Macau Business Daily, May 27, 2013 by Business Daily

Year II

Number 291

Monday May 27, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Triple threat looms over banking sector E

xposure to mainland Chinese assets, loans to the gaming sector and local property mortgages advanced during a period of rapid asset inflation are the main risks for Macau banks, says a report from Fitch Ratings.

Any of these factors could be responsible for an “inevitable” increase in the number of people unable to pay back loans, the credit assessment house warned. Macau banks could see their risk profiles “weaken” this

year, as they invest further in the mainland, Fitch adds. It expects credit growth to accelerate to 30 percent this year, from 26 percent last year, primarily led by China-related trade financing. More on page 3 I SSN 2226-8294

www.macaubusinessdaily.com

Bus firm’s situation not terminal but it is tricky

ublic bus operator Reolian Public Transport Co says even if it receives from the government a long-delayed increase in service subsides it may not be enough to turn the business around. Reolian reported a loss of about 58 million patacas (US$7.3 million) last year. “We are losing more than four million [patacas] every month” this year, Cédric Rigaud, the company’s general manager, told Business Daily. He foresees losses could further widen as the salaries of drivers continue to rise, along with annual increase of “8-10 percent” on fuel prices. The firm added it had paid a 50,000-patacas fine to the government for an accident dating back to 2011. Page 2

Hang Seng Index 22770

22728

22686

22644

22602

22560

May 24

HSI - Movers Name

Two-way cash flow in AERL plans joint Yeung-SJM dealings listing in Hong Kong Page 4

Young mainlanders seek non-gaming fun Mainland Chinese are changing their behaviour, and more young white-collar workers are coming to Macau and spending money on pleasures other than gambling, says Ben Cavender, associate principal of China Market Research Group, a market intelligence firm. Mr Cavender says some casino resorts here are already offering this new kind of tourist other options, but that more marketing is needed to emphasise other aspects of the city. He told Business Daily the government here should tailor its strategy to suit the changing circumstances. Pages 6 & 7

Page 5

Tourist spend up 10 pct y-o-y in Q1 Page 8

%Day

LENOVO GROUP LTD

3.79

TENCENT HOLDINGS

2.25

ESPRIT HLDGS

1.75

CLP HLDGS LTD

1.61

TINGYI HLDG CO

1.53

CHINA OVERSEAS

-1.70

COSCO PAC LTD

-2.34

CHEUNG KONG

-2.50

WHARF HLDG

-3.13

HUTCHISON WHAMPO

-3.32

Source: Bloomberg

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2013-05-29

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May 27, 2013

Macau

Cédric Rigaud, left, says Reolian’s losses could get bigger (Photo: Manuel Cardoso)

Govt subsidy hike won’t make Reolian profitable But bus operator says cash could help it invest in better services Tony Lai

tony.lai@macaubusinessdaily.com

ven if the government gets round to paying Reolian Public Transport Co more to run its bus services, the company does not expect the increase to be enough to turn its business around, according to Reolian general manager Cédric Rigaud. But Mr Rigaud told Business Daily in an interview on Friday that the money could allow his company to invest more and improve its services. Reolian made a loss of about 58 million patacas (US$7.3 million) last year and the financial strain has continued this year. “We are losing more than 4 million [patacas] every month,” Mr Rigaud said. He thinks the monthly loss could increase if the pay of bus drivers continues to rise, and if the price of fuel continues to rise at a rate of 8 percent to 10 percent each year. If the bus operators can persuade it to do so, the government can increase every year what it pays them to run their services, the amount of the increase depending on consumer price inflation and increases in the cost of fuel and the pay of drivers. Reolian, a Franco-Macau joint venture, and the city’s two other bus companies asked last June for an increase of 23.3 percent in what the government pays them. The government approved the increase last month – but only for Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM).

Sooner the better The Transport Bureau is refusing to pay Reolian any more until the company improves its services. Mr Rigaud said an increase of 23.3 percent in what the government paid his company would amount to only another 3.5 million patacas per month.

“The 23.3 percent will not cover the totality of our loss,” he said. But he said the increase would help sustain the company until it got another increase. The three bus operators have asked for another increase this year. Reolian has been putting into action an improvement plan it came up with last year. “We’re urging the government to give us the ability to implement our plan,” said Mr Rigaud. He said that the sooner his company had the increase it had asked for, the sooner it could improve its services. “We can keep our improvement in the same direction as in the past six to nine months,” he said. Reolian’s improvement plan includes more training for its drivers, an up-to-the-minute information system and more frequent services on some routes. Reolian deputy general manager Abel Kwok said the company would also add to its fleet three buses that comply with the Euro V emission standards, and 10 to 20 small buses. Mr Rigaud said the company was investing something under 20

MOP4 mln

Reolian’s monthly loss, says managing director

million patacas, depending on the final number of buses it bought.

One year on He admitted that “there is still a little room” for improvement in the company’s performance in sticking to its schedules during peak hours. But he said that, overall, its services had improved. The number of journeys Reolian buses make each day rose by onetenth in the first quarter of this year. But the average speed of its bus journeys dropped by 6.2 percent to 17.4 km per hour last year. Mr Rigaud laments the delay in the government paying his company what it asked for. “It’s already one year,” he said. “It’s already too long.” He said the arrangements for providing bus services could be better. “We’re talking about public services,” he said. “There should be a regulator to ensure all the conditions are met for the operators to provide the service.” Reolian was formed in 2009 by Macau’s HN Group Ltd and France’s Veolia Transport RATP. “We’re lucky to have very supportive parent companies – the local one and the French one. Not all companies would have survived when there are so many constraints,” Mr Rigaud said. “We don’t want to reach a plateau or even deteriorate,” he said. “Without a sense of the company’s future, we’ll start to be worried and create some hiccups. We don’t want this to happen.”

Late starter The Transport Bureau has said assessments of the quality of bus services will be important references for the government in considering future increases in what

Reolian pays MOP50,000 in penalties Reolian Public Transport Co says it has paid the government penalties amounting to 50,000 patacas (US$6,250) for an accident one of its buses had in 2011. Reolian says that in no other case has it been penalised. The company’s data show its buses had 3.5 accidents per 100,000 kilometres travelled in the first quarter of this year, compared to 6.9 accidents per 100,000 kilometres in 2011. Reolian general manager Cedric Rigaud said on Friday that his company had “learned a lot”. “We are now on the right path,” Mr Rigaud said of its public image. “We have confidence that the image will be restored, and we just need to be patient.” T.L.

it pays the operators. Mr Rigaud and Mr Kwok think quality assessments should serve only as incentives, and be excluded from the reckoning of what the government pays the bus operators. They think a good report should mean a bonus for a bus operator and a bad report should mean a penalty. Mr Kwok believes public opposition to the government paying the bus operators the increase they asked for last year was due to the size of the increase. He said the increase proposed was based on increases in costs. Reolian has been making losses since the government changed the arrangements for providing bus services in 2011. The other two bus operators have been doing slightly better. Mr Rigaud said Reolian had to “start from scratch” in 2011 and invest 200 million patacas, unlike the other bus operators. He said his company would cooperate more with the Transport Bureau to “secure a fair platform” for its business, such as better depot space and better access to filling stations. Asked what Reolian would do if the government refused outright to pay it more, Mr Rigaud replied: “If you have to feed yourself, but you have nothing to eat, what would you do?”

May 27, 2013

Macau

Fitch sees triple threat to banks

editorial

Making it right

The ratings agency thinks an increase in non-performing loans is inevitable Vítor Quintã

vitorquinta@macaubusinessdaily.com

Tiago Azevedo tiago.azevedo@macaubusinessdaily.com

Macau’s banking system is quite volatile, compared with Hong Kong’s, says Chikako Horiuchi (Photo: Manuel Cardoso)

xposure to mainland Chinese assets, loans to the gaming sector and mortgage lending are the main risks Macau banks are taking, according to Fitch Ratings. An increase in non-performing loans is “inevitable”, and could be the result of any one of these risks failing to pay off, Fitch Ratings says in its latest report on the industry. The ratings agency says the risk profiles of Macau banks could “weaken” this year as they invest more in the mainland. It expects credit growth to accelerate to 30 percent this year from 26 percent last year, mainly because of financing for Chinese trade. The Fitch report says most of the business Macau banks do with the mainland is the result of referrals from their mainland parent companies. The risk “is adequately mitigated with collateral and parental guarantees,” it says. However, a director of Fitch (Hong Kong) Ltd, Chikako Horiuchi, told Business Daily there were still “potential risks”. For instance, banks might be unable to enforce claims to assets used as collateral for loans, she said. Mainland assets made up 16 percent of the assets of banks here at the end of last year, official data show. But Ms Horiuchi said this figure excluded lending to Macau people living across the border or lending in Macau for investment in the mainland.

Betting on gaming Fitch believes that almost onequarter of the assets of Macau banks are somehow linked to the mainland. The proportion of their assets linked to the mainland was likely to be greatest among banks with mainland

parent companies, Ms Horiuchi said. The Fitch report says the exposure of Macau banks to the mainland will only grow, given the “increasing interconnectivity between the two banking systems and economies”. It says Macau banks are also exposed to the mainland through their lending to the gaming sector here, which gets its revenue mainly from mainland tourists. The report says direct lending to the gaming industry is “limited,” just 4 percent of bank assets at the end of last year. But credit to gaming companies for working capital and to related industries such as the hotel and construction industries made up another 10 percent of assets, it says. Ms Horiuchi said another risk was property mortgage lending, “which is very prominent in every bank in Macau”. Fitch warned last July that banks here were lending too much to property owners and could have trouble when the real estate market contracted. Its latest report says that so far homeowners have been able to service

KEY POINTS Gaming sector loan servicing relies on mainland tourists Regulatory regime ‘not geared’ to building risk buffers Non-performing loans ‘unsustainably low’

their loans and banks have refrained from lending hastily, so maintaining a “moderate” loan-to-deposit ratio.

Back to normal But it says risk management “relies strongly” on the appetite of individual banks for risk and on their monitoring practices. The Monetary Authority of Macau’s “rules and guidelines are not geared towards building forwardlooking risk buffers,” it says. Ms Horiuchi said: “Banks should have forward-looking provisioning, as well as risk testing. It’s a necessity for every banking system, regardless of how big or small it is.” The Monetary Authority required the banking system to have capital adequacy of 14.6 percent last year. The Basel III standards require capital adequacy of 13 percent in markets in a credit bubble. The first quarter of this year was the most profitable first quarter for banks here since the Monetary Authority began publishing bank profit data in 1990. Fitch believes the capital adequacy of Macau banks is “moderate, considering the system’s high potential volatility”. Ms Horiuchi said Macau’s banking system was “quite volatile”, compared with Hong Kong’s. The percentage of loans that were non-performing once reached 22 percent here, but has never risen above 11 percent in Hong Kong. The Fitch report says the proportion of non-performing loans here last year, at 0.2 percent, was “unsustainably low”. Ms Horiuchi said: “It will inevitably normalise and come up in 2013 and 2014.”

The government’s think-tank estimated last week that the city would require 40,000 more workers by 2016, when a few more megaresorts will be up and running in Cotai. Lao Pun Lap, head of the Policy Research Office, made this forecast to support the idea of allowing students from elsewhere that study at Macau universities to work here. More labour would be needed as the city strove to become a worldclass destination for tourists, Mr Lao said. It is obvious that this batch of qualified workers of the future – especially mainland Chinese students, who make up the majority – could help satisfy our need for labour, especially at a time when the unemployment rate hovers around 1.9 percent. Mainland students that graduate in Hong Kong can apply for a special immigration status which lets them work there. Things are different in Macau. There are as yet no special measures that allow this here, and the trade unions and a few legislators oppose the idea – chiefly because this is an election year. Prevented by law from extending their student visas beyond the duration of their studies, students from outside are obliged to leave Macau after graduating, regardless of their willingness to stay or the interest of employers in hiring them. If they wish to work in Macau, they must go through the normal procedure for imported labour, in accordance with the quota system. The numbers put forward last week seem a bit skewed, as at least four more megaresorts are planned for Cotai and the ones already there are expanding. Considering that one of the casino operators said this year that it would need about 8,000 workers for its new resort there, the figure of 40,000, even if only for imported workers, seems short of the market’s real needs. Last week Mr Lao stressed that big gaming enterprises would not be given priority, trying to brush aside fears that casino operators would get the pick of the crop to reinforce their workforces. He was probably right to say so. Big companies drain workers from small and medium enterprises, and unfortunately many of these enterprises are squeezed out of the labour market. The resident labour force cannot satisfy market demand, and to allow university students from elsewhere that have lived here for a few years a shot at the labour market seems a suitable policy. It does not have to mean that they will get the right of residency, but it would allow companies here to tap a pool of skilled workers that are familiar with the city. The measure has to be fine-tuned to suit the city’s needs, so it provides the market with much-needed workers without jeopardising the access of residents to better jobs. Legislators should also understand this need and help craft laws that support the city’s growth, instead of just vying for the easy vote with populist promises in an election year.

The resident labour force cannot satisfy market demand, and to allow university students from elsewhere that have lived here for a few years a shot at the labour market seems a suitable policy

May 27, 2013

Macau

Carson Yeung made SJM payment

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HOSPITALITY Staying away The first-quarter figures for visitors confirm trends that were already becoming apparent. The number of visitors is still rising, but seems to be in the process of settling down into a shallow climb. The number of visitors in the first quarter was 0.7 percent higher than a year earlier. As before, the rise was almost exclusively due to the increase in the number of mainland Chinese visitors. The number of mainlanders visiting rose by 4.4 percent. More visitors came from Hong Kong, Thailand, South Korea and Vietnam, but they added little to the general increase. Put simply, mainlanders are preventing the number of visitors from declining.

Of the falls in numbers of visitors, the biggest were in the numbers of visitors from Japan, Singapore, Malaysia, the Philippines and India. The numbers of Malaysian and Singaporean visitors continued falling trends that were apparent last year. The numbers of Japanese, Filipino and Indian visitors had been higher in the first quarter of last year than a year earlier. Japan had at one time looked like a promising source of increasing numbers of visitors, sending us 8.7 percent more in first quarter of last year than a year earlier. It sent us 31.2 percent fewer in first quarter of this year. The number of Filipino visitors was up 15.7 percent in the first quarter of last year, but 7.2 percent lower this year. Similarly, the number of Indian visitors went down from 6.9 percent to minus 4.4 percent. That seems to dash hopes that India would be a source of increasing numbers of visitors and help to diversify our sources of visitors. J.I.D.

31.2 %

Year-on-year drop in number of Japanese visitors in Q1

More evidence emerge in HK businessman’s money-laundering trial Vítor Quintã

vitorquinta@macaubusinessdaily.com

Carson Yeung is the controlling shareholder of English football club Birmingham City

arson Yeung Ka Sing made a payment to gaming operator SJM in early 2005, as the businessman was also receiving money from the casino operator, reported Hong Kong media. During a court hearing on Thursday in Hong Kong, it was said that a cashier’s order of HK$35 million was made payable to SJM from a bank account controlled by Mr Yeung in January 2005. It was redeemed two days later. Two weeks ago, the prosecution said SJM paid a total HK$62.45 million (US$8.04 million) over two months during late 2004 and early 2005 to Mr Yeung. The money was deposited in 14 cheques to Mr Yeung account at Wing Lung Bank Ltd, said the evidence of Johnny Kwan Sui Lun, a police financial investigator. “It is unusual to see cheques like these and this requires some explanation,” forensic accounting expert Roderick Sutton told the court. Mr Yeung received HK$721.3 million in deposits from SJM,

securities firms and “unknown parties” into five bank accounts controlled by him over a sevenyear period to 2007, John Reading, prosecution lawyer, said at the start of Mr Yeung’s trial, earlier this month. SJM’s chief executive Ambrose So Shu Fai was asked about the report at an event in Macau two weeks ago. “As the case is now undergoing judicial procedures, it is not appropriate [for SJM] to make any comment,” Mr So told reporters.

Gaming ties Asked whether any representative from the operator would be summoned to court to testify, Mr So said “I don’t know yet”. He made no further comment. Hong Kong prosecution stressed that the deposits “amounted to more than 300 times the total combined salary” of Mr Yeung and his father, who co-signed on two of the accounts. Mr Yeung has pleaded not guilty to five money-laundering charges against him. The trial resumes today.

The former hairdresser is chairman of Hong Kong-listed Birmingham International Holdings Ltd, which controls English football club Birmingham City. As Business Daily reported in January – from information given in an unrelated Macau lawsuit – when Mr Yeung bought the club in 2009 it was via a share issue underwritten by Kingston Securities Ltd. The latter is a unit of Hong Konglisted Kingston Financial Group Ltd. Kingston Financial Group is controlled by Pollyanna Chu Yuet Wah. Ms Chu’s father, Lee Sui Fok (also known as Lee Wai Man), is an operator of VIP rooms in SJM-licensed casinos. Kingston Financial Group bought Casa Real casino hotel in Macau in 2005. The property operates under the gaming licence of Sociedade de Jogos de Macau SA, a company founded by Stanley Ho Hung Sun and now controlled by SJM Holdings Ltd. Kingston also runs the SJMlicensed Grandview Hotel and its casino in Taipa.

May 27, 2013

Macau

Junket investor seeks dual listing in HK AERL also buying interest in Casino L’Arc VIP room

sia Entertainment & Resources Ltd – a Nasdaq-listed investor in Macau VIP junket rooms – plans a joint listing in Hong Kong. The firm said in a statement that to satisfy the Hong Kong listing rules, it would repay existing shareholder loans by purchasing approximately US$63 million (504 million patacas) of its ordinary shares from stockholders registered as of June 3. It said this was to “demonstrate its financial independence from shareholders at the time of the listing in Hong Kong”. The firm added: “The rights offering will permit AERL to raise equity capital through the sale of ordinary shares without diluting existing shareholders who exercise their rights in full.” In a separate development, AERL said it had entered into a non-binding memorandum of understanding

to acquire all of the outstanding interests and operations of a VIP gaming room at Casino L’Arc, a property licensed by Sociedade de Jogos de Macau SA. The room is operated by Wong Wing Yim. AERL added in its statement the VIP gaming room has six tables and is served by at least 500 agents. “Subject to due diligence and customary closing conditions, AERL expects to close the transaction by June 30, 2013,” stated the company. AERL will pay the equivalent of US$20 million in cash under the deal – US$10 million on closing and the remaining US$10 million on renewal or extension of the existing agent agreements to promote the VIP gaming room through to at least December 31, 2014. AERL – which currently has interests in four Macau VIP rooms – said in its first quarter results for the

AERL investing US$20 mln in Casino L’Arc junket

period ending March 31, that rolling chip turnover was US$4.1 billion, a decrease of 24 percent compared to the US$5.4 billion recorded for the three months ended March 31, 2012. Net income decreased 55 percent

to US$7.0 million, or 17 U.S. cents per fully diluted share – from US$15.3 million, or 36 U.S. cents per fully diluted share, in the same period of 2012. M.G.

Deloitte named new auditor of Sands China

Wynn fights university donation lawsuit

Appointment runs initially for one year, says Hong Kong filing

Says police retirement fund action ‘fatally defective’

asino operator Sands China Ltd has appointed Deloitte Touche Tohmatsu Ltd as its new auditor, the company said in a Hong Kong filing. The appointment is for an initial one-year period ending after the firm’s 2014 annual general meeting. Sands China’s AGM is usually held at the end of May. The appointment is subject to shareholders’ approval at an extraordinary general meeting. The new auditor will also act for Sands’ parent Las Vegas Sands Corp. Deloitte additionally audits LVS’s Macau market rivals MGM Resorts International – a 51 percent owner of MGM China Holdings Ltd – as well as SJM Holdings Ltd and Melco Crown Entertainment Ltd. In late April LVS said in a filing in the United States that PricewaterhouseCoopers LLP was stepping down as its independent auditor once it had completed the firm’s first quarter 2013 review. Sheldon Adelson, chairman and chief executive of LVS, has had a business relationship with a predecessor company to PwC dating back to the late 1980s. It was PwC that in November 2008 issued a warning that LVS faced a “substantial doubt about the company’s ability to continue as a going concern,” because of its then strongly leveraged position during the developing global financial crisis. PwC received slightly more than US$5.9 million (47 million patacas) from LVS in 2012 as fees for audit

Sheldon Adelson – longstanding links to PwC and predecessor firm

and tax work and other professional services according to an LVS proxy filing on April 23. LVS added in a 8K filing in New York, regarding PwC, that “there have been no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,” during the fiscal years ended December 31, 2011 and 2012, nor through to the filing date of April 23, 2013.” LVS is currently under U.S. federal investigation in relation to its Macau operations for possible breaches of the U.S. Foreign Corrupt Practices Act. M.G

teve Wynn and other directors of casino operator Wynn Resorts Ltd have asked a federal judge in the United States to dismiss an amended lawsuit by investors complaining about a cash bequest to the University of Macau. The Louisiana Municipal Police Employees’ Retirement System claims Wynn Resorts was acting illegally when it approved a US$135 million (1.1 billion patacas) gift to the University of Macau Development Foundation in 2011 at a time the firm was seeking a Macau government concession for a new casino resort on Cotai. Since the pension fund investors filed the revised suit last month, the U.S. Justice Department has said it has been conducting a criminal investigation into the donation. It includes looking at whether there was any breach of the Foreign Corrupt Practices Act, a U.S. law forbidding payments by U.S. companies to officials overseas. But Wynn Resorts said in a filing in federal court in Las Vegas, Nevada, the shareholders’ amended suit remained “fatally defective”, and “completely conclusory”. Wynn Resorts made its first donation to the university – of 200 million patacas – at a ceremony in May 2011 attended by Edmund Ho Hau Wah. Mr Ho was the first chief executive of Macau after its return to Chinese administration by Portugal in 1999, and is also a vice chairman of the Chinese People’s

Steve Wynn – fighting action

Political Consultative Conference. At the ceremony, it was said that for each of the next 11 years, Mr Wynn’s company would contribute an additional 80 million patacas. The university is due to open a new 9.8 billion patacas campus on Hengqin Island next door to Macau in time for the new academic year in September. It is being funded direct by the Macau government. The administration – which makes most of its income from an effective 39 percent tax rate on gambling – had a budget surplus of 39.6 billion patacas in the first four months of this year, 32.7 percent more than a year earlier. M.G. with Bloomberg News

May 27, 2013 April 19, 2013

Macau Brought to you by

Financial Monitor Against the trend Consumer price inflation has been slowing for the past year, with the inevitable ups and downs along the year. The annual rate of inflation in April was 5.24 percent from a year earlier. Last year, the same reading topped 6.76 percent. This trend should give some respite to inflation concerns, but is no cause for complacency. First, the component of the price index that is going down faster is a minor one – alcoholic beverages and tobacco. Its fall from almost 30 percent last year, to slightly over more than 6 percent this year, is mostly the effect of a single event: the earlier rise in taxes levied on tobacco products. That was a one-off effect and its impact on the overall inflation rate is small. Second, there are some sub-items that are bucking the trend – and it is the prices of these goods and services that affect the livelihoods of people most, and that affect them rapidly.

Market guru sees new wave Mainland Chinese are changing their behaviour, and more young, whitecollar workers are coming to Macau with a view to spending money on pleasures other than gambling, says Ben Cavender, associate principal of China Market Research Group, a Shanghai market intelligence firm. Mr Cavender says some casino resorts here are already offering this new kind of tourist other options, but that more marketing is needed to emphasise other aspects of the city. He told Business Daily in an interview that the government here should tailor its strategy to suit the changing circumstances Luciana Leitão

leitão.luciana@macaubusinessdaily.com

Housing and fuel costs, on one hand, and food and drinks, on the other, are rising at fasterthan-average rates. In the same period, they went up by 8.86 percent and 7.38 percent, respectively. These rates are, in relative terms, significantly above the average. This is a cause for some concern. What is more, housing costs and healthcare costs, are rising faster this year than last year. These three items are running against the trend. Worse, still, as fuels went down, the increase in housing costs were necessarily bigger than the corresponding sub-item value states. As this type of expenses is hard to substitute, it is likely that the price evolution is forcing changes in the typical patterns of consumers’ expenditure. J.I.D. The content of this column is the work of Business Daily’s journalists.

8.28 %

Average annual inflation in each of the 12 months ended April

Macau has been talking about economic diversification. Is it at last taking its first steps towards attracting new kinds of consumers? We are starting to see the beginnings of a change in terms of who is going down to Macau. In the past, it was very casinooriented, in terms of people going down to actually gamble and use the various machines or tables that were present at the casinos. What we’ve started to see in the last year or two is that there has been a shift towards more family travel, with people going down for a more resort-type vacation, and also groups of friends who are younger – maybe in their twenties – and just trying to have their first overseas travel experience. They’re going down and they are shopping, or they are looking for the entertainment venues that are available to them. So there has been a little bit of a shift in what people are going to Macau to do. The casinos have realised that they need to be offering more options

that are catering to these groups. If you look at what’s happening, you’ve got casinos like the Galaxy that are much more family-friendly than most of the casinos have been in the past. You have a lot more exhibitions or shows that people can go to, so it’s not just about gambling all the time, and I think that has helped towards pushing things in the right direction of what is going to be happening in the future. Who are these new consumers coming here? As people’s access to disposable income has increased in China, we’ve got a lot more people now who are looking at spending on lifestyle rather than spending on products. So in the past you would go out and buy something that is going to be flashy, that you can show off to your friends or to people to show that you are successful, but now what we have is a lot people saying: “I want to spend money, and I am willing to buy luxury lifestyle.”

And it’s not just about the items they have to show off. It is more about what is going to make their life comfortable, interesting and cultured, so you have a lot of people now who are sort of younger, white-collar workers, from a city like Shanghai or Beijing, but also from second-tier cities, like Dalian or Chengdu, that are prioritising this idea of having new experiences. That’s the sort of group that is starting to spend a lot more and that is showing up in Macau, Hong Kong or in Southeast Asia, because they want that lifestyle experience. Within the integrated resorts we have in Macau, which ones better suit these new Chinese consumers? There are some interesting newer options that are going to be attracting people. One example is the Hard Rock Hotel. It’s interesting because the lifestyle experience that it offers is very different from what people have seen in the past in terms of the

May April27, 19,2013 2013

Macau kind of hotels they can stay in. It’s got a music focus theme, and the way it’s decorated is different from what people have seen before in terms of materials, colours and styles. Things like that are going to be attractive to people. Also, a lot of the bigger casino chains, like the Venetian and Galaxy, have really worked on offering premium experiences that might be accessible to somebody who doesn’t necessarily have tons of money to spend. They might go down to Macau and choose to stay in a really nice room, like a suite, with their friends for one day, and stay in a cheaper hotel for the rest of the time. The big resorts are well positioned for that, because they have a lot of options for someone who wants to try different things. Outside the gaming resorts, do you see any features in Macau that attract these new consumers? There are some things that could be emphasised. Macau has a lot of interesting history – with heritage, food, international history – and I don’t know if that is always emphasised as well as it could be. I think there are a lot of opportunities for people to look at the old architecture, to experience those cultural elements, and that’s something that can be emphasised more than it was in the past in a bid to attract these younger groups who aren’t necessarily interested in just going down and having a VIP gambling experience.

Macau has a lot of interesting history – with heritage, food, international history – and I don’t know if that is always emphasised as well as it could be

There’s still room to grow and develop, but in terms of how Macau is developing right now, the government has done a good job in making it an easier place to visit. Pretty easy to fly in now and get around. It’s easy to combine a trip to Macau with a trip to Hong Kong, because it takes a ferry back and forth between the two cities. So I think there’s progress in terms of infrastructure and in terms of development of new places for people to stay, but at the same time it’s really important to make sure that the identity of the city is maintained and that people are reminded of the culture and the heritage. There’s a lot in Macau that makes it appealing to people who might be visiting not necessarily just for gambling. What is lacking in Macau to attract other kinds of clientele? The main obstacle is that the market is changing very quickly and it’s very difficult to plan anything too far in advance. One of the challenges is, as more and more people are going down and choosing it more as a vacation leisure destination, the resorts are going to have to be very current in terms of what they do as far as bringing in musical acts or bringing in new movies or events

or exhibits for people to look at. It’s difficult to do that well and quickly and efficiently, so that part of the challenge is going to be how they set up really good venues for those kinds of performances and how they keep things fresh and current. So there is a reason for people to come back if they’ve already come once, so there’s enough of a draw for someone to choose Macau as that first trip rather than going to Hong Kong, Thailand or somewhere else where they might feel they’re going to be getting a more interesting experience. Still, one of the main problems pinpointed is that tourists coming here are mostly day-trippers. How to overcome this? When people are travelling they are looking for sort of a really planned itinerary of things to do, and the way Macau is set up, unless you are going there because you know you want to gamble or you know you have got one or two days of shopping that you can do, there isn’t that much else scripted out for them to do. I don’t know if the government has done a good enough of a job of designing really clear itineraries for the consumer. Many of these people haven’t travelled that much before, so they are looking for someone to hold their hand a little bit, but they don’t necessarily want to be part of a tour group. Part of it is designing a package or an experience that can be showed to someone potentially interested in coming to Macau, so that they can choose and they don’t have to think too much. What would be the right strategy to really achieve diversification within the tourism sector? In terms of how Macau brands itself or markets itself or how the casinos market themselves, it needs to not just be about gambling. People have a very strong perception of what Macau is, just because over the past 10 years it has been such a popular destination for government officials for corporate events and things like that. Really emphasising on marketing, showing that Macau has something that is going to be family-friendly, that has culture, that has a lot of events and things to do besides just gambling, is going to be really important, especially if people are travelling with their families. That’s the first thing if companies want to get access to families; for young people, making Macau look like a young, hip destination to go to rather than sort of smoky, VIP, inaccessible destination. So part of it is just a branding issue and making sure that the branding message is really clear. Infrastructure and transport are things that could be improved to reach that goal? Overall, the transportation system is relatively quite good, but I do agree the major issue is, if you look at where people are travelling from, it’s not going to be the consumers coming from Guangzhou, Shenzhen, Beijing or Shanghai that are going to be leading the way any more. I think a lot of those groups have already had a trip to Macau and so they’re not necessarily going back again. The real challenge is going to be: how do you get someone getting out of a second-tier or third-tier city, looking to make that first international trip? For them, if they have to make a flight connection and if they have to fly from Xi’an to Kunming or Shenzhen and then fly from there to Macau, it’s not really that convenient.

If they’re doing that already, they’re saying: “We might as well be going somewhere more exotic, that’s not really China any more.” Having more direct flights is going to be important going forward, just in terms of capturing the Chinese consumers and making it easier for them to get in and out. Las Vegas was very successful in gaining different types of tourists, but Macau is still at the infant stage. Why is it so hard here to diversify the pool of visitors? You’re looking at Las Vegas as a casino-entertainment-holiday destination, and it’s been that kind of destination for much longer than Macau has. Macau’s history is much shorter, so we’re still at the early stages of development. Part of the challenge is that in many ways mainland Chinese consumers are very discerning, very demanding in terms of what they get for their money and what their experience is going to be, and so when they look at Macau they’re still seeing a lot of the development happening. So you’ll see people that are saying: “We’re going to wait a year or two to go, because we hear a new casino is opening and we’re not going to go right now, because we don’t want to stay in an old hotel.” There are a lot of people taking a wait-and-see approach to see what’s happening. The other problem is that, if you look at Las Vegas, they’ve been able to take their history as a town with organised crime and things like that, and turned that into a positive. They brand the history as being interesting, and people like that.

MIN

If you look at Macau, that sort of history doesn’t exist in the same way. People look at it right now and they draw associations to government officials scamming money and going down to gamble. Part of it is doing a stronger job of looking at Macau’s roots, the Portuguese history, the interesting food and interesting culture, and some of that might get a little bit more attractive to people who are sort of looking for a more cultural destination.

The main obstacle is that the market is changing very quickly and it’s very difficult to plan anything too far in advance

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May 27, 2013 April 19, 2013

Macau

Tourist spending rises 10 pct y-o-y in Q1 First quarter comparison excludes money spent on gambling Stephanie Lai

sw.lai@macaubusinessdaily.com

otal tourist expenditure in the first quarter – not including expenses on gaming – reached 14.5 billion patacas (US$1.8 billion). That’s 10 percent higher than the same period last

year, the latest data from Statistics and Census Service show. Per capita tourist expenditure rose eight percent year-on-year to 2,046 patacas, according to Friday’s data. The annual rate of tourist price

Mainland visitors – top spenders in Macau

inflation was 7.9 percent in the 12 months ended March 31. Tourism price inflation in the first three months of 2013 was 5.57 percent, compared to a consumer price inflation rate of 5.38 percent in the same period. The statistics service says on average 50 percent of each tourist’s expenses go to shopping, the remaining roughly split between accommodation and meals. A major shopping item for tourists is clothing, making up 22 percent of tourists’ budgets. The second major item is souvenirs and food products (20 percent), followed by jewellery and watches (19 percent). Clothes and shoes were 20.9 percent more expensive in the first quarter of this year than a year earlier. The key consumer group is mainland Chinese travelling under the individual visa scheme. Each one can spend as much as 1,974 patacas on shopping; with the average retail spend being 1,521 patacas. When all items are considered, mainland tourists spend an average 2,640 patacas per head; with IVS visa holders spending 13 percent more at 2,993 patacas. In the first quarter, tourists staying overnight in Macau spent an average of 3,574 patacas, an increase of six percent year-on-year. The rates charged for hotel rooms

Scholar calls for minimum wage pegged to median monthly pay Stephanie Lai

sw.lai@macaubusinessdaily.com

he minimum wage in Macau should be pegged with no less than 40 percent of the local median monthly pay, said Lai Wai Leung, assistant professor of public administration at the Macao Polytechnic Institute. Mr Lai was speaking during a roundtable session organised by New Macau Association on Saturday. The city is still waiting for the minimum wage legislation, which is still being discussed at the Standing Committee for the Coordination of Social Affairs. The legislation will not be ready by this year, the committee said last month after a plenary session. Mr Lai and Ng Kuok Cheong, legislator and a member of the association, agree that the minimum wage should be linked with the median monthly salary. Residents’ median monthly

pay reached 14,500 patacas (US$1,812.50) in the first quarter, an increase of 1,500 patacas or 11.5 percent over the previous quarter, official data show. The pay of residents makes up two-thirds of workers’ earnings but, even with the increase in their wages, the city’s median monthly salary was stable at 12,000 patacas, suggesting wages for imported workers were steady. “Taking the experience of OECD [Organisation for Economic Cooperation and Development] and European countries, the formula for the minimum wage usually takes as reference the relative poverty line, which is set at 50 to 60 percent of the median monthly income,” Mr Lai told Business Daily after the roundtable discussion. “I’d suggest Macau should go for no less than 40 percent of the median monthly income to set the minimum wage, which is a

conservative percentage but easier for the government to negotiate with the employers’ party,” Mr Lai said. “Instead of letting the committee handle a political fight on what should be the minimum wage level, the government should take a proactive stance and put forward a formula to set up the minimum wage, which can be regularly adjusted,” he added. While complying with the minimum wage standard would be challenging for smaller companies in the city, the government could consider requiring these companies to offer no less than 70 percent of the statutory minimum wage to workers, legislator Ng suggested. He says the minimum wage here should be set at 30 patacas per hour. Hong Kong introduced a citywide minimum wage of HK$28 per hour two years ago. It went up to HK$30 this month.

– the biggest single expense for most visitors – increased by 6.3 percent in the first quarter. Same-day tourists, mostly from Hong Kong and mainland China, are spending an average of 632 patacas per head, a year-on-year drop of five percent. But tourists from the U.S. and Australia are spending less than those from Southeast Asia. The spending per capita of tourists from Singapore – when taking into account one-day visitors as well as overnight visitors – is 1,692 patacas, followed by Malaysian tourists, who spent an average of 1,553 patacas in the city during the first three months of the year. Long-haul visitors from Australia and the United States invest most of their budget on accommodation and dining, the census service noted. The average spending per person for tourists from Australia reached 1,228 patacas per person in the first quarter, followed by U.S. visitors, who spend an average of 1,214 patacas.

MOP14.5 billion Total spending of visitors in Q1

May April27, 19,2013 2013

Greater China

HKMEx’s chief resigns public posts Barry Cheung said to quit Rusal board amid HK inquiry

ong Kong Mercantile Exchange chairman Barry Cheung resigned as a member of the board of Russian aluminium producer United Co. Rusal, which he chaired until October, because he is under police investigation, three people familiar with the situation said. He hasn’t been arrested or charged with any offence in connection with the Hong Kong police probe into HKMEx’s business, said the people, declining to be identified before the information is public. They said he decided to resign from all public duties to minimise the possible effect on public institutions, including Rusal. Mr Cheung was Rusal’s chairman from March through October last year before resigning to join Hong Kong’s government. He has also quit Hong Kong’s Cabinet because of the probe, according to a government statement on Friday. Mr Cheung, who ran the 2012 election campaign of the city’s Chief Executive Leung Chun-ying, took a leave of absence from public positions last week. A statement from Mr Leung’s office said that the chief executive on Friday received Mr Cheung’s resignation from all public posts – including Hong Kong’s core policy making body, the Executive Council – “on the ground that Mr Cheung is under police investigation”. “The Chief Executive has accepted his

Barry Cheung, ally of HK leader, being investigated in exchange probe

resignation,” the statement said. A Rusal spokeswoman, who could not be identified by name because of company policy, declined to comment. Mr Cheung also declined to respond when reached on his mobile phone and didn’t reply to an e-mailed message. He had said in a statement that he would cooperate fully with the police investigation. HKMEx, which traded gold and silver futures, surrendered its

operating licence in the week ended May 18, telling the Hong Kong Securities and Futures Commission that revenue wasn’t sufficient to support running costs. The regulator said on May 21 it found “serious” suspected irregularities in the exchange’s financial affairs and referred the case to the police. Three men arrested as part of the probe were charged on Friday with having false documents including

letters related to a US$460 million check and US$11 million of funds. Kowloon City Magistrate Clement Lee denied bail to the men, all from mainland China, and adjourned the hearing. No mention of HKMEx was made in the charges or in court. Mr Cheung, the founder and largest shareholder of the HKMEx, said previously that the three aren’t current or former employees. Bloomberg News/Reuters

May 27, 2013

Greater China China, U.S. agree on auditors’ records China agreed to give a U.S. regulator access to documents from Chinese accounting firms, moving toward a resolution of a dispute that could have pushed the country’s companies to stop trading on U.S. markets. The Public Company Accounting Oversight Board, the China Securities Regulatory Commission and China’s Ministry of Finance signed the agreement on May 7, the ministry said in a statement on its website. The deal is a step toward resolving other disputes including one with the U.S. Securities and Exchange Commission, PCAOB chairman James Doty was quoted as saying by the Wall Street Journal, which first reported the agreement. The SEC last year accused affiliates of the world’s top four auditing firms of withholding documents from investigators probing potential fraud by China-based companies. Auditors that don’t comply with the regulator’s demands face temporary or permanent deregistration in the U.S., according to the rule under which the proceedings were brought, meaning they wouldn’t be able to audit U.S.-listed companies. The auditors had said Chinese law prevented them from meeting the SEC’s demands.

Beijing seals FTA with Switzerland Chinese premier criticises EU move on trade measures

Bilateral trade between China and Switzerland worth US$26 bln

Regulator vows to push yuan reforms The Chinese government will continue to liberalise interest rates, make the yuan currency more responsive to market forces and more convertible this year, the government said. China will draft plans on a deposit insurance system and quicken the development of private financial institutions, according to guidelines on reforms for 2013 drafted by the National and Development and Reform Commission (NDRC). “We will steadily push forward marketoriented reforms of interest rates and gradually widened the floating range for both deposit and lending rates,” said the guidelines, which were published on the central government website. The guidelines have been approved by the cabinet. China will steadily push forward the process of making the yuan convertible on the capital account, it said without giving a timetable. China has been giving more leeway for commercial banks to set interest rates and make the yuan more flexible, in a broader push for reforms to strengthen its economy. The world’s second-largest economy also has ambitions for its currency to play a bigger role in international trade.

Beijing urges N.Korea to return to nuclear talks Chinese President Xi Jinping urged North Korea to return to six-nation talks aimed at resolving its disputed nuclear programme, the statebacked China News Service reported. Lasting peace on the Korean Peninsula is what people want and is the trend of the times, the report quoted Mr Xi as saying. China’s very clear position is that all involved parties should stick to the objective of denuclearisation and resolve disputes through dialogue and consultation, Mr Xi told North Korean military envoy Choe Ryong Hae, who delivered a handwritten letter from Kim Jongun, the report said. “I think the Chinese took advantage of the opportunity to be able to express their displeasure with the regime, but also give them some kind of bone to hopefully prevent them from going beyond the provocation cycle,” said David S. Maxwell, associate director of the Center for Security Studies at Georgetown University’s School of Foreign Service. As the North’s chief political and economic patron, China has come under pressure to rein in Mr Kim’s regime, which in March threatened nuclear strikes against South Korea and the U.S. Mr Choe’s visit may signal that North Korea is looking to ease tensions as it backs off its bellicose rhetoric from recent months.

hina has signed the framework of a free-trade agreement with Switzerland, which could become Beijing’s first such deal with a major Western economy. The signing ceremony took place during an official visit by Chinese Premier Li Keqiang to Switzerland. Bilateral trade between the two countries is worth US$26 billion through imports and exports of watches, medicines, textiles and dairy products. Mr Li said he hoped the deal would be felt beyond Switzerland’s borders. “This free-trade deal is the first

Taiwan slashes GDP growth forecast T

aiwan slashed its 2013 economic growth outlook on Friday, showing increased concern that lacklustre global demand poses a threat to the island’s pivotal tech exports to China and the United States. The government chopped to 2.4 percent from 3.59 percent its

Xi pledges to safeguard environment C

hina’s President Xi Jinping said the country won’t sacrifice the environment to ensure temporary economic growth, amid rising public discontent that industrial expansion is creating pollution and threatening food safety. China must carefully balance economic development and environmental protection, Mr Xi told a study session of the top

between China and a continental European economy, and the first with one of the 20 leading economies of the globe,” Mr Li told reporters after the two countries signed the preliminary agreement. “This has huge meaning for global free-trade,” he added. For his part, Swiss President Ueli Maurer described the agreement as a “real milestone”. China is Switzerland’s third biggest trading partner after the European Union and America, with exports to China of watches, pharmaceuticals and machinery

amounting to over US$22 billion. China has hinted it could also make Switzerland its financial centre of choice, if Beijing allows offshore trading of the yuan. High-level figures in Switzerland’s watch-making industry are viewing the deal positively, hoping it will reduce China’s import duties on watches from 16 percent to 12 percent. “It will give a legal framework to our cooperation,” Jean-Daniel Pasche, the head of Switzerland’s main watch federation, told AFP news agency. China is also looking to sell Switzerland more textiles and agricultural products. The agreement still needs to be cleared by both chambers of the Swiss parliament before it can be ratified. Speaking to business leaders in Switzerland, Mr Li criticised the European Union over its plans to investigate alleged anti-competitive behaviour by Chinese mobile telecom equipment makers and to impose punitive import duties on solar panels from China, the official Xinhua news agency reported. Such measures would “harm others without benefiting oneself,” he was quoted as saying. The European Union is considering whether to impose punitive import duties on solar panels from China after the United States levied its own duties last year – a move fiercely opposed by Beijing. European Trade Commissioner Karel De Gucht said this month he and fellow commissioners had agreed in principle to open an anti-dumping and anti-subsidy case against China, but would first seek to negotiate a solution with Chinese authorities. China has threatened to retaliate if the EU pushes ahead with the investigation. Reuters/AFP

forecast for this year’s growth in gross domestic product. However, the statistics agency also said on Friday that GDP grew more quickly in the first quarter than earlier estimated. It put annual growth for January-March at 1.67 percent, above its advance estimate of 1.54 percent. The agency also cut its forecast for this year’s consumer price index rise to 1.23 percent from a preliminary 1.37 percent. The government body said it had cut the full-year forecast because the outlook of global economy is “not as good as previously expected… The situation in Europe will not improve in short term, and there is still concern over the growth

momentum of China and the U.S. economies. These are the factors that bode ill for Taiwan’s exports”. It also said some Taiwan industries have been hit by soft global demand and increasing competition from Chinese companies. “The weak areas lie in PCs, notebook PCs and plastics and petrochemical products,” it said. Taiwan grew only 1.32 percent in 2012 but earlier had hopes of a much higher figure this year. In February, it raised its forecast for GDP growth this year to 3.59 percent from 3.53 percent. The agency said it revised first quarter GDP up because of higher government spending and lower imports of services and products.

leadership of the Communist Party on promoting ecological progress, the official Xinhua News Agency reported yesterday. Protests this month against plans by the country’s biggest oil producer to build a chemical plant in Yunnan province and revelations that rice produced in southern China contained excessive levels of a toxic metal are adding pressure on China’s new leadership to tackle environmental issues. Pollution has replaced land disputes as the main cause of social unrest, Chen Jiping, a former leading member of the Communist Party’s Committee of Political and Legislative Affairs, said in March. “We should be fully aware of the urgency and difficulty of protecting the environment and reducing pollution as well as the significance

and necessity of improving the environment,” Xinhua quoted Mr Xi as saying. Mr Xi vowed to set and strictly observe an ecological “red line” to ensure the environment is protected amid the country’s rapid urbanisation and said those who cross the line will be punished, according to Xinhua’s report. The president also called for more economical use of resources and for a reduction in consumption of energy, water and land, Xinhua said. The government has ordered stricter approval criteria to be applied to approvals of bond sales by financing companies set up by local governments in industries identified as being heavy polluters, people with knowledge of the matter told Bloomberg News this month.

Reuters

Bloomberg News

May 27, 2013

Asia

Bank Indonesia moving toward tightening bias As plan to raise fuel prices shifts focus to stability from growth

ank Indonesia Deputy Governor Perry Warjiyo said the central bank is leaning toward tightening monetary policy. “We already changed to neutral since February last year and now we’re even moving toward a tightening bias,” Mr Warjiyo, 54, said in an interview at the central bank in Jakarta. “If we can deal with the stability, I think there will be room for growth later.” Southeast Asia’s largest economy expanded at the slowest pace in more than two years in the first three months of 2013, capping 10 successive quarters of growth above 6 percent. Chatib Basri, sworn in as the nation’s new finance minister last week, plans to save US$4.3 billion this year by cutting fuel subsidies in the nation of 240 million people as early as next month. The planned fuel price increase threatens to boost inflation to as much as 7.7 percent this year, compared with a 5.5 percent pace should fuel rates remain unchanged, reducing the central bank’s scope to contain borrowing costs and support economic growth, Mr Warjiyo said. Bank Indonesia kept its benchmark interest rate unchanged since February last year. “The clarity of the decision on the energy subsidy will be one of the key factors” in formulating monetary policy, he added. Inflationary pressures and currency volatility will be the focus for the central bank this

Japan Inc averse to further yen drop: poll

igns are that most firms in export-driven Japan Inc, having got the weaker yen they craved, now want the currency to either stabilise or recover ground, rather than continue a slide that will increasingly raise their costs. About half the Japanese companies in a new Reuters survey say the yen has fallen enough, just 15 percent want a further yen decline and more than one-third would in fact like to see the currency rebound

ING’s Korean unit sale attracts three bids

NG Groep NV, the largest Dutch financial-services company, has attracted two more bidders for its South Korean insurance business, said a source with direct knowledge of the matter, taking the total number to three and raising the chances of a successful deal after an earlier sale fell through. Tong Yang Life Insurance Co Ltd and private equity firm MBK Partners made separate bids for a controlling stake in ING’s South Korean insurance

Jet Airways, SpiceJet report quarterly losses But rising fares bode well for India’s struggling airlines

Indonesia may cut fuel subsidies as early as next month

year, he said. Indonesia’s economy may expand by 6.2 percent should the government win parliamentary approval for proposals to help the poor, which it has said is a prerequisite for the planned increase in fuel prices, Mr Warjiyo said. The government has proposed increasing subsidised-fuel prices starting next month, raising the cost of gasoline by 2,000 rupiah (20 U.S. cents) a litre and diesel by 1,000 rupiah, Mr Basri said last week. President Susilo Bambang Yudhoyono made the adjustment conditional on lawmakers approving a compensation programme for the poor, which was included in the revised 2013 budget

submitted to parliament. Raising fuel prices “will be a painful decision over the shortterm but it will be a better prospect for long-term economic growth,” Mr Warjiyo said. “Whatever the government and the parliament decide, Bank Indonesia will be ready to adjust our policy response.” The bank’s response will include interest-rate policy, exchange-rate policy, influencing or managing liquidity and steering bank credit allocation, Mr Warjiyo said. Bank Indonesia is committed to maintaining the stability of the rupiah in line with economic fundamentals, he added.

from its 4-1/2-year lows. At the same time, top officials in Prime Minister Shinzo Abe’s halfyear-old government – who used to stress the urgency of reversing the yen’s strength – have also begun highlighting the downside of the yen’s steep slide, such as higher importedenergy costs. The yen has sunk 23 percent against the dollar and 24 percent against the euro since midNovember, when it became clear Mr Abe was poised to win a general election and implement his aggressive plans to reflate the world’s third-biggest economy and tame the Japanese currency. The Reuters Corporate Survey found that 48 percent of the companies want the yen to stabilise around 100 to the dollar. Just 7 percent want the yen to weaken

to 105 to the dollar and 8 percent to 110 yen. By contrast, a full 29 percent would like the yen to strengthen back to 95 to the dollar and 9 percent would prefer a 90-yen level. The total does not add up to 100 percent due to rounding. The results for manufacturers were similar to those for the full survey sample, showing that the weak yen is a two-edged sword, even for Japanese exporters, whose products are more profitable overseas thanks to the weak yen. That is because their imported inputs become pricier in yen terms as the currency falls. It also reflects a steady shift of Japanese manufacturing overseas during the strong-yen years, which means those companies get less benefit when the yen declines.

unit, the source said. They will compete with another bid made by South Korea’s third-largest insurer Kyobo Life Insurance Co Ltd, and collectively breathe new life into a delayed deal previously valued at roughly US$2 billion. The deal is set to get more crowded with the country’s second-largest insurer Hanwha Life Insurance Co Ltd expected to submit its own bid according to a second source with direct knowledge of the matter. The sources declined to be identified as the bidding process was private. The sale is set to be one of the largest M&A deals in Asia’s fourthlargest economy this year, although

the final value depends on the size of the stake that ING sells. ING is only required to sell more than 50 percent in the unit by 2013 and divest the remaining interest by the end of 2016, but it wants to sell as much as possible, sources said. The sale of a stake in its Korea insurance unit will bring ING Groep NV closer to fulfilling its agreement with European regulators to sell more than 50 percent of its Asian operations by the end of 2013. ING Life Insurance Korea Ltd is the country’s fifth-largest life insurer with 22.7 trillion won (US$20.11 billion) in assets as of end-2012.

Bloomberg News

ndia’s Jet Airways Ltd and its smaller rival SpiceJet Ltd reported quarterly losses as fare increases were not sufficient to cover high costs of operations. Jet Airways, which has agreed to sell a 24 percent stake to Gulf carrier Etihad in a US$370 million deal, was optimistic of demand growth and said airlines were regaining their pricing power. Airlines in India have increased fares in recent months after Kingfisher Airlines Ltd, once the country’s No.2 carrier, stopped flying last October, burdened by its high debt and as its flying licence was suspended. But high fuel costs and airport taxes, and a weak local currency still pose problems, and both Jet and SpiceJet cited these factors in their statements. Jet said in a statement its planned deal with Etihad would bring “immediate revenue growth and cost synergy opportunities” and help strengthen its balance sheet. Etihad’s investment in Jet is the first by an overseas operator in an Indian airline since ownership rules were relaxed and provides Jet with a deep-pocketed global partner as well as cash to retire debt. The deal is yet to win approval from Indian regulators. Jet, controlled by Indian businessman Naresh Goyal, said its net loss widened to 4.96 billion rupees (US$89 million) for its fiscal fourth-quarter ended March, from 2.98 billion rupees reported a year earlier. Total revenue fell to 44.84 billion rupees from 46.34 billion rupees a year earlier. Jet said its fourthquarter results included a one-time impact of 3.1 billion rupees, mainly due to payroll arrears, maintenance and foreign exchange losses. SpiceJet, ranked No.3 by local market share, said net loss for the three month to March narrowed to 1.86 billion rupees from 2.49 billion rupees a year earlier. SpiceJet however saw its revenue for the quarter rising 31 percent from a year earlier to 14.56 billion rupees as number of passengers grew by a fifth. Reuters

Reuters

Jet Airways says Etihad deal to bring immediate revenue growth

May 27, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

34.95

0.7204611

12592107

CHINA UNICOM HON

ALUMINUM CORP-H

3.11

-0.955414

17609862

CITIC PACIFIC

BANK OF CHINA-H

3.66

229631386

BANK OF COMMUN-H

6.02

-0.1658375

21511059

BANK EAST ASIA

30.6

-0.1631321

1108335

BELLE INTERNATIO

11.96

0.1675042

33458012

AIA GROUP LTD

NAME

CLP HLDGS LTD

-0.1633987

3558187

0.3696858

5051278

COSCO PAC LTD

10.84

-2.342342

10474178

SWIRE PACIFIC-A

101.3

0.09881423

842063

ESPRIT HLDGS

11.66

1.745201

12734442

TENCENT HOLDINGS

299.4

2.254098

4505223

29.7

1.192504

1795938

TINGYI HLDG CO

19.94

1.527495

8121616

126.9 -0.07874016

603546

WANT WANT CHINA

11.62

10999961

WHARF HLDG

72.65

-3.133333

7846634

HENDERSON LAND D

20.8

-1.187648

25173209

0.2004008

3672067

CHINA MOBILE

82.9

-0.539892

CHINA OVERSEAS

23.1

-1.702128

CHINA PETROLEU-H

8.21

CHINA RES ENTERP

24.5

CHINA RES LAND

CHINA LIFE INS-H

HENGAN INTL HONG KG CHINA GS

56.9

0.1760563

3531981

86.75

1521381

23.2

0.8695652

5286166

HONG KONG EXCHNG

130.9

0.6149116

2946324

HSBC HLDGS PLC

86.15

-1.0907

14050621

15616446

HUTCHISON WHAMPO

83.05

-3.317811

7675955

24425788

IND & COMM BK-H

5.39

0.1858736

288464142

-0.8454106

83735263

LI & FUNG LTD

10.98

0.9191176

14883492

3541294

MTR CORP

31.75

1.4377

23.2

-0.4291845

8280735

NEW WORLD DEV

13.16

CHINA RES POWER

20.2

0.4975124

8527470

PETROCHINA CO-H

9.45

CHINA SHENHUA-H

0.3861004

12001412

PING AN INSURA-H

58.65

CHINA MERCHANT

6814248

12.22

CHEUNG KONG

181334319

0.5031447

108.6

HANG LUNG PROPER

3173150

39.95

SUN HUNG KAI PRO

HANG SENG BK

6.3

SANDS CHINA LTD

Volume

SINO LAND CO

5637282

CHINA CONST BA-H

7610931

-0.4758668

3728916

3041175 4042905

0.4291845

DAY %

73.2

56921110

19362041

9.36

PRICE

POWER ASSETS HOL

1.612903

-0.1838235 -2.504318

NAME

-0.9957326

14.04

0.5649718

13782686

69.3

27.15

5.34

Volume

0.1811594

13.92

BOC HONG KONG HO

112.9

DAY %

11.06

CNOOC LTD

CATHAY PAC AIR CHINA COAL ENE-H

PRICE

MOVERS

6 23415

INDEX 22618.67 HIGH

23409.37

2266680

LOW

22563.93

-0.6042296

9436860

52W (H) 23944.74

0.2120891

61866131

-0.5932203

10244898

(L) 18056.4

22560

22-May

24-May

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.65

-0.5449591

79357478

AIR CHINA LTD-H

6.63

-0.3007519

4653803

ALUMINUM CORP-H

3.11

-0.955414

ANHUI CONCH-H

26.6

BANK OF CHINA-H

NAME

PRICE

DAY %

Volume

CHINA PACIFIC-H

26.8

-2.189781

6466704

CHINA PETROLEU-H

8.21

-0.8454106

83735263

17609862

CHINA RAIL CN-H

7.75

-1.649746

9062692

-0.5607477

16215198

CHINA RAIL GR-H

4.06

-0.2457002

13648528

3.66

229631386

CHINA SHENHUA-H

0.3861004

12001412

BANK OF COMMUN-H

6.02

-0.1658375

21511059

CHINA TELECOM-H

3.88

53932038

BYD CO LTD-H

31.8

1.597444

4154485

DONGFENG MOTOR-H

11.96

-0.9933775

20516920

CHINA CITIC BK-H

4.35

18191735

GUANGZHOU AUTO-H

8.15

4.086845

15418605

CHINA COAL ENE-H

5.34

0.5649718

19362041

HUANENG POWER-H

8.21

0.7361963

30411769

CHINA COM CONS-H

7.52

14779490

IND & COMM BK-H

5.39

0.1858736

288464142

CHINA CONST BA-H

6.3

181334319

JIANGXI COPPER-H

15.44

-0.5154639

12652649

CHINA COSCO HO-H

3.41

-1.729107

6692759

PETROCHINA CO-H

9.45

0.2120891

61866131

CHINA LIFE INS-H

20.8

-1.187648

25173209

PICC PROPERTY &

9.62

-2.434077

25042542

3.626943

18846253

PING AN INSURA-H

58.65

-0.5932203

10244898

CHINA MERCH BK-H

16.12

0.6242197

17907282

SHANDONG WEIG-H

8.23

-1.437126

2934815

CHINA MINSHENG-H

9.63

-0.9259259

35935492

SINOPHARM-H

1932487

CHINA NATL BDG-H

8.82

-2.217295

82316435

TSINGTAO BREW-H

53.9

-1.191567

921142

16.12

1.511335

3711486

WEICHAI POWER-H

28.7

-3.204047

3040700

CHINA LONGYUAN-H

CHINA OILFIELD-H

NAME

PRICE

DAY %

Volume

YANZHOU COAL-H

8.23

0.4884005

21380329

ZIJIN MINING-H

2.14

28114300

ZOOMLION HEAVY-H

7.99

-0.8684864

13637254

ZTE CORP-H

12.9

0.78125

2008703

MOVERS

7 11160

INDEX 10722.3 HIGH

11157.35

LOW

10706.65

52W (H) 12354.22 10700

(L) 8987.76 22-May

24-May

Shanghai Shenzhen CSI 300 PRICE

DAY %

Volume

PRICE

DAY %

Volume

7.51

-0.7926024

18539075

PING AN INSURA-A

39.59

0.2786221

22211836

CHONGQING CHAN-A

10.79

-0.09259259

34229183

POLY REAL ESTA-A

12.26

0.08163265

40552477

12275544

CHONGQING WATE-A

6.58

10535178

QINGDAO HAIER-A

12.87

-0.3098373

9691079

-1.155402

32737334

CITIC SECURITI-A

12.68

0.955414

65341772

QINGHAI SALT-A

23.69

1.980198

4701111

11.85

1.89166

47109345

CSR CORP LTD -A

4.3

1.654846

44946899

SAIC MOTOR-A

15.26

-0.3265839

29294021

BANK OF BEIJIN-A

9.03

0.8938547

20237740

DAQIN RAILWAY -A

6.98

-0.2857143

28015126

SANY HEAVY INDUS

9.49

-0.3151261

24571593

BANK OF CHINA-A

2.94

0.3412969

16188343

DATANG INTL PO-A

4.74

1.066098

9087572

SHANG PHARM -A

12.54

18249967

BANK OF COMMUN-A

4.75

0.422833

46997306

EVERBRIG SEC -A

13.84

1.540719

15952601

SHANG PUDONG-A

10.2

0.4926108

63230983

BANK OF NINGBO-A

10.59

0.3791469

12538026

GD MIDEA HOLDI-A

14.15

-0.7713885

13056908

SHANGHAI ELECT-A

3.92

6285541

BAOSHAN IRON & S

4.87

11462850

GD POWER DEVEL-A

2.67

74495610

SHANXI LU'AN -A

16.51

0.6707317

13185036

BEIJING TONGRE-A

23.67

2.778984

10147618

GEMDALE CORP-A

7.78

-1.017812

57584155

SHANXI XISHAN-A

10.62

0.1886792

12067988

0.5169443

10738998

GF SECURITIES-A

13.64

0.3679176

15767172

SHENZEN OVERSE-A

6.4

0.1564945

41079754

CHINA AVIC ELE-A

27.75

4.205783

9116218

GREE ELECTRIC

27.04

0.933184

15362769

SUNING COMMERC-A

6.2

-0.6410256

37904238

CHINA CITIC BK-A

4.39

0.2283105

17854656

GUANGHUI ENERG-A

20.06

4.971219

28640968

TASLY PHARMAC-A

42.55

2.283654

7752914

CHINA CNR CORP-A

4.55

2.247191

36510695

HAINAN AIRLINE-A

4.98

2.680412

30609278

TSINGTAO BREW-A

38.26

-0.1305142

1202098

CHINA COAL ENE-A

6.81

0.2945508

7902067

HAITONG SECURI-A

11.25

0.9874327

88406705

WEICHAI POWER-A

23.34

0.6468305

5594761

CHINA CONST BA-A

4.78

-0.6237006

29336698

HANGZHOU HIKVI-A

39.52

0.3810008

5982160

WULIANGYE YIBIN

24.19

0.8757298

24412074

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.73

95862456

AIR CHINA LTD-A

5.43

0.3696858

5463839

ALUMINUM CORP-A

4.15

0.2415459

ANHUI CONCH-A

17.11

AVIC AIRCRAFT-A

BYD CO LTD -A

NAME CHINA YANGTZE-A

NAME

CHINA COSCO HO-A

3.41

0.2941176

7460173

HENAN SHUAN-A

38.3

0.1569038

5089808

YANTAI WANHUA-A

17.93

1.701645

10609856

CHINA EAST AIR-A

3.06

0.990099

10590813

HONG YUAN SEC-A

24.7

1.022495

23643360

YANZHOU COAL-A

14.68

0.6168609

3576279

CHINA EVERBRIG-A

3.15

0.9615385

63328507

HUATAI SECURIT-A

9.92

0.7106599

23270743

YUNNAN BAIYAO-A

89.85

3.932909

3468756

CHINA INTL MAR-A

12.3

1.821192

7489705

HUAXIA BANK CO

10.72

-0.1862197

32310447

ZHONGJIN GOLD

12.1

0.4983389

17023151

CHINA LIFE INS-A

16.53

0.06053269

10513430

IND & COMM BK-A

4.16

37241058

ZIJIN MINING-A

3.08

0.6535948

34613171

CHINA MERCH BK-A

13.51

-0.0739645

55498940

INDUSTRIAL BAN-A

18.43

0.4907306

51315244

ZOOMLION HEAVY-A

7.29

36814315

CHINA MERCHANT-A

13.02

0.7739938

23873643

INNER MONG BAO-A

28.61

1.634103

26847999

ZTE CORP-A

12.92

3.030303

32371551

CHINA MERCHANT-A

28.67

-0.2782609

10905093

INNER MONG YIL-A

27.53

-2.479632

24532768

CHINA MINSHENG-A

10.43

0.192123

106908606

INNER MONGOLIA-A

4.84

0.4149378

35470790

CHINA NATIONAL-A

11.41

0.5286344

34779916

JIANGSU HENGRU-A

29.87

-0.1337345

8513130

CHINA OILFIELD-A

16.53

-0.1811594

6592924

JIANGSU YANGHE-A

63.16

-0.6605851

4394982

21.16

0.6181645

6772341

10.75

2.380952

10538794

CHINA PACIFIC-A CHINA PETROLEU-A

18.78

14230408

JIANGXI COPPER-A

6.7

-0.7407407

35602159

JINDUICHENG -A

CHINA RAILWAY-A

5.14

20454549

KANGMEI PHARMA-A

17.86

0.5630631

46901565

CHINA RAILWAY-A

2.85

27127701

KWEICHOW MOUTA-A

200.93

-0.7459

4507312

7167041

LUZHOU LAOJIAO-A

27.07

0.2592593

9786375

2.05

0.9852217

21970790

0.5845511

12328177

CHINA SHENHUA-A

20.87

0.3848004

CHINA SHIPBUIL-A

4.52

59982923

METALLURGICAL-A

CHINA SOUTHERN-A

3.48

1.162791

17954150

NARI TECHNOLOG-A

24.09

CHINA STATE -A

3.77

-0.2645503

80340178

NINGBO PORT CO-A

2.46

0.4081633

8311709

CHINA UNITED-A

3.68

0.5464481

66184070

PETROCHINA CO-A

8.54

0.3525264

11061539

11.91

-0.8326395

87662035

PING AN BANK-A

20.69

0.82846

33280996

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

CHINA VANKE CO-A

MOVERS 216

18 2630

INDEX 2597.228 HIGH

2625.04

LOW

2573.19

52W (H) 2791.303 (L) 2102.135

2570

22-May

24-May

FTSE Taiwan 50 Index NAME ACER INC

24.15

-1.629328

10007084

FORMOSA PLASTIC

25.9

0.1934236

16432364

FOXCONN TECHNOLO

ASIA CEMENT CORP

37.35

-0.4

1499148

FUBON FINANCIAL

ASUSTEK COMPUTER

341.5

-1.014493

1640599

AU OPTRONICS COR

13.65

0.3676471

100728110

CATCHER TECH

158.5

1.277955

11492785

HTC CORP

39.9

0.3773585

18303109

HUA NAN FINANCIA

16.95 -0.5865103

7585200

LARGAN PRECISION

955

LITE-ON TECHNOLO

ADVANCED SEMICON

CATHAY FINANCIAL CHANG HWA BANK

5400934

TPK HOLDING CO L

607

0.6633499

3546970

109.5

1.388889

26736102

79.9

-1.113861

4812601

40.35

17292446

TSMC

HON HAI PRECISIO

76.9 -0.2594034

43153344

UNI-PRESIDENT

HOTAI MOTOR CO

289 -0.6872852

251336

279

60.2 -0.9868421

8606521

UNITED MICROELEC

13.25

-1.119403

78792981

WISTRON CORP

-1.238938

10901403

30.25

2.368866

17897348

17.15 -0.2906977

7709341

YUANTA FINANCIAL

18734166

2.688172

2068511

YULON MOTOR CO

51 -0.1956947

2489999

48.75

0.7231405

8588172

363

-1.891892

9881413

23.55 -0.8421053

23348845

-2.234043

8440093

CHIMEI INNOLUX C

19.3

-2.278481

73513096

MEDIATEK INC

CHINA DEVELOPMEN

8.56

-1.268743

51310336

MEGA FINANCIAL H

CHINA STEEL CORP

25.85 -0.3853565

11535868

NAN YA PLASTICS

62.5

9693222

CHINATRUST FINAN

18.45 -0.2702703

41147166

PRESIDENT CHAIN

181.5

-2.156334

1277025

CHUNGHWA TELECOM

96.5

-1.127049

10652847

QUANTA COMPUTER

65.2

1.242236

9982203

COMPAL ELECTRON

18.3 -0.5434783

14510699

SILICONWARE PREC

35.2

-2.222222

11559499 14069196

FAR EASTONE TELE

Volume

113 -0.4405286

10959908

91.9

FAR EASTERN NEW

PRICE DAY %

TAIWAN MOBILE CO

-1.685393

CHENG SHIN RUBBE

DELTA ELECT INC

NAME

142

-1.388889

4605118

SINOPAC FINANCIA

14.5 -0.3436426

32.35

0.4658385

5342296

SYNNEX TECH INTL

43.1

73.3 -0.2721088

3418435

TAIWAN CEMENT

-1.710376

7601219

39.15 -0.5082592

4938976

17 -0.8746356

8621528

FIRST FINANCIAL

18.1 -0.5494505

7037683

TAIWAN COOPERATI

FORMOSA CHEM & F

71.4

-1.652893

8403226

TAIWAN FERTILIZE

75.2

-1.955671

4037133

FORMOSA PETROCHE

80.4 -0.3717472

1549979

TAIWAN GLASS IND

29.4

0.8576329

534083

MOVERS

3 5880

INDEX 5701.18 HIGH

5876.42

LOW

5680.42

52W (H) 5896.71 5680

(L) 4719.96 22-May

24-May

May 27, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 62.6

38.8

20.5

38.6

20.4

62.0

38.4

20.3

38.2

61.4 20.2

38.0 Max 38.7

average 38.362

Min 37.9

Last 38.65

37.8

Max 62.5

average 61.241

Min 60.85

40.2 40.0 39.8 39.6

Max 40.15

average 39.845

Min 39.45

Last 39.95

39.4

Max 20.45

average 20.166

Commodities PRICE

DAY %

YTD %

(H) 52W

Last 20.05

(L) 52W

WTI CRUDE FUTURE Jul13

94.15

-0.106100796

0.480256137

100.4000015

81.5

BRENT CRUDE FUTR Jul13

102.64

0.195236236

-4.440927288

115.9300003

96.04000092

GASOLINE RBOB FUT Jun13

283.9

0.385417772

-0.810565299

324.119997

235.9499931

855.75

0.528634361

-5.987366108

987.5

814

4.237

-0.563248064

20.78107184

4.457000256

3.203999996

285.69

-0.108391608

-5.010639713

323.8899946

258.589983

GAS OIL FUT (ICE) Jul13 NATURAL GAS FUTR Jun13 HEATING OIL FUTR Jun13 METALS

Min 20

Gold Spot $/Oz

1386.64

-0.2597

-16.6913

1796.08

1322.06

Silver Spot $/Oz

22.4

-0.5713

-25.6061

35.365

20.3395

Platinum Spot $/Oz

1452.5

-0.6056

-4.2991

1742.8

1374.55

Palladium Spot $/Oz

728.25

-1.5785

4.0863

786.5

553.75

1840

-0.540540541

-11.23974916

2200.199951

1809 6762.25

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

ASIA PACIFIC

CROSSES

-0.01369863

-7.968730299

8422

-0.026939655

-10.79326923

2230

1745

14805

-0.903614458

-13.21805393

18920

14609

15.715

1.028608165

-0.190536678

17.07500076

14.79500103

536.5

0.327255727

-10.54606086

665

512

697.5

-0.817632421

-12.12598425

900

664.75

SOYBEAN FUTURE Jul13

1476.25

-1.550516839

5.805411217

1605.75

1225

COFFEE 'C' FUTURE Jul13

127.25

-2.15301807

-14.91140087

202.1999969

126.7999954

NAME

16.55999947

ARISTOCRAT LEISU

69.94999695

CROWN LTD

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jul13 Dec13

WHEAT FUTURE(CBT) Jul13

SUGAR #11 (WORLD) Jul13

16.84

COTTON NO.2 FUTR Jul13

81.49

0.477326969 -0.354609929

-14.69098278 6.010147001

23.05999947 94.19999695

World Stock Markets - Indices NAME

Min 20.1

20.4

23.3

20.3

23.2

20.2

23.1

20.1

23.0

20.0

Max 23.35

average 23.181

Min 22.95

Last 23.25

22.9

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9652 1.5127 0.9615 1.2932 101.31 7.9965 7.7629 6.1328 55.645 29.97 1.2643 29.922 41.605 9774 97.785 1.24325 0.85514 7.9634 10.3604 131.01 1.03

-0.5871 0.2651 0.6448 0.3492 0.3751 -0.0063 0.0013 0.0277 -0.1078 -0.0667 0.0395 0.0267 0.2596 0.0921 0.9664 0.3089 -0.1064 -0.7396 -0.5473 0.0305 0

-6.9956 -6.4849 -4.7946 -1.956 -15.0133 -0.1663 -0.1584 1.5947 -1.1681 2.0354 -3.3932 -2.9711 -1.4421 0.1944 -8.6496 -2.8771 -4.6449 3.1908 1.6409 -13.312 -0.0097

1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7676 6.3964 57.3275 32 1.2971 30.203 43.76 9904 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1284 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 PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.09

-4.215457

29.84127

4.49

2.29

VOLUME CRNCY 5354895

12.83

-1.761103

20.24367

13.75

8.06

2118857

AMAX HOLDINGS LT

0.81

-42.14286

1.72

0.75

201150

BOC HONG KONG HO

27.15

-0.1838235

12.6556

20.85

5637282

CENTURY LEGEND

428000

0.305

15.09435

0.42

0.215

CHEUK NANG HLDGS

5.74

-0.5199307

-4.173619

6.74

2.8

155000

CHINA OVERSEAS

23.1

-1.702128

25.6

15.223

24425788

CHINESE ESTATES

13.94

14.92719

14.12

7.697

243500

CHOW TAI FOOK JE

9.8

1.977107

-21.22186

13.4

8.4

3362200

EMPEROR ENTERTAI

2.56

0.7874016

35.44974

2.64

1.12

710000

FUTURE BRIGHT

2.25

0.896861

85.63956

2.732

0.765

1806000

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15303.1

0.05622936

16.78065

15542.4

12035.08984

NASDAQ COMPOSITE INDEX

3459.144

-0.007891503

14.55964

3532.038

2726.68

GALAXY ENTERTAIN

38.65

1.710526

27.34761

40.65

16.94

7723452

FTSE 100 INDEX

6654.34

-0.6338858

12.8273

6875.62

5229.76

HANG SENG BK

126.9

-0.07874016

6.908175

132.8

99.2

603546

DAX INDEX

8305.32

-0.5586699

9.102663

8557.86

5914.43

HOPEWELL HLDGS

29.05

1.043478

-12.63158

35.3

19.049

710427

HSBC HLDGS PLC

86.15

-1.0907

5.965556

90.7

59.8

14050621

HUTCHISON TELE H

4.34

2.117647

21.91011

4.66

2.98

4253000

LUK FOOK HLDGS I

20.5

4.591837

-15.98361

30.05

14.7

2146000

MELCO INTL DEVEL

17.1

2.641056

89.78912

18.18

5.12

4538000

20.5

4.378819

54.38747

20.85

9.509

4145664

NIKKEI 225

14612.45

0.88698

40.56948

15942.6

8238.96

HANG SENG INDEX

22618.67

-0.2250142

-0.1688226

23944.74

18056.4

CSI 300 INDEX

2597.228

0.5567108

2.944017

2791.303

2102.135

TAIWAN TAIEX INDEX

8209.78

-0.3405023

6.627447

8439.15

6857.35

MGM CHINA HOLDIN MIDLAND HOLDINGS

3.39

0.8928571

-8.37838

3.25

854000

NEPTUNE GROUP

0.161

-0.617284

5.921056

0.226

0.084

7832000

NEW WORLD DEV

13.16

-0.6042296

9.484189

15.12

9436860

SANDS CHINA LTD

39.95

0.5031447

17.67305

43.7

20.65

6814248

SHUN HO RESOURCE

1.5

7.142859

1.67

1.03

755.149

SHUN TAK HOLDING

4.03

-0.7389163

-3.818617

4.65

2.56

3369298

3279.09

SJM HOLDINGS LTD

20.05

0.25

11.38889

22.7

12.34

13059211

SMARTONE TELECOM

13.74

1.627219

-2.414772

17.38

12.5

784000

WYNN MACAU LTD

23.25

2.422907

10.97852

26.5

14.62

9460364

KOSPI INDEX

1973.45

0.2163326

-1.181748

2042.48

1758.99

S&P/ASX 200 INDEX

4983.499

-1.559464

7.196223

5249.6

3985

5155.093

0.6578276

19.42244

5251.296

3635.283

FTSE Bursa Malaysia KLCI

1773.06

-0.606543

4.980023

1826.22

1540.49

NZX ALL INDEX

969.953

-1.303568

9.965391

998.487

PHILIPPINES ALL SHARE IX

4465.49

-0.4443285

20.72221

4571.4

JAKARTA COMPOSITE INDEX

20.1

Last 20.5

23.4

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

7299

3MO ($)

CORN FUTURE

average 20.272

20.5

COUNTRY MAJOR

1855.5

LME ZINC

Max 20.5

Currency Exchange Rates

NAME ENERGY

60.8

Last 60.85

HSBC Dragon 300 Index Singapor

645.9

-1.58

3.99

STOCK EXCH OF THAI INDEX

1607.46

-1.459599

15.48425

1649.77

1099.15

HO CHI MINH STOCK INDEX

500.24

0.4054434

20.90977

518.46

372.39

ASIA ENTERTAINME

4.37

2.34192

42.81046

5.18

2.4

250205

BALLY TECHNOLOGI

0.160973

25.25162

56.4

41.74

462231

Laos Composite Index

1367.3

0.6744518

12.55629

1455.82

980.83

BOC HONG KONG HO

3.52

2.028986

14.65798

3.6

2.7

7000

GALAXY ENTERTAIN

5.03

2.443992

26.70025

5.16

2.25

1335

INTL GAME TECH

18.25

1.388889

28.79322

18.64

10.92

1806407

JONES LANG LASAL

92.44

-1.941233

10.12628

101.46

61.39

256939

LAS VEGAS SANDS

57.55

-0.432526

24.67504

60.54

32.6127

3465176 3741479

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

MELCO CROWN-ADR

23.2

-0.2579536

37.76722

25.15

9.13

MGM CHINA HOLDIN

2.6

40.54054

2.67

1.36

500

MGM RESORTS INTE

14.93

28.2646

15.95

8.83

7646342

SHFL ENTERTAINME

16.65

-0.2396645

14.82759

17.2199

11.75

207009

SJM HOLDINGS LTD

2.6

-3.345725

12.55412

2.99

1.65

500

137.9

-0.3972553

22.58868

144.99

84.4902

944256

WYNN RESORTS LTD

AUD HKD

USD

May 27, 2013

Opinion

Explaining Apple’s Irish tax dodge Jonathan Weil

Bloomberg View columnist

Tim Cook, Apple’s chief executive

he outrageous part about Apple (AAPL) Inc.’s audacious tax strategies isn’t whether they are legal. They may well be. More upsetting are the ruses and contrivances that Apple used to pull them off. Consider an Apple subsidiary called Apple Operations International, which was spotlighted at a U.S. Senate hearing this week. Its net income accounted for 30 percent of Apple’s worldwide profit from 2009 to 2011. Apple Operations is incorporated in Ireland. It is managed and controlled in the U.S. Yet Apple says the unit isn’t a resident of either country – or any country. So it paid no corporate-income taxes. The structure is a farce, regardless of whether there’s a loophole that may have been threaded. The Internal Revenue Service has the authority to label it a sham and attribute the income to the parent company, according to a Senate investigative report released at last week’s hearing. However, the IRS has been hesitant to use its power this way out of concern it would lose in the courts, which have tended not to take action against foreign shell corporations. The tax code isn’t working, and so far authorities haven’t tried to fix it. What Apple did was legitimate, you might say. Apple has a duty to maximise returns for shareholders. Tax

planning is part of that. Except, this smacks of abuse. When I watched Apple executives testify on May 21 before the Senate Permanent Subcommittee on Investigations, it was with sadness. Here we had the top people from one of the country’s greatest, most-beloved companies. They didn’t dispute the facts set forth by the panel’s leaders – Democratic Senator Carl Levin of Michigan and Republican Senator John McCain of Arizona – only some of their characterisations.

I don’t want to imagine them as scheming to invent and maintain specious legal fictions to reduce the company’s tax bill while government budget deficits balloon. Yet the tax code begs companies to connive and dissemble to lower their payments. Take another example that the senators pointed to: Apple,

Tax avoidance Apple avoided US$9 billion in U.S. taxes in 2012 through one chink in the tax code alone, the panel’s report said. Timothy Cook, Apple’s chief executive officer, explained that the company paid US$6 billion in U.S. taxes, which was beside the point. He objected to the senators’ use of the words “gimmicks” and “shifting” (as in shifting profits to tax havens), but not the panel’s findings, most of which came from information that Apple provided itself. “We pay all the taxes we owe, every single dollar,” Cook said. “We don’t stash money on some Caribbean island.” That’s true, of course. Apple used a different island tax haven – Ireland. This isn’t how I want to think of Apple’s executives.

The tax code isn’t working, and so far authorities haven’t tried to fix it

as do many other multinational companies, uses a technique called transfer pricing. This lets it move income away from the U.S. to Ireland, where it has negotiated a 2 percent tax rate with the country’s government.

When Apple transfers intellectual-property rights to an Irish unit, it uses a so-called cost-sharing agreement. None of the transactions under the agreement is done at arm’s length. All the money going back and forth belongs to Apple. The rules say companies are supposed to be honest about the numbers they assign to these transactions between subsidiaries. But the tax authorities have a hard time challenging them because there are rarely correct answers when it comes to valuing intellectual property or allocating research-and-development costs. So companies can get away with pretty much anything, making it easy to move profits to low-tax countries while recording costs in high-tax jurisdictions.

Income shifting The Senate report said Apple shifted US$74 billion in income to Ireland from the U.S. through its cost-sharing agreement from 2009 to 2012. This helps explain why US$102 billion of Apple’s US$145 billion of cash and marketable securities was assigned to offshore subsidiaries, as of March 30. Even that comes with a twist: Most of the “offshore” funds are kept at U.S. banks. Beyond the questions of tax fairness, or how best to simplify and reduce rates, we

should ask ourselves: Is this the kind of culture that our laws should be fostering? The people running Apple – whose board includes former U.S. Vice President Al Gore – aren’t being dodgy for tax purposes because they are evil. The law encourages them to behave this way, which leads to other uncomfortable questions. If a company’s managers are willing to devise bizarre structures and stratagems to reduce corporate taxes, would they resort to creative accounting to boost the earnings they show investors on their financial statements? What other sorts of liberties might they be willing to take? Where does it stop? Levin and McCain deserve credit. Rarely does the public get a deep-dive report like the one they just released. They made several concrete recommendations, including strengthening the tax-code section on transfer pricing and using the IRS’s current authority to disqualify sham entities. It’s easy to be jaded, though. The IRS is in constant turmoil, most recently over singling out Tea Party groups for extra scrutiny. It’s doubtful that Congress will respond. Congress is the main reason the tax code is a mess. At least the public is better informed about how corporate taxes work. We should take progress where we can get it. Bloomberg View

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

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May 27, 2013

Opinion Business

wires

Europe’s lost Keynesians

Leading reports from Asia’s best business newspapers Kenneth Rogoff

Asahi Shimbun

Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

All Nippon Airways Co. said it will resume operations of its 787 Dreamliners ahead of schedule, but for special domestic flights only, later this month. ANA, Boeing Co.’s biggest customer for the aircraft, had planned to get its Dreamliners back into the skies from June 1 after battery concerns grounded the fleet in January. The airline decided to offer flights earlier to allay public concerns about the aircraft’s safety. The flight will connect Tokyo’s Haneda Airport with Sapporo between May 26 and 31.

Euro zone leaders must stop dreaming that the single currency can survive another 20 or 30 years without much greater political union

Korea Herald South Korean tax authorities are gearing up for a full-scale probe into those holding offshore accounts via paper companies created in tax havens. They will probe accounts held by notable family members connected to family-run conglomerates such as Korean Air, OCI and Hyosung. The Korea Centre for Investigative Journalism unveiled the number of Koreans – 245 – who held tax haven accounts via ghost companies, but not the characteristics of their operations. The National Tax Service said it will examine the feasibility of the data now disclosed.

Jakarta Globe Indonesia’s government has proposed a 23.5 percent increase in subsidy spending for electricity to 99.97 trillion rupiah (US$10.2 billion) in the draft revision of the 2013 state budget, which is pending approval from lawmakers. “The [original] 2013 state budget did not include the 2012 subsidy bill. However, the BPK [Supreme Audit Agency] said after an audit that the bill should be paid this year, thus the rising electricity subsidy spending,” Jarman, director general for electricity at the Ministry of Energy and Mineral Resources, said.

Wall Street Journal India’s government is looking at reducing airport fees at smaller airports in a bid to boost its flagging domestic aviation industry. Authorities are planning to soon reduce charges to land and park planes at 80 smaller destinations across the country to give airlines more incentive to fly there, Civil Aviation Minister Ajit Singh said in an interview. This pilot project, which will target existing airports and disused airstrips, could then be rolled out across more smaller airports, Mr Singh said. “The aim is to make these airports almost cost-free for smaller planes,” he added.

here is no magic Keynesian bullet for the euro zone’s woes. But the spectacularly muddleheaded argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the “anti-austerity” masses apparently believe that there are easy cyclical solutions to tough structural problems. The euro zone’s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union. This is not a problem with which Keynes was familiar, much less one that he sought to address. Above all, any realistic strategy for dealing with the euro zone crisis must involve massive write-downs (forgiveness) of peripheral countries’ debt. These countries’ massive combined bank and government debt – the distinction everywhere in Europe has become blurred – makes rapid sustained growth a dream. This is hardly the first time I have stressed the need for wholesale debt writedowns. Two years ago, in a commentary called “The Euro’s Pig-Headed Masters,” I wrote that “Europe is in constitutional crisis. No one seems to have the power to impose a sensible resolution of its peripheral countries’ debt crisis. Instead of restructuring the manifestly unsustainable debt burdens of Portugal, Ireland, and Greece (the PIGs), politicians and policymakers are pushing for ever-larger bailout packages with ever-less realistic austerity conditions.” My sometime co-author Carmen Reinhart makes the same point, perhaps even more clearly. In a May 2010 Washington Post editorial (co-authored with Vincent Reinhart), she described “Five Myths About the European Debt Crisis” – among them, “Myth #3: Fiscal austerity will

solve Europe’s debt woes.” We have repeated the mantra dozens of times in various settings, as any fair observer would confirm.

French anchor In a debt restructuring, the northern euro zone countries (including France) will see hundreds of billions of euros go up in smoke. Northern taxpayers will be forced to inject massive amounts of capital into banks, even if the authorities impose significant losses on banks’ large and wholesale creditors, as well they should. These hundreds of billions of euros are already lost, and the game of pretending otherwise cannot continue indefinitely. A gentler way to achieve some modest reduction in public and private debt burdens would be to commit to a period of sustained but moderate inflation, as I recommended in December 2008 in a commentary entitled “Inflation is Now the Lesser Evil”. Sustained moderate inflation would help to bring down the real value of real estate more quickly, and potentially make it easier for German wages to rise faster than those in peripheral countries. It would have been a great idea four and a half years ago. It remains a good idea today. What else needs to happen? The other steps involve economic restructuring at the national level and political integration of the euro zone. In another commentary, “A Centerless Euro Cannot Hold,” I concluded that “without further profound political and economic integration – which may not end up including all current euro zone members – the euro may not make it even to the end of this decade.” Here, all eyes may be on Germany, but today it is really France that will play the central role in deciding the euro’s fate. Germany cannot carry the euro on its shoulders alone indefinitely. France needs to

become a second anchor of growth and stability.

No safe path Temporary Keynesian demand measures may help to sustain short-run internal growth, but they will not solve France’s long-run competitiveness problems. At the same time, France and Germany must both come to terms with an approach that leads to far greater political union within a couple of decades. Otherwise, the coming banking union and fiscal transfers will lack the necessary political legitimacy. As my colleague Jeffrey Frankel has remarked, for more than 20 years, Germany’s elites have insisted that the euro zone will not be a transfer union. But, in the end, ordinary Germans have been proved right, and the elites have been proved wrong. Indeed, if the euro zone is to survive, the northern countries will have to continue to help the periphery with new loans until access to private markets is restored. So, given that Germany will be picking up many more bills (regardless of whether the euro zone survives), how can it best use the strength of its balance sheet to alleviate Europe’s growth problems? Certainly, Germany must continue to acquiesce in an ever-larger role for the European

Central Bank, despite the obvious implicit fiscal risks. There is no safe path forward. There are a number or schemes floating around for leveraging Germany’s lower borrowing costs to help its partner countries, beyond simply expanding the ECB’s balance sheet. For meaningful burdensharing to work, however, euro zone leaders must stop dreaming that the single currency can survive another 20 or 30 years without much greater political union. Debt write-downs and guarantees will inevitably bloat Germany’s government debt, as the authorities are forced to bail out German banks (and probably some neighbouring countries’ banks). But the sooner the underlying reality is made transparent and becomes widely recognised, the lower the long-run cost will be. To my mind, using Germany’s balance sheet to help its neighbours directly is far more likely to work than is the presumed “trickle-down” effect of a German-led fiscal expansion. This, unfortunately, is what has been lost in the debate about Europe of late: However loud and aggressive the anti-austerity movement becomes, there still will be no simple Keynesian cure for the single currency’s debt and growth woes. © Project Syndicate

May 27, 2013

Closing Macau hit by acid rain in 2012

Germany reports sluggish growth

Macau experienced 73 days of acid rain last year, with the pH value of rainwater lower than 5.6, according to the latest environmental report from the Statistics and Census Service. The monitoring stations at Northern District and Big Taipa Hill recorded 251 days and 255 days where air quality was considered “good”, but that was down by 13.8 and 11.6 percentage points respectively yearon-year. Since the release of data on fine suspended particles, smaller than 2.5 micrometres, in July 2012, a total of 32 days were recorded where the observed value was higher than the reference standard.

Germany’s economy barely grew in the first quarter of 2013 as exports and investment shrank, figures show. But higher domestic consumption, thanks to rising wages, helped offset the declines in foreign trade and capital investment, raising hopes it will help drive a sustained recovery. Gross domestic product rose 0.1 percent from the previous quarter, but contracted 1.4 percent compared with a year earlier. The figure showed the economy narrowly avoided falling into a recession. In the previous quarter, Germany’s annual economic output shrank by 0.7 percent. Imports fell by 2.1 percent and exports dropped 1.8 percent.

Japan’s Abe offers Myanmar aid, investment Loans offered to build and refurbish the country’s infrastructure

apan agreed to grant Myanmar 51 billion yen (US$503 million) of development loans yesterday, the Ministry of Foreign Affairs said in a statement. The agreement comes as Prime Minister Shinzo Abe visits the South Asian nation, meeting with President Thein Sein, whose moves to allow more political freedom and open the economy after five decades of military rule have helped end decades of international isolation. The loans will be used to build and refurbish infrastructure such as roads, electricity and water supply as Myanmar’s government seeks to reduce poverty. They carry 0.01 percent interest and are repayable in 40 years, including a 10-year grace period, according to the statement. Myanmar’s gross domestic product may grow 6.75 percent this fiscal year, led by natural gas sales and investment as it modernises its financial system, the International Monetary Fund said on Thursday. Natural gas is Myanmar’s most important source of export earnings, according to the Asian Development Bank.

Japan’s prime minister agreed on development loans

Japan will also clear Myanmar from overdue charges of about 189 billion yen from earlier debt after monitoring the nation’s reform efforts, according to a government press release. Japan agreed to a separate 40 billion yen of direct aid to the nation, Kyodo News reported earlier yesterday.

Japan decided to provide new yen loans and grant assistance in support of Myanmar’s development, according to a joint statement by Mr Abe and President Thein Sein. The two leaders agreed to build a lasting, friendly and cooperative relationship, the statement said.

Europe’s youth jobless tally at ‘unimaginable’ level: Merkel Euro zone’s youth unemployment rose in March to 24 percent

erman Chancellor Angela Merkel said the tally of unemployed youth in Europe has climbed to an “unimaginable” level that requires urgent action, including spending trade bloc cash effectively to create jobs. Addressing a congress of her Christian Democrats in the city of Muenster, Mrs Merkel said Germany is co-leading efforts with partners to assess how best to spend 6 billion euros ($7.7 billion) in European Union allocations after youth unemployment grew more than 50 percent in several countries. “We have to act quickly,” she said. “We’re not a poor continent and must succeed in making headway.” EU labour ministers due to meet in Berlin on July 3 won’t discuss an increase to the 6 billion euros allocated to battle the

problem, Mrs Merkel said yesterday. Youth unemployment – defined as youngsters below 25 without work – rose in March to 24 percent in the single currency area, according to Eurostat. The average masks rates of 56 percent in Spain and 38 percent in Portugal. Germany, which has the lowest youth joblessness rate in Europe, has been criticised for imposing tough austerity measures on the south of the eurozone. Wolfgang Schaeuble, the finance minister, and Ursula von der Leyen, the labour minister, will unveil the “New Deal for Europe” alongside their French counterparts in Paris tomorrow. Job seekers will be encouraged to move around the continent in search of opportunity. German officials say

Myanmar’s annual pay burden for a worker in manufacturing totalled US$1,100 per year, less than half the cost in Vietnam and a sixth that of Thailand, according to a Jetro survey published in December. Japanese companies are looking to diversify manufacturing operations following recent wage increases in Thailand, Malaysia and Indonesia, and a territorial dispute with China that soured ties between Asia’s biggest economies. Suzuki Motor Corp. got permission from Myanmar in February to form a manufacturing subsidiary to make small trucks beginning this month. Sumitomo and NEC Corp last week signed a contract to help improve the country’s communications network. Mitsui & Co. in March said it would import 5,000 metric tons of rice from Myanmar, its first purchase in more than four decades. The trading company may invest 15 billion yen to build three ricemilling plants in Myanmar capable of processing 300,000 tons a year for the Middle East and Africa, a Mitsui spokeswoman said in March. Mr Abe on Saturday met opposition leader Aung San Suu Kyi, and his itinerary during the threeday visit included a visit to the port and industrial estate at Thilawa, 25 kilometres (16 miles) south of Yangon, Myanmar’s biggest city. Mitsubishi Corp, Marubeni Corp and Sumitomo Corp are helping to develop the port, part of which is set to open as early as 2015. Bloomberg News

Pain from bond yield rise manageable, says Kuroda

the plans will include funding for flights and language courses. Other countries will be urged to emulate the successful German apprenticeship model, while thousands of young people from crisis-hit countries are expected to take up apprenticeship places in Germany over the next few years. Mrs Merkel had said previously that the European Union should finance early retirement schemes as a way of combating high youth unemployment. Mrs Merkel said: “Wouldn’t it be better to do what we did in Germany, and have an early retirement scheme for a few years?” German officials say the initiative will be targeted first at countries with the highest levels of youth unemployment.

ank of Japan Governor Haruhiko Kuroda said the country’s financial institutions have sufficient buffers against losses they may incur from rises in bond yields, as long as the market moves are driven by prospects of an economic recovery. The central bank will also be vigilant to any signs of overheating of asset prices or excessive risk-taking by financial institutions, the BOJ chief said, adding that there were no signs of that now. The central bank’s huge bond purchases have jolted bond markets and sent the 10-year yield to its highest in a year last week, casting a cloud over the effectiveness of its easing that attempts to push down borrowing costs.

Reuters