Macau Business Daily, May 23, 2013 by Business Daily

Macau could fall victim to gaming success: Fitch

Legislators say no to home rent curbs

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acau’s economic prospects remains positive and its finances solid, credit ratings agency Fitch Ratings said, while reaffirming the city’s ‘AA-’ grade. A report released yesterday praised Macau’s budget surpluses in the last decade, a period when jurisdictions with similar ratings struggled to break even. But Fitch warned that the territory is not without its “vulnerabilities”, particularly its “heavy-reliance” on the gaming industry. The city’s increasing economic integration with mainland China brings “significant benefits”, along with risks, the agency said. Macau is “highly exposed” to Beijing’s visa policy and to China’s economic growth, especially the banking sector, the report adds. Banks are also threatened by their heavy lending to the property sector, where sharp price hikes are raising concerns over housing affordability, Fitch wrote.

Property fund bullish on market prospects

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More on page 2

Year II

Number 289

Thursday May 23, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

www.macaubusinessdaily.com

Former Macau executive leads Bahamas casino

I SSN 2226-8294

Hang Seng Index

Former Las Vegas Sands Corp president Bill Weidner has been chosen to operate a new US$3.5 billion (28 billion patacas) gaming resort in The Bahamas. Baha Mar is being majority-funded by a state-owned Chinese institution and is due to open in December 2014. With “more and more Chinese travelling to exotic places”, Mr Weidner says the resort could become an interesting destination.

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Home pre-sales, offices fuel property prices

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May 22

HSI - Movers

Mortgage loans for commercial properties have more than doubled year-on-year in the first quarter of 2013, mostly due to the blooming office market, people in the industry say. Estate agents also say that developers tried to beat the introduction of rules on sales of unfinished flats. As a result pre-sales accounted for almost half of all home transactions in the first three months of the year.

Name

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BOC reinforces bank leadership

%Day

ESPRIT HLDGS

3.58

CHINA RES ENTERP

2.50

WHARF HLDG

1.95

HUTCHISON WHAMPO

1.27

CHEUNG KONG

1.11

CITIC PACIFIC

-1.82

CHINA MERCHANT

-1.93

KUNLUN ENERGY CO

-2.43

CHINA RES POWER

-4.50

POWER ASSETS HOL

-6.57

Source: Bloomberg

Macau’s banking sector had its best year ever in 2012 and Bank of China Ltd’s (BOC) Macau branch is still leading the pack. The Chinese state-owned subsidiary posted a 30-percent profit growth, much higher than its rivals. Other banks saw their profits stagnate or even tumble, blaming it on growing competition for deposits and loans. Page 16

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May 23, 2013

Macau opinion

Spotting symptoms of Wi-Fi withdrawal

Fitch reaffirms Macau credit rating Ratings agency praises city’s strong finances but warns of gaming reliance Vítor Quintã

vitorquinta@macaubusinessdaily.com

José I. Duarte Economist

eople have sometimes a certain inclination to expect that someone – “they”, often meaning the government – will deal with and, hopefully, solve all kinds of problems, real or presumed. The fact is that many perceived problems, on closer examination, turn out to be less of a problem than we originally thought. And the government is not necessarily the most appropriate vehicle for action. So any public policy should at least elicit a few questions before we jump into decisions and policy design and implementation. How serious is the problem? Does it deserve an explicit policy approach? Which are the best tools to use to deal with it? Who is in a better position to achieve results? How can we measure the results? What is the level of appropriate public involvement? Sometimes even these very preliminary considerations fail to be addressed. And that is very likely to be the case when the government wants to show that it cares about an issue and is doing something about it. And if the solution is showering a bit of money around, that cannot hurt, right? And if all can be done in the name of high morality and the protection of the weak and the innocent, so much the better. All this comes to mind, no matter how unlikely it may seem, after the announcement that the Social Welfare Bureau is giving away subsidies to fight “internet addiction”. A recently commissioned survey concluded that 22 percent of people between 10 and 18 years old were “addicted to the Internet”, while 30 percent were “potentially addicted”. So, someone concluded, something must be done. Charities will be able to apply from August 1 to October 31 for financial support to fight this addiction. According to the rules, their action should contribute, “through direct or indirect services” to promoting “the correct usage of the Internet”. That is to say, they should increase awareness among youngsters of “the correct navigation” of the Internet, and help them to avoid falling into “internet traps, or becoming isolated or addicted to the Internet”. Financial support of up to 40,000 patacas (US$5,000) per charity is available. A charity’s action must “provide creativity” – there is no word how this is assessed – and “bear in mind the cost/benefit relationship” – and one wonders how that is computed.

Well-behaved addicts Of course, a detailed analysis of and comment on the survey would require more space than I have here. But a few comments seem warranted. Let us start with the concept. How addiction is defined is, in itself, a tricky issue. How do we define the behaviour it engenders and what are the consequences that are deemed undesirable and should be avoided? The Internet has many uses (and abuses, for sure), but I doubt than any particular metrics can lead to a classification that is not loaded with caveats. Both the methodology of reference that was used, based on the subjective perception of those inquired about, and its adoption to local circumstances, would suggest the need for further elaboration, study and validation. (You do not expect 10–yearolds, who were part of the study, to be asked: “How often do you prefer the excitement of the Internet to intimacy with your partner?” Well, do you?) But, with some prudence, let us take the results as indicative of youthful behaviour and grant that to have them is better than to have nothing at all. What else can we say? Well, the same survey seems to suggest that the addiction has no big impact. Almost three-quarters of those surveyed are happy with life. That is not bad, for teenagers. The impact on their school performance does not seem statistically significant and, even if it was, the causality direction is less than obvious. That aside, the only “potentially deviant behaviour”, as defined in the survey, affecting more than 5 percent of our young addicts is – hold on a second – “drinking coffee”. Count me in! Other kinds of behaviour, defined as smoking, drinking alcohol, medicines dependency [sic], fighting, missing classes frequently, never affect more than 2 percent. On the face of it, our addicted kids seem rather well behaved (coffee drinking aside). So, in the end, we come to this: who can be against organising a summer picnic where a few pamphlets and one or two speakers of varying expertise introduce the youngsters to the arts of internet-trap avoidance? Nobody can, actually. (Will they be allowed to switch on their smartphones?) It may turn out to be a great day out. Whether this is a matter for public policy is another issue.

itch Ratings has yesterday maintained Macau’s longterm rating at ‘AA-’, the fourth-best investment grade with a stable outlook, but warned there are dangers ahead. The credit ratings agency says “robust” fiscal and external finances underpin the city’s positive score. With gaming revenue more than offsetting a trade deficit, the government’s foreign reserves at the end of 2012 were enough to cover for almost seven months of imports, the report adds. In the last few years “large tou ris m ” r ecei p ts a n d b u d g et surpluses have been the fruit of a gaming-driven “economic boom,” the report, led by analyst Anna Thung, says. Macau has a track record of fiscal prudence and the government enjoys a debt-free status, the Hong Kongbased analysts stressed.

KEY POINTS Macau’s economy remains highly concentrated in the gaming industry China to have a smooth economic rebalancing process and avoid economic hard-landing Economy and gaming industry highly susceptible to mainland’s economic performance Changes to Beijing’s policy towards gaming and tourism ‘highly unlikely in the near- to medium-term’

In the last 10 years the city achieved “substantial” budget surpluses, averaging 15.4 percent of the wealth creation, Fitch says. In the same period, jurisdictions with similar ratings have averaged a budget deficit of 0.1 percent, the reports highlights. As a result the territory has piled up “a large pool of fiscal reserves,” which are expected to reach 237 billion patacas (US$29.6 billion), or 59 percent of the wealth creation, by the end of this year. But Macau could become a victim of its own success, Fitch warns. “Heavy reliance” on casinorelated activities and a growing exposure to mainland China’s economy “are vulnerabilities” for the territory, the report adds.

Rating Sensitivities The main factors that, individually or collectively, could trigger:

Positive rating action - A significant improvement in China’s economic- and financial-sector risks

Negative rating action - Severe economic shock from China could be negative for the ratings, given the close economic and financial linkages - A sharp deterioration in financial sector stability given increasing risks from sharply rising property prices and mainland China exposures

Property, China risks Both the economy and public finances have become “increasingly tied” to the performance of the gaming sector, the report underlines. Last month Fitch revised its market outlook for Macau’s 2013 gaming revenue growth to “over 11 percent” from 8 percent. As tourists from the mainland and Hong Kong make up the bulk of visitor arrivals, this leaves Macau “highly exposed” to China’s economic evolution, as well as Beijing’s visa policy, the report says. From the more than 28 million tourists that came to Macau last year, 23.9 million were from the mainland and Hong Kong. China-related risks are rising particularly for the banking sector, the agency warns. The exposure of banks here to Chinese assets grew by almost twothirds last year and it now accounts for 16 percent of all banking assets. Fitch says the risks associated with this lending, including less transparent regulation and being unable to enforce claims to assets used as collateral for loans,

“remain a concern”. Nonetheless, the agency recognises the “significant benefits” flowing from the city’s “increasing economic integration with the fastgrowing” mainland. In another report released in February, Fitch said increased exposure to the mainland makes business riskier for Macau banks, but evolving offshore yuan markets present irresistible opportunities. Closer to home, “sharp rises” in housing prices spurred by low-interest rates and “strong investment demand,” have raised concern over housing affordability, the report highlights. Property cooling measures have lead to “early signs of stabilisation,” it adds. Banks’ exposure to the property sector is a concern but so far Macau households have managed to keep up their mortgage payments, Fitch writes.

Tourists from the mainland and Hong Kong accounted for 85 percent of all travellers last year

May 23, 2013

Macau A record cost of 63,511 patacas for a square metre of office space was reached in the first quarter

chief executive Ronald Cheung Yat Fai said expensive office transactions had probably driven the near-record loans. “The office market has been fairing quite well this year with a rise of about 50 percent in prices for some cases,” he told Business Daily. “In some districts, like NAPE, an office can now cost 5,000 to 6,000 patacas per [square] foot compared with about 3,000 patacas last year.”

High-rise costs

Spiralling office costs spur commercial loans New mortgages for commercial properties in the first quarter were double the value of loans last year Tony Lai

tony.lai@macaubusinessdaily.com

he value of commercial mortgages approved by Macau banks more than doubled in the first quarter of this year compared to the same time last year. New commercial mortgages reached 2.42 billion patacas (US$302.5 million) in March, a

fall of two-thirds from February’s record loans of 7.41 billion patacas, the Monetary Authority of Macau said yesterday. But the amount loaned in the first three months of this year was more than 13.6 billion patacas – a 139-percent increase in year-onyear terms.

It was the second highest quarterly result on record trailing the 14 billion patacas loaned in the third quarter of 2011. In June of that year, the special stamp duty regime was introduced on home loans but did not apply to commercial properties. Midland Realty (Macau) Ltd

The average cost of office space rose by one-third between the end of last year and March 31 to 63,511 patacas a square metre, according to data released by the Statistics and Census Service on Monday. It was the highest rate of growth among all types of property and a new record cost for office space. “The office price has risen fastest so far this year as it has trailed behind the hikes in other [types of] property in the past times and it is now catching up,” said Mr Cheung. There were 446 office and commercial transactions in the first quarter, down by more than half from the fourth quarter of last year. Mr Cheung said there had been a recent increase in the number of transactions for office units. He did not disclose the figures. The city’s financial regulator said new residential mortgages were 3.08 billion patacas, up by 12.8 percent from a year ago. Lending for incomplete flats, accounting for about 3 percent of all residential mortgages, surged to 92.71 million patacas, a 44.8-percent increase in year-on-year terms. Macau residents drew down 97.3 percent of all new home mortgages in March. New housing lending to nonresidents fell to 84.57 million patacas, a decrease of almost half compared to last year.

Home pre-sales price up as new rules loom Lack of supply boosts price of Macau’s older flats in first quarter Vítor Quintã

vitorquinta@macaubusinessdaily.com

ith developers trying to beat the introduction of Macau’s first-ever rules on sales of unfinished flats, pre-sales accounted for almost half of all home transactions in the first quarter of this year. A total of 3,585 residential units were sold in the January-March period, down by 21 percent from the previous quarter, the Statistics and Census Service announced late on Tuesday. But a staggering 42 percent of those units, or 1,491, were unfinished flats. “Developers wanted to sell before the government policy on pre-sales was introduced,” Skie Ng, business development manager at Savills (Macau) Ltd, told Business Daily. High-end project Pearl Horizon, located in Areia Preta, and other

similar development were launched to the market “in the first four or five months,” she said. But developers were not desperate enough to lower their asking prices, the executive admitted. The average price of unfinished units went up by 15 percent to 97,307 patacas (US$12,173) per square

MOP97,307

Average price paid per square metre of unfinished flats

The average price of unfinished units went up by 15 percent (Photo: Manuel Cardoso)

metre in the first quarter. This figure is a new record high and much higher than the average for existing flats, 59,756 patacas per square metre. Most of the unfinished projects hitting the market are “high-end developments,” Ms Ng said. Furthermore, “prices are high because the payment plan is very favourable. Buyers only need to put a down payment of 30 percent [the total price] with the rest paid after completion,” she added. At the other end of the market, the average price of residential units with more than 20 years reached 44,289 patacas per square metre, up by 13 percent from the previous quarter – a faster growth than for younger flats. “In 2010 and 2011 there were

not many new residential projects launched, which means you now have little supply,” Ms Ng said. “As a result people will go the second-hand market, and the price goes up very quickly,” she added. Even after the government called on homebuyers to be cautious, people are still tapping the market. “Everybody is afraid the [pre-sales] policy will be executed very quickly,” the Savills executive said. The law on pre-sales was approved at the Legislative Assembly on Tuesday and it should come into effect next month. Ms Ng does not believe pre-sales have grown any further in April and May. “Most of the stock was launched already,” she said.

May 23, 2013

Macau

Bill Weidner to run US$3.5 bln Bahamas casino Baha Mar being largely funded by state-owned Chinese bank Michael Grimes Michael.grimes@macaubusinessdaily.com

ormer Las Vegas Sands Corp president Bill Weidner has been chosen to operate a new US$3.5 billion (28 billion patacas) gaming resort in The Bahamas. Baha Mar is being majority-funded by the Export-Import Bank of China – a state-owned Chinese institution – and is due to open in December 2014. Another equity partner, with US$1 billion, is Sarkis Izmirlian, chief executive of Baha Mar Ltd. The resort will be managed by Mr Weidner’s Global Gaming Asset Management LLC, which has an equity stake in the US$1.2 billion Solaire Resort & Casino in the Philippines, and is pursuing a gaming resort licence in Matsu in Taiwan. Mr Weidner, who helped develop The Venetian Macao while at LVS, told Business Daily that an equity stake in Baha Mar wasn’t an option as the project was already advanced when GGAM was asked to get involved. “It was too far down the pipe [for that],” he stated. “It’s tough to see how you would carve out something like that.” The project has been in preparation for ten years, but an original proposed equity partner – Harrah’s, now Caesars Entertainment – was unable to go forward with the scheme, sources familiar with the situation told us.

Rendering of Baha Mar

Asked if there would be a supply of Chinese VIP gamblers to the resort, Mr Weidner told us: “It’s a year and a half away and you never know. Look what’s happening outside of Macau now. You have Singapore; you have lots of other places” He added: “This place [Macau] is the hub, this will always be the king. There’s plenty more to fuel this. But I think you’ll see more and more Chinese travelling to exotic places. It’s part of the evolution of a growing China.” Pete Wu, a former Macau gaming executive who is now senior vice president, international marketing and alliances for Baha Mar Ltd, told Business Daily: “There is a pipeline for Asian players out to that region. Also the resort is being built by China State Construction, and financed by the Export-Import Bank of China. They have ‘skin in the game’ so they have a vested interest in helping us be successful. They’re state-owned enterprises, so any additional conversations regarding airlift or airlines, visas, etc., they can offer some assistance.”

Golf course The beach-front project will have a 100,000-square-foot casino with 150 gaming tables and 1,500 slot machines as well as luxury hotels, dining and shopping, a golf course and a convention centre. Mr Wu stated: “We can even offer in-room gaming. If you want it in your suite, we can put it in there. We can do that in the form of tables or slots.” The executive added the resort also has permission to offer ‘in play’ betting on live sport, and also proxy telephone betting and online betting. It will be the second gaming resort in the Bahamas. The first, called Atlantis, was developed by South African gaming entrepreneur Sol Kerzner from 1994 onwards, from an earlier investor’s project.

MGM discounts size in a hunt for quality MGM chief executive Grant Bowie says progress at one of Cotai’s smallest sites is ‘on track’ Tony Lai tony.lai@macaubusinessdaily.com

GM China Holdings Ltd is confident the quality of the casino-resort built on one of Cotai’s smallest building sites will appeal to customers over a long period of time. While MGM’s rivals such as Sands China Ltd and Galaxy Entertainment Ltd hold leases for more than 400,000 square metres of the Cotai Strip, MGM China was granted a 71,833-squaremetre site in January. MGM chief executive Grant Bowie does not think the relatively small size of its lease will be a disadvantage for the company’s second resort in Macau. The MGM Macau on the peninsula is its other resort. “The key for us is that we are looking for quality experiences and, as is often the case, different companies take different approaches,” Mr Bowie told Business Daily. SJM Holdings Ltd, the city’s biggest gaming operator by market share, currently holds a smaller piece of

land in Cotai but is poised to triple the size of its footprint. While the government granted it 70,500 square metres of land last week for its first Cotai resort, the final resort is likely to be far bigger. SJM chief executive Ambrose So Shu Fai told reporters earlier this month the company was “very likely” to rent an adjacent 180,000-squaremetre plot from Macau Theme Park and Resort Ltd, which is controlled by SJM executive director Angela Leong On Kei. “If not, SJM only has a 70,000-squaremetre plot… the smallest among all other operators in Cotai,” Mr So said at the time. Mr Bowie is certain that size is irrelevant. “We’re very confident that what we create will be innovative, interesting and entertaining,” he said on the sidelines of a hospitality conference yesterday.

On track “We’re working with many different entertainment elements… but there’s a long way to go.” “It [the resort] needs to be attractive to all of the customers, not just the expectations of customers today but the expectations for many years in the future.” He did not reveal any further details about the development. MGM China joint chairman Pansy Ho Chiu King said in February the resort would include a theatre but the company was still seeking entertainers. The company’s plan for the casinoresort includes 1,600 hotel rooms, 500 gaming tables and 2,500 slot

Work on the foundations of MGM Cotai’s casino-resort will be complete this year, says Grant Bowie

machines. About 85 percent of the gross floor area would be reserved for non-gaming activities. Mr Bowie said construction progress was “on track” and would be completed by the middle of 2016. “We’ll have the foundations finished by the end of this year… and with the contractor now on board we can obviously start building the infrastructure in 2014,” he said. China State Construction International Holdings Ltd signed a HK$10.5-billion (US$1.35-billion) deal to act as main

contractor for the project. Mr Bowie said there was no need to again revise the resort’s US$2.6billion budget. The budget was increased by US$100 million this year. Mr Bowie is not worried that the simultaneous launch of several Cotai projects might further stain the construction labour market or slow progress at MGM’s resort. “I’m very confident that people in Macau and businesses always find a way to get the job done,” he said.

May 23, 2013

Macau

Expo Bytes

Pacquiao may launch own slot game in Macau this autumn His manager says likely to be two months before comeback fight at Venetian Macao Michael Grimes

Photo by Manuel Cardoso

michael.grimes@macaubusinessdaily.com

hilippines boxing legend Manny Pacquiao may visit Macau this autumn – prior to his fight at The Venetian Macao

– to launch a new Aristocrat Technologies slot machine game based on his career. The news was given to Business

Daily by the fighter’s manager Eric Pineda. “We’ll probably go first to the United States and then do an Asian tour including maybe Singapore and Macau,” said Mr Pineda. “We’ll probably do the promotion two months before the fight,” he added. Aristocrat’s game, Mega Manny Jackpots, is a progressive-style slot product. The game is still under development, but a prototype complete with top box featuring animated action sequences - is on display until this afternoon at Aristocrat’s stand at Global Gaming Expo Asia 2013 at The Venetian Macao. “It’s still under development but it looks really good. It would be nice if they could make him look even more handsome,” said Mr Pineda.

Soaring bet sizes ‘bad for Macau’s reputation’: SJM CFO

Bob McBain, CFO SJM Holdings Ltd

ob McBain, chief financial officer of SJM Holdings Ltd, told Business Daily yesterday he would like to see the government require casino operators to provide a minimum number of low-bet livedealer gaming tables. Mr McBain was speaking on the sidelines of a Global Gaming Expo Asia conference session. “If it were up to me, if I were advising the government, I would say ‘Why don’t you require some HK$50 tables?’ They want to build general tourism after all,” he stated, adding that what was good for all operators’ profitability – high minimum wagers in the high-margin premium mass market – wasn’t necessarily good for Macau as a holiday destination “If Macau is only for the high rollers, I think that’s bad for Macau’s reputation as a destination for everybody,” he added. Earlier, during a session titled ‘Show Me The Money: CFO Roundtable’,

Aristocrat Technologies is one of the world’s leading casino equipment suppliers and the market leader in Macau. Two important features of the game are that Manny’s opponents are ghost-like figures on the graphics, and the Filipino hero – the first-ever boxer to be a world champion at eight different weights – doesn’t ever lose a fight. “Manny Pacquiao is such an iconic figure and such a hero in the region and across the world that we’re very excited to be involved with this product,” said David Punter, general manager Asia Pacific for Aristocrat. Mr Pacquiao is to face Brandon Rios of the United States in a non-title welterweight bout in Macau on November 23.

We’ll probably go first to the United States and then do an Asian tour including maybe Singapore and Macau Eric Pineda, Pacquiao’s manager

Ben Toh, CFO of Sands China Ltd, said that since 2007, minimum bets on mass-market tables in Macau had risen fivefold. “When The Venetian opened, minimum bets were only HK$100 to HK$200. Today you can’t find that. It’s been pushed up to HK$500 or HK$1,000,” stated Mr Toh. “It used to be that HK$500 or HK$1,000 per hand was considered high limit,” he added. Hubert Wang, CFO MGM China Holdings Ltd, added during the session: “Personally I do believe Macau has priced out some consumers from the market, particularly at the low end of the mass market.” Mr McBain added: “The way things are going, give it another year or two and go to a Macau casino in the evening, and it’s going to be very difficult to find a table that’s less than [a] HK$500 minimum bet. And with this artificial shortage of tables, so you could see more of the casual gambling market and vacationer market – which is important for Macau’s future – being relegated to the slot machines and electronic games.” M.G.

May 23, 2013 April 19, 2013

Macau

Fund predicts bullish Home rent control proposal prospects for property Despite the hint of more curbs, one high-end property rejected Not enough time to discuss bill before summer break, legislators claim Stephanie Lai

sw.lai@macaubusinessdaily.com

he first-ever bill aimed at controlling home rent rise in Macau was rejected at the Legislative Assembly yesterday. Out of 20 assembly members who attended the session, only the three New Macau Association legislators and the bill proponent José Pereira Coutinho voted in favour. Most legislators, 11, voted against it and three abstained. The bill would allow no increases in rent during the first two years of a lease, and subsequently allow no increases greater than the annual rate of inflation. Ung Choi Kun, president of Association of Property Agents and Realty Developers of Macau, voted against the bill. But afterwards he told Business Daily: “As a legislator and a representative of my sector, I do support the intention of the bill. I rejected the bill because we have less than 60 days before the end of this legislative term. It is too short to afford a careful examination of the bill and ensure its quality.” According to the Civil Code, home rental contracts should last at least two years. During that period, rents cannot be raised without the tenant’s approval. However there were many irregularities in estate agents’ practices, namely in laying rental contracts that fall short of the legal requirement, Mr Ung admitted. “There are flaws in the execution of the law,” he said. “I think the government can initiate discussions on a rental policy, and on how to balance the protection of both the tenant and the landlord,” Mr Ung said.

developer has forecast constant growth in home prices Stephanie Lai sw.lai@macaubusinessdaily.com

espite hints that more curbs on the property market may be introduced soon, there are at least 24 months of growth ahead for Macau’s property market, according to Sniper Capital (Macau) Ltd. The final 22 flats in pre-sale phase of the high-end property development The Fountainside were launched yesterday. The low-density housing project on Penha Hill is owned by the Macau Properties Opportunities Fund and managed by Sniper Capital. Construction began about two years go and should be complete by the end of June, said Sniper director João Afonso. “We’re pretty confident with the sales of The Fountainside as we cannot see any new property projects to be rolled out in the coming two years,” said Mr Afonso. “We’ve gained a good timing for the sales.” Chief Executive Fernando Chui Sai On said late last month the government could impose a levy on second homes, raise stamp duty or tighten mortgage rules. “Despite any curbing policies or even the housing pre-sale law, we still project a gradual 5 to 10 percent

growth in home prices in the next two years,” Mr Afonso said.

Premium sales “That growth is supported by a limited supply in local market and a group of local buyers with strong purchasing power.” “These buyers are usually looking to switch for a new home and are able to not rely on bank loans to make the purchase.” In yesterday’s release at The Fountainside there are 15 basic flats, three special flats and four villas. Prices for a basic flat range from HK$11,000 to HK$15,000 (US$1,932) a square foot, with flat sizes from 718 square feet to more than 2,000 square feet. The villa is the most expensive property in the development, spread across three storeys, with a garden and private garage. Prices start at HK$13,000 a square foot. Sniper had already sold 20 units at an average of between HK$4,800 and HK$5,000 a square foot, Mr Afonso said. About 90 percent of the buyers are Macau residents. The Fountainside’s façade is four former homes of civil servants in

Coloane protection in discussion A motion filed by the New Macau Association legislators calling for a Legislative Assembly debate on turning Coloane into a protected green zone, was passed yesterday. One of the supporters of the motion, Kwan Tsui Hang, said the debate was the “last effort” to protect Coloane’s environment. A high-rise residential tower planned by Hotel Fortuna owner Sio Tak Hong for the island stirred public outcry earlier this year. Ng Kuok Cheong said the support for the motion was “not totally unexpected as the incident has brewed for a long time, and that there are persistent concerns voiced out by local youths”. The Fountainside exterior is four Portuguese-style former civil servants’ homes

Portuguese-style that were bought for US$8.6 million in 2006. With limited land available for development on the Macau peninsula, high-end residences located next to cultural heritage sites like Lilau Square would be hard to find, Mr Afonso said.

Niche shopping planned Property developer Sniper Capital is planning to build a 6,503-square-metre shopping centre near Senado Square. The project hopes to attract middle to high-end retail stores, Sniper Capital director João Afonso told Business Daily. It would be a chance to cater to a market niche, creating a modern shopping centre outside the city’s casino-resorts. The company is waiting for the government to approve its construction plans before it estimates the project’s budget. The shopping centre is due to open in 2016.

May April23, 19,2013 2013

Macau Strong start to fiscal reserve’s second year The fiscal reserve made a very strong start to its second year of operations, with the return on its investments reaching 0.3 percent in March alone. The figure, disclosed in a summary published by the Monetary Authority of Macau in the Official Gazette yesterday, is much higher than the 0.17 percent recorded a year earlier. The monetary authority told Business Daily last month it would “adopt an investment strategy that aims to achieve a higher return in the long term”. If the pace were to remain unchanged then the government’s reserve would finish its second year with a return of 3.6 percent, more than twice as much as the 1.75 percent recorded in the first year. It would also be a better performance than the predecessor of the fiscal reserve, the MSAR Reserve Fund, which achieved an average annual return of 2.21 percent between 2001 and 2009. However it would likely still be well below the rate of the inflation. The average rate of inflation for the 12 months ending April was 5.75 percent. The fiscal reserve contained 164.83 billion patacas (US$20.62 billion) at the end of March, up by 500 million patacas from the previous month.

Free trade zone planned for Nansha Guangzhou special area seeks to attract Macau, Hong Kong investors Vítor Quintã

vitorquinta@macaubusinessdaily.com

V.Q.

Nansha to offer preferential taxation and land policies to Macau residents working there

uangdong provincial authorities are negotiating with the central government to develop a pilot free trade zone in Nansha, the

Corporate

Sands launches Meet for Free offer Sands China Ltd is launching a promotion offering a rebate for meetings held at any of its five Cotai hotels starting next month, the company announced in a statement. The new Meet for Free offer grants a rebate on a maximum of two days of full-day meetings for groups that book a minimum of two nights’ stay and 50 rooms per night. Meeting planners can take advantage of the new offer on standard meeting packages for new bookings signed until the end of the year, for meetings to be held in 2013 or beyond. The offer comes with one plenary room, welcome coffee and/or tea each morning, morning and afternoon coffee breaks, lunch and basic audiovisual equipment. A total of 961 meetings were organised in Macau last year, down by 3 percent from 2011, according to official data from the Statistics and Census Service.

COD culinary team awarded at HOFEX The culinary team at City of Dreams, Melco Crown Entertainment Ltd’s flagship resort, received several awards at HOFEX, Asia-Pacific’s largest food and hospitality tradeshow, held earlier this month. The team received the gold medal in ‘Pastry Display Showpiece’, and, in collaboration with the Macau Chef’s Association, the gold medal and the cup for ‘The Best of the Best Gourmet Team Challenge’ for the second consecutive year. In this challenge the chefs needed to impress both guests and the panel of credential judges with their combined effort to create a themed buffet for 30 people. “The awards are recognition of the culinary excellence, which is the result of the collaborative teamwork of all our culinary colleagues,” said Kristoffer Luczak, Melco’s vice president of food and beverage. “We will strive for continued excellence and to share best practices to further propel the rapidly growing market,” he added in a statement.

official Shanghai Security News reported, quoting unidentified government sources. The plan should be approved by Beijing at the same time as

a similar zone in Shanghai’s Pudong New Area, said the official sources. The free trade zone will cover 24.52 square kilometres in the south and north of Longxue Island and Nansha Bay, China Daily – another official newspaper – reported on Wednesday. The mayor of Guangzhou, Chen Jianhua, visited the city’s Nansha district earlier this month to assess the site chosen for the free trade zone, China Daily said, quoting Nansha official sources. Nansha special economic area was singled out by the central government for autonomous management of some sectors. “According to my understanding, the separate system will include a free trade zone in Nansha New Area,” said Ding Li, a senior researcher with Guangdong Academy of Social Sciences. “It means that the zone will enjoy more preferential policies in foreign exchange, tax and customs,” he told China Daily. “The establishment of such a zone will improve communication in human resources, finance and logistics among Guangdong and Hong Kong and Macao,” Mr Ding said. Last year Nansha officials said they intended to offer preferential taxation and land management policies to Macau and Hong Kong residents working there. Last week, a delegation from Nansha signed seven cooperation agreements with Macau trade associations and firms that could involve up to 17.05 billion patacas (US$2.13 billion) in investments.

May 23, 2013 April 19, 2013

Greater China

HK probes failed Mercantile Exchange Three held in HKMEx investigation as chairman takes leave Simon Lee and Eleni Himaras

olice began probing the Hong Kong Mercantile Exchange Ltd, owner of the failed commodities market set up by a member of the city’s cabinet, after the securities regulator found suspected financial irregularities. The arrest of three men after the May 18 shuttering of the exchange prompted its chairman Barry Cheung, who sits on Hong Kong’s Executive Council, to say he is taking a leave of absence from all public positions. Mr Cheung hasn’t been accused of wrongdoing. HKMEx lost its trading licence after failing to attract sufficient volumes as it competed with rivals such as the Chicago Mercantile Exchange and the London Metals Exchange, which was bought by Hong Kong’s stock-exchange operator last year. Mr Cheung, who ran the 2012 election campaign for the city’s Chief Executive Leung Chun Ying, is the latest in a series of prominent Hong Kong government and business figures to be affected by criminal investigations. “This will have an impact on Hong Kong’s image of clean government,” Ivan Choy, political scientist at Chinese University of Hong Kong, said of the series of investigations involving high-profile figures. Last week Hong Kong’s anti-graft agency said it was investigating its former head over alleged misspending. The agency last year arrested the co-chairmen of the city’s largest property developer by market value Sun Hun Kai Properties Ltd. Thomas and Raymond Kwok have pleaded not guilty in that case.

The three men arrested aren’t current or former employees of HKMEx, Mr Cheung, 54, told reporters yesterday. He said he would cooperate fully with the investigation. A former McKinsey & Co. consultant, Mr Cheung said he is the HKMEx’s largest shareholder. EN+ Group, controlled by Russian billionaire Oleg Deripaska and China’s Industrial and Commercial Bank of China Ltd, the world’s largest lender by market value, also hold stakes in the exchange.

Mr Leung accepted Mr Cheung’s request to step aside as a member of his cabinet and other roles including head of the Urban Renewal Authority after the Securities and Futures Commission said it found “ s er i o u s ” s u s p ected f i n a n c i a l irregularities at the shuttered commodities market. Mr Leung, whose former development secretary is fighting charges of housing fraud, said on Wednesday the investigations into HKMEx would be impartial and he

“should not comment and would not interfere”.

Rusal, AIA Mr Cheung was the non-executive chairman of Deripaska’s United Co. Rusal, the world’s largest aluminium producer, until October, and remains on the board of the Russian commodities company. He was appointed to AIA Group Ltd, the former Asian unit of American International Group Inc., as an

The exchange has handed back its operating licence

EU wants market opening to make Chinese FTA real Bloc seeks to open markets for EU businesses Ethan Bilby

he European Union is willing to deepen trade ties with China but wants to see concessions from Beijing first, documents seen by Reuters showed. At the same time as EU regulators are ramping up trade pressure on Beijing by threatening duties on solar panels and telecoms equipment, Brussels is dangling the carrot of trade agreements before the Chinese. The European Commission is expected to adopt a mandate for negotiating an investment agreement with Beijing this month, but documents seen by Reuters show that a much more ambitious trade agreement could be considered afterwards if China plays ball. A free trade agreement (FTA) could be looked at in future if China can “address the root causes for current market access obstacles

and competition concerns”, a draft document written by the EU’s diplomatic service said. The strategy document is an EU response to a proposal Beijing made before last year’s EU-China summit, to deepen ties between the two powers in numerous areas. This draft agenda could then be agreed at this year’s meeting between top leaders from China and Europe, expected in the autumn. “Concluding an ambitious investment agreement as set out above would send a strong signal of this readiness and ability to deepen our relationship in an effective manner,” it said. The EU’s bilateral investment pact with China, proposed last autumn, would cement EU rules giving Chinese markets open access, while seeking to open Chinese markets for

EU businesses. A full FTA would go much deeper.

French, Italian worries But the mere suggestion of a free trade agreement with China has raised hackles in EU member countries such as France and Italy, which led objections to the strategy proposals at meetings of EU national trade experts last week, according to EU sources and documents. Germany and other member states said the European Union should seek to conclude a partnership and cooperation agreement (PCA) with China, which the European Union launched in 2007 and remains stuck in talks, before examining an FTA. Fredrik Erixon of Brussels-based think tank ECIPE said that the broad goals of the PCA, which dealt with a

The draft proposal sets out several areas for coopera

number of issues from nuclear power to cultural diversity, led to its stalling. This was echoed in another EU document which said those negotiations “were stuck due to different levels of ambition on the two sides and no progress could be foreseen in the future”. The draft EU-China strategy proposal sets out numerous areas for cooperation from the environment to financial services.

May April23, 19,2013 2013

Greater China

Banks curbing loans to commodities firms Targeting companies involved in transit trades Barry Cheung intendeds to re-apply for HKMEx’s licence

independent non-executive director in September. HKMEx began trading gold futures in May 2011 and silver contracts in July that year, both denominated in U.S. dollars. The exchange stopped trading and handed back its operating licence because revenue wasn’t sufficient to support running costs, the SFC said on May 18. “HKMEx was founded to bridge China’s fast-growing commodities markets with the rest of the world by providing products adhering to international standards, but tailored to local and regional market participants’ risk management needs,” Mr Cheung said in February 2012. He said on May 18 that HKMEx would strengthen its shareholder base and develop new products, and intended to re-apply for its licence. The closing of trading positions on the exchange went smoothly and is now complete, the SFC said. LCH. Clearnet Group Ltd, the Londonbased clearinghouse, has started returning collateral to clearing members, the markets regulator said. The SFC said it began investigating HKMEx on May 15 and then referred the matter to the Hong Kong police department’s Commercial Crime Bureau. Hong Kong police said they are investigating, on referral by the SFC, a suspected case of “using a false instrument” involving a commodities company. They said yesterday they had arrested three men as part of their investigation of HKMEx. Bloomberg News

Clampdown to have limited impact on gold imports

hinese commodities firms importing everything from gold and rubber to base metals are struggling to get trade loans as banks scrutinise their activities and hold back credit following Beijing’s orders to rein in currency speculation. China is the world’s top consumer of base metals and rubber, and the second-largest gold buyer after India. A crimp in imports as financing becomes harder will be bearish for the international benchmark prices of these commodities, but could mean their domestic prices will be supported. The latest crackdown mainly targets companies that are heavily involved in buying and selling imported goods stored in bonded warehouses within China’s tarifffree areas. Those that import raw material into the country for their own consumption are less affected. Banks in Guangdong province such as Industrial and Commercial

Bank of China Ltd and China Minsheng Bank Corp Ltd have stopped issuing letters-of-credit (LCs) with long maturity dates to some jewellers, which import gold into the mainland for export processing. “All [companies] cannot get LCs for transit trade in Guangdong at the moment,” said a source whose firm trades base metals and manufactures aluminium products in the southern province. He was referring to the trading of bonded stocks. ICBC and Minsheng could not be reached immediately for comment. China’s gold market is tightly controlled, with import licences granted to a handful of banks and export permission given only to authorised jewellery makers.

N Korea leader sends envoy to China

consumer goods, and trade between the two has dropped since Mr Kim’s regime fired a long-range rocket in December and detonated a nuclear device in February in defiance of international sanctions. “It is the young leader’s effort to redress some tension over the nuclear test and the threatening actions,” Zhu Feng, a professor of international relations at Peking University, said by phone. “Beijing is very irritated.” China has tightened sanctions on the totalitarian state in response to international pressure. A Chinese state bank closed the account of a North Korean lender earlier this month. State Councillor and foreign policy chief Yang Jiechi last month pledged “firm commitment” to working with the U.S. to convince the North to abandon its atomic ambitions. President Barack Obama and Chinese counterpart Xi Jinping will meet in California next month for the first time since Mr Xi took office in March.

Amid cooling relations between the two neighbours

ation

Brussels would like to see Europe’s green technology firms help Chinese cities to modernise, and to work together with China in Africa “with a particular focus on raw material and commodities”. The European Union also seeks an agreement on regulating export credits with China by 2014, and calls for better access for EU banks to the mainland market. Reuters

orth Korean leader Kim Jongun sent a “special envoy” to China as ties with his biggest benefactor showed signs of strain over the North’s nuclear ambitions and the seizure of a Chinese fishing boat. Choe Ryong-hae, vice marshal of the North Korean military and head of its political bureau, left Pyongyang yesterday, the official Korean Central News Agency said. While China’s Foreign Ministry declined to comment on the report, it was cited by the official Xinhua News Agency. Mr Choe is the highest-ranking official to visit China since Mr Kim succeeded his late father, Kim Jongil, in December 2011. North Korea depends on China for fuel oil and

Gold demand In the Panyu and Huadu districts in Guangzhou city in Guangdong,

Security forum Yesterday’s trip also comes ahead of a May 31-June 2 security forum in Singapore that will be attended by Asian defence ministers and U.S. Defence Secretary Chuck Hagel. The envoy was seen off at the airport in Pyongyang by Kim

there are over 900 jewellery makers. Their close proximity to Hong Kong has allowed the two areas to become an important jewellery processing base for exports. Some jewellery makers, trade sources said, have used LCs with maturities of up to a year to import gold as raw material. They would then export gold products, in many cases to their Hong Kong subsidiaries, at higher-than-market values and bring back the yuan into China. Hong Kong holds the biggest pool of yuan outside of China and is one of the few centres from where the yuan can be repatriated to the mainland. China ran a capital and financial account surplus of US$102 billion in the first quarter, up from US$20 billion in the fourth quarter of last year, reflecting the heavy capital inflows. The distortions led Beijing to set new rules earlier this month to stop fake trades. The rules, to take effect from June 1, require banks to tighten the management of their foreign exchange lending and types of clients that are able to access those loans. The clampdown would have some impact on gold imports in the near term, analysts said, but volume is unlikely to drop significantly as banks remain the largest importers. “Unlike copper, gold isn’t a popular financing tool because it is less liquid,” said Sun Yonggang, a gold analyst with Everbright Futures. “Physical demand is also very strong in China so banks are unlikely to shut off credit to the large jewellers for long.” The steep fall in international gold prices in April unleashed years of pent up demand in China for coins, bars and jewellery. Gold is down nearly 18 percent this year. Reuters

Kyok-sik, who KCNA identified in a separate dispatch as the regime’s new military chief. Kim Kyok-sik was replaced as defence minister last week by a younger general named Jang Jong-nam. Mr Choe, 63, holds the secondhighest rank in the North Korean military after Kim Jong-un. Mr Kim’s choosing Mr Choe signals that the envoy’s meetings will be focused on responding to Chinese security concerns instead of joint economic projects, Cheong Seong Chang, senior research fellow at the Sejong Institute in Seoul, said in an e-mail. “Kim sent the second most powerful person in the military as his envoy, as a response to China’s desire to talk about the North Korean nuclear weapons program and its longrange missiles, rather than bilateral economic ties,” Mr Cheong said. North Korea on Wednesday freed a Chinese fishing vessel and its crew after the boat’s owner posted comments on his microblog saying he’d been told to pay a 600,000 yuan (US$97,800) ransom. China National Radio later said no ransom was paid. “The releasing of the Chinese boat is another signal that Pyongyang really knows how irritated China is, so they don’t want to do anything that would make Beijing turn its back on North Korea,” Mr Zhu said. Bloomberg News

May 23, 2013

Asia Bank of Korea’s Kim warns of rate risks South Korea’s central bank chief said a U.S. pullback from monetary easing would spur risks worldwide from rising bond yields, adding to a global debate over how to manage costs from exiting record stimulus. “If the U.S. begins to exit from quantitative easing policies, the world will be facing interest-rate risks, in terms of how much would bond yields rise,” Bank of Korea Governor Kim Choong-soo said in a speech yesterday. Whether the international Basel III capital standards could require banks to increase assets as bond prices fall is a “problem to think about,” he said.

BoJ holds off on fresh monetary easing Japan’s central bank sees signs that the economy is ‘picking up’

Recent volatility in govt securities not yet affecting economy, says Mr Kuroda

he Bank of Japan kept policy steady yesterday despite concerns over recent volatility in bond market, saying growth is starting to pick up even

as risks loomed from an uncertain global outlook. The central bank upgraded its assessment of the economy, saying it “has started picking up,” as Prime

Minister Shinzo Abe’s programme of aggressive fiscal and monetary stimulus has boosted sentiment and a weaker yen has halted a decline in exports. As expected, the central bank stuck with April’s massive quantitative easing, in which it pledged to end 15 years of deflation by doubling its Japanese governmentbond holdings in two years as it expands the supply of money at an annual pace of 60 trillion (US$583 billion) to 70 trillion yen. BOJ Governor Haruhiko Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner. The biggest surge in government debt yields in five years threatens to undermine the BOJ’s stimulus, with companies pulling bond sales amid the tumult. The prospects of a growth rebound and the emergence of inflation has contributed to sending the rate on 10-year bonds up more than a quarter percentage point in two weeks. Mr Kuroda said that he did not expect JGB yields to spike and that a recent increase in JGB yields was not having a major impact on Japan’s economy. He reiterated the central bank’s commitment to buying about 50 trillion yen (US$490 billion) in JGBs a year to achieve 2 percent inflation within two years. “Kuroda believes he should basically stick to the bold easing line he has already dictated,” rather than altering course because of bond market moves,’’ said Yoshimasa

Maruyama, chief economist at Itochu Corp in Tokyo. The central bank raised its assessment of the economy yesterday, as a sliding yen and gains in the stock market aid Mr Abe’s efforts to boost wages and prices.

Yields rise Ten-year government debt yields rose to 0.885 percent in Tokyo from as low as 0.86 percent before the decision. That compared with a high of 0.92 percent last week. The yen weakened to 102.66 per dollar, down about 16 percent for the year. Mr Kuroda said at a government meeting on Monday that it’s natural for yields to rise gradually as the outlook for the economy and prices improves, an official told reporters. “If abrupt moves in yields continue, that will influence companies’ ability to raise funds,” Hiromasa Yonekura, the chairman of Sumitomo Chemical Co. and head of Keidanren, Japan’s biggest business lobby, said at a press conference on May 20. The government should “contain the volatile moves” while also being clear about “its commitment to achieve fiscal health,” he said. “The BOJ is walking a very narrow path trying to engineer a gradual, not a sudden, rise in long-term rates backed by improvements in the economy,” an official with knowledge of the central bank’s thinking said before the policy board’s two-day meeting. Reuters

Australia mine, energy projects delayed As resources spending boom peaked sooner than expected

he end of Australia’s resources boom is taking its toll on investment in the sector, with A$150 billion ($147 billion) in planned projects delayed or cancelled since April 2012, government data shows. China’s economic slowdown has squashed a decade-long mining boom in Australia that drove gold, copper, iron ore and coal to record prices. Mining companies now face a painful transition to lower margins brought on by the retreat in commodities markets and weak investment interest. The drop leaves A$353 billion in investment in new work in the sector in various stages of pre-development, the Bureau of Resources and Energy Economics said in a statement. “In the past twelve months, around A$150 billion of projects have either been delayed, cancelled

or have had re-assessed development plans,” it said in the statement, which accompanied a report on investment. There are now 73 projects at the committed stage with a combined value of A$268 billion, little changed from six months ago, the bureau says. Though this is 14 fewer projects than reported last October, the value of committed investment has remained constant because of cost increases to several high-value projects, it said. Committed investment has peaked and may drop to A$256 billion by the end of the year, the Canberra-based agency said. Woodside Petroleum Ltd shelved plans for its US$45-billion Browse liquefied natural gas project in Western Australia, saying it did not make economic sense. Global energy firms have invested more than US$190 billion in six

Companies cutting mine projects, exploration spending

LNG plants in just 2-1/2 years as Australia ramps up production on its way to becoming the world’s largest exporter of the gas. But investor interest in Australia’s LNG sector has cooled because of huge costs overruns and competition from North America, where new supplies

of gas have been exploited from shale. The Browse decision could spell an end to new onshore gas projects in Australia in favour of offshore plants that can be built more cheaply and face fewer environmental and landowner hurdles. Reuters

May 23, 2013

Asia Temasek buys stake in Markit Singapore state investor Temasek Holdings Pte Ltd has paid US$500 million for a stake of around 10 percent stake in financial data provider Markit Group, a person familiar with the transaction said. Markit said in a statement that the deal had been completed. The deal underlines how far Markit has come since it was formed by a group of credit traders in 2001. “The strength of Temasek’s position and profile in Asia, an area where we see significant potential and opportunity, will help fuel our growth in the region,” said Markit chief executive Lance Uggla.

Trade deficit widens Japan’s exports rose less than expected in April from a year earlier due to weak demand from Europe and China. The 3.8 percent annual increase in exports in April was below the median estimate for a 5.9 percent rise and followed a 1.1 percent increase in the year to March. The trade deficit grew to 880 billion yen (US$8.6 billion) from March’s 364 billion yen deficit. The result also underscores the limitations of a weak yen in bolstering the trade sector, especially as external headwinds crimp demand for exports. “Abenomics” has driven the yen to a 4-1/2 year low against the dollar and boosted Tokyo shares by 70 percent since November. However, the benefits of a weak yen has not been fully reflected in the trade sector, partly because manufacturers have been moving production overseas. The drop in the currency has so far sharply raised fuel import costs and many analysts predict trade deficits to persist through this year. “The yen’s weakness has pushed up values of both exports and imports, but the benefits from a weak yen have not appeared in export volumes yet,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. “The economy is expected to stay on a moderate recovery path. It will be difficult to picture the economy being led by external demand. Instead, it will probably be supported by fiscal policy.”

DBS gets nod to buy stake in Danamon Singapore’s DBS looking to expand further into emerging markets

BS Group Holdings Ltd got approval from Indonesia’s central bank to acquire a US$2.75 billion stake in PT Bank Danamon Indonesia, giving Southeast Asia’s largest lender less control than it had sought. DBS, which in April 2012 proposed buying all of Danamon from Temasek Holdings Pte Ltd and minority holders, will be allowed to purchase 40 percent, Bank Indonesia Governor Darmin Nasution said in Parliament yesterday. Last year’s agreement valued Danamon shares at 7,000 rupiah (72 Singapore cents) each, a 17 percent premium to their closing price on Tuesday. The decision may thwart DBS’s ambition of expanding in Indonesia, Southeast Asia’s most profitable lending market. Approval for the proposed US$6.8 billion acquisition, which would have been the region’s biggest banking takeover, has been delayed as Indonesia sought more access for its lenders in the island nation. “I would have to question the rationale for going after a 40 percent stake,” said Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte, who rates DBS as “neutral”. “If they could just end up holding that, and never be able to consolidate, that’s got to be a risk.” Shares in Danamon dropped as much as 5 percent yesterday,

Philippine bourse closer to debt exchange merger

he Philippine Stock Exchange Inc. agreed with the nation’s bankers association and Singapore Exchange Ltd to pursue a combination of the country’s equities and bonds exchanges. The Philippine exchange signed a “basic memorandum of agreement” to merge with the debt exchange, president Hans Sicat said yesterday in Manila. The bourse, Singapore Exchange and the Bankers Association of the Philippines hold 65 percent of the Philippine Dealing System Holdings Corp, owner of the bond exchange and a securities depository. “We agreed to work together and figure out how we consolidate both exchanges,” Mr Sicat said in

pressed down by uncertainty over whether DBS will be able to purchase a majority stake in the Indonesian lender. The closed 2.50 percent down, at 5,850 rupiah. DBS shares fell 0.27 percent to S$17.31 in Singapore trading. The stock climbed 17 percent this year, compared with the 9.2 percent gain in the benchmark Straits Times Index.

‘Very reluctant’ DBS hasn’t received written notification of the approval from Bank Indonesia and “hopes” its application will be approved as originally submitted, Karen Ngui, a Singaporebased spokeswoman at DBS, said in an e-mailed statement yesterday.

US$2.75 bln DBS will pay for a 40 percent stake in Danamon

Vietnam signals rate pause an interview. “We will still work out the details.” The transaction will probably be completed this year, and the full operational merger will take another year, he added. Finance Secretary Cesar Purisima has supported a combination to deepen the nation’s financial market. A union would have bonds traded on the stock exchange, bourse chairman Jose Pardo said in July 2011 when he first mentioned a possible merger. “This will make bond prices more accessible and transparent because the stock exchange’s platform has a broader reach and access to more individual investors,” said Paul Joseph Garcia, at BPI Asset Management Inc. Bloomberg News

ietnam will find it “difficult” to cut interest rates further this year, central bank Deputy Governor Nguyen Dong Tien said, as the nation moves to create an asset company that would clean up bad debt and revive growth. “The pressure on inflation still remains and there are still some factors that will cause inflation to quicken toward the end of the year,” Mr Tien said in an interview yesterday. “A further rate cut by the central bank is difficult. There’s a small chance.” Prime Minister Nguyen Tan Dung has approved the formation of an asset management company to acquire non-performing loans from the nation’s lenders, the central bank said yesterday. Officials are under pressure to rejuvenate an economy that grew last year at the slowest pace

DBS had proposed buying all of Danamon

DBS is “very reluctant” to buy minority stakes, chief executive Piyush Gupta said on May 2, after the bank reported earnings for the three months to March 31. Basel III rules that require banks to deduct minority investments of 10 percent or more from their capital make such deals “quite punitive,” chief financial officer Chng Sok Hui said on the same day. By contrast, majority acquisitions don’t trigger capital deductions. Buying just a 40 percent stake in Danamon could reduce DBS’s Tier 1 ratio by 70 basis points, and the deal may take longer to add to earnings than an all-out acquisition, Krishna Guha, an analyst at Jefferies Group LLC, wrote in a research note. In Indonesia, ownership rules from the central bank, set after DBS announced its bid last year, limit lenders’ initial purchases of stakes in the country’s lenders to 40 percent. Buyers meeting capitalstrength criteria would be allowed to increase holdings over time, the regulator had said. The central bank signalled it may implement a five-year waiting period before acquirers can increase stakes above 40 percent. Bloomberg News

since 1999, as one of the highest baddebt levels in Southeast Asia hurts credit to businesses. “They’re pausing for now on rates,” said Edwin Gutierrez, a London-based portfolio manager at Aberdeen Asset Management Plc. “Further rate cuts wouldn’t really stimulate the economy anyway. The banking sector’s focus is not on providing credit, it’s on the asset management company. There’s not much appetite to lend.” The asset company will start operations in the second quarter, the central bank said in an e-mailed statement yesterday. Bloomberg News

May 23, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

35.9

-0.5540166

13132381

CHINA UNICOM HON

ALUMINUM CORP-H

3.23

0.310559

13051000

CITIC PACIFIC

BANK OF CHINA-H

3.74

-0.795756

342711618

6.2

0.4862237

13583660

31.15

-0.9538951

1067620

12.5

0.3210273

27244379

27.65

0.5454545

5515311

HANG LUNG PROPER

CATHAY PAC AIR

14.66

0.5486968

3187142

CHEUNG KONG

118.6

1.108269

4546408

CHINA COAL ENE-H

5.55

0.1805054

42514422

CHINA CONST BA-H

6.45

-0.1547988

193772389

CHINA LIFE INS-H

21.6

-0.2309469

24522629

CHINA MERCHANT

25.45

-1.926782

2608870

BANK OF COMMUN-H BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO

CHINA MOBILE

NAME

PRICE

DAY %

VOLUME

11.68

0.6896552

21558850

9.7

-1.821862

8382663

SANDS CHINA LTD

CLP HLDGS LTD

69.25

-0.4313444

2748636

CNOOC LTD

14.42

45383243

COSCO PAC LTD

11.34

0.8896797

6278210

ESPRIT HLDGS

11.56

3.584229

16859803

30.4

0.4958678

2616210

HANG SENG BK

128.7

-0.4640371

795074

HENDERSON LAND D

57.45 -0.08695652

1924506

HENGAN INTL

87.65

-1.239437

2033700

HONG KG CHINA GS

23.45

-0.845666

6317091

HONG KONG EXCHNG

133.8

0.5259204

2286963

HSBC HLDGS PLC

89.4

-0.249844

10028061

84.8

-0.7606788

13278390

HUTCHISON WHAMPO

87.7

1.270208

6039992

23.95

-0.2083333

11591475

IND & COMM BK-H

5.53

0.1811594

290282287

CHINA PETROLEU-H

8.55

-0.5813953

38566089

LI & FUNG LTD

11.38

0.1760563

13556220

CHINA RES ENTERP

24.6

2.5

28528626

32.4

0.777605

CHINA RES LAND

23.7

-0.8368201

5775832

NEW WORLD DEV

13.64

CHINA RES POWER

20.15

-4.50237

24963700

PETROCHINA CO-H

9.71

CHINA SHENHUA-H

26.9

-0.5545287

11416815

PING AN INSURA-H

60.95

CHINA OVERSEAS

MTR CORP

NAME

PRICE

DAY %

73.9

-4.36133

4895059

40.95

-0.1219512

9648995

SINO LAND CO

12.48

-0.3194888

5129434

SUN HUNG KAI PRO

111.9

3209683

SWIRE PACIFIC-A

103

0.684262

1216283

TENCENT HOLDINGS

303

-0.3289474

3157760

TINGYI HLDG CO

20.4

-1.686747

23505200

12.06

-1.631321

7501225

78.4

1.950585

5024390

POWER ASSETS HOL

WANT WANT CHINA WHARF HLDG

MOVERS

VOLUME

2 23505

INDEX 23261.08 HIGH

23501.84

2913892

LOW

23200.91

-0.4379562

5091386

52W (H) 23944.74

-1.120163

90466536

0.1643385

9843562

23200

(L) 18056.4 20-May

22-May

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.76

0.5347594

64866200

AIR CHINA LTD-H

6.82

-0.872093

6614000

ALUMINUM CORP-H

3.23

0.310559

ANHUI CONCH-H

27.3

BANK OF CHINA-H

NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

28.4

-0.6993007

5695800

CHINA PETROLEU-H

8.55

-0.5813953

38566089

13051000

CHINA RAIL CN-H

8.06

6665664

0.7380074

13887855

CHINA RAIL GR-H

4.16

-0.952381

10985664

3.74

-0.795756

342711618

CHINA SHENHUA-H

26.9

-0.5545287

11416815

CHINA TELECOM-H

6.2

0.4862237

13583660

4.04

-1.463415

70103336

33.15

-0.896861

4203332

DONGFENG MOTOR-H

12.48

-0.952381

25157399

CHINA CITIC BK-H

4.47

0.6756757

14013156

GUANGZHOU AUTO-H

8.31

7.364341

30890583

CHINA COAL ENE-H

5.55

0.1805054

42514422

HUANENG POWER-H

7.94

-8.314088

133395557

CHINA COM CONS-H

7.87

1.679587

12104014

IND & COMM BK-H

5.53

0.1811594

290282287

CHINA CONST BA-H

6.45

-0.1547988

193772389

JIANGXI COPPER-H

15.94

1.787995

10399806

CHINA COSCO HO-H

3.61

1.977401

8753000

PETROCHINA CO-H

9.71

-1.120163

90466536

CHINA LIFE INS-H

21.6

-0.2309469

24522629

PICC PROPERTY &

10.08

1.408451

13280688

CHINA LONGYUAN-H

7.74

-3.491272

17701607

PING AN INSURA-H

60.95

0.1643385

9843562

CHINA MERCH BK-H

16.7

9672771

SHANDONG WEIG-H

8.42

3.694581

8125000

CHINA MINSHENG-H

10.06

-0.1984127

29929064

SINOPHARM-H

22.6

1.801802

3207712

CHINA NATL BDG-H

9.13

-0.6528836

22200324

TSINGTAO BREW-H

-1.459854

695251

16.32

-1.330109

4175325

WEICHAI POWER-H

30.95

1.143791

3849620

BANK OF COMMUN-H BYD CO LTD-H

CHINA OILFIELD-H

NAME

PRICE

DAY %

VOLUME

YANZHOU COAL-H

8.42

-1.405152

42139336

ZIJIN MINING-H

2.19

19848951

8.4

2.439024

17602968

12.94

-1.221374

3691360

ZOOMLION HEAVY-H ZTE CORP-H

MOVERS

2 11245

INDEX 11053.04 HIGH

11241.08

LOW

10994.13

52W (H) 12354.22 10990

(L) 8987.76 20-May

22-May

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

AGRICULTURAL-A

2.76

60604011

CHONGQING CHAN-A

11.14

9.001957

95186537

PING AN INSURA-A

40.59

0.09864365

16396047

AIR CHINA LTD-A

5.51

-0.5415162

6106637

CHONGQING WATE-A

6.67

-2.769679

16508715

POLY REAL ESTA-A

12.4

0.6493506

62393186 15016821

NAME

VOLUME

4.18

0.4807692

17870476

CITIC SECURITI-A

12.85

0.390625

87056697

QINGDAO HAIER-A

-0.990099

ANHUI CONCH-A

17.89

1.474759

43838723

CSR CORP LTD -A

4.31

-0.6912442

30686311

QINGHAI SALT-A

23.86

0.2099958

6570322

BANK OF BEIJIN-A

9.15

0.2190581

23097751

DAQIN RAILWAY -A

7.05

-1.398601

32950599

SAIC MOTOR-A

15.86

1.40665

44081338

BANK OF CHINA-A

2.96

30481207

DATANG INTL PO-A

4.72

-3.080082

20040599

SANY HEAVY INDUS

9.73

-0.4094166

26715406

BANK OF COMMUN-A

4.79

0.4192872

50850061

EVERBRIG SEC -A

13.97

-0.1429593

21798967

SHANG PHARM -A

12.29

1.069079

15560052

BANK OF NINGBO-A

10.68

1.040681

17359209

GD MIDEA HOLDI-A

14.53

0.2068966

10327913

SHANG PUDONG-A

10.36

0.1934236

71207689

BAOSHAN IRON & S

4.94

-0.8032129

11438459

GD POWER DEVEL-A

2.84

-3.728814

190214318

SHANGHAI ELECT-A

3.92

6285541

BEIJING TONGRE-A

23.36

-0.5957447

14456210

GEMDALE CORP-A

7.8

1.298701

48918741

SHANXI LU'AN -A

16.93

-0.8201523

20386801

BYD CO LTD -A

GF SECURITIES-A

13.76

0.2184996

21929978

SHANXI XISHAN-A

10.91

-0.274223

14639919

GREE ELECTRIC

27.71

-0.752149

18265388

SHENZEN OVERSE-A

6.49

-1.067073

75753818

ALUMINUM CORP-A

37.25

3.90516

22187064

CHINA AVIC ELE-A

26.3

-5.734767

9425364

CHINA CITIC BK-A

4.49

0.8988764

21409781

GUANGHUI ENERG-A

19.25

-1.231401

16883447

SUNING COMMERC-A

6.24

-2.194357

55773543

CHINA CNR CORP-A

4.52

0.6681514

26309057

HAINAN AIRLINE-A

4.9

1.239669

27317092

TASLY PHARMAC-A

40.23

4.020685

9121402

CHINA COAL ENE-A

6.89

9295833

HAITONG SECURI-A

11.39

-0.3499563

100605284

TSINGTAO BREW-A

38.79

0.3362649

2763615

HANGZHOU HIKVI-A

-4.260412

14224085

WEICHAI POWER-A

23.86

0.9306261

8476092

CHINA CONST BA-A

4.87

-0.204918

15151751

CHINA COSCO HO-A

3.44

-0.8645533

13305697

HENAN SHUAN-A

38.99

0.1026958

4982783

WULIANGYE YIBIN

24.22

3.06383

42357710

CHINA EAST AIR-A

3.07

13273493

HONG YUAN SEC-A

24.47

0.369155

36278937

YANTAI WANHUA-A

18.04

0.5574136

12367684

CHINA EVERBRIG-A

3.18

61628479

HUATAI SECURIT-A

0.6036217

31210371

YANZHOU COAL-A

14.97

0.2679169

6612175

CHINA INTL MAR-A

12.19

-3.100159

9693115

HUAXIA BANK CO

10.95

0.6433824

24477245

YUNNAN BAIYAO-A

86.2

1.411765

2507843

CHINA LIFE INS-A

16.86

13193404

IND & COMM BK-A

4.16

-0.952381

39746131

ZHONGJIN GOLD

12.11

-0.3292181

18775411

CHINA MERCH BK-A

13.99

3.095063

140450104

INDUSTRIAL BAN-A

18.73

1.407688

70853000

ZIJIN MINING-A

3.09

-0.3225806

41955592

CHINA MERCHANT-A

13.1

0.8468052

31500008

INDUSTRIAL-A

11.76

-0.3389831

21750622

ZOOMLION HEAVY-A

7.42

-1.066667

58815371

CHINA MERCHANT-A

29.58

3.246073

13282536

INNER MONG BAO-A

28.92

0.7665505

32095536

ZTE CORP-A

12.77

-1.69361

38641988

28.44

-2.133517

21690065

CHINA MINSHENG-A

10.64

-0.1876173

96668455

INNER MONG YIL-A

CHINA NATIONAL-A

11.29

-2.251082

35546730

INNER MONGOLIA-A

4.9

0.4098361

47227515

CHINA OILFIELD-A

16.53

0.2425713

5519227

JIANGSU HENGRU-A

29.55

-3.24165

23616532

CHINA PACIFIC-A

19.27

12704627

JIANGSU YANGHE-A

64.55

2.103765

6115865

21.63

0.9332711

15230703

10.7

-0.5576208

8912585 26271297

CHINA PETROLEU-A

6.82

-0.4379562

23834721

JIANGXI COPPER-A

CHINA RAILWAY-A

5.21

-0.5725191

22832966

JINDUICHENG -A

CHINA RAILWAY-A

2.89

22836724

KANGMEI PHARMA-A

16.55

-1.370679

CHINA SHENHUA-A

21.07

0.04748338

7596239

KWEICHOW MOUTA-A

199.47

2.281817

4614964

59982923

LUZHOU LAOJIAO-A

27.2

1.568335

13476655

2.05

-0.9661836

34061128

-0.3799071

13972840

CHINA SHIPBUIL-A

4.52

CHINA SOUTHERN-A

3.47

-0.2873563

19139008

METALLURGICAL-A

CHINA STATE -A

3.82

-1.29199

87827902

NARI TECHNOLOG-A

23.6

CHINA UNITED-A

3.74

0.8086253

122829837

NINGBO PORT CO-A

2.46

9374933

CHINA VANKE CO-A

12.1

0.5818786

76503339

PETROCHINA CO-A

8.58

-0.2325581

10376186

CHINA YANGTZE-A

7.67

-1.918159

14080708

PING AN BANK-A

21.16

0.2843602

41311346

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

MOVERS 132

145

23 2630

INDEX 2618.034 HIGH

2626.12

LOW

2593.94

52W (H) 2791.303 (L) 2102.135

2590

20-May

22-May

FTSE Taiwan 50 Index NAME ACER INC

24.8

0.4048583

8065145

ADVANCED SEMICON

26.1

0.1919386

15170698

ASIA CEMENT CORP

37.8 -0.2638522

ASUSTEK COMPUTER

TAIWAN MOBILE CO

FOXCONN TECHNOLO

82.1

0.7361963

6705552

TPK HOLDING CO L

601 -0.8250825

3433343

1911150

FUBON FINANCIAL

41.7 -0.7142857

17251649

TSMC

112 -0.4444444

31297421

UNI-PRESIDENT

60.7

0.1650165

5820686

UNITED MICROELEC

13.9

-1.41844

158823359

2655839

HON HAI PRECISIO

78.3

1.293661

32127622

2.189781

195209860

HOTAI MOTOR CO

300 -0.6622517

377747

CATCHER TECH

159

-1.851852

8909506

CATHAY FINANCIAL

40.9

12818292

HUA NAN FINANCIA

CHANG HWA BANK

17.35

6333999

CHENG SHIN RUBBE

96.2

1.263158

7860511

20.45 -0.2439024

HTC CORP

288.5

4564426

WISTRON CORP

17.5

0.5747126

8426052

YUANTA FINANCIAL

LARGAN PRECISION

963

-1.834862

1406949

YULON MOTOR CO

LITE-ON TECHNOLO

50.1

1.622718

5376253

382

1.192053

7873771

24.25 -0.2057613

19249390

45403485

MEDIATEK INC

8.9

0.4514673

37807857

MEGA FINANCIAL H

CHINA STEEL CORP

26.25

0.3824092

10738388

NAN YA PLASTICS

5831167

CHINATRUST FINAN

18.8

0.2666667

25687648

PRESIDENT CHAIN

193

684441

CHUNGHWA TELECOM

98.2

0.1019368

6855161

QUANTA COMPUTER

64.4 -0.9230769

COMPAL ELECTRON

18.6

0.5405405

14633914

SILICONWARE PREC

36.8

2.080444

12574138

DELTA ELECT INC

4445182

4839179

-0.286944

CHINA DEVELOPMEN

Volume

113.5 -0.4385965

-0.811908

CHIMEI INNOLUX C

PRICE DAY %

73.3

347.5

AU OPTRONICS COR

NAME

FORMOSA PLASTIC

5923796

146.5

3669361

SINOPAC FINANCIA

14.9

-1.324503

17312547

FAR EASTERN NEW

32.9

0.304878

2824314

SYNNEX TECH INTL

43.85

1.036866

7777401

FAR EASTONE TELE

74.3 -0.2684564

3740150

TAIWAN CEMENT

39.7

0.5063291

3384179

TAIWAN COOPERATI

17.4

0.2881844

7151011

TAIWAN FERTILIZE

76.5

3986576

TAIWAN GLASS IND

30.1

1.006711

886051

FIRST FINANCIAL

18.6

0.2695418

10635987

FORMOSA CHEM & F

74.3 -0.2684564

3067597

FORMOSA PETROCHE

83.6 -0.4761905

916312

MOVERS

29.7

5773208

16.55

1.223242

17631436

51.5 -0.7707129

2412443

8 5880

INDEX 5845.14 HIGH

5876.42

LOW

5831.48

52W (H) 5896.71 5830

(L) 4719.96 20-May

22-May

May 23, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 63.5

39.6

20.6

39.5

20.5

39.4

63.4

39.3

20.4 20.3

39.2 Max 39.55

average 39.383

Min 39.1

Last 39.15

39.1

Max 63.4

average 63.4

Min 63.4

63.3

Last 63.4

41.0

40.9

Max 41

average 40.968

Min 40.85

Last 40.95

40.8

Max 21.15

average 20.966

Commodities PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Jul13

95.79

-0.405489707

2.230522946

100.4000015

BRENT CRUDE FUTR Jul13

103.22

-0.664036185

-3.900940322

115.9300003

96.04000092

GASOLINE RBOB FUT Jun13

281.71

-1.00850376

-1.575710992

324.119997

235.9499931

GAS OIL FUT (ICE) Jul13

868.75

-0.912460793

-4.559187037

987.5

814

4.225

0.78721374

20.43899658

4.457000256

3.203999996

290.09

-0.959371799

-3.547679213

323.8899946

258.589983

Gold Spot $/Oz

1382.49

0.0695

-16.9406

1796.08

1322.06

Silver Spot $/Oz

22.555

-0.062

-25.0913

35.365

20.3395

NATURAL GAS FUTR Jun13 HEATING OIL FUTR Jun13 METALS

Platinum Spot $/Oz

81.5

1463.55

-0.2692

-3.5711

1742.8

1374.55

Palladium Spot $/Oz

750.1

1.0195

7.2092

786.5

553.75

LME ALUMINUM 3MO ($)

1861

0.026874496

-10.22672455

2200.199951

1809 6762.25

LME COPPER 3MO ($)

7370

-0.391944857

-7.073509015

8422

LME ZINC

1851

-0.161812298

-11.00961538

2230

1745

15075

-0.264637777

-11.63540445

18920

14609

15.2

0.131752306

-3.461416323

17.07500076

14.79500103

640

-8.210828254

824

534

682.5

0.293901543

-14.01574803

900

664.75

1479.25

0.067647556

6.020426447

1605.75

1217.75

133

0.226073851

-11.06653293

202.1999969

132.25

3MO ($)

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

Last 21.05

Jul13

WHEAT FUTURE(CBT) Jul13 SOYBEAN FUTURE Jul13 COFFEE 'C' FUTURE Jul13 SUGAR #11 (WORLD) Jul13

16.88

COTTON NO.2 FUTR Jul13

Min 20.25

Last 20.35

25.6

21.1

25.1

21.0

24.6

20.9

24.1

20.8

84.3

0.118623962

-14.48834853

0.524683997

9.665669312

23.05999947 94.19999695

ASIA PACIFIC

CROSSES

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

Max 25.4

average 24.627

Min 23.75

Last 23.95

23.6

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.975 1.5084 0.9711 1.293 102.9 7.994 7.7609 6.1312 55.5238 29.79 1.2608 29.812 41.235 9770 100.337 1.25555 0.85716 7.9268 10.3355 133.05 1.0301

-0.3067 -0.4422 -0.206 0.4974 -0.1652 0.0063 0.0116 0.0962 -0.196 0 -0.0238 0.0671 -0.0728 -0.0716 0.1246 -0.7001 -0.938 -0.3822 -0.4741 -0.6614 -0.0097

-6.0513 -6.7507 -5.7358 -1.9712 -16.3265 -0.1351 -0.1327 1.6212 -0.9524 2.6519 -3.125 -2.613 -0.5578 0.2354 -10.973 -3.8286 -4.8696 3.6673 1.8857 -14.6411 -0.0194

1.0625 1.6381 0.9972 1.3711 103.31 8.0111 7.7678 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 133.2 1.032

0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1291 51.3863 28.56 1.2152 28.913 40.54 9329 74.482 1.20054 0.77553 7.7018 9.6245 94.12 1.029

Macau Related Stocks NAME

16.69999886

ARISTOCRAT LEISU

69.94999695

CROWN LTD

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.2

-0.7092199

33.33333

4.49

2.29

VOLUME CRNCY 8633116

12.96

-1.818182

21.46204

13.75

8.06

2598168

AMAX HOLDINGS LT

0.83

5.063291

-40.71428

1.72

0.75

366375

BOC HONG KONG HO

27.65

0.5454545

14.73029

20.85

5515311

0.31

16.98114

0.42

0.215

464000

5.8

-0.6849315

-3.17195

6.74

2.8

41000

CHINA OVERSEAS

23.95

-0.2083333

3.679652

25.6

15.143

11591475

CHINESE ESTATES

CHEUK NANG HLDGS

13.92

-0.286533

14.7623

14.12

7.697

374500

CHOW TAI FOOK JE

9.7

-22.02572

13.4

8.4

4896400

EMPEROR ENTERTAI

2.59

-0.7662835

37.03704

2.64

1.12

1490000

FUTURE BRIGHT

2.34

-2.5

93.06515

2.732

0.765

2741955

GALAXY ENTERTAIN

39.15

-1.011378

28.99506

40.65

16.94

4115178

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15387.58

0.3410437

17.42534

15434.5

12035.08984

NASDAQ COMPOSITE INDEX

3502.124

0.1627945

15.98305

3512.152

2726.68

FTSE 100 INDEX

6793.95

-0.1457994

15.19446

6805.17

5229.76

HANG SENG BK

128.7

-0.4640371

8.424603

132.8

99.2

795074

DAX INDEX

8468.67

-0.04166568

11.2485

8476.62

5914.43

HOPEWELL HLDGS

29.55

-0.6722689

-11.12782

35.3

19.049

1198962

NIKKEI 225

15627.26

1.600934

50.33179

15706.63

8238.96

HSBC HLDGS PLC

89.4

-0.2498329

9.963096

90.7

59.8

10028061

HANG SENG INDEX

23261.08

-0.4506049

2.666559

23944.74

18056.4

HUTCHISON TELE H

4.17

-2.34192

17.13483

4.66

2.98

2251000

CSI 300 INDEX

2618.034

0.1216512

3.768682

2791.303

2102.135

LUK FOOK HLDGS I

20.15

0.2487562

-17.41803

30.05

14.7

1064702

MELCO INTL DEVEL

17.2

1.057579

90.899

18.18

5.12

2163000

TAIWAN TAIEX INDEX

8398.84

0.1883563

9.082926

8439.15

6857.35

MGM CHINA HOLDIN

20.35

53.25781

20.85

9.509

2292369

KOSPI INDEX

1993.83

0.6430803

-0.1612425

2042.48

1758.99

MIDLAND HOLDINGS

3.47

-0.5730659

-6.216217

3.25

2912000

S&P/ASX 200 INDEX

5165.365

-0.2836262

11.10821

5249.6

3985

5216.738

0.5392233

20.8505

5251.296

3635.283

FTSE Bursa Malaysia KLCI

1784.47

-0.1628081

5.655586

1826.22

1535.11

NZX ALL INDEX

985.26

0.4380389

11.70078

998.487

PHILIPPINES ALL SHARE IX

4534.2

0.6093096

22.57974

4571.4

JAKARTA COMPOSITE INDEX

20.2

21.2

COUNTRY MAJOR

CENTURY LEGEND

NAME

average 20.35

Currency Exchange Rates

NAME ENERGY

Min 20.85

Max 20.6

NEPTUNE GROUP

0.167

1.829268

9.868425

0.226

0.084

2750000

NEW WORLD DEV

13.64

-0.4379562

13.47753

15.12

7.95

5091386

SANDS CHINA LTD

40.95

-0.1219512

20.61855

43.7

20.65

9648995

SHUN HO RESOURCE

1.5

7.142859

1.67

1.03

755.149

SHUN TAK HOLDING

4.2

0.7194245

0.2386621

4.65

2.56

3872012

3279.09

SJM HOLDINGS LTD

21.05

0.9592326

16.94444

22.7

12.34

7911410

13.7

-0.1457726

-2.698863

17.38

12.5

817481

23.95

-0.8692053

14.3198

26.5

14.62

13049531

SMARTONE TELECOM

HSBC Dragon 300 Index Singapor

656.53

-0.78

5.71

STOCK EXCH OF THAI INDEX

1646.14

0.164899

18.26313

1649.77

1099.15

HO CHI MINH STOCK INDEX

502.23

0.4098525

21.39076

518.46

372.39

ASIA ENTERTAINME

4.65

12.31884

51.96079

5.18

2.4

618186

BALLY TECHNOLOGI

55.51

0.3434563

24.15567

56.4

41.74

494645

Laos Composite Index

1358.14

11.80223

1455.82

980.83

BOC HONG KONG HO

3.6

17.26385

3.6

2.7

2300

GALAXY ENTERTAIN

5.12

0.3921569

28.96725

5.15

2.25

42200 2673578

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

WYNN MACAU LTD

INTL GAME TECH

18.54

0.5422993

30.8398

18.64

10.92

JONES LANG LASAL

96.64

0.07248628

15.12985

101.46

61.39

479680

LAS VEGAS SANDS

59.48

0.9333107

28.85615

59.97

32.6127

4146161

MELCO CROWN-ADR

24.62

0.08130081

46.19952

25.15

9.13

1986538

MGM CHINA HOLDIN

2.6

-2.621723

40.54054

2.67

1.36

500

MGM RESORTS INTE

15.54

0.2580645

33.50515

15.95

8.83

5023810

SHFL ENTERTAINME

16.96

-0.2352941

16.96552

17.2199

11.75

216935

SJM HOLDINGS LTD

2.72

-3.202847

17.74892

2.99

1.65

6691

142.43

-0.475159

26.6157

144.17

84.4902

738607

WYNN RESORTS LTD

AUD HKD

USD

May 23, 2013

Opinion

France must lead breakup of euro Brigitte Granville

Professor of international economics and economic policy in the School of Business and Management at Queen Mary University of London

Hans-Olaf Henkel

Professor of international management at the University of Mannheim

Stefan Kawalec

Chief executive of Capital Strategy and a former vice minister of finance in Poland

government announced a complicated system of temporary tax credits, conditional on the rebated cash being used to invest and recruit new workers. This approach cannot correct the tax system’s gross and long-standing distortions. In any case, the proposal’s complexity means that companies won’t get relief until 2014-15. France needs fundamental structural reform – lower public spending and a shift in taxation from employment to consumption. But there’s a catch – and it’s a big one. The immediate effect of such a programme would be weaker domestic demand and slower economic growth. Compensating pro-demand forces also need to be set in motion. The government could do this by easing the short-term fiscal stance and tapping external demand through currency depreciation, but neither is possible in the euro system: The deficit rules constrain fiscal policy, and France no longer has a currency to devalue. Since nothing else can give way, the euro system will have to.

German exit

rance played a decisive role in shaping not only the euro system but the entire European project. This history has predisposed French leaders to the goal of preserving the euro at all costs. Those costs have become quite insupportable. A new strategy is needed, and France’s role in shaping it will once again be pivotal. France sits on the fault line between the euro system’s deficit and surplus countries. It runs a large and costly welfare system with high-quality public services, often referred to as the French model, founded on a deep and dearly held national consensus. But unlike the Scandinavian countries, which have a similar preference for expensive welfare, the French model has been financed not by high taxes on income and spending, but by punitive taxes on employment (notably through employers’ social-security contributions) and capital, and by heavy public borrowing. Public debt has surged to about 90 percent in 2012 from about 64 percent of gross domestic

product in 2007. This emphasis on taxing employment has been the path of least political resistance. It maintains the illusion of a welfare state financed by business, not citizens. The idea that taxing companies is a painless way to finance welfare and public services has reaped chronically high unemployment, eroding competitiveness, weak growth and living standards that are stagnant at best.

helping. Business sentiment is falling fast. In the past decade, France’s share of export markets has dwindled. The country is running a current-account deficit. The French economy needs a “supply-side shock”. That’s what last year’s report by Louis Gallois – a leading, left-leaning industrialist – recommended. Instead of the deep and permanent cut in social levies on business urged by Gallois, the

Excessive regulation The Ile-de-France region has the highest average labour cost in Europe. The problem is aggravated by excessive regulation – of labour, and of markets for goods and services. Transport, professional services and retailers are more heavily controlled in France than in most other rich countries. The result is higher prices, and higher costs. This burden stifles entrepreneurship. President Francois Hollande’s tax assault on high incomes, dividends, capital gains and wealth isn’t

The financial crisis and its aftermath have shown that the euro… has the potential to destroy the whole project

For France and for the euro system as a whole, the best strategy is to dismantle the monetary union from the top – via the exit of Germany and the other most competitive countries. Appreciation of the new German currency would improve the deficit countries’ trade balances. In some cases, debt writeoffs would still be necessary, but the scale of reduction and the cost to creditors would be smaller because the monetary dismantling would boost the deficit countries’ growth. The surplus countries would have to recapitalise their banks after losses due to any debt reduction, so exiting the system doesn’t mean abandoning the crisis countries. The difference is that, after the exits, their assistance would help put the deficit countries on a recovery path, whereas the current bailouts lead only to a dead end. The European Central Bank would have to strive to maintain credibility and trust during any controlled dismantling of the euro system. The ECB could be preserved, at least for some time, as the central bank responsible for monetary policy in all 17 member countries, even after some had replaced the euro with new currencies. Many observers concede that the euro was a mistake but think there’s no going back. They reckon that dissolving the monetary union would lead to economic chaos, first in Europe, and then around the world. European leaders are afraid that backtracking on the euro

project would also be a lethal blow to the larger cause of European integration and could be the beginning of the end of the EU and the single market. These fears give rise to what we regard as the disastrous strategy of defending the euro at all costs. Although a controlled segmentation of the euro system through the exit of the most competitive countries would actually be the most effective way to help the deficit countries, it could still be seen as a decision by the strong to abandon the weak. Europe’s history makes it difficult for Germany’s leaders to initiate such a move.

Protecting France The deficit countries, struggling with recession and internal political divisions, and trying to get better terms for assistance from the rest of the EU, might be afraid of worsening their negotiating position by taking the lead. EU institutions, such as the European Commission and the ECB, couldn’t propose the solution we advocate. French leadership in advancing this idea might work – and could be the only thing that will. France has played the leading role in EU integration for more than 50 years. The euro is very much a French product. In 1990, President Francois Mitterrand won Chancellor Helmut Kohl’s support for the single European currency in exchange for France’s acceptance of German unification. Persuading Germany to give up the deutsche mark, whose strength had given the Bundesbank de facto control of monetary policy throughout Europe, was a remarkable French success – or so France believed. The euro was seen as the ultimate underpinning for the edifice of European integration. The financial crisis and its aftermath have shown that the euro instead has the potential to destroy the whole project. It impedes the reforms necessary to restore France’s fading international competitiveness. Retaining the present euro system whatever the cost will cripple the French economy, undo French social cohesion, and weaken France’s position in Europe and the world. The alternative is economic failure, deeper divisions and bitter resentments among Europe’s nations, putting the most valuable achievements of European integration at risk. One way or another, Europe’s house will be divided. The question is how much, or how little, this division will sweep away. Splitting the euro in the way we advocate is vital to the survival of the European idea. Bloomberg News

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 23, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Bangkok Post Thailand’s economic growth projection has been cut to between 4.2 percent and 5.2 percent this year from 4.5 percent and 5.5 percent as previously forecast by the government’s planning agency, as exports are expected to be much lower than earlier projected. “We are worried about the economic growth in the third and the fourth quarters,” Arkhom Termpittayapaisith, secretary general to the National Economic and Social Development Board, on Tuesday. The NESDB also lowered export growth for the year from 11 percent to 7.6 percent.

Taipei Times The legislature’s Finance Committee yesterday approved a proposal to revise the capital gains tax on securities investment, with the third reading of the amendment to the Income Tax Act expected to be approved next week. Other than cancelling the 8,500-point threshold, individual investors who sell NT$1 billion (US$33.3 million) in shares within the calendar year will be subject to either a 15 percent tax on their capital gains, or a 0.1 percent tax rate on their stock trades that exceed NT$1 billion, effective 2015.

Wall Street Journal Singapore state investment company Temasek Holdings Pte. Ltd added to its stock holdings in Industrial and Commercial Bank of China Ltd, buying part of a stake sold Monday by Goldman Sachs Group Inc. Temasek bought US$198 million worth of shares in ICBC at HK$5.5 per share (71 U.S. cents), for a total purchase of 280 million shares. That increased the Singapore firm’s stake to 7.04 percent from 6.71 percent, Temasek said in a Hong Kong filing on Tuesday.

Asahi Shimbun Japan and India are set to resume official negotiations on a nuclear energy agreement, which were suspended after the Fukushima nuclear disaster in March 2011, sources said. Prime Minister Shinzo Abe and his counterpart Manmohan Singh are expected to include the policy to reopen talks on the agreement, a precondition for exporting nuclear-related technologies, in a joint statement at a summit meeting in Tokyo on May 29.

The flawed origins of expansionary austerity Jeffrey Frankel

Professor of Capital Formation and Growth at Harvard University

everal of my Harvard University colleagues have recently been casualties in the crossfire between fiscal “austerians” and fiscal stimulators. The economists Carmen Reinhart and Kenneth Rogoff have received an astounding amount of press attention since it was discovered that they made a spreadsheet error in a 2010 paper that examined the statistical relationship between debt and growth. They quickly conceded their error. Soon after, the historian Niall Ferguson – also at Harvard – received much flack when, asked to comment on Keynes’ famous phrase, “In the long run we are all dead,” he “suggested that Keynes was perhaps indifferent to the long run because he had no children, and that he had no children because he was gay”. Ferguson, too, quickly apologised. But Reinhart and Rogoff’s estimates in 2010 had already been superseded by a 2012 paper that they wrote with Vincent Reinhart, which used a more extensive data set that did not contain the error. And “some of Ferguson’s best friends” are gay, while Keynes actually tried to have children. Clearly, as the austerians’ barricades have weakened under the continuing onslaught of facts (most notably the recessions in Europe, and now Japan’s conversion to expansion), the stimulators have found the missteps of Reinhart/Rogoff and Ferguson to be convenient weapons. But they are the wrong weapons. Neither controversy bears on the Keynesian claim that under conditions of high unemployment, low inflation, and low interest rates (which hold in rich countries today, as in the 1930’s), fiscal expansion is expansionary and fiscal contraction is contractionary.

Little doubt The Reinhart/Rogoff papers’ basic finding continues to hold up: growth tends to be lower on average among countries with debt/GDP ratios above 90 percent. But that finding, like the policy advice that they offered in the aftermath of the 2008 financial crisis, was not intended to support the proposition that a recession is a good time to undertake fiscal contraction. The Ferguson controversy is even less relevant, because Keynes’s phrase concerning the long run was not about fiscal policy when he wrote it, and it was not an argument against deferred gratification. Nor was Keynes in favour of uninhibited fiscal stimulus, regardless of economic conditions; rather, he argued

that “the boom, not the slump, is the right time for austerity at the Treasury”. But research by yet another Harvard colleague, Alberto Alesina, does bear much more directly on the proposition that austerity is appropriate under today’s conditions. Alesina’s influential papers with Roberto Perotti in 1995 and 1997, and with Silvia Ardagna in 1998 and 2010 suggested that fiscal contraction is not contractionary, and that it may even be expansionary. It is true that sometimes a country may have no alternative to fiscal “consolidation,” if its creditors insist on it, as has been the case with Greece and some other euro zone members. But that does not mean austerity is expansionary, especially if the currency cannot depreciate to stimulate exports. As with Reinhart and Rogoff, the Alesina papers themselves are much more measured in their conclusions than one would think from the claims of some conservative politicians that such academic research finds fiscal austerity to be expansionary in general. Nonetheless, the conclusions seem to leave

The Reinhart/ Rogoff papers’ basic finding continues to hold up: growth tends to be lower on average among countries with debt/ GDP ratios above 90 percent

little room for doubt: “Even major successful adjustments do not seem to have recessionary consequences, on average,” while “several fiscal adjustments have been associated with expansions even in the short run”. Moreover, “spending cuts are much more effective than tax increases in stabilising the debt and avoiding economic downturns”. Most recently, a May 2013 paper with Carlo Favero and Francesco Giavazzi reports that “spending-based adjustments have been associated, on average, with mild and short-lived recessions, in many cases with no recession”.

Tough reality Alesina’s recent policy advice is that the U.S. should cut spending right away. By contrast, the advice of Reinhart and Rogoff leans more toward financial repression, postponement of fiscal adjustment (trim entitlements in the future, but increase infrastructure spending today), or, in more far-gone cases like Greece, debt restructuring. A new attack on Alesina’s econometric findings comes from an unlikely source. Perotti, his co-author on two articles, has now recanted, owing to methodological problems

(which also affect Alesina’s later papers with Ardagna). Under the dating scheme that they used, the same year can count as a consolidation year, a pre-consolidation year, and a post-consolidation year, and it turns out that some of what they treated as large spending-based consolidations were, in fact, never implemented. Currency devaluation, reduced labour costs, and export stimulus played an important part in any instances of growth (for example, the touted stabilisations of Denmark and Ireland in the 1980’s). Perotti concludes that “the notion of ‘expansionary fiscal austerity’ in the short run is probably an illusion: a trade-off does seem to exist between fiscal austerity and short-run growth”. As a result, “the fiscal consolidations implemented by several European countries could well aggravate the recession”. This is a more powerful indictment of the reasoning behind recent attempts to justify spending cuts during a recession than is a spreadsheet error or a flippant remark about Keynes’s sexuality. Neither misstep supported the case for austerity, and reality has been far more damaging to it. © Project Syndicate

May 23, 2013

Closing Sony to discuss spin-off suggestion

Apple’s Cook defends tax claim

Sony Corp said it will consider a proposal from one of its biggest shareholders that it should spin off up to 20 percent of its entertainment business. The idea came from Daniel Loeb, founder of U.S. hedge fund Third Point. He said Sony should use the cash to boost its ailing electronics arm. Sony CEO Kazuo Hirai said yesterday that Sony’s board would discuss the proposal, but gave no timetable. Yesterday, Sony cut its sales targets for digital cameras, smartphones and tablets by 13-17 percent for the year to end-March 2015, but said there were “encouraging” signs of a revival in its electronics business.

Apple Inc. has been defending itself against accusations that it’s avoided paying tax on tens of billions of dollars in profits. Chief executive Tim Cook told a U.S. Senate committee Apple paid all the taxes it owed, complying with both the law, and the spirit of the law. He said last year it paid US$6 billion to the U.S. Treasury, a tax rate of about 30 percent. Earlier, the head of a Senate committee panel accused Apple of “exploiting an absurdity” in its tax payments. Mr Cook told the panel that a “dramatic simplification” of U.S. tax laws was required, and said the firm believed that reform should be “revenue neutral”.

BOC profit grows faster last year But 2012 was also a good year for many banks with a double-digit rise in earnings Tony Lai

tony.lai@macaubusinessdaily.com

he banking sector had a banner year in 2012, with several banks posting doubledigit profit growth. Bank of China Ltd’s (BOC) Macau branch led the way with a 30-percent jump. The profit of the subsidiary of the Chinese state-owned bank hit 2.41 billion patacas (US$301.5 million) last year, according to a notice published in yesterday’s Official Gazette. Ye Yixin, general manager of BOC Macau, said in a statement that the positive result was due to an optimisation of its business structure, customer base and products. For instance, BOC issued for the first time a Union Pay chip card and yuan-denominated certificates of deposits in Hong Kong last year, as well as launching services targeted for buyers of units in big housing projects. “Every business sector underwent rapid and healthy development with double-digit growth in deposits, loans, total

Transaction tax would raise borrowing costs: EU panel G

overnment bonds should be excluded from the European Union’s planned financialtransaction tax because the levy would drive up sovereign borrowing costs, a panel of European debtmanagement officials said. Primary issuance, secondary-

Bank of China’s Macau branch posted a 30-percent jump in profit last year (Photo: Manuel Cardoso)

assets and profits,” Mr Ye wrote. Business growth was slower for Banco Nacional Ultramarino SA (BNU), one of the city’s banknoteissuing banks along with BOC.

Its “profit, deposit growth and private loan grants were affected by the intensifying competition in the banking sector,” the bank said. BNU’s profit only inched up

market trading, related derivatives and repurchase agreements all affect borrowing costs, which would rise unless transactions involving government debt are exempt, according to an April 18 letter to senior EU finance aides that was obtained by Bloomberg News. The proposed tax “underestimates the impact of the proposal on market liquidity,” said the twopage analysis signed by Anne Leclercq, director for treasury and capital markets in Belgium’s finance ministry in Brussels. “This impact would substantially reduce the attractiveness of sovereign bonds and jeopardise diversification of the investor base, in particular for those sovereign issuers for which liquidity is at the heart of their strategy.” The officials’ concern adds to warnings issued by European

Central Bank policy makers. ECB Executive Board members Yves Mersch and Benoit Coeure both questioned the tax’s design this month. The ECB’s Bond Market Contact Group said in a May 6 report that the proposal would hurt banks and disrupt markets.

Findings ‘exaggerated’ EU Tax Commissioner Algirdas Semeta said the debt managers’ reservations are overblown. “I think that their findings are exaggerated,” he said yesterday in an interview on Bloomberg Television. The low proposed tax rates, combined with exemptions for primary sales and trades with national debt managers, are sufficient to safeguard markets, he said. “The scope which was proposed

by 0.5 percent last year to 327.1 million patacas. Its ratio of loans to deposits went down from 52.9 percent in 2011 to 45.6 percent. If the ratio is too low, banks may not earn as much as they should.

Growing competition BNU savings grew at a faster rate of 25 percent last year than loans, which rose by just 7.9 percent. “On the one hand these results mean that the transformation process initiated in 2011 is bearing fruits, especially in business growth,” BNU chief executive Pedro Cardoso told Portuguese news agency Lusa. Tai Fung Bank Ltd, founded by prominent businessman Ho Yin, also recorded a 13-percent rise in profit last year to 504.7 million patacas. “The growth of the overall economy remained ideal particularly in the banking sector, thanks to the continuous rapid growth of China’s economy and the stable rise on gaming revenues,” said the bank in a statement. Tai Fung’s deposits went up by 13.1 percent last year while loans rose by 14.7-percent rise. While most banks enjoyed business growth last year, a subsidiary of another mainland stateowned bank went through hardship. China Construction Bank (Macau) Corp Ltd reported a decline of more than 50 percent in net profit last year to 19.83 million patacas “due to the narrowing net interest margin resulting from the intense market competition”. Profit for Banco Luso Internacional, SA went up by 15.9 percent 147.5 million patacas. The Macau branch of DBS Bank (Hong Kong) Ltd posted a 17-percent profit hike to 47.5 million patacas.

by the commission corresponds to the need to ensure that it is impossible to circumvent the tax,” Mr Semeta said. “We consider that this would be the best solution.” Mr Semeta aims to create the transaction tax to take effect as soon as next year. The proposed levy could be collected worldwide by France, Germany and nine other EU nations, including Belgium, that have so far signed up, if the effort stays on schedule. The EU is trying to remedy what it sees as a “patchwork” of levies and rein in speculative trading. The plan would charge a 0.1 percent rate for stock and bond trades and 0.01 percent for derivatives transactions, with some exemptions for primary-market sales and trades with the ECB. Bloomberg News