pakistan court disqualifies PM

Spain’s cost of borrowing jumps Spanish borrowing costs on 12 and 18-month bonds jumped to 5.1 percent at its first debt auction since securing a 100-billion-euro (US$126bn) bank bailout, as investors worried the country will soon be forced to ask for international aid. Madrid raised the intended 3.04 billion euros but the interest rate payable rose from 3 percent at a similar debt sale in May. On Monday, the interest rate, or yield, on benchmark 10-year bonds traded on the secondary market hit a record high of 7.1 percent. Rates higher than 7 percent is seen as unsustainable for Spain’s shaky public finances.

Pakistan’s top court has disqualified Prime Minister Yousuf Raza Gilani from holding office. The Supreme Court ruled he had “ceased to be the prime minister of Pakistan”.

In April, the Supreme Court convicted Mr Gilani of failing to pursue corruption charges against President Asif Ali Zardari. In April, Mr Gilani was given only a token sentence and spared a jail term. Yesterday’s ruling disqualified him from office and from parliament. The Supreme Court decision does not automatically lead to the fall of the government, which has the numbers in parliament to survive.

Outer Harbour Ferry Terminal to be kept Authorities want to retain the Outer Harbour facility and speed up construction on public buildings – subject to public consultation Xi Chen

xi@macaubusinessdaily.com

T

he second round of public consultation on the overall planning of the territory’s new reclamation zones has concluded; with over 3,000 opinions identifying the main concerns of residents.

What worries them most is whether to keep or to move the Outer Harbour Ferry Terminal to both increase its capacity and reduce car traffic in the area, a public task force said at a press conference revealed yesterday.

Out of the 232 opinions gathered over this issue, 132 supported keeping the ferry terminal while 50 suggested relocating it with the remaining 50 being neutral on the issue.

The task force suggested keeping the ferry terminal as it is based on public opinion and thorough analysis, the press release states.

The head of the Urban Planning Department at the Land, Public Works and Transport Bureau, Lao Iong, said the Taipa ferry terminal, set to be ready by the end of next year, and the upcoming Hong KongMacau-Zhuhai Bridge in 2016 will significantly increase the territory’s capacity to handle visitors and ease the burden on the ferry terminal.

He also said it’s impossible to expand the Outer Harbour terminal

as it is constrained by space, located between the Sai Van Bridge and the Fisherman’s Wharf.

However, public transportation can be improved with the construction of the Light Rapid Transit rail system, as well as with better interconnections between the terminal and the territory’s old areas, Mr Lao said.

Currently about 15 million out of the 28 million total visitors arrive in Macau through the Outer Harbour Ferry Terminal, according to government data.

The developments on Zone B, the area of reclaimed land close to the Macau Tower, were also discussed, including an integrated area of government buildings.

The Court of Final Appeal, the Court of Second Instance, the Lower Court, the Public Prosecution Office, Commission against Corruption, Commission of Audit as well as the headquarters of the police forces will all be located in the eastern side of the area, according to the plan.

The press statement says the urban planning team will speed up the detailed planning and construction of the public buildings.

The territory obtained the central

G20 alarmed over eurozone crisis Talks shifting toward spurring economic growth

‘This crisis was not originated in Europe,’ said European Commission president, José Manuel Barroso

About 15 million out of the 28 million total visitors arrive in Macau through the Outer Harbour Ferry Terminal

government’s permission at the end of 2009 to reclaim 3.61 kilometres of land. The reclamation projects are expected to be finished within the next five years.

The new urban areas will include five zones, which are projected to

G

roup of 20 leaders focused their response to Europe’s financial crisis on stabilising the region’s banks, raising pressure on German Chancellor Angela Merkel to expand rescue measures as contagion engulfed Spain.

As U.S. President Barack Obama called after-dinner talks with euroarea leaders at the G-20 summit in Mexico, the Treasury department’s top international negotiator, Lael Brainard, said Europe is making an effort to “break the feedback loop” between banks and government debt, the link that is worsening Spain’s woes.

“We’re seeing a notable shift in European discussion” toward spurring economic growth and “laying out a path to financial union,” Ms Brainard told reporters as the two-day summit began at the resort of Los Cabos.

World leaders at the G20 summit in Mexico have urged Europe to take all necessary measures to overcome the eurozone debt crisis.

They voiced unease over what one top official described as “the single biggest risk for the world economy”.

But European Commission president

increase the territory’s population by 130,000.

The process will now move as soon as possible to the third stage of public consultation, said Mr Lao, where more details will be discussed to set up specific plans.

José Manuel Barroso said “the challenges are not only European, they are global”.

Sunday’s victory of a pro-bailout party in the Greek election did not give stock markets the expected boost.

Antonis Samaras, the leader of the New Democracy party, which narrowly won the poll, is holding urgent talks to form a coalition government.

On Monday, many world leaders expressed alarm in Los Cabos at what they saw as a lack of progress in dealing with the eurozone crisis.

But Mr Barroso mounted a strong defence of the EU’s handling of the crisis so far.

Asked to explain why North Americans should “risk their assets to help Europe”, he replied: “Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy.”

“This crisis was not originated in Europe... seeing as you mention North America, this crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market.”

Agencies