Macau Business Daily, May 16, 2013 by Business Daily

Package tours in March decline

EU Chamber to boost exports to city

CEPA a ‘limited success’ says WTO

Page 6

Page 7

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

www.macaubusinessdaily.com

Year II

Number 284

Thursday May 16, 2013

Govt’s secret assurances on LVS licence rights B

usiness Daily has obtained evidence the government secretly wrote to one of Las Vegas Sands Corp’s bankers to assure in private what the administration couldn’t say in public for political reasons – that LVS’s Macau gaming rights were completely independent from those of Galaxy

Casino SA – the Chinese company with which it was officially paired. A Nevada lawsuit, concluded on Tuesday United States time, turned on whether Beijing or Macau had the final say back in 2002 on LVS entering the Macau casino market. Our sources suggest Macau went to extraordinary lengths to attract and

retain LVS. Nonetheless LVS must pay US$70 million (560 million patacas) to Hong Kong businessman Richard Suen after he convinced a Nevada jury that meetings he arranged with mainland officials were the deciding factor. More on pages 2 & 3

SJM shares hit Nansha ‘easier’ than peak on Cotai Hengqin for SMEs land grant

I SSN 2226-8294

Hang Seng Index 23120

23098

23076

23054

23032

he spotlight of Macau’s small- and medium-sized enterprises (SMEs) has been Hengqin Island, but Guangzhou’s Nansha district might be a better prospect, says Victor Lei Kuok Fai. “Frankly speaking, I think Nansha has an easier threshold for small and medium enterprises to settle in than Hengqin,” said the president of the Macau Chamber of Commerce in Nansha. Page 5

Luck factor boosts Galaxy Q1 earnings G

JM Holdings Ltd yesterday received a Cotai land concession and the right to a casino resort there. It’s the firm’s first presence on Cotai, an area contributing an increasing share of the city’s total gaming revenues. SJM’s Cotai parcel is small compared to market rivals Las Vegas Sands Corp and Galaxy. But the eventual footprint of its resort could be three times the 70,468-square-metre parcel. SJM hopes to combine its plot with a much larger one next door owned by its executive director Angela Leong On Kei. Page 4

alaxy Entertainment Group’s adjusted earnings before interest, taxation, depreciation and amortisation rose 29 percent year-on-year in the first quarter to HK$2.8 billion (US$357 million) the firm said. Galaxy will be added to Hong Kong’s benchmark Hang Seng Index with effect from June 17. The casino operator said last week that it will pay HK$3.25 billion for loss-making Grand Waldo hotel-casino. Page 4

23010

May 15

HSI - Movers Name

%Day

LI & FUNG LTD

8.35

ESPRIT HLDGS

5.82

TINGYI HLDG CO

2.24

BELLE INTERNATIO

2.21

WHARF HLDG

2.03

CATHAY PAC AIR

-0.98

SINO LAND CO

-1.14

CHINA SHENHUA-H

-1.29

CHINA OVERSEAS

-1.29

CHINA COAL ENE-H

-5.52

Source: Bloomberg

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May 16, 2013

Macau

How Macau wooed Las Vegas Sands A secret letter to bankers, second chances and a plea to the firm to stay in the bidding process Michael Grimes

michael.grimes@macaubusinessdaily.com

art of the testimony in the latest Richard Suen lawsuit turned on whether it was Beijing or Macau that had the final say back in 2002 in choosing Las Vegas Sands Corp as a new operator for the Macau casino market. Business Daily has obtained evidence that the Macau government was very keen indeed to have LVS as a partner. So much so that it secretly wrote to one of LVS’s bankers to assure in private what the administration could not say in public for political reasons – that LVS’s Macau gaming rights were completely independent from those of the Chinese company with which it was originally paired. That assurance was important, because some of LVS’s banking partners – many of them Western companies – fretted that LVS’s Macau rights, technically and officially a sub-concession, could be at risk if the supposedly senior partner Galaxy Casino SA, a local unit of Galaxy Entertainment Group Ltd, lost its primary licence. The written assurance was supplied by Francis Tam Pak Yuen, then as now the Secretary for Economy and Finance in a letter dated May 25, 2006. Business Daily has seen a copy of the letter, sent to

Bank of Nova Scotia – at the time a lead arranger of project debt for LVS – and signed by Mr Tam. The key issue is raised in paragraph 3 (1) of the letter. It states: “Venetian Macau S.A. shall be able to exploit games of chance and other games in casino [sic] in Macau autonomously from Galaxy Casino S.A., even in the event of termination and extinction of Galaxy Casino S.A.’s concession contract…” “The sub-concession is not ‘sub’ at all, in the way many people might understand the concept,” a person familiar with the situation told Business Daily. “The sub-concessionaire took over half the investment commitment of its respective concessionaire, but apart from that – and a common end-date on the rights – they are quite separate. There are, for example, no cross-default provisions [whereby a loan default by one of the parties would trigger a technical default at the other],” added the person. “I think the Macau government’s original vision was for three operators post liberalisation – one from the U.S., [Wynn Resorts was eventually selected] one consisting of STDM/ SJM [the firms created by former Macau casino monopolist Stanley Ho Hung Sun], and one Asian

operator [Galaxy],” added a second source. “To get Galaxy ‘over the line’ it needed gaming expertise. What was intended initially was not a joint venture between Galaxy and LVS, but a management agreement, whereby LVS would operate Galaxy’s casinos for a fee.”

Not gazetted Business Daily has also learned that some members of the government wanted the facts in Mr Tam’s 2006 assurance letter to be recorded in Macau’s Official Gazette as a matter of public policy. But it was decided not to do so reportedly for technical, legal, reasons. That lack of gazetting arguably also had some incidental political benefits for the government, because it avoided the appearance that Macau had gone out of its way to favour one particular foreign company in its casino market liberalisation drive. Sources have told this newspaper that although back in 2002 LVS had a relatively short track record in casino operations in Las Vegas, Macau officials liked the quality of The Venetian Las Vegas compared to some of the casinos around it on the Las Vegas Strip. They also liked LVS’s focus on the conventions business.

During the second trial of the Suen lawsuit, LVS chairman Sheldon Adelson explained to the jury that the impetus for involvement in Macau was driven by the firm’s own management. But sources have suggested to us that the issue was more nuanced. All the Las Vegas operators interested in Macau were concerned going there could put their Nevada licences at risk. “Groups in Las Vegas approached the Nevada Gaming Control Board and asked if it would be okay to go to Macau,” stated a U.S.-based source. “But Nevada’s position is ‘You do so at your own peril’.” The person added: “Because they [LVS] didn’t have clear guidance from the [Nevada] Gaming Control

Sub-concession How three concessions produced six operators in the liberalised casino market

ands China Ltd – a company now listed in Hong Kong and 70.3 percent owned by Las Vegas Sands Corp. – had Macau assets with a net book value of approximately US$6.99 billion (55.8 billion patacas) as of June 30 according to the firm’s 2012 interim report filed with the Hong Kong Stock Exchange. The story of how all those assets theoretically rest on a subconcession from Galaxy Casino SA – a previously untried casino company founded by construction materials tycoon Lui Chee Woo – has never been fully explained. Jorge Oliveira, a former commissioner for legal affairs for the Macau Gaming Commission, gave some of the background in the original 2008 Nevada civil court case brought by Hong Kong businessman Richard Suen. Mr Suen was then – as now – suing LVS for money he said the firm owed him for helping get Macau gaming rights. In his evidence, given in person, Mr

Oliveira explained that neither LVS nor Galaxy could have succeeded on its own in Macau. They couldn’t agree to work together, and so he came up with the sub-concession idea. Once LVS got its sub-concession from Galaxy, the other two successful bidders in the 2002 process – Sociedade de Jogos de Macau SA, founded by former Macau gaming monopolist Stanley Ho Hung Sun; and Wynn Resorts Ltd, chaired by Steve Wynn – argued they too should have the right to offer sub-concessions. SJM was allowed to sell its subconcession rights to a joint venture between the then MGM MIRAGE and Pansy Ho Chiu King, a daughter of Mr Ho, for US$200 million. Wynn was able to get US$900 million from another joint venture – then known as Melco-PBL and now Melco Crown Entertainment Ltd headed by another of Mr Ho’s children, Lawrence Ho Yau Lung – for its sub-concession. “It has been suggested that the

right to sell off the sub-concession compensates the licence holders in some way for the additional competition entering the market,” says Professor William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. M.G.

Francis Tam – confidential letter to LVS bankers

May 16, 2013

Macau

Suen wins US$70 mln for helping LVS Casino firm says will appeal second Nevada jury award linked to Macau gaming licence Michael Grimes

michael.grimes@macaubusinessdaily.com

Board, and because they [LVS] knew nothing about China or Asia, they were scared that it might impact on their licence. They decided to ask someone to recommend a financial entity that would work with them to make ‘a Venetian’ in Macau.”

Taiwan connection An advisor in the U.S. recommended CDIB Capital International Corp, based in Taiwan and one of the largest and longest standing merchant banking groups in Asia with approximately US$17 billion in assets. A suggested partner on the ground in Macau was Asian American Entertainment Corp., a firm linked to CDIB. But CDIB was

politically unacceptable to Macau and Beijing. The chairman of CIDB also happened at that time to be chairman of the financing committee of the Kuomintang – the Chinese Nationalist Party that lost the civil war to Mao Zedong’s Communist Party of China in 1949 and went into exile on Taiwan. “LVS had absolutely no sensitivity for this issue,” says the U.S.-based source. So keen however was the Macau government to tie with LVS, that a message was sent privately to the firm that its proposed tie-up with CDIB “would not go anywhere” but that the administration wanted LVS to stay involved in the tender process, and that the firm was “free” to associate with someone else if it wished.

as Vegas Sands Corp must pay US$70 million (560 million patacas) to Hong Kong businessman Richard Suen for his help in obtaining a Macau casino licence more than a decade ago, a Nevada jury said at the end of a second trial on the matter. The award is nearly US$10 million more than the US$43.8 million plus interest the first jury gave him in 2008. The Nevada Supreme Court overturned that verdict on technical grounds in 2010 after an appeal by LVS. There is no indication Mr Suen will get the money from his latest courtroom win any time soon. “We believe there are compelling and sufficient grounds on which to appeal this verdict and we will do so aggressively,” Ron Reese, a spokesman for the casino company, said in an e-mailed statement. John O’Malley, one of Mr Suen’s lawyers, said after the verdict on Tuesday U.S. time, he thinks the latest decision will survive any appeal. “A question for Mr Adelson: ‘When are you going to pay that?’” Mr O’Malley said. LVS’s 2012 annual report shows that last year Macau – where LVS now has four casino resorts – accounted for 53 percent of the company’s US$3.79 billion global adjusted property earnings before interest, taxation, depreciation and amortisation. Mr Suen had asked in the latest lawsuit for US$328 million – more than four times what the jury eventually awarded him. His lawyers a r g u ed L VS b r ea ch e d a 2 0 0 1 agreement to pay him and some associates US$5 million (40 million patacas) and two percent of the net income from the company’s Macau casinos if it were awarded a gaming permit there. LVS chairman Sheldon Adelson claimed during his court testimony in the month-long trial that Mr Suen – introduced by his younger brother Lenny Adelson – in reality contributed nothing to the company’s being selected by the Macau government. Lawyers for the casino

firm argued that Macau made its decisions independently from the central government in Beijing. Mr Suen argued at the trial that the meetings he arranged for LVS senior management with China’s then vice premier Qian Qichen and Beijing mayor Liu Qi, were crucial to the firm’s success in obtaining a Macau licence. Mr Suen said it helped that during those meetings, Mr Adelson reassured Chinese officials they didn’t have to worry that the U.S. House of Representatives would derail Beijing’s bid to host the 2008 Olympics.

Multiple lawsuits Other middlemen or former partners have claimed they helped LVS win Macau gaming rights. In 2009 the firm agreed to pay US$42.5 million in an out of court settlement to Clive Bassett Jones, Dax Turok and Cliff Cheong. The men said they had been responsible for pairing LVS with Galaxy Casino SA in one of three concessions awarded by the Macau government in 2002. LVS was given a sub-concession later that year to build and operate its own casinos after it decided not to proceed with the Galaxy partnership. In January last year Asian American Entertainment Corp, a Taiwan company led by Taiwan entrepreneur Marshall Hao Shisheng, filed a lawsuit against LVS in Macau. It claimed LVS and Mr Hao agreed to put forward a joint bid for Macau rights with financial support from Taipei-based China Development Industrial Bank, which agreed to underwrite the offer. The bank would get a share of 51 percent of the resulting local concession, while LVS would get 27.5 percent and Mr Hao 10 percent said Asian American’s suit. LVS describes the Macau lawsuit from Mr Hao’s firm as “vexatious and oppressive re-litigation of duplicative claims” claiming it addresses “issues that were already resolved” in Nevada courts. That Macau case is still pending.

Richard Suen, left, won new Nevada trial v. Sheldon Adelson’s LVS

With Bloomberg News

May 16, 2013

Macau

Cotai land grant sends SJM shares to record Announcement comes seven months after SJM said it had land in Cotai; will seek to lease an adjoining block Tony Lai

tony.lai@macaubusinessdaily.com

hares of SJM Holdings Ltd reached a new high yesterday after an announcement the casino operator won government approval to develop a casino-resort in Cotai. SJM’s stock price surged as much as 4.9 percent in trading on the Hong Kong Stock Exchange, the highest share price since 2008’s initial public offering, to close at HK$22.50 (US$2.84). The company was granted a 25year lease for a 70,468-squaremetre block of land near the Macau Dome, the Official Gazette reported. The lease permits an up-market hotel-casino development with a floor area of about 520,000 square metres to be built on the site. SJM will pay a land premium of 2.15 billion patacas and rent of 8.97 million patacas a year. The company first applied for Cotai land in 2006. The proposal

Each of the city’s six gaming operators now have land for casino-resort developments in Cotai (Photo: Manuel Cardoso)

included a casino, hotel, spa and apartment hotel in an area of about 74,000 square metres. The plan was revamped in 2010 and its approval officially

announced yesterday. The project will be the first whollyowned Cotai resort for the company founded by gaming tycoon Stanley Ho Hung Sun and means each of the

city’s six gaming operators now have land in Cotai.

Land lock “SJM is now formally entitled to develop that land,” said Union Gaming Research Macau analyst Grant Govertsen. He said the next step was to win approval for construction, which should take “at least a few months”. Last November, SJM said the Cotai development could cost up to 20 billion patacas, include 700 gaming tables, 1,000 slot machines and 2,000 hotel rooms. But the price tag is likely to increase with the company hoping to combine its land with a 180,000-square-metre block controlled by SJM executive director Angela Leong On Kei. If that plan is approved, the company would have a casino-resort more than three times the size of the plot approved yesterday. SJM chief executive Ambrose So Shu Fai said last week it was likely that SJM would rent the nearby land controlled by Macau Theme Park and Resort Ltd, a company led by Ms Leong. “When we develop together… we can put the non-gaming elements on [Macau Theme Park’s] parcel to support the gaming elements in the original land plot SJM was granted,” he said. Mr So said construction would begin this year and be completed sometime “between 2016 and 2017”. Mr Govertsen said SJM might be able to begin heavy construction sometime towards the end of this year. With Bloomberg News

Lady luck boosts Galaxy earnings Record results for Galaxy, thanks to mass-market growth, higher win rates Vítor Quintã

vitorquinta@macaubusinessdaily.com

The acquisition of Grand Waldo ‘will further extend our casino permitted landbank,’ says Lui Che Woo

ith more bets falling on mass-market tables and a more favourable lucky streak, casino operator Galaxy Entertainment Group Ltd posted a 29 percent year-on-year increase in first-quarter earnings. Adjusted earnings before interest, taxes, depreciation and amortisation for last quarter rose to HK$2.8 billion (US$357 million), Galaxy said in a statement yesterday. That compares with a median estimate of HK$2.79 billion from six analysts compiled by Bloomberg News. Most of the growth came from the mass-market tables at its flagship property Galaxy Macau, with bets rising by 14 percent year-on-year to HK$6.69 billion. But the amount of money that the Hong Kong-based firm pocketed from those bets rose even faster, by 42 percent to HK$2.26 billion, all thanks to lady luck. The operator founded by billionaire Lui Che Woo managed to keep 33.8 percent of all bets, up from 27.1 percent a year earlier. And Galaxy’s lucky streak also extended to the VIP segment. Even though high-stakes bets at Galaxy Macau fell by 2 percent year-on-year to HK$168 billion, the firm’s net win rose by 15 percent to HK$5.9 billion.

VIP gamblers curbed spending last year as China’s economy weakened but “there have been positive signs that demand in the VIP segment is regaining momentum,” Galaxy said. VIP gaming revenue in Macau’s casinos rose by 9.8 percent in the first quarter of this year, official data show. Galaxy said last week that it will pay HK$3.25 billion for lossmaking Grand Waldo hotel-casino. “We are pleased that we will further extend our casino permitted landbank,” chairman Lui Che Woo said in a statement. The operator is also investing HK$16 billion in the second phase of Galaxy Macau, which will almost double the current size of its Cotai resort. The phase-two expansion, which the company has started, will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotels by 2015. Galaxy is also planning to spend up to HK$50 billion to begin phasethree expansion of the project at the end of 2013 or the beginning of 2014. Galaxy shares, which have gained 82 percent over the past 12 months, were 0.26 percent up to close at HK$38.40 in Hong Kong trading. The benchmark Hang Seng Index gained 0.5 percent. With Bloomberg News

May 16, 2013

Macau

Nansha ready to fight for SMEs Delegation signs investment deals worth 17 billion patacas with trade associations and industries Stephanie Lai

sw.lai@macaubusinessdaily.com

he destination of choice for small and medium enterprises was Hengqin Island but Nansha might be a brighter prospect, says the president of the Macau Chamber of Commerce in Nansha. “Frankly speaking, I think Nansha has an easier threshold for small and medium enterprises to settle in than Hengqin,” said the chamber’s president Victor Lei Kuok Fai. Speaking on the sidelines of an investment promotion conference yesterday, Mr Lei said Hengqin had “a higher requirement for capital spending”. Auctions of land in Hengqin have been restricted to companies with assets of more than 300 million yuan (390.2 million patacas) that can afford a 80-million-yuan deposit. “And the service sector in Hengqin is of a narrower range. It is too tourism-oriented,” said Mr Lei, who is the managing director for logistics firm Victor Pacific Service Ltd. He said Nansha would promote the stable development of logistics. “Nansha has a bonded port, which makes it easier for import-export

companies to have their products bonded as soon as the ships entered the port,” he said. A delegation from Nansha signed seven cooperation agreements with trade associations and firms here that could involve up to 17.05 billion patacas (US$2.13 billion) in investments. The agreements cover commercial services, logistics and sales of cultural and creative products. A 550-million-pataca deal signed by the Macau Chamber of Commerce in Nansha would see it establish a product exhibition centre for products made by Portuguesespeaking countries and a logistics hub, including cold storage, Mr Lei said.

Corporate Zhou Shiming back in the ring Zou Shiming, the two-time Olympic gold medallist and three-time Amateur World Champion will return to the ring at the Cotai Arena on July 27 to face Jesus Ortega from Mexico. The Fists of Gold II will also feature two world championship fights – WBO/WBA flyweight champion Juan Estrada vs. Milan Melindo and IBF featherweight champion Evgeny Gradovich vs. Mauricio Muñoz. Fists of Gold II ticket holders will be able to purchase advance tickets for November’s Manny Pacquiao vs. Brandon Rios fight during an exclusive period prior to general public sales. “Deciding to host Zou Shiming’s professional debut in April was a great move – for Sands China and for Macau,” said Edward Tracy, president of Sands China Ltd, in a statement. “I was very pleased with how quickly [Zou] Shiming learned what I was teaching during our first training camp and he is the hardest worker in the gym,” said trainer Freddie Roach.

Grand Hyatt opens new club An interactive open kitchen is the highlight of the new Grand Club unveiled at the 37th floor of City of Dreams’ Grand Hyatt Macau last month. The club includes private dinning and meeting rooms, as well as a lounge featuring design inspired by Macau’s Portuguese heritage. Floor-to-ceiling windows showcase views over Cotai and a seated terrace offers alfresco lounging and dining, with chefs ready to create Asian and international flavours. Guests of the four private dining rooms can enjoy a combination of signature gourmet specialties, including Peking duck and traditional Macanese food. The private dining rooms are sized from 15 to 40 square metres for between eight to 12 guests, Grand Hyatt said in a statement. They can also be used for small meetings, as each comes with a built-in LCD projector or flat-screen TV. Two of the rooms are equipped with an LCD TV with built-in videoconferencing capabilities.

Officials from Nansha, a statelevel special economic zone, said in September closer cooperation with Hong Kong and Macau would be built. Officials intend to offer preferential taxation and land management policies to Hong Kong and Macau residents working there. Full details have not been released. The Nansha delegation signed 17 cooperative agreements with Hong Kong on Monday, with more than 234.8 billion yuan in investments pledged in areas including commercial services, energy and film production. Nansha is 803 square kilometres and has a population of 720,000 people. It is the biggest of the three

special trade zones in the mainland, which include Qianhai and Hengqin. Nansha district committee secretary Ding Hongdu said yesterday that Nansha could attract more than 1.5 trillion yuan in investments over the next 15 years and boast a population of 2.5 million people. At the beginning of this year, there were 156 developments underway in the district, involving an investment of 370 billion yuan. Mr Ding told reporters earlier this year that Nansha had a target for fixed investment growth of 25 percent this year. At yesterday’s conference he said a similar trade promotion conference would soon be organised in Singapore.

May 16, 2013 April 19, 2013

Macau

EU Chamber of Commerce could be a reality this year More European small and medium firms seeking to start a business here Tony Lai

tony.lai@macaubusinessdaily.com

acau will soon see the establishment of a chamber of commerce that could help firms from all European Union (EU) countries to run a business here. “We’re still in the process of construction and we hope to finalise it soon,” said Franklin Willemyns, president of the France Macau Business Association. “It needs a lot of coordination [from different parties] and we mainly have to think how it will be structured, financed and so on,” he told Business Daily on the sidelines of a seminar yesterday. Mr Willemyns’ national business association is one of the six European chambers here behind the founding of the European Chamber of Commerce, which could “hopefully start this year,” he said. The other five are the chambers

from Portugal, Britain, Germany, Romania and Ireland. The European Union chamber will play “a complementary role” with the existing European organisations here while supporting firms from European countries that have no representative here, said the Frenchman. Vincent Piket, the head of the Office of the European Union to Hong Kong and Macau, is “very happy” to see the project closer to becoming a reality. “We are totally dedicated to try to build up the chamber into a flourishing entity to promote bilateral trade and to promote the visibility of the EU companies here,” he told reporters on the sidelines of the same event. Mr Willemyns also sees “a growing trend” for small and medium

enterprises from Europe starting business here in sectors like bakery, design and translation. “Macau is a growing market with many possibilities,” he said. “The environment is easy with no taxes or low [taxes] and legally speaking it is something similar to what people may find in Europe.” “Macau customers may be more demanding [compared to mainland China] but it is easier to start a business,” he said. Macau is an attractive first stop for European firms seeking access to the Chinese market. Mr Piket said bilateral trade between Europe and Macau continues to grow in 2013 after “reaching a record last year”. The Europe Union’s exports to Macau rose by 7.4 percent to 16.65 billion patacas (US$2.08 billion)

City suffers ‘surprising’ fall in package tourist arrivals For the first time in two years, the number of tourists arriving on package tours has dropped Tony Lai

tony.lai@macaubusinessdaily.com

The number of package tourists from Taiwan in March fell by more than a third in year-on-year terms

streak of increasing arrivals of tourists on package tours ended unexpectedly in March, declining for the first time since April 2011. The Statistics and Census Service announced yesterday the number of

arrivals on package tours was about 739,000 people in March, a decline of 2 percent compared to the same time last year. “It is surprising, as the number of package tours has sustained quite a strong growth in recent

times,” said president of the Macau Travel Industry Council, Andy Wu Keng Kuong. “It is difficult to pinpoint any reason now as we have not expected that.” Arrivals on package tours grew at a double-digit rate last year, even though overall visitor arrivals tumbled between May last year and January. Arrivals from the city’s second biggest market for package tourists, Taiwan, fell to 45,703 people in March, a 35.2-percent drop. Mr Wu told Business Daily the fall was potentially because the number of tourists had grown by two-thirds, making the base for comparison much larger this year. “There was sound growth in Taiwan tours last year as the casino companies here had carried out many promotion activities there to lure [the Taiwanese] to come,” he said. “But this year we feel there were relatively fewer casinos promotions in Taiwan.” In the first three months this year, Taiwanese arrivals in tour groups have fallen by 18.2 percent. Year-on-year growth of package tourist arrivals from the mainland, Macau’s biggest market, declined slightly to about 533,100 tourists in March – a fall of 0.4 percent

‘Macau customers may be more demanding but it is easier to start a business’, says Franklin Willemyns

in last year. Mr Piket recommends that Macau “join the government procurement agreement under the WTO (World Trade Organization)”. It is “valuable” in order to ensure both Macau and outside firms can have an “equal” opportunity to compete for public projects here, he said. Secretary for Justice and Administration Florinda Chan, also present at the event, told reporters they would carefully look into Mr Piket’s suggestions.

But there were almost 1.7 million additional mainland tourists arriving on package tours in the first quarter of this year, an increase of 21.4 percent. Mainlanders accounted for 73.8 percent of all tourists arriving on package tours in the first quarter of this year.

A one-off Mr Wu said the fall was “more of a one-off phenomenon”. “I do not think the political situation played a strong role in this [slow-down],” he said. A subsidiary of gaming operator Melco Crown Entertainment Ltd is being investigated by prosecutors in Taiwan for alleged illegal transfer of gamblers’ cash to Macau. The inquiry comes after a pledge by President Xi Jinping to strengthen efforts to tackle corruption. Mr Wu is optimistic that package tours will grow this year. “From what the industry has experienced, the April figures will not be bad in spite of the gloom of the H7N9 virus,” he said, referring to the bird influenza outbreak late in March. “Package tours will continue to be the main driving force of the tourist growth in the city as we expect there will only be a low rise in individual travellers.” Macau received about 2.3 million visitors on package tours in the first quarter, an 11.8 percent increase that outstripped the 1.9-percent rise in total arrivals. The number of arrivals from South Korea and Thailand increased at double-digit rates in the first quarter but there was a sharp drop in tourists from Japan and India. Occupancy rates at the city’s 100 hotels and guesthouses fell to 78.7 percent in March, a year-on-year fall of 6.3 percentage points. The statistics bureau said about 5,850 more rooms were made available.

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Diversification ‘limited’ under CEPA, says WTO An intensified effort is required to assist the city’s financial industry push into mainland markets

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acau’s attempts to develop new trade and business ties with the mainland through the Closer Economic Partnership Arrangement has enjoyed “limited success so far”, the World Trade Organisation says. In a report for the fourth Trade Policy Review, a three-day meeting that ended in Geneva yesterday, the Macau government said CEPA had “nurtured some ‘new’ manufacturing industries”. Exports of food and coffee processing, recycled plastics, stamps and refined copper foil to the mainland have “increased markedly since 2009” because they are exempt from tariffs, the report said. The trade organisation said Macau’s representatives at the meeting were hopeful the city could develop “a high value-added textile and clothing sector”. “Some new industries have also emerged, including green lighting products, spring mattresses, electric motorcycles, and solar technology.” The trade organisation said CEPA might “enable enterprises to extend their industrial chains and move into more advanced industries, and thus help boost industrial transformation and upgrade”. But “more efforts to diversify the economy are needed to realise the opportunities brought by the CEPA, and to achieve sustainable development of the economy,” the report says.

Although some “made-inMacau” products can be exported to the mainland without duties, no sales have been reported. The dominance of the tourism and gaming sector “has led to increased production costs, including for land and labour” and “squeezed the manufacturing sector”. CEPA applies to the city’s service sector but entering the mainland “remains difficult particularly in the financial services sector,” the report says. The government says the financial sector “is among those ripe for diversification” as CEPA can help it “explore new business opportunities in mainland China”. However, no CEPA service supplier certificates have been issued for banking, insurance, securities and futures in Macau, “mainly due to the relatively high minimum capital requirement”, the World Trade Organisation said. “The economy is small and most enterprises in Macau SAR are SMEs”. CEPA also provides foreignowned enterprises with a tariff-free gateway to the mainland market but so far very few have done so. “If foreign investors take advantage of the opportunities provided under the CEPA and other regional cooperation initiatives to enter China’s market”, foreign direct investment into Macau could increase.

Food processing exports to the mainland have increased since CEPA arrangements came into effect

May 16, 2013 April 19, 2013

Greater China Hon Hai up on higher contract prices Hon Hai Precision Industry Co., the Taiwanese assembler of iPhones and iPads, posted first-quarter profit that missed analysts’ estimates after reporting its biggest revenue drop in at least 13 years. Net income for the period was NT$16.35 billion (US$549 million) from NT$14.92 billion a year earlier, the Taipei-based company said in an exchange statement. Higher assembly fees lifted first-quarter earnings even as shipments declined on slower demand for Apple Inc.’s gadgets. Weakening orders from Apple Inc. products and a slowing global computer market drove revenue down 19 percent from a year earlier.

Li signals little room for policy stimulus Chinese Premier warns economy under pressure

hinese Premier Li Keqiang signalled policy makers are reluctant to use stimulus to counter a slowdown in the world’s second-largest economy because the risks outweigh the benefits. “To achieve this year’s targets, the room to rely on stimulus policies or government direct investment is not big – we must rely on market mechanisms,” Mr Li said in a May 13 speech broadcast to officials around the country, according to a transcript published Tuesday night on the central government’s website. “If there in an over-reliance on government-led and policy driven measures to stimulate growth, not only is this unsustainable, it would even create new problems and risks,” he was quoted as saying. The comments indicate China may be unlikely to boost government spending or follow central banks across Asia in cutting interest rates as Mr Li tries to pare the state’s role in the economy. Bank of America Corp. and JPMorgan Chase & Co. this week lowered 2013 growth estimates to 7.6 percent after April industrial production and investment trailed forecasts. “The comment suggests that there won’t be any large-scale stimulus, but that doesn’t mean the government won’t try at all to boost growth,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The growth in the

To achieve this year’s targets, the room to rely on stimulus policies or government direct investment is not big – we must rely on market mechanisms Li Keqiang, China’s prime minister

first four months is too weak for the government to be fully relaxed.”

Lending spree Last year China cut interest rates twice and accelerated

Chinese corporate debt to overtake U.S., S&P says

hinese corporate borrowing will probably exceed that of U.S. companies within the next two years, according to Standard & Poor’s. Non-financial institutions from the world’s second-largest economy will need US$18 trillion of debt during the five years ending 2017, the ratings company said in a report yesterday. That’s 34 percent of the US$53 trillion in bonds and loans S&P estimates will be sought globally and compares with US$13 trillion forecast for U.S. companies. Chinese and Hong Kong borrowers sold US$41.2 billion of U.S. dollardenominated bonds since December, the busiest start to a year on record, according to data compiled by Bloomberg. Cnooc Ltd, the nation’s biggest offshore energy explorer, raised US$4 billion this month with the largest offering out of Asia in a decade, as it looks to replace part of a loan used to

investment approvals in response to slowing growth. Mr Li’s comments were made at a nationwide teleconference on reducing’s the government’s role in economic development. The government will cut unnecessary

checks and approvals to boost private investment, he said. The country’s growth is under “relatively large” downward pressure, he added. Mr Li’s predecessor, Wen Jiabao, rolled out a 4 trillion yuan stimulus (US$586 billion at the time) and an

EU may levy duties against Huawei

acquire Canada’s Nexen Inc. “High levels of investment, primarily in manufacturing, real estate, and infrastructure, have supported the country’s strong economic growth rate, particularly over the past five years – and credit is fuelling this investment,” S&P said in the report. “While China is now on a lower growth trajectory than in the prior decade, the trajectory is still very high by global standards.” China’s risk of a growth correction is the highest among 32 economies surveyed because the nation’s investments are less productive, S&P wrote in the report. The country’s outstanding corporate debt will overtake that of the U.S. in 2014 if it swells at 1.2 times the pace of nominal gross domestic product growth, or in 2015 if the increase matches GDP, S&P said. Bloomberg News

Commission to send formal letter to Beijing

he European Commission plans to send a formal warning to China that it is ready to levy sanctions against telecoms equipment makers Huawei Technology Co Ltd and ZTE Corp over illegal subsidies, people close to the matter said. EU trade chief Karel De Gucht is set to win support from the bloc’s executive to send the warning letter and show China’s new president, Xi Jinping, that Brussels is serious about countering what it says is state support. “We want to send a warning to the Chinese, a letter of intent that if they don’t change their practices, there will be duties,” said one person involved, adding that Mr De Gucht had the full backing of European Commission president José Manuel Barroso. The decision will mark an

intensification of the European Union’s efforts to guard against what Brussels says is dumping by China, the EU’s second-largest trading partner. From June, the Commission will also levy duties on billions of dollars of solar panels from China, EU officials have told Reuters. Huawei was a little known telecoms firm less than a decade ago but today, along with its smaller rival ZTE, it holds almost a quarter of the European market. That poses a security risk, the Commission says, because European industries ranging from healthcare to water utilities are becoming reliant on cheaper Chinese wireless technology. An internal EU report last year recommended that the 27-member bloc should take action against Chinese

May April16, 19,2013 2013

Greater China Galaxy Sec prices IPO near bottom China Galaxy Securities Co Ltd, a brokerage controlled by the country’s sovereign wealth fund, raised about US$1.1 billion in an initial public offering in Hong Kong, pricing the offer at the low end of its marketing range as it looks for a first day pop on its debut next week. The company, based in Beijing, sold 1.57 billion shares at HK$5.30 apiece, the people said. The final price values Galaxy Securities at about 1.3 times estimated end-2013 book value, one of the people said. The company launched the deal on May 6, with an indicative range of HK$4.99 to HK$6.77 per share. On Tuesday it narrowed the range to HK$5.28-5.43 per share.

unprecedented bank lending spree at the end of 2008 to shield the economy from the global financial crisis, leaving an overhang of debt from loans. China needs to break an “administrative monopoly” in finance, telecommunications, logistics, health care and education to boost the growth of service industries, Mr Li said in the speech. “The barriers to entry in these areas are high or very high, but the potential of these areas is huge for China,” he said. Economic growth of 7.7 percent in the first quarter trailed the fourthquarter expansion of 7.9 percent. Mr Li’s comments reinforce Nomura Holdings Inc.’s view that any policy easing is unlikely, at least this quarter, and growth may slow to 7.5 percent in the April-June period, Zhang Zhiwei, chief China economist in Hong Kong, said in a note yesterday. That outlook is shared by economists at Bank of America led by Lu Ting, head of Greater China economics in Hong Kong. “We don’t expect China’s new policy makers to introduce any significant incremental stimulus measures,” they wrote in a note. “Neither do we expect rate cuts.” The government in March set a 2013 goal of 7.5 percent, a target most analysts believe would be attained, though some have slashed their forecasts down towards 7.5 percent from initial predictions closer to 8 percent due to fragile economic conditions. Bank of America-Merrill Lynch, for instance, reduced last week its 2013 growth forecast for the Chinese economy to 7.6 percent. Bloomberg News/Reuters

telecoms equipment makers as their increasing dominance of mobile networks made them a threat to security as well as to home-grown companies. A Huawei spokeswoman in Brussels declined to comment on the move, but the company denies receiving unfair subsidies. It says its advantages are due to low-cost manufacturing and that its products are secure. Mr De Gucht told Reuters in February there were serious concerns about China’s growing presence in mobile telecoms networks, noting that the United States and Australia had effectively shut Huawei out of their markets.

Yuan band may be widen after SAFE rule: JPMorgan Government has pledged to allow more flexibility

PMorgan Chase & Co. said China may widen the yuan’s trading band in the next three months after the foreign-exchange regulator announced rules to deter speculative funds from betting on appreciation. The State Administration of Foreign Exchange said on May 5 it would put in measures to increase monitoring of cross-border trade flows and ordered banks to adjust currency positions so that dollar loans are kept at a certain proportion to deposits. Patrick Wu, head of yuan trading at JPMorgan, the largest U.S. bank by assets, said the move may be part of preparations to broaden the band. “If SAFE widened the band without the new measure, it would trigger more speculation,” MrWu said in an interview yesterday in Shanghai. “However, if they introduce the measure, it would be more helpful to push down the yuan’s spot level and give SAFE more room to widen the band because corporates and banks will have to reduce shortdollar positions.” The government has pledged to allow more flexibility in the exchange rate and promote freer movement of capital in and out of the country for investment

purposes. China’s State Council signalled last week it will propose plans this year for yuan capitalaccount convertibility. The central bank last widened the band in April 2012, to 1 percent from 0.5 percent.

Taiwan recalls envoy over Manila row

Guard ship opened fire on a fishing vessel in waters claimed by both sides, spokeswoman Li Jia-fei said at a briefing. The Philippines had offered to send the chairman of the Manila Economic and Cultural Office to apologise. Taiwan had given the Philippines until yesterday to respond to its demands that it issue a formal apology, compensate the fisherman’s family, investigate the incident and punish those responsible, and negotiate to settle a dispute over fishing grounds claimed by both sides, Mr Li said. Taiwan will impose a “second wave” of measures if the Philippines doesn’t meet those demands.

Placing limits on work applications may slow Philippine President Benigno Aquino’s push to cut the jobless rate, with Filipinos the third-largest group of foreign workers in Taiwan. The Philippines’ overseas workforce accounts for 10 percent of its gross domestic product. The commander and crew of the vessel that opened fire on the fishing boat have been relieved of duty, Mr Aquino spokeswoman Abigail Valte said earlier this week. He said the Philippines expresses “heartfelt sorrow” over the incident.

body this year, will be investigated by Simon Peh, who succeeded him as commissioner of the Independent Commission Against Corruption in July, the agency and government said. The ICAC pursued a number of high-profile investigations under Mr Tong including arresting former Chief Secretary Rafael Hui in March 2012 and the co-chairmen of Sun Hung Kai Properties Ltd, Thomas and Raymond Kwok. Hong Kong lawmakers and Chief Executive Leung Chun Ying earlier said they will review spending at the

ICAC under Mr Tong, who headed the agency from 2007 until 2012. The investigation into Mr Tong is the first the ICAC has publicly disclosed into a current or former agency head since it was founded in 1974. It declined to comment further yesterday. Lawmakers questioned Mr Tong’s actions after the ICAC reported he had spent at least HK$218,000 (US$28,000) on gifts, including a HK$4,140 ornament given to the Supreme People’s Procuratorate of China. He also spent HK$757,921 on 34 trips, 19 of them to the mainland.

aiwan President Ma Ying-jeou recalled his representative from the Philippines and froze the hiring of workers from the Southeast Asian country, rebuffing the government’s apology over the killing of a fisherman at sea. Mr Ma isn’t satisfied with the Philippine government’s response to the May 9 shooting, in which a Coast

June prediction The People’s Bank of China sets a daily reference rate against the dollar around 9.15 am in Shanghai. The yuan has been within 0.1 percent of the upper limit on most days since October. The fixing was weakened 0.06 percent to 6.2070 yesterday. Mr Wu said the reference rate may strengthen to 6.10 by year-end. China’s currency has appreciated

1.5 percent in the last three months, the third-best performance among 24 emerging-market currencies tracked by Bloomberg after the Mexican peso and Malaysia’s ringgit. Widening of the band is likely in June or shortly after, Credit Agricole CIB strategist Dariusz Kowalczyk wrote in a research note on May 7. With the new foreign-exchange position limits for banks, policy makers were likely trying to reduce speculative capital and prepare ground for foreign-exchange regime relaxation, Hong Kong-based Mr Kowalczyk said. The band may be expanded around June, before the U.S.-China Strategic Economic Dialogue in Washington during the week of July 8-12, Bank of America Merrill Lynch strategist Christy Tan in Singapore wrote in a report. The PBOC may widen the band against the dollar to 1.5 percent or 2 percent, while 1.5 percent is more likely, Ms Tan said. A widening is likely “in the near future,” People’s Bank of China Deputy Governor Yi Gang said in April. China will push ahead with opening its capital account because current economic conditions are favourable, Mr Yi said. Bloomberg News

AFP

Reuters

KEY POINTS EU worried about subsidies to telecoms gear makers Huawei, ZTE hold almost 25 pct of EU market Sanctions would follow duties on Chinese solar panels

Former ICAC head faces graft probe

ong Kong’s anti-graft agency will investigate its former head amid allegations of corrupt practices and misconduct after spending more than US$100,000 on gifts and travel during his term. Timothy Tong, who was appointed to China’s national political advisory

Bloomberg News

May 16, 2013

Asia

Australia’s budget surplus blows out to deficit Treasurer Swan shuns Europe-style austerity

ustralian Treasurer Wayne Swan will eschew Europeanstyle austerity as a stronger currency slows growth, wagering the government can win a September 14 election fought on jobs and absorb the pain of a broken surplus promise. The underlying cash deficit will be A$18 billion (US$17.8 billion) in the 12 months to June 30, 2014, Mr Swan said in Canberra as he released the federal budget. The A$19.4 billion shortfall this fiscal year is 1.3 percent of gross domestic product, compared with a projected A$1.1 billion surplus released in the government’s mid-year review seven months ago. The Australian dollar dropped to an 11-month low after the release. “To those who would take us down the European road of savage austerity I say the social destruction that comes from cutting too much, too hard, too fast is not the Australian way,” Mr Swan told parliament. “The alternative, cutting to the bone, puts Australian jobs and our economy at risk.” Mr Swan outlined a longer path back to the black that funds pledged spending on infrastructure, education and disability care, while saying restraint gives the Reserve Bank of Australia scope to cut recordlow interest rates even further. Prime Minister Julia Gillard’s Labor government trails Tony Abbott’s opposition by double digits and has seen its economic credibility weakened as a stronger currency dents tax revenue and weighs on exporters and manufacturers. “The revenue forecasts have

been pared back, they’re a bit more realistic, but I think they’re probably still a little optimistic,” said Su-Lin Ong, Sydney-based head of Australian economic and fixed-income strategy at Royal Bank of Canada. “It’s a modest fiscal tightening back to surplus. It sits with the idea of lower for longer in terms of the RBA. That’s consistent with their easing bias.” After the fiscal plans were released, Moody’s Investors Service vice president Steven Hess said Australia’s Aaa rating with a stable outlook remains intact. Standard & Poor’s echoed that view, saying the government continues to demonstrate a commitment to prudent fiscal policy. Fitch Ratings said its AAA rating with a stable outlook remains and the budget is consistent with

A$19.4 billion

Australia’s budget deficit this fiscal year

Australia’s commitment to fiscal consolidation. Traders are pricing in a 69 percent chance RBA Governor Glenn Stevens will lower the overnight cash-rate target by a quarter percentage point to a new record 2.5 percent by September, on the eve of the election, swaps data compiled by Bloomberg show. “The market’s mood towards the Australian dollar has turned remarkably bearish in a very short period of time, and Treasurer Swan gave it no reason to change its mind,” said Sean Keane, an analyst in Auckland at financial advisory group Triple T Consulting.

Huge pressure Treasury projects Australia’s unemployment rate will rise to 5.75 percent by June 2014, from 5.5 percent last month, as the economy undergoes a “substantial transition” from resource investment to growth led by industries like housing construction. “Challenging global conditions and the high Australian dollar have put huge pressure on the budget and led to a significant reduction in expected tax receipts,” Mr Swan said, announcing a revenue shortfall of A$16.6 billion in fiscal 2014. “This government is providing a buffer to continued global uncertainty and giving the Reserve Bank of Australia more scope to cut interest rates should it want.” Ms Gillard and Mr Swan, also her deputy, have struggled to protect

Fading mining boom has slowed economy

the ruling Labor party’s electorate from the two-speed economy – a phrase officials use to distinguish resource-rich regions in the north and west that powered growth and hired workers during the mining investment bonanza, from struggling tourism, manufacturing and retailers of the south and east. To help woo voters in the outer suburbs ahead of the election, the government plans to spend A$24 billion on roads and railways in Sydney, Melbourne, Brisbane and Adelaide. The government projects the budget will return to balance in the 12 months through June 2016 and record a surplus of A$6.6 billion in 2016-17, the budget papers show.

Singapore home sales halved in April Residential transactions down from March record

ingapore’s April home sales dropped 51 percent from a record in March as developers marketed fewer projects as residential prices posted the smallest gain in three quarters. Home sales fell to 1,375 units in April, according to data from the Urban Redevelopment Authority released yesterday. Sales in March rose to a record 2,793 units.

The island-state’s private residential property price index rose 0.6 percent in the three months ended March, the slowest pace in three quarters, according to data by the authority. Government measures in January, the seventh round of curbs in about four years, included an increase in the stamp duties for homebuyers by 5 percentage points to 7 percentage points.

Singapore – attempting to rein in prices since 2009

“Developers couldn’t sustain the pace of launches they had in March, so we are seeing fewer sales in April,” said Alan Cheong, senior director of research and consultancy at broker Savills (Singapore) Pte. “The month of May will probably see the same pace of launches as April. We may see a pickup from the start of the third quarter.” Home sales rose to a record in

March, rebounding from a 14-month low in February and the highest since the government started releasing the information in June 2007, the data showed. The curbs in January also included higher taxes on permanent residents when they buy their first home, and for Singaporeans starting with their second purchase. Singapore will offer five residential sites in May which can yield about 2,725 homes, according to a government statement today. Home sales reached 22,699 units in 2012, based on the government data that dates back to 1996. Singapore also plans to raise taxes for luxury homeowners and residential properties that are rented out. The higher tax will apply to the top 1 percent of homeowners who live in their own residences, or 12,000 properties, Singapore Finance Minister Tharman Shanmugaratnam said in his budget speech on February 25. The government tightened loanto-value limits for buyers seeking a second mortgage, referring to the amount they are allowed to borrow relative to the value of their properties. The cash down-payment will rise to 25 percent from 10 percent starting from the second loan, it said. Bloomberg News

May 16, 2013

Asia Nikkei surges past 15,000 mark

apan’s Nikkei average rose 2.3 percent yesterday, breaking above 15,000 for the first time since January 2008, with Sony Corp surging after an activist U.S. fund called on the company to spin off and list its lucrative entertainment unit. The market’s run to a fresh 5-1/2 year high was underpinned by further weakness in the yen and a strong performance from Wall Street, which was boosted by signs of better economic growth. The benchmark Nikkei advanced 337.61 points to 15,096.03, after rising as high as 15,108.83, levels last visited in January 2008. Sony soared 10.4 percent to its highest level in 22 months and was the fifth-most traded stock on the board by turnover. Hedge fund investor Daniel Loeb called on Sony to spin off its lucrative entertainment

Funding a return to surplus and savings to offset pre-election announcements of a disability care programme, overhaul of education and the upgrade of transport infrastructure, are measures including tightening company tax breaks for a saving of A$4.2 billion through June 2017. It will also scrap a cash payment to parents of newborns and cap family payments for a saving of A$2.4 billion. “This year we face the second largest revenue writedown since the Great Depression,” Mr Swan said in the speech. “This budget sets a sensible pathway to surplus, while making room for the big investments in our nation’s future.”

Japan PM’s aide makes N. Korea visit The alternative, cutting to the bone, puts Australian jobs and our economy at risk Wayne Swan, Australian Treasurer

Bloomberg News

n aide to Japanese Prime Minister Shinzo Abe made an unannounced visit to North Korea that could ease regional tensions after months of threats from the totalitarian state. Isao Iijima arrived on Tuesday in Pyongyang, the state-run Korean Central News Agency said in a statement, and was met by North Korean Foreign Ministry official Kim Chol-ho. Mr Iijima also served as a secretary to former Prime Minister Junichiro Koizumi, who visited Pyongyang in 2002 and 2004 in a bid

arm, setting the stage for a clash between his activist Wall Street fund and management at the Japanese electronics maker. Other exporters also were in the spotlight, with Toyota Motor Corp gaining 3.7 percent, Panasonic Corp surging 5.4 percent and Nikon Corp jumping 6.3 percent, after the dollar climbed as high as 102.40 yen on Tuesday, the highest level in 4-1/2 years. The broader Topix gained 1.8 percent to 1,252.85 in very active trade, with trading volume hitting a six-week high of 5.75 billion shares and the second highest this year. The Nikkei index has gained more than 6 percent since last Thursday, when the dollar broke above 100 yen. Analysts said that strength in overseas shares has encouraged the risk-on mood, which has drawn money into the Japanese market despite the rapid pace of gains in the Nikkei over the past week. The Nikkei has surged more than 45 percent this year on the back of bold government and central bank policies to revive the third largest economy. Reuters

to resolve the issue of Japanese citizens abducted by North Korea decades ago. Mr Abe yesterday in parliament declined to comment on Mr Iijima’s visit. Japan broke off talks with North Korea on the abduction issue in December after Kim Jong-un’s regime announced plans to fire a long-range rocket in defiance of international sanctions. North Korea then detonated an atomic bomb and warned of pre-emptive nuclear strikes against the U.S. and South Korea, threats that have moderated since the beginning of May. North Korea has been ready to conduct a fourth nuclear weapons test since its last atomic detonation in February, the South Korean Defence Ministry said last month. AFP

Wal-Mart opts out of Bangladesh factory deal Retailer’s safety plan draws scepticism from worker advocates

al-Mart Stores Inc. stepped up Bangladesh factory inspections while U.S. and European retailers pursued separate accords to try to prevent another disaster in a garment industry where more than 1,200 workers have died in the past six months. Wal-Mart, the world’s biggest retailer, said it does not plan to sign a fire and building safety agreement backed by some of Europe’s biggest apparel brands because it believes its own safety inspection plans will get faster results. Yesterday was the deadline for retailers to decide whether to join the consortium, led by labour groups such as Europe’s IndustriALL. Other U.S. retailers including Gap Inc. said they would not join the European pact without changes in the way conflicts are resolved in the courts. U.S. companies have been reluctant to join any industry accord that creates legally binding objectives. “Walmart believes its safety plan

meets or exceeds the IndustriALL proposal, and will get results more quickly,” the U.S. retailer said in a statement on Tuesday. But labour advocates reacted sceptically, noting that Wal-Mart’s announcement came only after at least seven major retail brands agreed to join forces and sign the safety accord hailed by supporters as industry-changing. Wal-Mart has begun checking the 279 factories that supply its stores, and plans to inspect them all within six months. Its checks have already turned up two locations with safety problems and it asked the Bangladesh government to suspend production at those factories. In Chittagong, about 250 kilometres from Bangladesh’s capital Dhaka, workers at one factory that Wal-Mart wants closed said they were unaware of any safety concerns and business was proceeding as usual. Company officials at Stitch Tone Garments Ltd said they were no longer making clothes for Wal-

Wal-Mart to inspect all its factories within six months

Mart, but did not say who they were currently supplying. The minimum wage for Bangladesh’s garment workers is about US$39 a month, although many factories pay more than that in order to attract workers in a tight labour market. Bangladesh ranked last in minimum wages for factory workers in 2010, according to World Bank data. The April 24 collapse of Rana Plaza in Savar, near Dhaka, has focused attention on safety standards at Bangladesh factories that make

clothing for the world’s major apparel brands and retailers. The death toll stood at 1,127 as rescue operations ended this week. But the companies that rely on Bangladesh for inexpensive apparel have yet to agree on how best to ensure safe working conditions. Wal-Mart’s approach may be faster, but touches only a fraction of Bangladesh’s estimated 6,500 garment factories. The European-led accord will take months to implement, but covers a wider spectrum. Reuters

May 16, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

35.3

0.7132668

14629288

CHINA UNICOM HON

ALUMINUM CORP-H

3.11

15002254

CITIC PACIFIC

BANK OF CHINA-H

3.78

1.340483

281740651

BANK OF COMMUN-H

6.18

22535539

BANK EAST ASIA

31.15

-0.7961783

2571133

BELLE INTERNATIO

12.96

2.208202

24766089

BOC HONG KONG HO

27.75

0.3616637

6748624

HANG LUNG PROPER

14.1

-0.9831461

3849508

HANG SENG BK HENDERSON LAND D

CATHAY PAC AIR CHEUNG KONG

NAME

CLP HLDGS LTD

PRICE

DAY %

VOLUME

11.36

-0.3508772

20565190

9.84

0.6134969

PRICE

DAY %

POWER ASSETS HOL

77.85

0.5164622

842256

9539335

SANDS CHINA LTD

40.45

-0.4920049

9117613

SINO LAND CO

12.16

-1.138211

14818609

SUN HUNG KAI PRO

109.7

0.3659652

3627766

99.9

-0.7944389

715202

274.4

1.704967

2897608

68.8

0.1455604

1445387

CNOOC LTD

14.44

0.8379888

57866243

COSCO PAC LTD

10.44

0.5780347

4233526

ESPRIT HLDGS

11.28

5.816135

29137261

30.3

0.6644518

2960970

129.6

0.1545595

619575

56.05

-0.1780944

4507510

84.5

-0.8215962

2299143

-0.6410256

6775979

115.6

3678701

CHINA COAL ENE-H

5.22

-5.516821

137873544

HENGAN INTL

CHINA CONST BA-H

6.48

0.621118

221454532

HONG KG CHINA GS

23.25

CHINA LIFE INS-H

21.6

0.9345794

24138868

HONG KONG EXCHNG

130.7

2102272

CHINA MERCHANT

25.15

0.1992032

1467347

HSBC HLDGS PLC

87.95

12326803

86.4

0.5235602

12309579

HUTCHISON WHAMPO

84.95

0.2951594

2923721

22.95

-1.290323

17125802

IND & COMM BK-H

5.55

1.092896

197861951

LI & FUNG LTD

11.16

8.349515

127922814

31.4

-0.3174603

3053389

CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H

8.6

0.5847953

47325161

CHINA RES ENTERP

25.5

-0.5847953

2989276

CHINA RES LAND

22.95

1.548673

9589381

NEW WORLD DEV

13.54

-0.5873715

15183049

CHINA RES POWER

22.75

2.017937

23626020

PETROCHINA CO-H

10.02

0.2

37019653

CHINA SHENHUA-H

26.85

-1.286765

23320900

PING AN INSURA-H

60.55

0.4145937

7376176

PRICE

DAY %

VOLUME

28.05

0.5376344

5062301

8.6

0.5847953

MTR CORP

NAME

SWIRE PACIFIC-A TENCENT HOLDINGS TINGYI HLDG CO

20.1

2.238047

4134384

0.8403361

7124416

75.5

2.027027

4344209

WANT WANT CHINA WHARF HLDG

MOVERS

VOLUME

4 23250

INDEX 23044.24 HIGH

23245.58

LOW

22895.13

52W (H) 23944.74 22880

(L) 18056.4 13-May

15-May

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.79

0.7978723

87818565

AIR CHINA LTD-H

6.72

0.2985075

4720329

ALUMINUM CORP-H

3.11

15002254

CHINA RAIL CN-H

8.13

ANHUI CONCH-H

27.35

0.1831502

11808956

CHINA RAIL GR-H

BANK OF CHINA-H

3.78

1.340483

281740651

CHINA SHENHUA-H CHINA TELECOM-H

NAME CHINA PACIFIC-H CHINA PETROLEU-H

PRICE

DAY %

VOLUME

YANZHOU COAL-H

7.85

-1.875

26184736

47325161

ZIJIN MINING-H

2.24

38331702

2.392947

10845053

ZOOMLION HEAVY-H

8.23

2.236025

11771366

4.23

0.9546539

8347369

13.48

0.7473842

2724468

26.85

-1.286765

23320900

6.18

22535539

4.14

0.729927

46076643

33.25

4.068858

9332013

DONGFENG MOTOR-H

12.66

-1.860465

15837178

CHINA CITIC BK-H

4.42

1.144165

28041055

GUANGZHOU AUTO-H

7.39

0.1355014

7777404

CHINA COAL ENE-H

5.22

-5.516821

137873544

HUANENG POWER-H

9.6

1.052632

9402978

CHINA COM CONS-H

7.69

0.7863696

14125627

IND & COMM BK-H

5.55

1.092896

197861951

CHINA CONST BA-H

6.48

0.621118

221454532

JIANGXI COPPER-H

15.48

-1.27551

10851948

CHINA COSCO HO-H

3.31

-1.19403

8881050

PETROCHINA CO-H

10.02

0.2

37019653

CHINA LIFE INS-H

21.6

0.9345794

24138868

PICC PROPERTY &

10.14

1.4

7366555

CHINA LONGYUAN-H

7.81

3.994674

21206397

PING AN INSURA-H

60.55

0.4145937

7376176

CHINA MERCH BK-H

16.76

0.7211538

8439880

SHANDONG WEIG-H

7.62

-0.5221932

4184870

CHINA MINSHENG-H

10.06

23073423

SINOPHARM-H

23.15

-1.489362

2900752

CHINA NATL BDG-H

9.13

0.440044

25781530

TSINGTAO BREW-H

51.75

0.1936108

672056

CHINA OILFIELD-H

16.2

-0.7352941

3641263

WEICHAI POWER-H

28.85

-0.3454231

1802100

BANK OF COMMUN-H BYD CO LTD-H

NAME

ZTE CORP-H

MOVERS

4 11270

INDEX 11083.29 HIGH

11263.61

LOW

10987.61

52W (H) 12354.22 10980

(L) 8987.76 13-May

15-May

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

6.71

2.286585

5264213

CITIC SECURITI-A

12.27

0.4914005

11819026

CSR CORP LTD -A

4.19

0.7211538

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.71

0.3703704

26566646

AIR CHINA LTD-A

5.34

6404585

ALUMINUM CORP-A

4.05

-1.219512

NAME CHONGQING WATE-A

NAME

PRICE

DAY %

VOLUME

QINGDAO HAIER-A

12.82

0.3915427

6569810

55614585

QINGHAI SALT-A

22.47

-0.3547672

5665719

30684642

SAIC MOTOR-A

15.16

0.397351

23846747

ANHUI CONCH-A

16.96

-0.2939447

20596929

DAQIN RAILWAY -A

7.05

0.1420455

13819551

SANY HEAVY INDUS

9.12

-1.084599

26456121

BANK OF BEIJIN-A

8.83

0.3409091

16363549

DATANG INTL PO-A

4.92

-1.006036

11830139

SHANDONG GOLD-MI

32.13

4503942

BANK OF CHINA-A

2.89

0.3472222

17556555

EVERBRIG SEC -A

12.9

-0.2320186

24560230

SHANG PHARM -A

12.14

1.335559

6437334

BANK OF COMMUN-A

4.63

0.2164502

26938443

GD MIDEA HOLDI-A

14.26

-0.2797203

10217796

SHANG PUDONG-A

9.99

0.2006018

47275904

BAOSHAN IRON & S

4.93

-0.2024291

25438460

GD POWER DEVEL-A

2.84

1.067616

18210493

SHANGHAI ELECT-A

3.88

1.570681

4067319

BEIJING TONGRE-A

24.46

1.493776

6181740

GEMDALE CORP-A

7.08

0.5681818

33307228

SHANXI LU'AN -A

15.51

-1.084184

14323572

36.7

0.4928806

28683919

GF SECURITIES-A

13.21

1.303681

17132402

SHANXI XISHAN-A

10.21

-0.5842259

11203889

25.51

1.029703

11578823

SHENZEN OVERSE-A

6.19

6.724138

166549609

BYD CO LTD -A CHINA AVIC AVI-A

25.34

5.145228

13427295

GREE ELECTRIC

CHINA CITIC BK-A

4.31

-0.4618938

12501015

GUANGHUI ENERG-A

18.55

-1.539278

19773437

SICHUAN KELUN-A

64.7

846481

CHINA CNR CORP-A

4.38

1.154734

24146314

HAITONG SECURI-A

10.64

0.8530806

44505182

SUNING COMMERC-A

5.93

0.6791171

32545579

CHINA COAL ENE-A

6.62

-0.7496252

7515738

HANGZHOU HIKVI-A

38.19

7.124825

14427055

TASLY PHARMAC-A

78.19

1.717185

2265480

HENAN SHUAN-A

39.58

1.905252

3903448

TSINGTAO BREW-A

36.54

0.9113505

1217126

CHINA CONST BA-A

4.76

CHINA COSCO HO-A

3.28

-0.3039514

6663098

HONG YUAN SEC-A

21.65

-1.005944

22011814

WEICHAI POWER-A

21.76

-1.849346

6515576

-0.6622517

16170250

HUATAI SECURIT-A

9.5

0.3167899

17619346

WULIANGYE YIBIN

22.73

0.4418913

10633911

CHINA EAST AIR-A

14623038

CHINA EVERBRIG-A

3.11

0.3225806

33890192

HUAXIA BANK CO

10.51

0.1906578

16092626

YANTAI WANHUA-A

17.72

-1.281337

14559805

CHINA INTL MAR-A

11.78

-1.340034

5665085

IND & COMM BK-A

4.06

-0.4901961

26143732

YANZHOU COAL-A

14.03

-0.4258339

4115516

CHINA LIFE INS-A

16.27

-0.7926829

13506499

INDUSTRIAL BAN-A

17.86

-0.1676914

52897176

YUNNAN BAIYAO-A

87.03

-0.0229753

1155532

CHINA MERCH BK-A

13.59

1.950488

109663142

INDUSTRIAL-A

11.36

0.6200177

14681567

ZHONGJIN GOLD

11.83

-1.252087

18116090

CHINA MERCHANT-A

12.25

0.9060956

15155995

INNER MONG BAO-A

27.79

15321291

ZIJIN MINING-A

3.04

-0.3278689

26267031

CHINA MERCHANT-A

26.38

0.3805175

7108744

INNER MONG YIL-A

29.31

1.034126

7133188

ZOOMLION HEAVY-A

7.24

-0.9575923

33041744

CHINA MINSHENG-A

10.14

0.2967359

74792094

INNER MONGOLIA-A

4.75

0.422833

13156537

12.88

34734589

CHINA NATIONAL-A

9.83

0.9240246

18221871

JIANGSU HENGRU-A

32.08

1.77665

3559541

CHINA OILFIELD-A

15.78

-0.06333122

2231034

JIANGSU YANGHE-A

59.46

1.225741

3231421

CHINA PACIFIC-A

18.54

0.05396654

12646569

JIANGXI COPPER-A

20.4

-0.1956947

6279006

6.62

0.1512859

14908557

JINDUICHENG -A

10.19

-0.09803922

4370621

17.36

3.149138

22988353

194.66

1.814948

2326440

CHINA PETROLEU-A CHINA RAILWAY-A

5.22

0.967118

11999606

KANGMEI PHARMA-A

CHINA RAILWAY-A

2.85

0.7067138

13342697

KWEICHOW MOUTA-A

CHINA SHENHUA-A

20.45

-0.2925402

4765318

LUZHOU LAOJIAO-A

25.79

0.6635441

4033497

CHINA SHIPBUIL-A

4.39

2.093023

31549884

METALLURGICAL-A

2.03

31001742

CHINA SOUTHERN-A

3.38

-0.2949853

18809137

NARI TECHNOLOG-A

20.05

4.481501

16644257

2.43

10321011

8.45

0.1184834

7394761

19.3

0.05184033

24208282

38.69

-0.8965164

32587356

CHINA STATE -A

3.67

-0.5420054

35418724

NINGBO PORT CO-A

CHINA UNITED-A

3.61

0.2777778

35334007

PETROCHINA CO-A

CHINA VANKE CO-A

11.31

-0.08833922

32849474

PING AN BANK-A

CHINA YANGTZE-A

7.41

0.4065041

7029521

PING AN INSURA-A

10.25

0.8858268

27163404

POLY REAL ESTA-A

11.57

-0.1725626

33745582

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

CHONGQING CHAN-A

ZTE CORP-A

MOVERS 180

101

19 2550

INDEX 2506.925 HIGH

2542.41

LOW

2480.07

52W (H) 2791.303 (L) 2102.135

2470

13-May

15-May

FTSE Taiwan 50 Index NAME ACER INC

24.2

1.25523

6475003

ADVANCED SEMICON

25.8

2.178218

15230817

37.95

0.66313

2424107

ASIA CEMENT CORP ASUSTEK COMPUTER

NAME

PRICE DAY %

FORMOSA PLASTIC

73.9

1.094391

4595550

TAIWAN MOBILE CO

FOXCONN TECHNOLO

80.4

0.6257822

4019298

FUBON FINANCIAL

42.15

2.181818

Volume

117.5

6.818182

TPK HOLDING CO L

590

4.795737

11296748 5142232

18703463

TSMC

115 -0.4329004

26133560

UNI-PRESIDENT

59.6

1.016949

6447788

0.3861004

105601312

340

1.040119

2241734

HON HAI PRECISIO

78.2

-1.262626

82396128

13.65

2.247191

102510070

HOTAI MOTOR CO

305

1.836394

429666

CATCHER TECH

159

0.952381

7438845

HTC CORP

282

0.5347594

6889207

WISTRON CORP

29.25

6996513

CATHAY FINANCIAL

40.9

2.634881

25709052

HUA NAN FINANCIA

17.3

1.169591

4351652

YUANTA FINANCIAL

15.8

3.606557

33013120

CHANG HWA BANK

17.3

0.8746356

5817161

LARGAN PRECISION

901

3952878

YULON MOTOR CO

51.8

0.1934236

1468345

CHENG SHIN RUBBE

96.1 -0.4145078

12475372

LITE-ON TECHNOLO

46.8

-2.5

11763439

CHIMEI INNOLUX C

19.4

1.041667

72524672

MEDIATEK INC

367.5

0.1362398

4201714

CHINA DEVELOPMEN

8.54

1.545779

74214741

MEGA FINANCIAL H

23.65

1.284797

18881044

CHINA STEEL CORP

26.05

0.3853565

11941806

NAN YA PLASTICS

62.7

11505539

CHINATRUST FINAN

18.2

0.5524862

37177133

PRESIDENT CHAIN

190.5

1.061008

1230618

CHUNGHWA TELECOM

97.2

1.25

14029851

QUANTA COMPUTER

60.9

0.4950495

10486579

COMPAL ELECTRON

18.3

-1.347709

34250140

SILICONWARE PREC

35.5

-0.140647

11021100

DELTA ELECT INC

AU OPTRONICS COR

146

0.6896552

3523670

SINOPAC FINANCIA

1.010101

12904488

FAR EASTERN NEW

1.071975

3436543

SYNNEX TECH INTL

50.1

3625941

FAR EASTONE TELE

74.9

2.60274

7238246

TAIWAN CEMENT

39.45

0.8951407

4913246

FIRST FINANCIAL

18.35

0.5479452

8501275

TAIWAN COOPERATI

17.1

0.5882353

5606437

FORMOSA CHEM & F

74.3

1.226158

4930683

TAIWAN FERTILIZE

74.2

0.8152174

5826564

FORMOSA PETROCHE

84.2

1.080432

2595122

TAIWAN GLASS IND

29.95

0.5033557

1228040

UNITED MICROELEC

MOVERS

3 5830

INDEX 5825.39 HIGH

5825.69

LOW

5774.13

52W (H) 5854.36 5771

(L) 4719.96 13-May

15-May

May 16, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 38.8

64.50

38.6

64.25 20.2

38.4

64.00

38.2

average 38.352

Max 40.65

average 40.460

Min 37.85

Min 40.3

Last 38.5

Last 40.45

37.8

Max 64.5

average 64.281

63.50

Last 63.6

Max 20.35

average 20.097

Min 19.8

PRICE

22.6

25.2

40.6

22.4

25.1

40.5

22.2

25.0

40.4

22.0

24.9

40.3

Max 22.55

average 22.089

DAY %

YTD %

(H) 52W

Min 21.85

Last 22.5

(L) 52W

WTI CRUDE FUTURE Jun13

93.56

-0.689947989

0.074874318

101.4199982

81.34999847

BRENT CRUDE FUTR Jun13

102.24

-0.350877193

-5.280711506

116.6699982

90.91999817

GASOLINE RBOB FUT Jun13

282.9

-0.303073019

-1.159946894

324.119997

235.9499931

GAS OIL FUT (ICE) Jun13 NATURAL GAS FUTR Jun13 HEATING OIL FUTR Jun13

853

-0.900377578

-6.469298246

992.75

799.25

4.028

0.099403579

14.82326112

4.457000256

3.203999996

285.63

-0.58127393

-5.030589174

323.8899946

258.589983

Gold Spot $/Oz

1411.04

-1.2458

-15.2254

1796.08

1322.06

Silver Spot $/Oz

22.955

-2.0628

-23.7629

35.365

22.0713

Platinum Spot $/Oz

1496.15

0.4128

-1.4232

1742.8

1374.55

Palladium Spot $/Oz

725.23

1.801

3.6546

786.5

553.75

1857

-0.53561864

-10.41968162

2200.199951

1809 6762.25

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

7245

-2.292650034

-8.649602824

8422

LME ZINC

1847

-0.858829844

-11.20192308

2230

1745

15105

-1.145287958

-11.45955451

18920

14609 14.79500103

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jul13

21.8

Max 25.15

average 24.987

Min 24.8

Last 24.85

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

DAY %

YTD %

(H) 52W

(L) 52W

0.9869 1.5236 0.9697 1.2902 102.44 7.994 7.7617 6.1461 54.7275 29.72 1.2452 29.898 41.225 9752 101.101 1.25107 0.84684 7.9318 10.3125 132.17 1.03

-0.5442 -0.2684 -1.2891 -0.4552 -0.8005 0 0.0013 -0.0521 0.1621 -0.1682 -0.3373 -0.2341 -0.2668 0.0513 -0.2651 -0.8337 0.1842 0.7186 0.48 -0.3556 0

-4.9046 -5.8111 -5.5997 -2.1835 -15.9508 -0.1351 -0.143 1.3749 0.4888 2.8937 -1.9113 -2.8932 -0.5337 0.4204 -11.6458 -3.4842 -3.7103 3.602 2.113 -14.0728 -0.0097

1.0625 1.6381 0.9972 1.3711 102.62 8.0111 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 132.77 1.032

0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1307 51.3863 28.56 1.2152 28.913 40.54 9291 74.482 1.20054 0.77553 7.7018 9.6245 94.12 1.029

15.33

-0.227790433

-2.635757383

17.07500076

-0.268199234

-6.66905701

824

531.5

WHEAT FUTURE(CBT) Jul13

706.25

-0.633134013

-11.02362205

900

664.75

SOYBEAN FUTURE Jul13

1408.75

-0.424103198

0.967568536

1605.75

1217.75

143.7

-0.208333333

-3.911735206

202.1999969

132.6999969

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

16.94000053

ARISTOCRAT LEISU

4.19

-2.331002

33.01587

4.37

2.29

1806184

69.94999695

CROWN LTD

13.5

0.2227171

26.52296

13.75

8.06

1426092

Jul13

COFFEE 'C' FUTURE Jul13 SUGAR #11 (WORLD) Jul13

16.97

COTTON NO.2 FUTR Jul13

86.44

-0.293772033 -0.552231937

-14.03242148 12.44959022

23.05999947 94.19999695

Macau Related Stocks

World Stock Markets - Indices

AMAX HOLDINGS LT

0.8

-42.85714

1.72

0.75

498525

27.75

0.3616637

15.14523

20.85

6748624

0.32

20.75472

0.42

0.215

5.8

0.1727116

-3.17195

6.74

2.8

204850 17125802

CHEUK NANG HLDGS CHINA OVERSEAS

22.95

-1.290323

-0.6493523

25.6

14.624

CHINESE ESTATES

13.88

0.1443001

14.43253

13.92

7.697

358550

CHOW TAI FOOK JE

10.1

-18.81029

13.4

8.4

2479550

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15215.25

0.8187955

16.11025

15219.55

12035.08984

NASDAQ COMPOSITE INDEX

3462.609

0.6926271

14.67439

3468.674

2726.68

FTSE 100 INDEX

6674.51

-0.1727475

13.16929

6689.64

5229.76

HANG SENG BK

DAX INDEX

8340.69

0.01894687

9.567301

8368.06

5914.43

HOPEWELL HLDGS

29.85

NIKKEI 225

15096.03

2.287575

45.22144

15108.83

8238.96

HSBC HLDGS PLC

HANG SENG INDEX

23044.24

0.4969848

1.709501

23944.74

18056.4

CSI 300 INDEX

2506.925

0.5449321

-0.6352422

2791.303

2102.135

TAIWAN TAIEX INDEX

8318.59

0.8091548

8.04065

8322.69

KOSPI INDEX

1971.26

0.1234236

-1.291407

S&P/ASX 200 INDEX

5191.658

-0.561752

5085.778

FTSE Bursa Malaysia KLCI

NZX ALL INDEX PHILIPPINES ALL SHARE IX

JAKARTA COMPOSITE INDEX

VOLUME CRNCY

BOC HONG KONG HO CENTURY LEGEND

NAME

24.8

PRICE

650.75

CORN FUTURE

19.8

Last 20.35

Currency Exchange Rates

NAME

METALS

Min 63.5

40.7

Commodities ENERGY

20.0

63.75

38.0 Max 38.8

20.4

EMPEROR ENTERTAI FUTURE BRIGHT GALAXY ENTERTAIN

2.4

0.8403361

26.98413

2.49

1.1

920000

2.39

0.8438819

97.19047

2.732

0.765

1260000

38.5

0.5221932

26.85338

39.15

16.94

12892538

129.6

0.1545595

9.182817

131.5

99.2

619575

-1.322314

-10.22556

35.3

19.049

1449873

87.95

8.179578

88.5

59.8

12326803

HUTCHISON TELE H

4.46

-2.832244

25.2809

4.66

2.98

2824096

LUK FOOK HLDGS I

20.9

1.703163

-14.34426

30.05

14.7

1038500

MELCO INTL DEVEL

17.12

-1.722158

90.01109

18.18

5.12

7313518

6857.35

MGM CHINA HOLDIN

20.35

3.299492

53.25781

20.4

9.509

8025200

2042.48

1758.99

MIDLAND HOLDINGS

3.51

0.5730659

-5.135136

3.249

2444000

11.67378

5249.6

3985

0.07552234

17.81669

5115.643

3635.283

1782.49

-0.3321349

5.538355

1826.22

1526.6

991.734

0.01593423

12.43474

998.487

4567.08

0.6882928

23.46863

4571.4

NEPTUNE GROUP

0.171

4.907975

12.5

0.226

0.084

45840000

NEW WORLD DEV

13.54

-0.5873715

12.64559

15.12

7.95

15183049

SANDS CHINA LTD

40.45

-0.4920049

19.1458

43.7

20.65

9117613

SHUN HO RESOURCE

1.52

8.57143

1.67

1.03

755.149

SHUN TAK HOLDING

4.11

0.4889976

-1.909309

4.65

2.56

2115836

3238.77

SJM HOLDINGS LTD

22.5

4.895105

22.7

12.34

15929577

SMARTONE TELECOM

13.96

-0.2857143

-0.8522722

17.38

12.5

2222500

WYNN MACAU LTD

24.85

-0.6

18.61575

25.3

14.62

4334012

ASIA ENTERTAINME

4.06

-0.4901961

32.67974

5.25

2.4

270651

53.24

1.332318

19.07851

54.92

41.74

696160

HSBC Dragon 300 Index Singapor

664.19

-0.04

6.94

STOCK EXCH OF THAI INDEX

1631.93

0.5204869

17.24224

1635.42

1099.15

HO CHI MINH STOCK INDEX

485.97

0.4381523

17.46066

518.46

372.39

BALLY TECHNOLOGI

Laos Composite Index

1385.6

0.6647535

14.06274

1455.82

980.83

BOC HONG KONG HO

3.6

17.26385

3.6

2.7

1554

GALAXY ENTERTAIN

4.98

-0.7968127

25.44081

5.05

2.25

13255 3882241

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

INTL GAME TECH

17.99

-0.4977876

26.95836

18.18

10.92

JONES LANG LASAL

97.12

0.1237113

15.70169

101.46

61.39

232804

LAS VEGAS SANDS

59.49

1.345826

28.87782

59.97

32.6127

6759087

MELCO CROWN-ADR

24.5

-0.8899676

45.48693

25.15

9.13

3694696

MGM CHINA HOLDIN

2.58

3.2

39.45946

2.59

1.36

8912

MGM RESORTS INTE

15.86

1.019108

36.25429

15.95

8.83

10328134

SHFL ENTERTAINME

16.4

1.234568

13.10345

17.2199

11.75

255657

SJM HOLDINGS LTD

2.8

2.189781

21.21212

2.85

1.65

1500

142.14

1.268168

26.3579

142.65

84.4902

917296

WYNN RESORTS LTD

AUD HKD

USD

May 16, 2013

Opinion

Is the Fed afraid to regulate the big banks? Simon Johnson

Professor at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics

he skirmishing is almost over, the main armies almost assembled. Ahead is a great battle over the future of our financial system that could have more profound consequences than the DoddFrank legislation of 2010. The battleground is the hearts and minds – and fears – of the seven people who make up the board of governors of the Federal Reserve System. The critical contest will be about bank capital and how large financial institutions should fund themselves. The fog of war has masked the terrain, so that even well-informed bank lobbyists don’t realise they have wandered into a potentially disadvantageous position. It remains to be seen whether the Fed can make the most of this real opportunity for reform. Too many governors still seem encumbered by a flawed mental model of how megabanks work. The headlines continue to focus on the international agreement regarding capital requirements – known as Basel III – and how it will be implemented in the U.S. There are interesting questions here, including what the Fed will decide regarding the so-called SIFI surcharge (the extra equity funding required for systemically important financial institutions).

Basel standards For the most part, however, the Basel-related changes are meaningless. The Basel deal is, at its core, about “riskweighted capital,” and this is the wrong way to think about banks’ balance sheets. As experts such as Tom Hoenig, the vice chairman of the Federal Deposit Insurance Corporation, and Morris Goldstein, a longtime International Monetary Fund official (and my colleague at the Peterson Institute for International Economics) argue, all that we really know about risk weights is that, in every crisis, they are completely wrong. Management is free to use risk weights for internal purposes (and good luck with that), but capital regulation

needs to be about the true ability to absorb losses relative to total assets. Regulators should focus on this measure – known as leverage – and its implications for what happens when a financial company faces failure. “We must end too big to fail” is the refrain now heard from regulators and big-bank representatives (seriously, they say this with a straight face). And the main mechanism that they propose is the resolution powers granted to the FDIC under Title II of the Dodd-Frank Act. The FDIC’s proposed approach calls for losses in any part of a financial holding company to be absorbed by the holding company. Absorption here is a polite term for wiping out the equity and converting debt into equity. Ideally, bank holding companies would be funded with a lot more equity. But the Fed has already signalled that it will wimp out on this issue – with “we agreed to this in Basel” as a smokescreen. Equity levels will remain too low to make a difference. The bank lobbyists are cheering. After all, big banks like to borrow heavily, increasing the upside for executives but also creating more downside for the rest of us. But here is the rub. The FDIC’s approach to resolution only remotely makes sense if there is enough “bail-inable capital” at the holding company. (I’m on the FDIC’s Systemic Resolution Advisory

Committee; my views are mine alone.) According to reasonable independent estimates, some of our largest financial holding companies have very little such bail-in capacity – Moody’s Investors Service estimates that JPMorgan Chase & Co. (JPM) has 5 percent. (This is Moody’s assessment of what could be used to recapitalise the group, divided by total assets of the group; avoid thinking about risk weights in this context.)

reflecting the downside protection given to, among others, creditors who lend to the operating subsidiaries. The latter get a greater degree of protection under the FDIC’s plan, with a big chunk of that protection supposedly provided by creditors to the holding company.

‘Loss-absorbing’ The Fed now needs to rule on how much bail-in-able capital there must be in this form. And it also needs to set rules about who holds the relevant types of debt. “Lossabsorbing debt” cannot be held by other leveraged institutions or by any institution prone to a run – such as a moneymarket fund. In this case, a company-specific event can easily become systemic panic. If the Fed waits even six months, it will destroy any chance of the FDIC establishing credibility for its Title II resolution mechanism. People in the credit markets are already highly sceptical that the FDIC will be able to implement this effectively. The big banks are preparing to complain that this bail-inable capital is “expensive” and therefore should be set at a low level. But the precise point is that creditors should lend to holding companies only at a high rate of interest,

Investors and regulators don’t know what risks are being taken

Remember the debts that can pile up at those subsidiaries, particularly when risk management is weak. (For a relatively small-scale and transparent illustration, see the case of JPMorgan’s London Whale and the losses amassed by the bank’s trader Bruno Iksil.) Crazy loans and losses in 2007-08 represent the

nightmare scenario on a grand scale, but not necessarily the worst that could happen. Lenders to the holding company should be very sceptical and deeply scared – and charge accordingly. Global megabanks are profoundly complex, and intentionally so. Investors and regulators don’t know what risks are being taken. Board members also are usually in the dark. Whether top management understands what is happening is an open question: Chief executive Jamie Dimon is adamant that he had no real knowledge of JPMorgan’s Whale positions, which eventually had a notional value in the trillions of dollars.

Pricing risk Megabanks say they want to end “too big to fail.” This statement will only be credible if investors see and price the risk inherent in lending to holding companies. If you don’t see a large spread between loans to the operating subsidiary and loans to the holding company, then nothing has happened. For this policy to work, the Fed has to require the price of debt to megabank holding companies to increase. Everything else is an illusion. Some Fed board members (perhaps two of them) have shown some appreciation for this point, at least in private conversations. Others shy away from the reality of pricing risk appropriately. The Fed will draw serious political support if it moves to increase bail-in-able capital into the range of 20 percent to 30 percent of total assets for large-bank holding companies (with some colleagues, this is what I have proposed). The central bank will draw great ire if it sides with the megabanks, again. The Fed has to decide. Should it make Title II resolution meaningful and allow a real chance of reducing the risks posed by the biggest financial institutions? Or should it shy away from a decisive victory? On current form, the Fed seems likely to fail us, again. Bloomberg View\

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

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May 16, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

U.K. exit from EU may really happen

Inquirer Business Bangko Sentral ng Pilipinas has directed pawnshops to strictly implement identification requirements for customers to help ensure that items being pawned are not stolen goods or illicit covers for money laundering. The central bank said it has received reports that a substantial number of pawnshops do not comply with the “know-your-pawner” policy. Lax implementation of this policy makes pawnshops susceptible to becoming facilitators of money laundering activities, the bank said. The FATF, the international body against money laundering, earlier this year kept the Philippines on its “grey list”.

Clive Crook

Bloomberg View columnist

The Age The Australian dollar has been driven down by a larger-thanexpected budget deficit and a further surge in the U.S. currency, continuing weeks of volatility. The announcement by the Treasurer of a A$19.4 billion deficit for the 2013-14 financial year was towards the higher end of economists’ forecasts, triggering a sell-off in the local currency, analysts said. ‘‘Budgets don’t usually illicit much response in the currency, but this one was a little bit different,’’ ANZ’s currency strategist Andrew Salter said.

Times of India Inflation in India would subside in the current financial year due to slowing real wage growth in rural areas and moderation in food prices, experts have said. Wholesale price index (WPI) based inflation fell further to 4.89 percent in April from 5.96 percent in March, the first time it has fallen below 5 percent since November 2009. Most forecasters expect inflationary pressures to subside significantly in 2013-14 from the average of 7.3 percent in 2012-13. “This is no surprise given that private consumption growth decelerated sharply to 4.1 percent in 2012-13,” Crisil said.

The Star Malaysia Airlines is unlikely to return to the market to raise more funds for either the purchase of aircraft or working capital, as it would be able to generate enough cash to sustain operations by end2014. “We will not [go to the market]. As we move forward, MAS would be in a position to self finance [its operations], as its balance sheet [would be] strong,” group chief executive Ahmad Jauhari Yahya was quoted as saying. “We hope to get it done by 2014. This is our plan, and it would be a situation where it would be selfsustainable, and start building on cash (reserves),” he said.

isiting the U.K. over the past week, I realised for the first time that Britain might actually leave the European Union. Of course, it has talked about this eventuality, on and off, almost since it joined – but for years the constant whining could be dismissed as so much background noise. Things have changed. Attitudes are hardening, and by promising an “in or out” referendum on EU membership after the next election, Prime Minister David Cameron may have put the country on a course that will force it to choose. If the referendum Cameron promises for 2017 were put to voters tomorrow, the U.K. would probably leave. According to polling by the Pew Global Attitudes Project, only 26 percent of Britons think Europe’s economic integration has helped the economy, and only 43 percent have a favourable opinion of the EU. Other recent polls show steady (though mostly slender) majorities in favour of exit. Cameron will have to win another election to keep his referendum promise. His government is unpopular so that’s no sure thing. But the opposition Labour Party will probably have to promise a referendum, too, once the 2015 election comes into view – especially if the U.K. Independence Party, which is committed to an exit, keeps gathering strength. (UKIP already attracts more support than the pro-European Liberal Democrats.) It’s hard to run on a platform of denying voters a choice.

New treaty Cameron isn’t a Eurosceptic: He’s the pro-EU leader of a party that’s long been bitterly divided on the issue. To hold the Conservatives together and keep the country in the EU, he wants to draft a new European treaty that is more to Britain’s liking before

a referendum occurs. The other EU leaders say they want nothing to do with this. It’s a point that British advocates of exit have seized on. In an article in the Times last week, Nigel Lawson, a former Tory chancellor of the exchequer (and no knee-jerk Little Englander), said he expected nothing from the renegotiation and would be voting for exit. Several other former ministers have said the same. Here’s the surprise: These interventions weren’t greeted as reckless or sensational, as they once would have been. Suddenly, exit is on the political agenda. Much of the City has turned Euro-sceptic as a reaction to what many see as a vindictive regulatory assault from Brussels. U.K. businesses used to be strongly pro-EU, but that’s no longer so. What once might have seemed an idle or even absurd threat has become a real possibility. I think the question of whether the U.K. should remain part of the EU is a closer call than either side wants to admit – and, just as Cameron says, it all depends on the terms. If the EU responds to the economic crisis with new strides toward a United States of Europe, the costs for the U.K. will surely outweigh the benefits: Britain just doesn’t want to be part of that enterprise. If EU membership will require eventual membership of the euro area – and that’s the prevailing model, as though the crisis had never happened – Britain should again say no thanks. As free trade becomes the global norm, the benefits of open access to Europe’s markets are less and less confined to EU members. Cameron, visiting President Barack Obama in Washington this week, discussed the proposed U.S.-EU trade pact, among other things. The U.S. has signed free-trade

agreements that span the globe. The U.K. could do the same.

Better arguments At the very least, Britain’s pro-EU forces need better arguments. They say Cameron shouldn’t have raised the issue in the first place, implying it’s better to deny voters a say. What are voters to make of that? Pro-EU politicians keep repeating that exit is unthinkable – but never really say why. What makes Switzerland’s relationship with the EU unthinkable? They

think Britain should be leading Europe, that it maximises its global influence that way. Well, that’s just delusional. Why should Britain expect to lead a union of 27, soon to be 28, countries? Let’s take Canada as a thought experiment. It’s a small economy next to a big economy. Its global influence is limited by its size, of course. Would it be better off as part of the U.S.? Would its influence in the world be greater? And wouldn’t Canadians be giving up something they value very highly? The pro-EU cause should find some answers to these questions. For Europe’s sake, as much as it pains them, the other EU governments should acknowledge that Cameron is right about the need for a new constitutional settlement. The Pew survey shows that disaffection with the EU is by no means confined to the U.K. Grievances aren’t concentrated in the south, either. Support for the union in France – co-architect of the whole project – is actually lower than in Britain. Can it seriously be maintained that Europe’s economic calamity raises no questions about the EU’s constitutional direction, that the commitment to “ever closer union” enshrined in the founding documents can’t ever be reviewed, and that the euro system, despite its recent difficulties, is fundamentally sound? That’s what the EU’s leaders are asking an increasingly dismayed European electorate to believe. Cameron’s critics say he’s the trouble maker. I don’t think so. The real threat to the EU is the other leaders’ bizarre refusal to acknowledge what’s happening. Bloomberg View

May 16, 2013

Closing Pataca loses momentum

Housing sites for Macau buyers on study

The pataca lost value against the currencies of the city’s main trading partner, after rallying for three consecutive months, the Monetary Authority of Macau revealed yesterday. The pataca’s trade-weighted effective exchange rate index fell by 0.13 points month-to-month from March to 98.12 points in April. It rose by 1.15 points from a year earlier. Macau’s foreign exchange reserves fell by 0.8 percent from March to 128.9 billion patacas (US$16.12 billion) at the end of April. It was the third straight drop since January. The city’s foreign exchange reserves at end-April represented 16 times the currency in circulation.

The government has commissioned a study on housing exclusive to Macau residents. The University of Macau will be in charge of the study, according to yesterday’s Official Gazette. It will analyse whether the sales of houses should be restricted to individuals or include companies as well, and look at other issues such as the re-sale of such properties. The Hong Kong government announced a pilot programme to implement the ‘Hong Kong land for Hong Kong people’ project on two land parcels last year. About 1,100 homes are to be built there to Hong Kong permanent residents only.

Malaysia’s growth slows to below 5pct

Eurozone economy stuck in recession T

Malaysia’s economy grew 4.1 percent in the first quarter of 2013, its slowest pace in more than three years, missing expectations as weak exports weighed on the trade-dependent nation. It was the slowest growth since the third quarter of 2009, but the central bank said yesterday it still expected full-year gross domestic product to rise 5-6 percent on robust domestic demand. Private sector investment grew 10.9 percent from a year earlier, while public investment rose 17.3 percent. But exports slipped 2.4 percent in the first quarter from a year ago.

Boeing resumes deliveries of 787 Boeing Co resumed deliveries of its high-tech 787 Dreamliner jet, ending a period of nearly four months in which it was unable to provide new planes to customers because of safety concerns about the battery system. The delivery of the first jet with a redesigned battery system marks a turning point in Boeing’s 787 crisis, allowing the jet maker to book revenue for completed sales of the jet, which costs US$207 million at list prices.

BYD’s electric taxis hit HK roads Carmaker BYD Co Ltd rolled out Hong Kong’s first electric taxi fleet yesterday, marking a milestone for its all-electric battery car that highlights its promise and its limitations. “We expect to increase the number of e6 taxis in Hong Kong to 5,000 in three years,” said Liu Xueliang, general manager of BYD Asia Pacific sales. The Hong Kong Taxi & Public Light Bus Association said it is renting an initial fleet of 45 taxis for HK$8,000 (US$1,000) each per month, although only six vehicles had licences so far.

May gaming revenue close to current record Michael Grimes

michael.grimes@macaubusinessdaily.com

HSBC signals 14,000 jobs cuts HSBC Holdings Plc, Europe’s largest bank, will eliminate as many as 14,000 more jobs as chief executive Stuart Gulliver set out plans to cut an additional US$3 billion of costs as he tries to revive profitability. The bank expects to reduce the number of employees to as few as 240,000 over the next three years, Mr Gulliver told reporters on a conference call yesterday. He’s already eliminated more than US$4 billion of annual expenses, beating his initial target, and cut 46,000 jobs since he took over in 2011.

ay’s gaming revenue is unlikely to surpass the current monthly record of 31.3 billion patacas (US$3.92 billion) but it is likely to show healthy year-on-year expansion of between 13 percent and 19 percent, suggest analysts. “The first 13 days of May gaming revenues imply around 28 billion patacas for the month versus our estimate of 29 billion patacas (up around 19 percent year-on-year),” writes Harry Curtis of Nomura Equity Research in New York in a report. Several analysts from other institutions expect revenue expansion of between 13 percent and 17 percent. Cameron McKnight of Wells Fargo said in a note: “Expect 13-17 percent year-on-year growth for May. As expected, gaming revenues trailed off following Golden Week with [daily] revenues down 37 percent week on week to 850 million. Following prior year trends, we would expect ADR [average daily rate] to recover as the month progresses.”

In May last year, the city’s casinos reported 26.1 billion patacas in gross gaming revenue. A 17-percent yearon-year growth rate would mean casino revenue of 30.5 billion. A 19 percent growth rate would suggest 31.06 billion patacas revenue for May, although the luck factor on VIP baccarat can make a difference to final tallies given the high volumes involved. Macau’s gaming industry has only topped a monthly tally of 30 billion patacas once – in March this year, when it registered 31.3 billion patacas. Kenneth Fong of J.P. Morgan in Hong Kong estimates Macau is tracking 14 percent growth in May based on revenue to May 12. He said in a note: “We believe the slight run rate drop off post Golden Week is normal seasonality and was also due to VIP luck factor normalisation (first few days started with a very high VIP win rate and the factor was below theoretical 2.85 percent in the second week).”

he euro fell to a six-week low against a buoyant dollar yesterday, hurt by worsethan-expected German and French gross domestic product data that strengthened the case for more monetary easing in the euro zone. The bloc’s economy shrank by 0.2 percent between January and March, according to official figures. That left the region’s economy 1 percent smaller for the period compared with a year ago. The euro fell 0.2 percent against the dollar to US$1.2888, with exporter bids cited at US$1.2880. Many investors are looking to initiate bets against the single currency into a bounce towards US$1.2900 for an eventual grind lower to this year’s trough of US$1.2740, traders said. “The risk is for euro zone GDP to undershoot expectations of a modest contraction,” said Jeremy Stretch, head of currency strategy at CIBC World Markets. “This will put pressure on the ECB to act. And if U.S. yields stay supported and data there keeps improving, we could see the euro target the US$1.2740 area.” European Central Bank officials have said they could ease monetary policy further, and perhaps even take the deposit rate, the level at which banks park their surplus cash with the central bank, below zero, if the economy slowed. Individual data for member countries showed nine were in recession, although Germany recorded weak growth of 0.1 percent in the period. France entered a shallow recession after contracting by 0.2 percent in the first three months of the year. The weak state of so many economies in the euro zone has led to rising unemployment. About 19 million people in the 340 million-strong euro zone population are without work, with unemployment in Greece and Spain running at 27 percent of the workforce. Reuters