Year I Number 232 MOP 6.00 Tuesday March 5, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã
www.macaubusinessdaily.com
Okada wants Wynn stake monies put in escrow Kazuo Okada has asked a Nevada state court in the United States to order an escrow account established to hold as much as US$1.89 billion payable to him by Wynn Resorts after his near 20 percent stake in the firm was cancelled last year. Wynn wants to pay the money in nine years from now.
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Hint of new curbs on real estate drives sales T
he housing market showed a new spike in activity this week as the government signalled the possibility of further cooling measures designed to curb sales. Chief Executive Fernando Chui Sai On said yesterday before leaving the city for a trip to Beijing that the administration was “greatly concerned” about the surge in flat prices. He assured that the authorities would put out new
cooling measures at “an appropriate time” but did not answer media questions on when. At the end of February the Hong Kong government doubled the stamp duty on all types of property transactions there, exempting buyers who are Hong Kong permanent residents or first-time flat owners. China also imposed a new round of dampening measures on mainland mortgage lenders last week.
Shun Tak bond plan sparks Harbour Mile hopes Macau needs academic support for architecture
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The unavailability of architectural studies in the city makes it hard for local building design practices to compete for mainland business, local architect Cham Si told Business Daily. Mr Cham established his own architecture design firm T & C Design International after graduating from Guangzhou’s South China University of Technology in 1998.
hun Tak Holdings Ltd’s long awaited Harbour Mile scheme – on a waterside plot linking its part-owned One Central development to its Macau Tower complex – could get government approval “soon” suggests Credit Suisse Group AG, a bank. On February 22 Business Daily reported that Hong Konglisted Shun Tak said in a filing it planned to issue up to US$1 billion (7.9 billion patacas) in U.S. dollar denominated bonds.
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I SSN 2226-8294
HANG SENG INDEX 22866.0
22771.5
22677.0
22582.5
22488.0
March 4
HSI - MOVERS
Going is hard for loss-making Jockey Club Chinese Estates forecasts govt will rebate land costs
More on page 3
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Chinese Estates Holdings Ltd expects the government to pay back some of its investment on the La Scala housing project if its lawsuit challenging the government’s decision to take back the plot fails. According to a legal opinion, “the Macau government shall return the land costs and the premium” if the land revocation is confirmed it said.
acau Jockey Club remained in the red for a ninth year after last year’s loss of about 30 million patacas (US$3.75 million), said the club’s chief executive, Thomas Li Chu Kwan. The organisation’s financial position deteriorated last year, with its loss increasing by more than two-thirds from a deficit of 17.8 million patacas in 2011. The club has not recorded a profit since 2004.
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Name
%Day
KUNLUN ENERGY
1.24
AIA GROUP LTD
1.13
HUTCHISON WHAMPO
1.11
SANDS CHINA LTD
1.07
BELLE INTERNATIO
1.01
CHINA RES ENTERP
-1.54
POWER ASSETS HOL
-1.54
ALUMINUM CORP-H
-1.69
CHINA SHENHUA-H
-1.79
CHINA COAL ENE-H
-1.96
Source: Bloomberg
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business daily March 5, 2013
macau Wynn Cotai cost confirmed in filing Wynn Resorts Ltd says in its 2012 annual report that Wynn Cotai will cost “US$3.5 billion to US$4.0 billion” (28-32 billion patacas). Those numbers were mentioned by Steve Wynn, chairman of Wynn Resorts and its Macau unit Wynn Macau Ltd to our sister publication Macau Business magazine last May. Soon after during an earnings call he told analysts that was “a little high” and the firm was looking to “re-engineer the property”. A Hong Kong filing on May 2 last year at the time Wynn Cotai’s land concession was gazetted didn’t mention a project cost.
Okada wants cancelled Wynn stake monies placed in escrow Could mean up to US$1.89 bln cash commitment by Wynn Resorts, which plans to oppose move ‘vigorously’ Michael Grimes
michael.grimes@macaubusinessdaily.com
K
a z u o Okada has filed a motion in the Nevada state court in the United States asking that an escrow account be set up to hold money payable to him by Wynn Resorts. In February last year the firm cancelled the Japanese entrepreneur’s near 20 percent stake in Wynn Resorts – then valued at US$2.7 billion (21.6 billion patacas), in return for a promissory note payable in 10 years at a 30 percent discount to the valuation. According to Wynn Resorts’ annual report for 2012 filed on Friday U.S. time, lawyers for Mr Okada on February 13 asked the Nevada court to establish a “disputed ownership fund” – for monies related to his cancelled Wynn Resorts stake – as defined in a federal tax regulation. Although Mr Okada has disputed the stake cancellation, the redemption terms and the discount, were Wynn Resorts required to pay the balance of up to US$1.89 billion into escrow before the planned 10year redemption deadline, it would represent a significant commitment for the company. “The company believes there is no basis for the relief requested in the motion and intends to oppose the motion vigorously,” Wynn Resorts stated in its annual report. “Specifically, the motion sought an order establishing an escrow account to hold the Redemption Note issued to Aruze USA, Inc. [Mr Okada’s casino equipment business] as compensation for the shares of Wynn Resorts common stock redeemed by the board of directors in February 2012 in light of the board’s determination of unsuitability…. pending a resolution of the state court action,” said the Wynn filing to the U.S. Securities and Exchange Commission. A hearing on the motion has been set for March 22. Mr Okada, who made his fortune from pachinko machines in his native country, helped to fund Wynn Resorts in its early days. He resigned from the Wynn Resorts board on February 21, before a boardroom motion scheduled for the following day asking stockholders to vote for his removal. His resignation came a year after the cancellation of his Wynn Resorts stake and his removal from the Wynn Macau Ltd board for alleged “unsuitability”. That judgement by the company was based on an investigation by former Federal Bureau of Investigation director Louis Freeh. The inquiry
into Mr Okada looked at issues including his entertainment at Wynn Macau of officials from the Philippine Amusement and Gaming Corporation. Mr Okada strongly denies wrongdoing and has vowed to clear his name. Mr Okada is currently pursuing a casino project in the Philippines. In a story filed by Bloomberg News in May, Mr Okada’s Manila plan was described as a US$2.3 billion
scheme. A filing to the Philippine Stock Exchange last July said Empire East Land Holdings Inc. controlled by Filipino Chinese entrepreneur Andrew Tan, had signed a joint venture agreement with Okada Group; Tiger Resort Leisure and Entertainment Inc. (a unit of Mr Okada’s Universal Entertainment Corp.); and Eagle 1 Landholdings Inc., a Philippine company, to develop a “12.95-hectare (32-acre) luxury residential resort condominium project in Entertainment City Manila”.
Derivative lawsuits
The company believes there is no basis for the relief requested in the motion Wynn Resorts
Wynn Resorts said in its annual report that six lawsuits from shareholders – known as ‘derivative actions’ – were generated as a result of Mr Okada’s dispute with Wynn Resorts’ chairman Steve Wynn and the Wynn Resorts board. Four filed in the United States District Court, District of Nevada, were dismissed – without prejudice to
the plaintiffs – on February 1, says Wynn’s latest filing. The remaining two complaints were lodged with the Eighth Judicial District Court of Clark County, Nevada, and are still active. They allege “breach of fiduciary duty; abuse of control; gross mismanagement; and unjust enrichment,” against Wynn Resorts and its directors – including Mr Okada who was a director at the relevant time. The state court plaintiffs claim that “the individual defendants failed to disclose to the company’s stockholders the investigation into, and the dispute with director Okada as well as the alleged potential violations of the FCPA [Foreign Corrupt Practices Act, a U.S. law against bribing foreign officials] related to, the University of Macau Development Foundation donation”. The state plaintiffs seek remedies including unspecified monetary damages and an order directing the company to launch an internal investigation into the donation.
March 5, 2013 business daily | 3
MACAU
Rumours of new curbs drive sales of homes The chief executive pledges new measures to stabilise the property market at ‘an appropriate time’ Tony Lai
tony.lai@macaubusinessdaily.com
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ould-be homeowners are increasingly eager to enter the housing market as they suspect the government is planning a new round of measures to curb the surge in prices of flats, according to estate agents. Rumours have been circulating in the property market that the government will follow in Hong Kong’s footsteps and take new measures to cool the market. HKP Estate Agency (Macau) Ltd told Business Daily that it has heard conjecture about a doubling of duty on purchases of flats by buyers that already own more than one home. “Going by past experience, the timing and the content of cooling measures implemented in Macau and Hong Kong are closely related,” said HKP Estate Agency district sales director Marco Wong. “The government will lay out more new curbs to rein in the
continuous rise in flat prices, but the measures may not be the same as in Hong Kong,” Mr Wong said. On February 22 the Hong Kong government doubled the stamp duty on all types of property transactions except for sales to Hong Kong permanent residents or first-time buyers. Ricacorp (Macau) Properties Ltd managing director Jane Liu Zee Ka said the government here was under pressure to introduce new curbs as Hong Kong and mainland China had already done so. Chief Executive Fernando Chui Sai On said yesterday before leaving for an official visit to Beijing that his government was “greatly concerned” about the surge in prices of flats. He said the government would take new measures to cool the market “at an appropriate time” but declined to say exactly when. Mr Chui was the second senior official to have commented on the
real estate market in a week. Secretary for Transport and Public Works Lau Si Io said on February 25 that more curbs might be imposed.
Sales double Estate agents said buyers were snapping up homes in anticipation of more curbs. “After the Lunar New Year holidays there were at least 840 to 850 flats sold in less than two weeks, twice as many as in normal times,” Mr Wong said. “March is traditionally a strong season for flat sales in the real estate sector, but this year the strong sales have started in the end of February.” Ms Liu said would-be buyers were wary of any new curbs that would further constrain supply and push up the price of a home. “Most think that if they do not purchase it now they may not be able
to afford one in the future,” she said. In January the average price per square metre of residential floor space reached 74,524 patacas (US$9,282), the most ever, data from the Financial Services Bureau show. This meant the average price had risen by 2 percent since October, when the government announced that non-residents and corporations that bought homes would have to pay an extra levy of 10 percent on the transactions. Estate agents said a rise in sales of flats late last month could be due to the popularity of the Pearl Horizon development in Areia Preta and the One Oasis development in Cotai. Neither has been completed. The developers of Pearl Horizon and One Oasis may put more flats in them up for sale this month and next as the Legislative Assembly may pass this month a bill to regulate the sale of unfinished homes.
Airport passengers up in February
Lunar New Year holidays brought more mainland passengers to airport Vítor Quintã
vitorquinta@macaubusinessdaily.com
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h e Macau International Airport handled over 390,000 passengers last month, representing an increase of 25 percent in comparison with the same period one year before.
According to a statement made by the Macau International Airport Company Ltd (CAM), the airport benefited from the Lunar New Year celebrations. An average of over 13,000 people
arrived or departed from the airport each day during February, the operator says. The peak was felt on February 15, the end of the week-long holidays in mainland China, when over 19,000
passengers went through the airport. This figure “is the highest daily passenger volume in recent years,” the company said. The number of passengers increased even faster than the aircraft movement, which rose by 21 percent year-on-year to over 3,600, according to Business Daily calculations. This means that, even though airlines increase frequencies on its regular routes and added extra charter flights on Chinese New Year, there were fewer empty seats. With flag carrier Air Macau Co Ltd focusing on expanding its China services, the February growth was mostly felt in the mainland routes, where passengers increased by 38 percent. Last year Southeast Asia was the major market for the Macau airport and in February the number of passengers from this region rose by 28 percent year-on-year. Meanwhile passengers on Taiwan routes grew by 9 percent. The airport is becoming “less reliant on the Taiwan market,” the Macau Civil Aviation Authority president Simon Chan Weng Hong said last month. Before 2008, Macau airport served as a main stopover for passengers travelling between the mainland and Taiwan, as political tensions prevented direct flights.
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business daily March 5, 2013
macau
Shun Tak US$1 bln bond scheme renews Harbour Mile hopes Government still considering master plan for Nam Van, Sai Van areas says company Michael Grimes
michael.grimes@macaubusinessdaily.com
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h u n Tak Holdings Ltd’s long awaited Harbour Mile scheme – on a waterside plot linking its part-owned One Central development to its Macau Tower complex – could get government approval “soon” suggests Credit Suisse Group AG, a bank. The finance house is listed on Shun Tak’s website as covering the stock. In December Credit Suisse said in a report that Harbour Mile might be approved within 12 months. On February 22 Business Daily reported that Hong Kong-listed Shun Tak said in a filing it planned to issue up to US$1 billion (7.9 billion patacas) in U.S. dollar denominated bonds. At the time it said it wanted the money for “general corporate purpose”. This week Credit Suisse said the bond exercise could be a sign Harbour Mile was moving nearer to getting its build plan approved, adding that Harbour Mile accounted for 27 percent of Shun Tak’s gross asset value. In November Citigroup – also listed on Shun Tak’s website
as covering its stock – said Harbour Mile’s building proposal could be gazetted by the government in the next 18 months. The plot where Shun Tak would like to build Harbour Mile is in a zone that came into being 17 years ago as part of the land reclamation project that created the Nam Van and Sai Van freshwater lakes. Some of the land between One Central and Macau Tower is currently used as an openair parking lot for Macau’s large fleet of public buses and private coaches. In its 2011 annual report Shun Tak described the Harbour Mile site as part of its “land bank” but said the completion date of the acquisition of a 100 percent interest in Harbour Mile had been “extended to on or before 31 December 2013 because additional time is needed for the Macau SAR Government to finalise the Master Plan for the Nam Van District and the site area for Harbour Mile first before the submitted development plans can be approved”. It referred to its proposed use of Harbour Mile at that time as “residential/commercial/
hotel” with a total gross floor area of 401,166 square metres (4.3 million sq. feet). Yesterday no one from Shun Tak was available to comment further on its plans for Harbour Mile.
Bond terms On February 28 Bloomberg News stated that the firm – where Pansy Ho Chiu King is managing director – was considering offering sevenyear bonds at around six percent interest. It cited the source as a person familiar with the deal. The exercise would be the first benchmark offering in U.S. currency for the Hong Kong-based ferry operator and property developer, according to data compiled by Bloomberg. Shun Tak is currently developing phase five of its 100 percent owned Nova City residential scheme in Taipa. Pansy Ho also has a personal 27 percent stake in MGM China Holdings Ltd, the holding unit of the MGM Macau casino resort connected to One Central.
In January the government launched a second three-month-long consultation over its plan to establish a night market on the shore of Sai Van Lake near to Macau Tower. That initiative followed public criticism of the idea.
6%
interest expected on Shun Tak 7-yr U.S. dollar notes
Assembly electoral committee announced Still no word on election day or campaign spending budget for candidates Stephanie Lai
sw.lai@macaubusinessdaily.com
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ourt of First Instance judge Ip Son Sang has been appointed as head of the electoral committee for this year’s Legislative Assembly elections. A dispatch from Chief Executive Fernando Chui Sai On published on yesterday’s Official Gazette names four other committee members. They are Civic and Municipal Affairs Bureau director Raymond Tam Vai Man, Public Administration and Civil Service Bureau director José Chu, Financial Services Bureau director Vitória da Conceição and Government Information Bureau head Victor Chan Chi Peng. According to the legislative assembly electoral regulations, the chief executive appoints all the electoral committee members. Mr Tam and Mr Chu are the only members that we are part
of the committee that supervised the previous assembly elections, held in 2009. The electoral committee will be responsible to publicise the electoral campaign details to voters, oversee the campaign spending of the candidates and suggest airtime to be allocated to each candidacy on the television and radio. The government has yet to announce the day in which the election will take place but it should happen in late summer. There is also still no cap for the campaign spending of each electoral candidacy. In previous election the campaign spending limit for each candidacy was set at 8.94 million patacas (US$1.12 million). As electoral regulations stipulate, the campaign spending
limit must be equal to 0.02 percent of the administration’s total budget for that fiscal year. The cap for this year’s campaign
may top 16.5 million patacas, given that the Macau government is planning to spend a whooping 82 billion patacas this fiscal year.
March 5, 2013 business daily | 5
MACAU
Gambling’s biggest loser extends 8-year streak Macau Jockey Club made a loss of about 30 million patacas last year and sold land to keep running Tony Lai
tony.lai@macaubusinessdaily.com
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h e Macau Jockey Club remained in the red for a ninth year after last year’s loss of about 30 million patacas (US$3.75 million), the club’s chief executive, Thomas Li Chu Kwan, said on Sunday. The club’s financial position deteriorated last year, with its loss increasing by more than twothirds from a deficit of 17.8 million patacas in 2011. The club has not recorded a profit since 2004, when it had a net profit of 52.9 million patacas. Mr Li did not explain the details of the most recent loss on Sunday,
and final results have not been released, but government data show revenue from betting on the horses has been tumbling. Gross revenue from bets dropped to 356 million patacas last year, down by 19.1 percent from 2011, according to data from the Gaming Inspection and Coordination Bureau. Mr Li said the club had seen signs that revenue was recovering. Volume had improved in the first two months of this year compared to the same period last year. Mr Li said about 30 million patacas was wagered each race day. He said the club was hopeful it would break even, if
turnover held up for the rest of the year. Mr Li said yesterday that the club was selling land to a Hong Kong developer in order to keep operating. The land is adjacent to the club and was sold to GAW Capital Partners for development as high-end flats for between HK$3 billion and HK$4 billion. GAW Capital had secured a syndicated loan facility of HK$2.1 billion backed by six banks last year, the lead bank, the Industrial and Commercial Bank of China (Macau) Ltd said in November. The Gaw family controls Hong Kong real estate and hotel investment
company Pioneer Global Group Ltd. The club planned to invest “several million” patacas in upgrading facilities, including the track, and this meant it was too early to issue a forecast of this year’s results, Mr Li said. Jockey Club betting controller Ronnie Chan Yiu Jok told reporters in August that betting was declining all over the world. Horse racing was distinct from other gambling in Macau and required gamblers to be “very familiar with the rules”, he said. The club holds the exclusive horse racing concession here, which will expire in August 2015.
Kazuo Okada – not going quietly
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business daily March 5, 2013
macau
More universities urged to teach architecture A lack of courses in architecture here makes Macau’s architectural firms less competitive in mainland China, says the founder of one such firm Stephanie Lai
sw.lai@macaubusinessdaily.com
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nly one university here awards degrees in architecture, so it is little wonder the city does not play much of a role in mainland China’s building boom, Macau architect Cham Si says. Mr Cham told Business Daily that architectural design and development here has been stagnant for years. Born in Macau, Mr Cham received his education in architecture at Guangzhou’s South China University of Technology. He established an architectural firm, T&C Design International, shortly after graduating in 1998. The firm now has a staff of about 100. Most of its business is in the Pearl River Delta. T&C Design’s services are sought typically for the building of new hotels, shopping malls and hospitals. Mr Cham, speaking on the sidelines of a lecture on the challenges of being an entrepreneur in the mainland, said Guangdong was a massive market, its construction projects generating heavy demand for architects, whether from the mainland or outside. But it was difficult for Macau architects to compete in the mainland “when the subject is not even being taught in local universities”, he said. The only university here that teaches architecture is the University of Saint Joseph, which offers a course leading to bachelor’s degree. “Very few local architects have established a network in the mainland,” said Mr Cham, who worked with award-winning Macanese architect Carlos Marreiros
Architects have trouble earning the respect of mainland clients, says Cham Si
on a Zhaoqing library project. “It would be good if there was more academic support for architectural studies in the city, but this depends on the government’s position and how academia develops training in this field,” Mr Cham said.
Earning respect In contrast to their Macau counterparts, Hong Kong architects are expanding into the mainland, notable firms like Rocco Design Architects Ltd and Wong Tung & Partners Ltd having already established themselves there.
“Hong Kong architects started heading for mainland China in the early 1990s, and they have played pivotal roles since in construction projects for Guangzhou, Shanghai and Beijing,” Mr Cham said. He said convincing clients of the value of architectural design was a challenge, which required continuous interaction. Continuous interaction wa s p a r ti cu l a r l y n e c e s s a r y i n explaining his craft’s practical benefits, he said. Mr Cham said that for Hong Kong or Macau architectural firms pursuing design business in the
mainland, the hardest task was to earn the respect of their clients. “Customers may feel like it is not worth it to pay one million for a few architectural design papers or an architectural idea,” he said. “But, on the other hand, mainland clients often have conflicting emotions, as they yearn for foreign architectural firms. It is like chasing a favoured brand.” Mr Cham believes that as more Chinese architects gain prominence in the world, understanding of architects among clients and respect for their status may improve.
Couples falling out of love with rat race
Living together in Macau is not as blissful as it used to be
T
hough it’s commonly said ‘love can conquer all’, romance in Macau seems to be losing some magic. A ‘happiness index’ started three years ago has for the first time reported single people living alone reporting greater levels of life satisfaction than those cohabiting –whether married or not. Couples either married or living together scored 6.79 out of 10 points in the latest survey compiled last year and just published; with 10 being
the happiest. Macau singles scored 7.04 points last year, up from 6.84 points in 2011. Couples’ happiness appears to have been on a downward trend in recent years, declining from 7.05 points in 2011, according to the study compiled by Macao Polytechnic Institute and Macao Association of Economic Sciences. The index was first compiled in 2010. It was created by asking 1,021
registered residents of Macau aged 18 or above about their satisfaction over different factors including living environment, government policy, financial situation, income, career and social relations. Joey Lao Chi Ngai, the association’s chairman, said yesterday that the lower satisfaction level of couples might relate to rising living costs, coupled with the increase in the numbers of people living in one household – a phenomenon seen for many years in the high-cost Hong Kong property market. “The costs and pressures of normal daily life have increased as Macau has undergone rapid economic development,” said Mr Lao. Secretary for Economy and Finance Francis Tam Pak Yuen said last week the city’s inflation was stabilising. But Mr Lao warned that price growth would “stay at a high level for some time, unless there is a change in the economic environment”. The latest official figures show the annualised consumer price index remained at 5.96 percent in January.
Housing first Residents with children were also less content last year than previously, with their happiness index slipping by nearly 0.2 points since 2010 to 7.03
points in 2012, the survey shows. The trend was reversed for residents without children – their index was at 6.81 points last year comparing with 6.72 points in 2010. The overall happiness index for Macau residents was 6.91 points last year, declining slightly by 0.01 points from a year ago. In 2010 an improvement in income appeared to track an improvement in happiness. But that cause and effect appears to have been broken for respondents to the latest survey – probably because of higher living costs, the report says. Residents with a monthly income below 5,000 patacas (US$625) were actually the happiest group. Mr Lao believes the simplest way to start making people happier is to increase the public housing supply and suppress speculation in the private real estate market. Raising the income cap for public housing applicants, as well as implementing policies to restrict the sales of certain flats to Macau residents only, would be helpful, he said. The economist also suggests the government improve its labour policy. It needs to help resident workers achieve workplace promotion rather than leaving them to shop around among employers for a same-level post he said. T.L.
March 5, 2013 business daily | 7
MACAU
Chinese Estates forecasts govt will rebate land costs The developer is confident that it will get back its HK$1.9 billion investment in La Scala Vítor Quintã
vitorquinta@macaubusinessdaily.com
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h i n e s e Estates Holdings Ltd expects the government will pay back some of the money lost on the La Scala housing project if its court case against the government’s decision to take back the plot fails. According to a legal opinion, “the Macau government shall return the land costs and the premium” if the grants of land are ultimately revoked, Chinese Estates, a Hong Kong company, told the Hong Kong Stock Exchange yesterday. A Chinese Estates subsidiary, Moon Ocean, paid HK$1.3 billion (US$167.6 million) for land near the airport the government granted
to it in 2006. Moon Ocean paid a further HK$624 million in 2011 for eight additional parcels of land for the project. The government declared both sets of grants invalid last year, after the Court of Final Appeal said Ao Man Long, secretary for transport and public works at the time, took bribes of HK$20 million in 2005 from Chinese Estates boss Joseph Lau Luen Hung and another businessman, BMA Investment Ltd chairman Steven Lo Kit Sing. Chinese Estates has taken its case against the revocation of the land grants to court. The company said its case rested
on strong legal grounds. It acknowledged that legal precedent posed a “plausible risk that Moon Ocean might not get the title of the Macau land back”. Chinese Estates said it would sue the government to recover construction costs of HK$152.4 million and other project costs of HK$5.5 million, if it did not get the land back. Chinese Estates has already included in its financial results a loss of HK$694.7 million on the La Scala project. But two buyers of a home in La Scala are suing the company for the return of their deposit of
HK$603,000, a company filing show. The developer pre-sold 302 homes in La Scala worth HK$3.8 billion and received HK$384 million in deposits before suspending sales. Despite its legal troubles here, Chinese Estates had revenue of HK$2.4 billion last year, more than four times as much as in 2011. The revenue growth was “mainly due to the increase in sales of development properties”, the company said. The firm’s gross profit jumped from HK$283.3 million in 2011 to HK$1.86 billion last year, in part because it reduced its investment in securities trading.
Corporate
Macau promoted at Lisbon Travel Market Álvaro Santos Pereira (right of picture) Portugal’s Minister for Economy, visited the Macau Government Tourist Office (MGTO) at the Lisbon Travel Market. The MGTO pavilion focused on promoting two of Macau’s major tourism events in 2013. One is the 25th anniversary of the Macau International Fireworks Display Contest in the autumn. The other is the Macau Grand Prix, which will mark its 60th anniversary in November and will be held over two weekends instead of the usual one-weekend competition. It will be the second time João Manuel Costa Antunes – former director of MGTO – will act as coordinator of the Macau Grand Prix Committee. Mr Pereira visited the Macau booth on the opening day of the trade exhibition. He was presented with a Chinese painting by Rodolfo Faustino (centre), coordinator of the Macau Tourism Promotion and Information Center in Portugal. The tourism trade show celebrates its quarter century this year.
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business daily March 5, 2013
GREATER CHINA
Market demand to pace yuan liberalisation China central bank fears sudden opening could trigger currency crisis
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hina is set to use swelling offshore holdings of its tightly-managed currency worth around 1 trillion yuan (US$160 billion) to justify a landmark shift in tactics to relax capital controls. The shift means the People’s Bank of China will abandon a time-table approach to liberalising capital controls, favouring instead a series of reforms tied to soaring foreign demand for yuan to give more freedom to invest offshore currency deposits on the mainland. Sources with knowledge of the latest central bank thinking say the institution believes the strategy shift would shield the economy from the risk of a 1997/98-style Asian currency crisis that could be triggered in the wake of liberalisation. “Responding to foreign demand for renminbi products would be the best way of maintaining momentum for capital market and capital account reforms,” a former top official in the bank’s international division told Reuters, on condition of anonymity. “The bank is very worried about opening up the capital account because when it does, it knows that anything could happen,” the former official said. “But if you give investors a market-based reason to hold renminbi (yuan) they will.”
Investors expected China to make its currency basically convertible by 2015, or 2020 at the latest according to a series of time-tabled steps. The new approach adds more uncertainty to the route Beijing may take to full currency flexibility. A more flexible approach to currency liberalisation widens the range of possibilities for policy tweaks, such as raising quotas for offshore yuan to be invested onshore, making changes to asset allocation rules for such investments and widening participation in domestic money markets.
Volatility storm “This would clearly be a way for technocrats to sell it to the government,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong. “Allowing more foreign investors to come in and introduce capital inflows to balance out capital outflows. And it responds to market forces.” Foreign firms already hold about four times more Chinese currency than they can invest in the country, based on Reuters calculations of official data on cross-border trade settled in yuan, which leapt 41.3 percent to 2.9 trillion yuan in 2012. But that belies the risk of sudden capital flight, particularly if strict currency rules are rapidly
lifted, which worries the central bank. China suffered a US$214 billion outflow in 2012, twice as big as that during the 2008 global financial crisis, according to one external adviser to China’s monetary authorities. Last year was also the first year that China suffered a capital account deficit since 1998, the height of Asia’s crisis. The central bank worries that a build-up of yuan stranded offshore would further discourage foreigners from holding the Chinese currency if a storm of volatility were to hit. China’s efforts to promote the yuan as a settlement currency for cross-border trade in goods is part of the solution, designed to make the yuan more desirable globally. The inability of foreigners to freely invest currency on the mainland that they accumulate offshore is becoming an obstacle to Beijing’s efforts to make the yuan a true dollar alternative. “Improving international access to domestic capital markets is key. Without this, there is no chance for the yuan to become a true reserve currency,” said a second former bank staffer, now researching the yuan’s role in the global financial system for a think-tank linked to the institution. Reuters
Luxury car sales to beat US by 2016
The Chinese passenger-vehicle market is growing fast
Demand for luxury vehicles in China expected to more than double by 2020
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hina premium car sales will probably surpass the United States as early as 2016 and equal that of Western Europe by 2020, driven by rising incomes in the world’s second-largest economy, according to McKinsey & Co. Demand for luxury vehicles in China is expected to more than
double by 2020 to 3 million from the 1.25 million cars sold last year, outpacing the total market, McKinsey said in a report released yesterday. Deliveries of upscale autos will probably reach 2.25 million by 2016, according to McKinsey’s estimates. Automakers from General Motors Co. to Nissan Motor Co. are
expanding their premium brands to compete for luxury buyers in China, where German marques led by Volkswagen AG’s Audi account for about 80 percent of sales, according to McKinsey. Ford Motor Co. plans to start sales of its Lincoln nameplate in China next year, while PSA Peugeot Citroen is readying its flagship DS dealership in Shanghai. “Even now, China’s premium car market presents a sizable opportunity for latecomers,” Sha
Sha, Theodore Huang and Erwin Gabardi at McKinsey wrote in the report. “Japanese and U.S. attackers still have a chance to create a market footprint.” Luxury car sales have increased 36 percent annually in the past decade, compared with the 26 percent rate for the total passenger-vehicle market, according to McKinsey. The segment remains attractive for automakers as 111 large Chinese cities still don’t have premium car dealerships, according to Morgan Stanley & Co. Audi sales in China and Hong Kong rose 30 percent last year to a record 405,838 units. German luxury nameplates accounted for 80 percent of premium car sales in China last year, with the remaining shared by other European, U.S. and Japanese brands, McKinsey said. In its survey of Chinese consumers, 59 percent of respondents said they won’t choose a local brand when buying premium vehicles, while 16 percent believe a Chinese automaker will never be able to produce a luxury model that garners global recognition. Women are also becoming more important as buyers of premium cars and they value exterior styling, safety and comfort, according to McKinsey, which surveyed 1,200 consumers in 12 large Chinese cities for its report. Bloomberg News
March 5, 2013 business daily | 9
GREATER CHINA
Property curbs may trigger short-term home buying rush Developers’ stock plunged the most since June 2008
Average home prices in China’s 100 biggest cities rose for a ninth straight month
C
h i n a ’ s property-related shares fell by the most in nearly five years on Monday on plans to tighten curbs on the housing market, though some economists predict a near-term spike in existing home prices, at least until local governments work out how to implement the changes. The plans, announced by the cabinet late on Friday, include the stricter implementation of an existing 20 percent capital gains tax on home sales, strengthening restrictions on home buying and increasing loan rates for those buying a second home in cities where prices are rising too quickly. “More detailed measures will be announced by related ministries including the People’s Bank of China and local governments, so markets should definitely take the edict seriously and be prepared for falling prices of related financial assets,” Bank of America-Merrill Lynch’s chief China economist Ting Lu wrote in a March 3 note. Mr Lu said there could be a rush
to buy existing homes before local governments say how they will levy the capital gains tax, but the number of deals would then slump, hitting property agencies.
Stocks battered A gauge of property-related stocks listed in Shanghai slumped 9.3 percent on Monday - its biggest drop since mid-June 2008. The CSI300 index of leading Shanghai and Shenzhen stocks dived 4.6 percent, its steepest fall since November 2010. In offshore Chinese markets, China Resources Land slumped 8.6 percent, reversing gains so far this year, in its worst session for 17 months. The stock is now down 2.4 percent in 2013 after surging 69 percent last year. The broader Hang Seng Index is down 0.5 percent this year. “The actual impact of the new policy can be very severe or not severe at all, depending on implementation.
But the wording is unexpectedly harsh,” said Yao Wei, China economist at Societe Generale CIB. “In three months time, the impact may not be big at all. But it has stirred very high negative expectations.” Local governments are expected to release their property control targets and detailed implementation plans by end-March, various Chinese media reported on Monday, citing Qi Ji, a vice-minister of housing and ruralurban development.
Leadership change Friday’s announcement came amid speculation about rising house prices and what additional curbs Beijing may bring in in the run-up to annual parliamentary meetings that officially complete China’s leadership transition. Xi Jinping formally takes over as the country’s new president on Tuesday. A private survey last week showed average home prices in China’s 100 biggest cities rose for a ninth straight
month in February, although the pace of increase slowed. BofA-Merrill’s Mr Lu said the measures – a “turning point” for China’s property sector – may shift demand for existing homes to new homes, and are independent of China’s overall monetary policy position, which should remain supportive in the first half. While it’s difficult to predict just how local governments will implement the changes, analysts said the moves would likely accelerate consolidation in the property sector over time, with larger developers cutting prices in a market with fewer home-buying deals. The 20 percent capital gains tax is not new, but home-owners had a choice between that and paying 1-2 percent of the property’s sale price. “The side-effect could be that secondary market transactions will dry up,” said Lee Wee Liat, head of Asia property research at BNP Paribas. Reuters
CNPC to invest on cleaner fuel production State Council announces new fuel standards amid air pollution in big cities
C
h i n a National Petroleum Corp, the nation’s biggest energy company, will spend 15 billion yuan (US$2.4 billion) to upgrade the quality of fuel it refines, general manager Zhou Jiping said. The money would allow CNPC to upgrade the standard of its fuel to China IV from China III, Mr Zhou said in Beijing Sunday at annual meetings of the Chinese People’s Consultative Conference. The cost of upgrading to China V from IV would be less, he said. China’s largest oil companies have announced plans for billions of yuan of upgrades after air pollution in the Chinese capital hit hazardous levels on 20 days in January. China Petrochemical Corp chairman Fu Chengyu said in an interview with state broadcaster China Central Television last month
that the nation’s biggest refiner would spend about 30 billion yuan a year to upgrade its plants to produce cleaner fuel. The nation should also aggressively increase the use of natural gas so that it accounts for a greater percentage of total energy usage, Mr Zhou said. China should exploit both conventional and unconventional natural gas, he said, adding that the company will see more gas output from its fields in Qinghai, Sichuan and Talimu as well as Changqing. Beijing tightened emissions criteria for new cars from February 1, becoming the first city to adopt the China V standard that caps sulfur content at 10 parts per million. China IV standard caps sulphur content at 50 parts per million. All gasoline sold will have to be at the China IV standard by the end
of this year, Mr Zhou said. Diesel will have to be at the same standard by the end of next year, he said. The State Council, China’s cabinet, said February 6 that all
fuel would need to be at the China V standard by 2017. About a third of CNPC’s fuel is at the China IV standard now, according to Mr Zhou. Bloomberg News
10 |
business daily March 5, 2013
ASIA India’s fiscal budget ‘realistic’: Moody’s India’s budget for the next fiscal year offers a “realistic” plan to meet the country’s fiscal deficit target, and should be a credit positive for its sovereign ratings, Moody’s Investor’s Service said in a report yesterday. India’s fiscal consolidation plans could pave the way for monetary easing, thus helping revive economic growth, Moody’s also said about the budget unveiled last week. Still, the credit agency noted India would continue to find it challenging to meet some of the assumptions about growth, as well as revenue and spending, made in the budget.
Job advertisements in Australia rebounded by 3 percent in February
Australia job, housing markets signal rate cuts working Central bank seen on hold, though low inflation offers scope to ease
A
ustralian job advertisements have enjoyed the biggest rise in almost three years while approvals to build new houses increased by the most in eight months, further hints lower interest rates are percolating through the economy. The raft of economic data added to expectations the Reserve Bank of Australia (RBA) will keep rates at a record-matching low of 3 percent at its March policy meeting today. “We think the RBA is happy to sit and wait for the stimulus already in the pipeline to feed through,” said Michael Workman, a senior economist at Commonwealth Bank. “They will be encouraged that the housing market is showing signs of life and job
ads have bounced.” A Reuters poll of 23 analysts found all but one expected an unchanged outcome this month. Financial markets imply only a 14 percent chance of a move this week, but do have a cut to 2.75 percent pencilled in by June. Yesterday’s data showed job advertisements in newspapers and on the Internet rebounded by 3 percent in February, for a second month of gains. “The recent rise in job ads suggests tentative signs of a stabilisation in hiring intentions,” said ANZ’s head of Australian economics, Ivan Colhoun. Employment growth has been pedestrian over the past year, though the jobless rate has still remained low at
around 5.4 percent. Mr Colhoun fears that could yet creep up to 5.75 percent by mid-year, which would give the RBA an incentive to cut.
No pricing power Inflation would seem no bar to a move, at least according to one private measure of prices. The TD SecuritiesMelbourne Institute’s measure of consumer prices was unchanged in February, while the annual pace of inflation slowed a tick to 2.4 percent to remain comfortably within the RBA long-term target band of 2 to 3 percent. “The ongoing lowinflation environment certainly allows for further easing should that be
necessary, a conclusion we expect to be repeated tomorrow, but a trigger for actual easing at this juncture remains absent,” said TD’s head of Asia-Pacific Research, Annette Beacher. “In the same vein, we are not of the view that the easing cycle is over given such weak pricing power evidence in the early months of 2013.” Other figures out yesterday from the Australian Bureau of Statistics showed a promising 3.2 percent year-on-year increase in approvals to build new houses in January, the largest rise since May. Overall approvals were pulled down by a drop in the volatile multi-unit sector, though that comes after a stellar run. Approvals for apartment towers and the like were
almost 35 percent higher than for January last year. Housing is only around 5 percent of the economy but swings in the sector can have a big impact year to year. For instance, a typical recovery in home building can add anywhere from half to a full percentage point to economic growth. The central bank would very much like housing to make such a contribution over the next year or two when a long boom in mining investment is expected to finally plateau. “If the current pace is sustained we reckon housing construction could rise 10 percent this year, which would add half a percentage point to growth,” said Mr Workman at CBA. Reuters
March 5, 2013 business daily | 11
ASIA
S.Korea inflation eases, Bank of Japan nominee gives room for rate cut vows to conquer deflation Analysts say economic growth weak, expect more stimulus
S
outh Korean inflation unexpectedly slowed in February on weak domestic demand even as a private survey of manufacturers showed a pickup in activity, data showed yesterday, giving the central bank plenty of room for another rate cut to spur growth. The consumer price index rose 1.4 percent last month from a year earlier, Statistics Korea data showed, down from a 1.5 percent gain in January and compared with the median 1.7 percent rise forecast in a Reuters survey of analysts. It stood well below the lower end of the Bank of Korea’s target range from 2.5 percent to 3.5 percent as domestic demand in Asia’s fourthlargest economy remained depressed. Separately, the HSBC/ Markit purchasing managers’ index of South Korea’s manufacturing sector rose to a seasonally adjusted 50.9 in February from 49.9 in January, marking a 9-month high as new export orders grew at the fastest pace since July 2011. But the survey also showed that manufacturers’ output fell for the second consecutive month in February, as economic conditions remained weak, reinforcing beliefs that Asia’s fourth-largest economy has yet to stage a firm rebound. “We already saw in January’s industrial output data that all major categories remained weak, and there’s no issue that will force a sudden change in this trend,” said SK Securities economist Yum Sang-hoon, adding that investors continue to expect more stimulus from the central bank or the government. Investors are betting
No limits on cash central bank can pump into economy, says Mr Kuroda
that the Bank of Korea will cut interest rates at its March 14 policy meeting, with yields on both three-year and five-year treasury bonds quoted below the benchmark rate of 2.75 percent at Thursday’s close.
Home prices The central bank has kept the base rate unchanged for the past four months following two reductions last year and has repeatedly said it doesn’t see economic conditions getting worse. But many analysts still expect at least one more rate cut, with the economy slowing and with the new administration of president Park Geun-hye eager to revive growth. Combined exports for January and February this year barely grew from a year earlier despite signs of improving China and United States economies as the rapidly depreciating yen undercut Korean firms’ price competitiveness, suggesting that firstquarter growth may be weaker than anticipated. In addition, housing prices across South Korea fell in February for the eighth month in a row to post their sharpest annual decline in about three and a half years, data from the country’s top lender showed yesterday. Housing prices in February fell 0.1 percent from January and dropped 0.5 percent from a year ago, the data from Kookmin Bank showed, underscoring a sustained weakness in the local property market weighed down by uncertain economic growth prospects. The annual pace of decline marked the fastest since September 2009, the data showed. Reuters
A 101 trillion yen asset-buying programme is not enough, says Mr Kuroda
T
he government’s pick to lead the Bank of Japan vowed yesterday to do “everything possible” to reverse years of growthsapping deflation, and blasted previous Bank of Japan management for failing to fix the problem. Haruhiko Kuroda, an experienced finance veteran who has announced his resignation as head of the Asian Development Bank, is widely expected to be confirmed by parliament as Japan’s top central banker in the coming weeks. The 68-year-old has long criticised the central bank for not doing enough to lift the world’s third-largest economy and is likely to lead a fresh drive for more spending and aggressive monetary easing. “I want to make it clear that we will do everything possible to get rid of deflation,” Mr Kuroda told a parliamentary committee, according to Jiji Press. Japan has been beset by deflation since the 1990s. It continues to hurt the economy as falling prices lead consumers to put off purchases in the hopes of paying less later and cuts into corporate profits, leading
firms to slash jobs and put off growth-generating capital investment. The country’s prime minister Shinzo Abe, whose Liberal Democratic Party swept December elections, has vowed to stoke the economy with big spending and aggressive monetary easing. That put him on a collision course with outgoing central bank head Masaaki Shirakawa, who is stepping down on March 19, three weeks before the end of his term, after he and Japan’s new leader sparred on policy matters. Mr Abe had previously warned Mr Shirakawa that he might change a law guaranteeing the bank’s independence if it did not follow his policies, stirring protest from central bankers abroad. Under increasing pressure from Mr Abe’s administration, the central bank in January announced an unlimited easing programme to start from next year and the adoption of a two-percent inflation target aimed at reversing deflation. The asset-purchase policy is similar to the United States Federal Reserve’s unlimited monthly bond-
buying programme, known as quantitative easing. Yesterday Mr Kuroda applauded the new inflation target, seen as more explicit than the bank’s previous “goal” to raise prices. But he said the Bank of Japan’s 101 trillion yen (US$1.08 trillion) assetbuying programme did not go far enough. “The size and items subject to the Bank of Japan’s current asset purchases are not enough,” Mr Kuroda was quoted by Jiji as saying, although he hailed the inflation target as “utterly unprecedented”. “If appointed, I think that achieving the (inflation) objective at the earliest time is my most important duty,” he added. Markets have cheered Mr Abe’s efforts, with the benchmark Nikkei 225 index soaring and the yen weakening in recent months, good news for the country’s hard-hit exporters. Mr Abe’s prescription for the recession-hit economy has sparked criticism that Tokyo is intentionally pushing down the yen’s value and risking a global currency war as rival nations race to gain a trade advantage. AFP
N.Zealand to start asset sales in May
N
ew Zealand said yesterday that it expects the first phase of a multi-billiondollar state asset sale programme to be completed by mid-May. Prime minister John Key said energy company Mighty River Power would be the first of five state assets to be partially privatised under
the programme, which is expected to raise an overall total of NZ$5-7 billion (US$4.1-5.8 billion). Under the plan, the government will sell 49 percent of coal producer Solid Energy and energy companies Mighty River, Meridian and Genesis, while retaining majority 51 percent stakes. It will also reduce its
holding in flag carrier Air New Zealand from 76 to 51 percent. The sell-off is the centrepiece of the government’s blueprint to cut debt and bring the budget back into the black by 2014-15. Mr Key said he expected Mighty River, a hydroelectric generator, to be listed
on the stock exchange before the government hands down its annual budget on May 16. “The government’s share offer programme is an important policy,” he said. “It is expected to free up NZ$5-7 billion that we can then invest in other assets such as modern schools and hospitals, without having to borrow in volatile
overseas markets.” The partial sale of Mighty River was initially slated for late last year but was delayed when Maori groups took legal action arguing New Zealand’s indigenous people own the water needed to run its power stations. The courts rejected the challenge. AFP
12 |
business daily March 5, 2013
MARKETS Hang SENG INDEX NAME AIA GROUP LTD ALUMINUM CORP-H BANK OF CHINA-H
PRICE
DAY %
VOLUME
PRICE
DAY %
Volume
33.45
-0.4464286
39606893
NAME CHINA UNICOM HON
10.74
-2.717391
30716235
3.19
0
60476465
CITIC PACIFIC
10.94
-2.841918
17728126
3.5
-1.960784
497916885
BANK OF COMMUN-H
5.84
-3.311258
53435082
BANK EAST ASIA
31.5
-0.6309148
4526673
BELLE INTERNATIO
14.4
-1.369863
35608340
ESPRIT HLDGS HANG LUNG PROPER
BOC HONG KONG HO CATHAY PAC AIR CHEUNG KONG
26
-1.140684
12872837
14.3
-1.785714
3120396
116.8
-1.76619
4180455
CHINA COAL ENE-H
7.35
-2
21462970
CHINA CONST BA-H
6.19
-2.365931
334679464
CHINA LIFE INS-H
22.7
-1.943844
40124588
CHINA MERCHANT
26.85
0.1865672
3983880
CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H CHINA RES ENTERP
NAME
PRICE
DAY %
Volume
POWER ASSETS HOL
69.65
-0.5710207
1880943
SANDS CHINA LTD
36.35
-1.222826
12392992
CLP HLDGS LTD
67.85
0.4441155
5726135
13.7
-2.560455
10919762
CNOOC LTD
14.58
-2.016129
83520975
SUN HUNG KAI PRO
114.5
-2.718777
7116542
COSCO PAC LTD
12.36
0.3246753
10959814
SWIRE PACIFIC-A
98.35
-1.403509
1453238
9.86
-1.4
10013635
TENCENT HOLDINGS
274.2
2.084885
5322438
TINGYI HLDG CO
HANG SENG BK
28.3
-2.749141
12362830
20.4
0
4640750
125.6
-0.4754358
1550709
WANT WANT CHINA
11.08
1.094891
22960410
WHARF HLDG
64.55
-3.368263
6363764
HENDERSON LAND D
52.35
-1.690141
3352814
HENGAN INTL
79.65
1.919386
2368208
HONG KG CHINA GS
21.55
-0.4618938
6069885
HONG KONG EXCHNG
137.6
-1.78444
3134035
HSBC HLDGS PLC
84.25
-1.23095
15879230
82.45
-2.713864
7627592
5.4
-2.173913
340450114
LI & FUNG LTD
10.4
-0.7633588
14435185
MTR CORP
31.7
-0.9375
2269063
83.5
-1.241869
19910478
HUTCHISON WHAMPO
21.45
-7.142857
66300111
IND & COMM BK-H
8.9
-1.330377
122799792
SINO LAND CO
24.65
-0.6048387
3029403
CHINA RES LAND
20.6
-8.849558
35714125
NEW WORLD DEV
13.8
-2.816901
14793604
CHINA RES POWER
21.5
-3.587444
7032501
PETROCHINA CO-H
10.36
-1.333333
57772697
CHINA SHENHUA-H
28.55
-1.551724
17196898
PING AN INSURA-H
62.85
-2.178988
13576654
PRICE
DAY %
Volume
27.7
-1.423488
15396202
8.9
-1.330377
122799792
MOVERS
7
42
1 23031
INDEX 22537.81 HIGH
23031.69
LOW
22488.09
52W (H) 23944.74 (L) 18056.4
22488
28-February
4-March
Hang SENG CHINA ENTErPRISE INDEX NAME
NAME
PRICE
DAY %
VOLUME
AGRICULTURAL-H
3.87
-2.518892
132963257
AIR CHINA LTD-H
6.26
-3.692308
19117000
CHINA PETROLEU-H
ALUMINUM CORP-H
3.19
0
60476465
CHINA RAIL CN-H
8.01
-2.317073
10658072
ANHUI CONCH-H
27.8
-4.794521
24674008
CHINA RAIL GR-H
4.1
-3.981265
24100496
BANK OF CHINA-H
3.5
-1.960784
497916885
CHINA SHENHUA-H
28.55
-1.551724
17196898
BANK OF COMMUN-H
5.84
-3.311258
53435082
CHINA TELECOM-H
3.98
-0.7481297
48908419
BYD CO LTD-H
28.2
1.256732
2635500
DONGFENG MOTOR-H
10.82
-6.401384
39370238
CHINA CITIC BK-H
4.71
-3.285421
63354702
GUANGZHOU AUTO-H
6.4
0.4709576
4560673
CHINA COAL ENE-H
7.35
-2
21462970
HUANENG POWER-H
8.07
0.2484472
17629988
CHINA COM CONS-H
7.25
-0.137741
22071425
IND & COMM BK-H
5.4
-2.173913
340450114
CHINA CONST BA-H
6.19
-2.365931
334679464
JIANGXI COPPER-H
17.48
-3.532009
19312534
CHINA COSCO HO-H
4.01
-2.43309
11433500
PETROCHINA CO-H
10.36
-1.333333
57772697
CHINA LIFE INS-H
22.7
-1.943844
40124588
PICC PROPERTY &
11.06
-1.776199
18448791
CHINA LONGYUAN-H
7.19
0
25224800
PING AN INSURA-H
62.85
-2.178988
13576654
CHINA MERCH BK-H
16.2
-2.291918
23332064
SHANDONG WEIG-H
7.16
-0.5555556
5502000
CHINA PACIFIC-H
CHINA MINSHENG-H
10.3
-4.096834
46934632
SINOPHARM-H
24.25
1.25261
2561642
CHINA NATL BDG-H
11.76
-3.130148
44499529
TSINGTAO BREW-H
48.55
-0.1028807
1355566
15.4
-3.387704
8989736
WEICHAI POWER-H
28.8
-2.207131
4555653
CHINA OILFIELD-H
NAME
PRICE
DAY %
Volume
11.48
-3.040541
27983685
2.6
-1.886792
34659958
ZOOMLION HEAVY-H
9.73
-3.087649
27730380
ZTE CORP-H
12.8
0.3134796
8142773
YANZHOU COAL-H ZIJIN MINING-H
MOVERS
3
35
2 11448
INDEX 11104.65 HIGH
11448.63
LOW
11053.66
52W (H) 12354.22 (L) 8987.76
11053
28-February
4-March
Shanghai Shenzhen CSI 300 NAME
PRICE
DAY %
Volume
PRICE
DAY %
Volume
6.67
3.732504
65704686
SANY HEAVY INDUS
10.77
-8.573854
120896554
CITIC SECURITI-A
13.81
-6.499661
219582310
SHANDONG DONG-A
48.51
-1.040392
6739712
20777011
CSR CORP LTD -A
4.64
-2.521008
46079430
SHANDONG GOLD-MI
34.33
-1.914286
12377047
82117446
DAQIN RAILWAY -A
8.05
1.898734
95773610
SHANG PHARM -A
13.24
-3.216374
17313436
75919716
DATANG INTL PO-A
4.09
-1.918465
23420629
SHANG PUDONG-A
10.39
-6.98299
261002023
EVERBRIG SEC -A
SHANGHAI ELECT-A
3.98
-2.926829
8529527
19.54
-9.495137
47147992
PRICE
DAY %
VOLUME
AGRICULTURAL-A
2.85
-3.389831
252133397
AIR CHINA LTD-A
5.33
-3.266788
22239121
ALUMINUM CORP-A
4.73
-2.674897
17.88
-10.0151
ANHUI CONCH-A BANK OF BEIJIN-A
8.94
-6.289308
BANK OF CHINA-A
2.91
-2.675585
69501213
BANK OF COMMUN-A
4.74
-4.819277
195380996
10.84
-5.984389
23851479 41883761
BANK OF NINGBO-A BAOSHAN IRON & S
4.94
-1.2
NAME CHONGQING WATE-A
NAME
13.95
-9.474367
60855225
2.78
0.3610108
137855546
GF SECURITIES-A
15.05
-6.579764
64417787
SHANXI XINGHUA-A
GREE ELECTRIC
28.36
-4.383007
31551795
SHANXI XISHAN-A
GD POWER DEVEL-A
SHANXI LU'AN -A
37.4
2.15788
9155237
12.15
-6.322282
36109058 137352420
25.03
-2.035225
5967552
GUANGHUI ENERG-A
19.34
-0.8205128
39461148
SHENZEN OVERSE-A
5.85
-10
CHINA CITIC BK-A
4.45
-5.720339
42697543
HAITONG SECURI-A
11.86
-6.393054
200118922
SICHUAN KELUN-A
67.5
-1.989255
1697064
CHINA CNR CORP-A
4.63
-2.526316
43779415
HANGZHOU HIKVI-A
34.72
0.6960557
6157654
SUNING APPLIAN-A
6.27
-4.274809
70342933
CHINA COAL ENE-A
7.31
-3.050398
15508996
HENAN SHUAN-A
73
2.672293
3257199
TASLY PHARMAC-A
64.99
2.314232
4549931
19.1
-5.725568
20504260
TSINGTAO BREW-A
35.16
0.2852253
2789270
102381733
WEICHAI POWER-A
23.24
-7.594433
21049941
WULIANGYE YIBIN
BYD CO LTD -A
CHINA CONST BA-A
4.57
-2.765957
61463462
HONG YUAN SEC-A
CHINA COSCO HO-A
4.04
-2.650602
17848990
HUATAI SECURIT-A
10.8
-5.096661
CHINA CSSC HOL-A
23.15
-3.702163
11735474
HUAXIA BANK CO
10.51
-5.992844
52362701
24.2
-1.465798
30379746
CHINA EAST AIR-A
3.32
-2.639296
16999789
IND & COMM BK-A
4.08
-2.158273
139516945
YANGQUAN COAL -A
13.72
-7.609428
32247622
CHINA EVERBRIG-A
3.22
-5.571848
178184534
INDUSTRIAL BAN-A
18.34
-9.027778
207091532
YANTAI WANHUA-A
16.1
-6.504065
23065355
CHINA INTL MAR-A
12.86
-3.525881
10315623
INNER MONG BAO-A
31.92
-3.243407
34540306
YANZHOU COAL-A
16.59
-5.091533
8084706
17.3
-5.77342
51825902
INNER MONG YIL-A
28.14
2.439024
19977325
YUNNAN BAIYAO-A
77
0.07798284
2017518
CHINA MERCH BK-A
12.27
-6.120888
174787313
INNER MONGOLIA-A
4.79
-4.008016
48919489
ZHONGJIN GOLD
14.9
-2.295082
24629863
CHINA MERCHANT-A
13.45
-5.878237
73869369
JIANGSU HENGRU-A
34
0.4134672
9538913
ZIJIN MINING-A
3.63
-1.626016
61691572
CHINA MERCHANT-A
25.36
-10.0071
22298900
JIANGSU YANGHE-A
78.24
-0.5844981
4252598
ZOOMLION HEAVY-A
8.63
-7.799145
182760361
CHINA MINSHENG-A
9.49
-6.777996
381455272
JIANGXI COPPER-A
22.89
-5.841218
25192199
ZTE CORP-A
9.58
-3.32997
28682001
CHINA NATIONAL-A
8.12
-3.218117
36163858
JINDUICHENG -A
11.26
-6.788079
13733563
JIZHONG ENERGY-A
CHINA LIFE INS-A
CHINA OILFIELD-A
16.62
-2.235294
8254057
13.84
-10.013
51112098
CHINA PACIFIC-A
18.59
-5.586592
50636814
KANGMEI PHARMA-A
16.8
-2.211874
31855388
174.72
0.517777
5207295
-2.761217
12208836
CHINA PETROLEU-A
7.14
-0.9708738
67099190
KWEICHOW MOUTA-A
CHINA RAILWAY-A
5.44
-3.374778
22319896
LUZHOU LAOJIAO-A
30.99
CHINA RAILWAY-A
2.97
-2.941176
41047433
METALLURGICAL-A
2.1
-1.408451
40829286
2.5
-1.574803
26600548
MOVERS 25
CHINA SHENHUA-A
21.97
-2.959364
26944383
CHINA SHIPBUIL-A
5.43
-0.9124088
96747732
PETROCHINA CO-A
8.84
-1.886792
33854939
PING AN BANK-A
21.75
-5.680833
109877959
HIGH
2678.89
LOW
2529.81
CHINA SOUTHERN-A
3.65
-3.183024
36326295
3.46
-9.660574
349592211
PING AN INSURA-A
42.68
-7.116431
80587240
CHINA UNITED-A
3.45
-2.266289
101420199
POLY REAL ESTA-A
11.37
-9.976247
164441639
CHINA VANKE CO-A
10.84
-9.966777
311545544
QINGDAO HAIER-A
12.48
-5.740181
26251006
CHINA YANGTZE-A
7.15
-0.6944444
25888179
QINGHAI SALT-A
26.95
-0.07415647
10178392
CHONGQING CHAN-A
8.16
-6.314581
34942133
SAIC MOTOR-A
15.51
-5.885922
48004127
NAME
PRICE DAY %
Volume
PRICE DAY %
Volume
ACER INC
25.85 -0.5769231
11397507
FORMOSA PLASTIC
74.6
-2.864583
12253973
25.1 -0.1988072
25360337
FOXCONN TECHNOLO
80.6
-1.104294
6378659
-1.856436
13 2678
INDEX 2545.715
NINGBO PORT CO-A
CHINA STATE -A
262
52W (H) 2791.303 (L) 2102.135
2529
28-February
4-March
FTSE TAIWAN 50 INDEX
ADVANCED SEMICON ASIA CEMENT CORP
36.85
0
ASUSTEK COMPUTER
367.5
AU OPTRONICS COR
12.7
NAME
0.4830918
TPK HOLDING CO L
565
0.3552398
5322248
18052989
TSMC
102
-2.857143
50102946
UNI-PRESIDENT
56.5
-1.396161
10471857
UNITED MICROELEC
10.9
-1.357466
47657718
33.45
0.6015038
7073858
YUANTA FINANCIAL
15.2
-1.935484
20852950
YULON MOTOR CO
53.8 -0.1855288
4085837
39.65
0.2728513
3897664
HON HAI PRECISIO
80.5
-1.348039
37342092
-2.681992
60050834
HOTAI MOTOR CO
229
-1.927195
389170
134.5 -0.3703704
4504996
HTC CORP
280.5
0.1785714
9143052
CATHAY FINANCIAL
37.8 -0.6570302
27451589
HUA NAN FINANCIA
17.05
-1.445087
13255836
CHANG HWA BANK
16.9
-1.744186
19545226
LARGAN PRECISION
808
-1.101591
939810
CHENG SHIN RUBBE
80.9 -0.2466091
7058551
LITE-ON TECHNOLO
45.75
0.4390779
6041340
CHIMEI INNOLUX C
16.3
-1.807229
77014119
MEDIATEK INC
341.5
0.8862629
11990457
8.6
-2.824859
87273963
MEGA FINANCIAL H
24.65
-1.202405
23224077
CHINA STEEL CORP
27.4 -0.9041591
21189562
NAN YA PLASTICS
55.3
-3.826087
12689980
CHINATRUST FINAN
17.4
-1.416431
33183734
PRESIDENT CHAIN
165
0.3039514
2938175
CHUNGHWA TELECOM
91.7 -0.7575758
13172079
QUANTA COMPUTER
63.9
0
6517816
COMPAL ELECTRON DELTA ELECT INC FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL
20.45
-2.15311
15463244
SILICONWARE PREC
32.8
1.234568
11134141
112
0.4484305
4013275
SINOPAC FINANCIA
13.55
-1.454545
18702444
32
-3.759398
13474523
SYNNEX TECH INTL
59.2
-1.168614
4897448
68.7 -0.4347826
7037013
TAIWAN CEMENT
38.6 -0.6435006
11140334
18.45
-2.894737
30837421
TAIWAN COOPERATI
16.9
-1.169591
15791996
FORMOSA CHEM & F
73.3
-3.679369
10947032
TAIWAN FERTILIZE
70.5
-1.398601
6306682
FORMOSA PETROCHE
81.7 -0.8495146
3982761
28
-1.754386
2267283
TAIWAN GLASS IND
Volume
104
FUBON FINANCIAL
CHINA DEVELOPMEN
PRICE DAY %
TAIWAN MOBILE CO
3814266
CATCHER TECH
NAME
WISTRON CORP
MOVERS
11
37
8775388
2 5570
INDEX 5485.98 HIGH
5570.71
LOW
5476.16
52W (H) 5639.93 (L) 4719.96
5476
28-February
4-March
March 5, 2013 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) 32.35
32.06
31.78
Max 31.9
Average 31.589
Min 31.5
31.50
Last 31.6
Max 50.1
Average 49.364
Min 48.85
Last 49.7
36.65
36.36
36.08
Max 36.65
Average 36.272
Min 35.8
35.80
Last 36.35
Max 19.3
Average 18.972
Commodities PRICE
DAY %
YTD %
(H) 52W
(L) 52W
WTI CRUDE FUTURE Apr13
90.2
-0.529333921
-2.728351127
108.4599991
81
BRENT CRUDE FUTR Apr13
110.23
-0.153985507
1.072803961
118.2900009
91
GASOLINE RBOB FUT Apr13
312.12
-0.23652752
7.609032925
334.4000101
238.2400036
GAS OIL FUT (ICE) Apr13
924.5
0.216802168
0.489130435
1010.5
800.25
NATURAL GAS FUTR Apr13
3.437
-0.549768519
0.999118425
3.997000217
3.032000065
292.95
-0.020477117
-2.206569635
326.7999887
254.189992
1574.63
-0.0983
-5.3969
1796.08
1527.21
HEATING OIL FUTR Apr13 METALS
Gold Spot $/Oz Silver Spot $/Oz
28.625
0.0612
-4.9319
35.365
26.1513
Platinum Spot $/Oz
1575.7
0.1653
3.8182
1742.8
1379.05
Palladium Spot $/Oz
718.25
-0.7256
2.657
777.38
553.75
LME ALUMINUM 3MO ($)
1975
-1.496259352
-4.727448143
2331
1827.25
LME COPPER 3MO ($)
7703
-1.433141395
-2.874795108
8702.75
7219.5
LME ZINC
2020
-2.179176755
-2.884615385
2230
1745
16605
0.030120482
-2.667057444
19600
15236
15.77
-0.031695721
1.840490798
16.95000076
15.22999954
709.75
0.176429076
1.356658336
838
520.25
WHEAT FUTURE(CBT) May13
716.25
-0.589868147
-9.076483656
938
665
SOYBEAN FUTURE May13
1439.5
-0.27710426
2.876541004
1639.5
1218.75
COFFEE 'C' FUTURE May13
142.8
-0.383676317
-2.658486708
213.7999878
137.5999908
SUGAR #11 (WORLD) May13
18.02
0.614182021
-8.06122449
24.56999969
COTTON NO.2 FUTR May13
85.15
-0.292740047
12.24624308
92.62999725
3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) May13 CORN FUTURE
Last 18.88
49.78
19.21
49.48
19.14
49.16
19.07
48.85
Max 19.28
Average 19.105
Min 19
May13
MAJOR
20.80
19.19
20.68
19.09
20.57
18.98
20.46
18.88
Max 20.80
Average 20.615
ASIA PACIFIC
CROSSES
PRICE
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
Min 20.35
Last 20.60
20.35
DAY %
1.0137 1.5054 0.9424 1.3015 93.61 7.9892 7.7566 6.2251 55.005 29.83 1.2474 29.729 40.775 9714 94.894 1.22645 0.86456 8.0965 10.398 121.83 1.03
-0.6469 0.1064 0.0531 -0.0538 -0.0214 -0.0263 -0.0232 -0.0337 -0.1818 -0.2347 -0.5612 -0.3229 -0.2183 -0.3294 0.6302 0.1256 0.1666 0.599 0.1154 0.0328 0
YTD %
(H) 52W
-2.3222 -6.9362 -2.865 -1.3268 -8.0226 -0.0751 -0.0774 0.0884 -0.0182 2.5142 -2.0843 -2.3411 0.5641 0.8133 -5.8665 -1.5467 -5.6838 1.4945 1.2733 -6.7799 -0.0097
(L) 52W
1.0744 1.6381 0.9972 1.3711 94.77 8.0039 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 97.728 1.25692 0.88151 8.4957 10.9254 127.71 1.0314
0.9582 1.4986 0.9002 1.2043 77.13 7.9824 7.7498 6.2105 49.695 29.63 1.2152 28.913 40.54 9095 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029
MACAU RELATED STOCKS NAME
(H) 52W
(L) 52W
3.7
-1.333333
17.46031
3.94
2.29
1020644
CROWN LTD
11.9
-0.08396306
11.52765
12.12
8.06
1411869
17.67000008
AMAX HOLDINGS LT
0.07
-4.109589
0
0.104
0.055
5548000
68.18999481
BOC HONG KONG HO
26
-1.140684
7.883816
27.1
20.8
12872837
0.36
1.408451
35.84906
0.42
0.215
400000
6.3
-0.6309148
5.175296
6.74
2.8
179000
CHINA OVERSEAS
21.45
-7.142857
-7.142859
25.6
14.124
66300111
CHINESE ESTATES
11.56
0.1733102
-4.694523
12.964
7.697
104500
CHOW TAI FOOK JE
10.98
-2.831858
-11.73633
13.4
8.4
8385200
2
-0.990099
5.820107
2.15
1.1
660000
2.32
3.111111
90.16393
2.37
0.485
12194000
ARISTOCRAT LEISU
CHEUK NANG HLDGS
World Stock MarketS - Indices
EMPEROR ENTERTAI
PRICE
DAY % YTD %
VOLUME CRNCY
COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
14089.66
0.2502403
7.520681
14149.15
12035.08984
31.6
-2.918587
4.118615
35.7
16.94
8766309
NASDAQ COMPOSITE INDEX
US
3169.744
0.3023236
4.975312
3213.595
2726.68
HANG SENG BK
125.6
-0.4754358
5.812977
129
99.2
1550709
FTSE 100 INDEX
GB
6344.45
-0.5353839
7.572982
6412.44
5229.76
HOPEWELL HLDGS
33.85
-1.598837
1.804511
35.3
19.049
1228391
DAX INDEX
GE
7651.16
-0.7394761
0.5093015
7871.79
5914.43
HSBC HLDGS PLC
84.25
-1.23095
3.628532
88.45
59.8
15879230
NIKKEI 225
JN
11652.29
0.3955583
12.09321
11767.67969
8238.96
HUTCHISON TELE H
3.84
0.7874016
7.86517
3.92
2.98
5981000
HANG SENG INDEX
HK
22537.81
-1.496533
-0.5257086
23944.74
18056.4
LUK FOOK HLDGS I
25.2
-2.325581
3.27869
30.05
14.7
2929250
MELCO INTL DEVEL
12.04
-2.746365
33.6293
13.96
5.12
4553000
CSI 300 INDEX
CH
2545.715
-4.613285
0.9022441
2791.303
2102.135
MGM CHINA HOLDIN
19.28
0.7314525
37.51783
19.48
10.04
11208923
TAIWAN TAIEX INDEX
TA
7867.34
-1.221526
2.17988
8170.31
6857.35
3.35
-1.470588
-9.459461
5
3.249
6581553
0.186
3.910615
22.36842
0.226
0.084
136120000
KOSPI INDEX
SK
2013.15
-0.6582811
0.8061879
2057.28
1758.99
S&P/ASX 200 INDEX
AU
5010.524
-1.486591
7.777535
5112.5
3985
ID
4750.221
-1.275913
10.04322
4825.699219
3635.283
FTSE Bursa Malaysia KLCI
MA
1634.96
-0.1514559
-3.19666
1699.68
NZX ALL INDEX
NZ
919.906
-1.529658
4.291469
PHILIPPINES ALL SHARE IX
PH
4172.07
-0.03546142
12.78974
JAKARTA COMPOSITE INDEX
19.00
Last 19.28
19.30
COUNTRY
CENTURY LEGEND
NAME
19.28
CURRENCY EXCHANGE RATES
NAME ENERGY
Min 18.88
50.10
GALAXY ENTERTAIN
MIDLAND HOLDINGS NEPTUNE GROUP NEW WORLD DEV
13.8
-2.816901
14.80865
15.12
7.95
14793604
SANDS CHINA LTD
36.35
-1.222826
7.069217
39.95
20.65
12392992
SHUN HO RESOURCE
1.58
-1.25
12.85714
1.67
1.03
0
1526.6
SHUN TAK HOLDING
4.37
-0.6818182
4.295941
4.65
2.56
3683636
934.988
751.011
SJM HOLDINGS LTD
18.88
-1.768991
4.888889
22.15
12.34
5607715
4196.63
3238.77
SMARTONE TELECOM
13.26
-0.896861
-5.823863
17.5
13.16
2088500
20.6
0.4878049
-1.670648
25.5
14.62
4164301
HSBC Dragon 300 Index Singapor
SI
632.95
-0.08
1.91
NA
NA
STOCK EXCH OF THAI INDEX
TH
1535.99
-0.2344765
10.34965
1549.82
1099.15
HO CHI MINH STOCK INDEX
VN
468.74
-1.762548
13.29611
497.87
372.39
Laos Composite Index
LO
1426.32
-0.7784294
17.41481
1455.82
924.63
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
FUTURE BRIGHT
WYNN MACAU LTD ASIA ENTERTAINME
3.83
3.794038
25.1634
6.95
2.4
177647
BALLY TECHNOLOGI
47.48
-0.565445
6.195484
51.16
41.74
615129
BOC HONG KONG HO
3.379
0
10.06515
3.55
2.68
7000
GALAXY ENTERTAIN
4.2375
0
6.738034
4.57
2.25
1500
INTL GAME TECH
16.24
1.882058
14.60833
17.37
10.92
3543008
JONES LANG LASAL
96.77
0.1345199
15.28472
100.33
61.39
328998
LAS VEGAS SANDS
51.31
-0.3495824
11.15685
58.3216
32.6127
4939706
MELCO CROWN-ADR
19.39
0.9895833
15.14252
21.475
9.13
3869919
MGM CHINA HOLDIN
2.44
0
31.89189
2.44
1.36
392
MGM RESORTS INTE
12.43
-0.4803843
6.786938
14.8
8.83
7233727
SHFL ENTERTAINME
15.84
-0.1261034
9.241379
18.77
11.75
413845
SJM HOLDINGS LTD
2.62
0
13.41992
2.85
1.65
4730
116.57
-0.2822926
3.626991
129.6589
84.4902
1041064
WYNN RESORTS LTD
AUD HKD
USD
14 |
business daily March 5, 2013
Opinion
Why higher bank equity is in the public interest Simon Johnson Bloomberg columnist
of the most leveraged. JPMorgan’s recent investor presentation stresses its supposed impending “excess capital,” yet barely mentions its true leverage.
Echoing views
I
n their important new book, “The Bankers’ New Clothes,” Anat Admati and Martin Hellwig challenge a cherished belief of people who run big banks: Equity is “expensive” and requiring banks to fund themselves with more equity (relative to their debts) will somehow slow the economy. This is what we hear from top executives as their central argument in the pushback against financial reforms. Jamie Dimon, the chief executive officer of JPMorgan Chase & Co., for example, suggested last week: “I think all banks will have too much capital in two and a half years. And they’re not going to know what to do with it.” Admati, a professor at Stanford University, and Hellwig, a director at the Max Planck Institute in Bonn, are finance experts. Their book, excerpts of which were published by Bloomberg View, dissects the bankers’ claims – along with many of Dimon’s public statements – in meticulous and often humorous detail. Their bottom line is simple: The people who run banks will always want to have less equity, because this enables them to get more upside when times are good, and they can rely on various forms of government downside support when decisions go wrong. It is very expensive for the rest of us if banks fund themselves with so much debt and so little equity, because this creates a fragile and distorted financial system
that doesn’t provide reliable support to the economy.
Borrowed funds Equity is a way of obtaining funds. So is debt. If the bank has no sensible way to use the funds obtained from shareholders, as Dimon suggests, how can we be confident that it puts borrowed funds – such as those from depositors – to good use? How much equity is enough? Looking historically and also thinking about the scale of potential losses that could befall financial companies, the authors recommend a range of 20 percent to 30 percent for equity
Banks will always want to have less equity, because this enables them to get more upside when times are good, and they can rely on various forms of government downside support when decisions go wrong
as a percent of total assets. This is consistent with the way other types of companies fund themselves, because they don’t benefit from the scale of guarantees available to banks. This statement is about total assets, not riskweighted assets. You can measure total assets in different ways. Personally, I like adjusted tangible equity relative to adjusted tangible assets, measured according to international accounting standards, as suggested by Federal Deposit Insurance Corp. Vice Chairman Tom Hoenig. For most global big banks, this equity-to- asset ratio is between 2 percent and 5 percent. JPMorgan, for example, expects its capital to be 9.5 percent of risk-weighted (not total) assets by the end of this year. This estimate uses the deeply flawed Basel III approach. The one thing we know about risk weights is that they are always wrong. At the end of 2012, JPMorgan’s tangible common equity (US$144.6 billion) was a little more than 6 percent of its total assets (US$2.4 trillion), measured under U.S. generally accepted accounting principles. And if we adjust the bank’s balance sheet to allow for a more accurate measure of its derivative assets (and liabilities), using the Hoenig measure and data for the second quarter of 2012, its equity is only 3.12 percent of adjusted asset value. Seen this way, one of the largest banks in the world is also one
Doug Elliott, a Brookings Institution fellow who worked in finance for 20 years and who was a managing director at JPMorgan from 2006 to 2009, has issued a paper that is partly a reply to some of the points made by Admati and Hellwig, even though he doesn’t mention them by name. (Others, including Harvard University’s Ken Rogoff, a former chief economist of the International Monetary Fund, are expressing similar views.) Elliott has in some situations suppor ted higher capital requirements, yet he seems to think that Admati and Hellwig go too far. He concedes the theoretical high ground, which is wise. Nonetheless, he suggests that there are three main points about the real world that Admati and Hellwig fail to understand. In my assessment, Elliott is incorrect on all dimensions of the debate, and his points are refuted in their book. First, he points out that banks obtain substantial benefits from funding with debt rather than equity. For example, interest payments on their debt are tax-deductible and there are downside guarantees that help protect creditors (and executives). But these are private benefits to the banks, paid for by taxpayers – and we should be assessing the social impact, including the cost to taxpayers and the broader economy. The goal is, partly, to reduce the subsidies to banking, particularly the guarantees that are implicit for any financial institution that is “too big to fail.” These guarantees create moral hazard and perverse incentives more generally; they also become more valuable as the bank takes bigger risks and becomes larger relative to the economy. No one wants their subsidies reduced. But when these subsidies create so many distortions and are dangerous – on a scale that could cause another Great Depression
– cutting them becomes a pressing national priority. Second, Elliott is concerned about transitional issues, such as what happens when banks are told to increase their equity funding. Any transition can be mismanaged, of course, but the main proposal on the table from Admati and Hellwig would prevent big banks from paying dividends or buying back shares. Instead, earnings should be retained, building up equity on the balance sheet. Nothing is being taken from shareholders because they still own this equity.
Excess capital Seen in this light, JPMorgan doesn’t have US$28 billion of “cumulative excess capital,” as it claims, but rather an opportunity to nudge its true equity-asset ratio a little closer to 4 percent, and a little further away from the dangerous degree of leverage prevailing in the most precarious European banks. Third, Elliott is concerned that any higher capital requirements for banks will shift more financial transactions into the “shadows.” If you police the highways, crime may move to the back-alleys. As Admati and Hellwig ask: Does this mean you should give up on law enforcement? Why not patrol the back-alleys, too? Fortunately, for all its other limitations, the DoddFrank Act anticipated this issue by authorizing the Financial Stability Oversight Council and the Federal Reserve to extend regulation to any systemically important areas. The council’s recent push to improve the rules for money-market funds is a case in point. The issue isn’t any particular fund but rather their collective behavior and the risks they create. Risky undertakings should be funded with sufficient equity rather than too much debt. This is how venture capital operates and how nonfinancial companies making risky bets typically fund themselves (go ask Silicon Valley). Read the book and make up your own mind. Then send a copy to Jamie Dimon. Bloomberg View
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March 5, 2013 business daily | 15
OPINION
The Arab revolutions’ wires reality check Business
Leading reports from Asia’s best business newspapers
Business Inquirer
Joschka Fischer
Germany’s foreign minister and vice-chancellor from 1998 to 2005, was a leader in the German Green Party for almost 20 years
The Philippine Dealing System (PDS) Holdings Corp. is working to introduce onshore trading of the Chinese renminbi, along with euro, as part of plans to diversify its foreign exchange offerings. “Further product expansion will be brought to the FX (foreign exchange) community,” PDS president Vicente Castillo said during the PDS Annual Awards Thursday night. Mr Castillo said the PDS was working on local trading and settlement system for two new currencies. He did not disclose which new currencies will be introduced, but informed banking sources said he was referring to the renminbi and euro.
The Economic Times India will make it easier for foreign investors to claim tax concessions offered under bilateral tax treaties by simplifying the process of proving residency of the country from which the investment originates. The government issued a press release on Friday, clarifying that a tax residency certificate (TRC) will be enough for investors routing money through Mauritius to claim tax benefits. The India-Mauritius tax treaty offers exemption from capital gains tax. As a result, foreign investors from third countries prefer to route investments through the island nation.
The Star Malaysianbanks,whichhavegone on an overseas expansion drive in recent years, are beginning to see these investments pay off. Among the five biggest banks by asset size in the country, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd have exposures in consumer banking operations in Indonesia and Singapore, two countries that are experiencing healthy economic growth. “Overseas operations for Maybank and CIMB had seen a higher growth rate and the pace have been stronger than what had been experienced domestically,” RHB Research Institute’s analyst David Chong told StarBiz.
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wo years after popular uprisings began to convulse the Middle East, few people speak of an “Arab Spring” anymore. Given Syria’s bloody civil war, the rise to power of Islamist forces through free elections, the ever-deepening political and economic crises in Egypt and Tunisia, increasing instability in Iraq, uncertainty about the future of Jordan and Lebanon, and the threat of war over Iran’s nuclear programme, the bright hope of a new Middle East has vanished. Add the region’s eastern and western peripheries – Afghanistan and North Africa (including the Sahel and South Sudan) – and the picture becomes even grimmer. Indeed, Libya is increasingly unstable, al-Qaeda is actively engaged in the Sahel (as the fighting in Mali shows), and no one can foresee what will happen in Afghanistan after the U.S. and its NATO allies withdraw in 2014.
Bangkok Post Samsung Group is likely to win the Thailand online lottery contract,replacingcurrentcontract holder Loxley GTech Technology (LGT), after offering to pay any damages demanded for contract termination. Benja Louischaroen, director-general of the Customs Department and chairwoman of the Government Lottery Office (GLO), said the department has considered proposals by many companies and so far Samsung’s has been the best deal. Ms Benja is unhappy with delays to the installation of lottery machines. LGT should have installed a total of 12,000 units nationwide, but so far it has only installed 3,000.
The whole of the Middle East is in motion, and a new and stable order will take a long time to establish
All of us tend to make the same mistake repeatedly: we think at the beginning of a revolution that freedom and justice have prevailed over dictatorship and cruelty. But history teaches us that what follows is usually nothing good. A revolution not only overthrows a repressive regime; it also destroys the old order, paving the way for a mostly brutal, if not bloody, fight for power to establish a new one – a process that affects foreign and domestic policy alike. Normally, revolutions are followed by dangerous times.
Unstable borders Indeed, exceptions to this pattern are rare: South Africa is one, owing to the genius of one of the century’s most outstanding statesmen, Nelson Mandela. The alternative option can be observed in Zimbabwe. Central and Eastern Europe after 1989, though a very interesting reference point for analysts of the Arab revolutions, is not an appropriate reference point, because the region’s new domestic and foreign order resulted from the change in external conditions stemming from the collapse of Soviet power. Internally, nearly all of these countries had a very clear idea about what they wanted: democracy, freedom, a market economy, and protection from the return of the Russian empire. They wanted the West, and their accession to NATO and the European Union was logical. Nothing of the sort applies to the crisis belt of the Middle East. No power anywhere, within the region or without, is willing and able to implement the barest vision of a new
regional order – or even a vision for parts of it. Chaos is a constant threat, with all of its accompanying risks and threats to world peace. In addition to poverty, backwardness, repression, rapid population growth, religious and ethnic hatred, and stateless peoples (such as the Kurds and the Palestinians), the region has unstable borders. Many were drawn by the colonial powers, Great Britain and France, after World War I, and most, with the exception of Iran’s and Egypt’s, have little legitimacy.
Regional ambitions As if this were not enough, some countries – including Iran, Saudi Arabia, and even tiny (but very rich) Qatar – have ambitions to be regional powers. All of this worsens an already tense situation. All of these contradictions are currently exploding in Syria, whose population is suffering a humanitarian catastrophe, while the world stands by, up to now unwilling to intervene. (If chemical weapons are deployed, intervention will become inevitable.)
Although intervention would be temporary and technically limited, everyone seems to be avoiding it, because the stakes are very high: not only a devastating civil war and massive human suffering, but also a new order for the whole of the Middle East. Any military intervention would entail a confrontation not only with the Syrian military (supported by Russia and China), but also with Shia Iran and its Lebanese proxy, Hezbollah. Moreover, no one can guarantee that intervention would not quickly lead to another war with Israel. The dangers of both action and inaction are very high. The most likely outcome in Syria is that the human catastrophe will continue until President Bashar alAssad’s regime collapses, after which the country very likely could be divided along ethnic and religious lines. And Syria’s disintegration could further balkanize the Middle East, potentially unleashing new violence. Frontline states like Lebanon, Iraq, and Jordan will not manage to remain aloof from a disintegrating Syria. What will happen with Syria’s Kurds and Palestinians, or its Christians, Druze, and smaller Muslim minorities? And what about the Alawites (the backbone of Assad’s regime), who could face a terrible destiny, regardless of whether the country splits up? Unanswered questions abound. Of course, even in the face of this misery, we should not lose hope in agreements reached by diplomatic means; but, realistically, the chances are dwindling every day. The whole of the Middle East is in motion, and a new and stable order will take a long time to establish. Until then, the region will remain very dangerous, not only internally, but also for its neighbours (including Europe) and the world. © Project Syndicate
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business daily March 5, 2013
CLOSING HSBC raises dividend, shrugs off profit fall Eurozone targets Cyprus bailout this month HSBC is to increase dividend payouts this year, a sign that Europe’s largest bank has regained its financial strength even though full-year profits fell more than expected. The London-based bank is in the last year of a three-year restructuring under chief executive Stuart Gulliver, where it has closed or sold 47 businesses and cut 38,000 jobs. HSBC said yesterday it would bump up its dividend by 11 percent. HSBC’s 2012 pretax profit fell six percent from the previous year to US$20.6 billion. This partly reflected a US$5.2 billion loss on the value of the bank’s own debt.
The eurozone is aiming to reach a bailout deal for Cyprus over the course of this month, the head of the finance ministers’ Eurogroup said yesterday. “We are probably going to reach agreement in March, that’s what we’re looking at,” Dutch Finance minister Jeroen Djisselbloem said on arrival for talks in Brussels. The other ministers from the 17 members of the currency area were meeting their new Cypriot counterpart, Michael Sarris. Mr Sarris was named by incoming Cyprus president Nicos Anastasiades, who has vowed to save the near-bankrupt island with the “earliest possible” bailout.
Beijing ‘greatly concerned’ with corruption: NPC Ho Iat Seng, Lei Pui Lam running for legislature’s standing committee
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he Chinese administration is “greatly concerned” with its anti-corruption efforts, but officials admitted that the mission of building a clean government still had a long way to go. Fu Ying, spokesperson for National People’s Congress (NPC), said China’s top legislature has “exerted great efforts” in amending criminal procedures and laws regulating moneylaundering, government purchases and bidding.
“We will improve our laws and regulate the authority exercised by our officials,” said Ms Fu at a press conference after a preparatory meeting yesterday. She did not make any mention of Macau during her remarks on anticorruption works. The NPC first plenary meeting will start today. The ‘double congress’ of both the NPC and the Chinese People’s Political Consultative Conference, which
already started on Sunday, will end in mid-March. A preparatory meeting held yesterday confirmed the delegates that are on the running for a seat in the standing committee of the Chinese congress. Two of the 12 NPC Macau delegates – Ho Iat Seng and Lei Pui Lam – and Bai Zhijian, outgoing director of the Chinese Liaison Office here, are among the 178 nominees. Mr Ho, a businessman and vice
president of the Legislative Assembly, is expected to be re-elected again as a standing committee member. But the future of Mr Lei, president of the Chinese Educators Association of Macau, is less certain as he is one of the newcomers in the nominee list, replacing outgoing Lau Cheok Va, president of the Legislative Assembly. The elections of the committee members will be held at a later stage of the 13-day congress meeting. S.L./T.L.
EU urges austerity as Italy closer to new vote No solution in sight for Italian electoral standstill
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uropean leaders demanded that euro members press on with budget cuts to end the debt crisis as Italy edged closer to a new election after an anti-austerity vote last week resulted in political deadlock. Finance ministers from the 17-member single-currency bloc met in Brussels late yesterday to discuss issues including a bailout for Cyprus. In Rome, a top aide to Democratic Party leader Pier Luigi Bersani said the country might need to hold another election this year after passing new electoral laws. “Now in Europe, after the Italian election, it seems to be a case of either austerity and savings programs or growth, but that’s a completely false premise,” German chancellor Angela Merkel said on Friday. EU Economic and Monetary Affairs commissioner Olli Rehn
echoed those comments this weekend, telling Germany’s Der Spiegel magazine that there’s no scope for the bloc to let up on budget discipline. Italian political instability, after last week’s election ended in a four-way split, threatens to reignite concern about the deepening of the debt crisis. Voters in the bloc’s third- largest economy revolted against Germaninspired austerity measures, handing the party of comedian-turnedpolitician Beppe Grillo more than 25 percent of the vote with its antispending cut message and a call for a referendum on euro membership.
4.84 percent as of 10 am in Berlin. Still, Spanish bonds rallied last week along with Greek and Portuguese securities on speculation that the European Central Bank, which eased a market panic last year with a pledge to buy sovereign debt, will maintain control over the three-year-old debt crisis.
Italian image Italian 10-year bond yields climbed to a three-month high last week, jumping 34 basis points to 4.79 percent. Yields rose 6 basis points to
Finance ministers from the Eurozone bloc met in Brussels late yesterday
Any “significant” attempt to unravel prime minister Mario Monti’s reforms would risk “serious turmoil across Europe,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a note yesterday. “Our base case remains that Brussels, Frankfurt and Berlin jointly with the bond vigilantes will simply leave Italy no choice but to stay on the straight and narrow – or at least to not go astray for very long.” Italian president Giorgio Napolitano told political leaders Saturday to put public interest and the country’s international reputation first. Mr Bersani, whose faction won the most votes, is resisting cooperation with former premier Silvio Berlusconi and Mr Grillo reiterated that his party, the 5 Star Movement, won’t back any government. Bloomberg News