Macau Business Daily, May 9, 2013 by Business Daily

Govt queries Sands over Four Seasons ‘sales’ reports

Lack of valuation experts dooms land premium reform Page 3

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MGTO blames landowner for budget hotel delay Page 6

Homebuyers struggling to make down payment Y

oung couples are being asked to pay up to HK$4 million (US$500,000) for a studio flat in Macau’s supply-constrained market. Prices are now so inflated that it makes the government’s guidelines on home lending – whereby 30 percent of the purchase price should be made via a down payment – hard to meet. Telok Real Estate Partners, which is marketing 160 studio apartments in the Mong Há Hill area, has had to introduce a 20 percent down payment plan to help purchasers of starter homes. Even though this plan involved paying an extra three percent interest on the rest of the money loaned for the purchase, “one out of four” buyers of Telok’s Cerese development chose it, a company executive revealed. More on page 6

www.macaubusinessdaily.com

Year II

Number 279

Thursday May 9, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Air Macau limited by small jets, soft demand It will be years before Air Macau Co. Ltd can fly to longhaul destinations, a company executive said yesterday. Air Macau’s plans for route expansion are constrained by its fleet of small Airbus aircraft with a maximum fivehour flying range admitted Air Macau vice-president Yang Jianhua. The airline needs “perhaps two years” before it is ready to open routes to Russia and India, Mr Yang stated.

I SSN 2226-8294

Hang Seng Index 23250

23234

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23202

Page 2 23186

23170

May 8

HSI - Movers Name

‘Regrets’ at Alfastreet absence from G2E Asia

Melco Crown first quarter net income down 56 pct

Alfastreet Gaming Instruments – a maker of electronic casino games that has decided to boycott this year’s Global Gaming Expo Asia trade show in Macau – tells Business Daily it will hold its own event in Malaysia in June for regional customers. “Our special event is still being organised and the plan is for it to happen in June,” Albert Radman, Alfastreet’s sales director for Asia told us.

Melco Crown Entertainment Ltd’s net income fell by 56 percent in the first quarter. On a U.S. GAAP (generally accepted accounting principles) basis, it was US$53.8 million compared with US$122.1 million in the first quarter of 2012. The firm said the year-on-year decrease in net income was primarily attributable to refinancing of the company’s 10.25 percent senior notes and costs resulting from Studio City’s financing.

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%Day

CHINA LIFE INS-H

3.24

PETROCHINA CO-H

2.91

CATHAY PAC AIR

2.87

CHINA MERCHANT

2.67

LI & FUNG LTD

2.20

TINGYI HLDG CO

-0.50

HONG KONG EXCHNG

-1.10

HANG LUNG PROPER

-1.30

WANT WANT CHINA

-1.31

ESPRIT HLDGS

-4.77

Source: Bloomberg

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May 9, 2013

Macau opinion

Smoke and mirrors

For now, Air Macau finds wings clipped New long-haul routes are planned but weak demand and smaller aircraft are limiting expansion Tony Lai tony.lai@macaubusinessdaily.com

José I. Duarte Economist

o the mystery is over. The wait is about to end, and the cheque will be in the post shortly. The money showered on us under the “wealth partaking scheme” will be pelting down from early July onwards. After months of delay and silence – it seems to involve undisclosed, delicate, complex calculation and distribution issues – the news is out. White smoke is espied at last, just in time for the summer holidays, albeit too late for the Lunar New Year gambling rite. A half-baked measure – which took long to find a half-serious justification, and which the chief executive promised at one stage would be temporary – drags on and on, and becomes a mandatory happening in the political calendar. It will, in time, become a classic in political studies. And yet it is as old as the world: when people get used to getting one sweet without sweating for it, sooner or later they will want two, and then three. And before we realise it will take a chocolate to buy them off. In slightly more demanding environments in terms of public policymaking, this scheme would hardly have survived the first attempts to put in place. Its rationale is poor. To start with, it was not clear, even to the government, what it was meant to achieve, other than perhaps silencing critical voices. First, we were told, it was to fight inflation, which is pure economic nonsense. Then it was to help people cope with inflation. That, again, amounted to no more than another half-baked reason. Then it was to share wealth. It is not a very efficient or, some would say, fair way of doing so. But this provided at least a fig leaf to hide the absence of any real social policy. And here we are still. There was not even an attempt to develop, a posteriori, a serious rationale or to adapt the measure to sounder foundations.

Arbitrary choices Its only clear objective is so general that it means nothing. What do we actually mean by “wealth partaking”? How much wealth should we be partaking of? What are the principles, the criteria or the concrete aims to be achieved through partaking of it? No one is, in general, against sharing wealth fairly. The trouble is always about getting to a consensus on what that actually means and how to achieve it in practice. This scheme does not deal with the nuts and bolts of real policy matters or the hard choices they entail. It just avoids them. The amounts and the timing are purely arbitrary. There is no effort to consider other options, perhaps more appropriate or efficient, for achieving the same objectives of “wealth partaking”, should we be able to reach a consensus on them. It is all about expediency, not policy. Having said all that, we could at least expect the government to be monitoring and evaluating its execution and effects. But it has done no such thing. We are informed, without a hint of embarrassment, that “there is no monitoring mechanism” and the government “believes people will use the money well”. As there was no trouble taken to assess the likely effects of the measure in advance, so there is not a shred of an attempt to understand its actual consequences. It is all a matter of faith. We should feel reassured, it seems. That such a badly concocted measure came to be and may become all but irreversible is sad testament to how dysfunctional our political system has become. But time wears out the feelings, real or otherwise, of the players faster than it moderates their demands. When the people’s love and trust (or at least, quiescence) comes with a price tag, the longer that state of affairs lasts, the more just keeping things as they are will require increasing amounts of hard cash. The trouble is that popularity built exclusively or mostly on money largesse breeds a sense of entitlement. That is the paradox of populist measures. They buy compliance today at the price of increasingly unmanageable demands tomorrow. But we are not there yet, and no one seems to care. And now you can ask: in the absence of ideas or projects capable of furthering the pursuit of a vision, a dream, a worthy collective purpose, why should people relinquish it without a murmur? Well… Enjoy your cheque!

Air Macau’s expansion plans are limited by a fleet of smaller Airbus aircraft models with a maximum five-hour range

imited by its fleet of small jets and soft demand, it will be years before Air Macau Co Ltd is geared up to fly to long-haul destinations. “This year we still have plans to further boost our flying capacity in Asia but we now do not have the conditions to fly long haul,” Air Macau vice-president Yang Jianhua. “We do not have enough aircraft to afford starting long-haul flights.” The airline’s fleet, including smaller single-aisle Airbus models, cannot fly for more than five hours or carry more than 180 passengers, Mr Yang told reporters after the airline announced a code-sharing arrangement with Shenzhen Airlines Co Ltd yesterday. Bigger models such as the 335-passenger-capacity Airbus A330 are needed on flights lasting eight hours or more, Mr Yang said. In a statement released last week, Macau International Airport Co Ltd asked the government to offer financial support to airlines that wanted to launch long-haul routes. The airport operator said the development of longer routes was “lagging behind and worsening”. Yesterday, Mr Yang said market demand would largely determine the launch of any new flights. “Starting a new route surely requires support from many parties and also a market that can fully support [the operation],” he said.

“If not… this will lead to a heavy loss.” The airline needs “perhaps two years” before it is ready to open routes to Russia and India, Mr Yang said. Both countries are singled out by the Macau Government Tourist Office as new sources of arrivals. Air Macau plans to buy two new Airbus A321 aircraft within two years. The aircraft can carry up to 180 passengers and is similar to aircraft it already flies. Each will cost at least US$56 million (448 million patacas). Passenger volume on international routes fell by 5 percent over the past two months, hurt by the H7N9 bird influenza outbreak, Mr Yang said. “Passengers from South Korea, Japan and Taiwan are worried about the H7N9 virus… affecting their willingness to visit here,” he said. He said the ‘flu had “not much impact” on routes to Eastern China. The airline was performing better this year compared to 12 months ago. Air Macau chairman Zheng Yan made contradictory comments last week. Mr Zheng said mainland routes were feeling the pitch from both the virus and Beijing’s anti-corruption efforts, and that was particularly the case last month. Air Macau’s annual profit rose by 11.4 percent last year to 279.8 million patacas (US$35 million), setting a record.

A stronger regional role looms The city’s airport should become a transit hub for mainland passengers instead of competing directly against other Pearl River Delta airports, an official at Shenzhen Airlines Co Ltd suggested yesterday. “The airports of Shenzhen, Guangzhou, Hong Kong and Macau… should have their own position and appeal,” said the director of Shenzhen Airlines’ passenger marketing centre, Zhang Yu. “Hong Kong [airport] is more internationalised, while the Macau one… can tend to serve as a transit hub for mainlanders to visit Taiwan and Southeast Asian countries.” He told reporters yesterday there was “much room for growth” in mainland tourism here, particularly for arrivals under the individual tourist scheme. Shenzhen Airlines has announced a code-share agreement with Air Macau Co Ltd on routes to Jinjiang in Fujian and Wuxi in Jiangsu. The agreement should lead to improved convenience for passengers and ticket sales. T.L.

May 9, 2013

Macau

Govt queries Sands over Four Seasons sales plan Operator is reportedly looking to sell serviced apartments via timeshare Stephanie Lai sw.lai@macaubusinessdaily.com

LVS trying to sell its Four Seasons serviced flats since 2007

Poor qualifications hold back city from cashing in on land Hong Kong’s system for creating land premiums could be a model for Macau, if it had the talent

he government has sent a letter to Venetian Macau SA, the local unit of Sands China Ltd, after Hong Kong media reported last month the company is looking to sell its Four Seasons’ serviced apartments via timeshare. Lau Si Io, Secretary for Land, Transport and Public Works mentioned the letter when speaking to media yesterday after a meeting of the Legislative Assembly’s first standing committee. Jaime Carion, the director of the Land, Public Works and Transport Bureau, was also present. Mr Carion said that, “according to the land grant contract, any transfer [of ownership] needs the approval from the MSAR administration”. “We have already sent the company a letter asking them to explain to us what the whole thing is about,” he added. “They did not contact us on timeshare sales of serviced apartments before, and we have not received any prior information on it except media reports,” Mr Carion stressed. “There is absolutely no basis to the information in the news reports,” Sands China said in a statement. “The company considers these reports to be intentionally false and is seeking legal advice accordingly,” the company added. The value of each of the luxury serviced apartments at Four Seasons – occupying a total of over 7,000 square feet per unit on average – could top HK$130 million (US$16.75 million),

Hong Kong media said, quoting property sources. Union Gaming Research Macau said in a report in June last year that the sale of title to the Four Seasons apartments could realise as much as US$900 million net of development costs and pre-tax.

Veto power Asked by media yesterday if timeshare sales of the hotel’s serviced apartments would contravene the land grant provisions, Mr Carion said: “Any transferral [of ownership] needs our approval”. “We will have our legal team to study the matter,” he added. The official admitted that the current land law does not prohibit the sales or transfer of serviced apartments at the Four Season resort. The assembly’s first standing committee is currently discussing a legal change whereby any land concessionaire experiencing a more than 50 percent change of ownership would be deemed to have transferred the Macau land it holds to new ownership. That would need government permission. The change would close an existing loophole that allows the transfer of public land plots without requiring the government approval. However, Mr Carion stressed in relation to Sands China: “if we found the transfer contravening the land grant contract, or the spirit of the land grant, the government has the right not to approve the sales”. Venetian Macau, SA – now a unit of Sands China – announced publicly in 2007 that the firm planned to sell serviced apartments at the luxury resort to buyers who could use them as holiday homes. The company planned to sell the flats through a cooperative scheme, thus avoiding restrictions that ban concessionaires from selling flats in an area earmarked for gaming and entertainment. Under a cooperative or ‘co-op’ scheme, buyers hold shares in a legal entity that controls the property. The deal was however never authorised by the government.

Stephanie Lai sw.lai@macaubusinessdaily.com

ithout a system of professional qualifications for land and property valuers, Macau cannot learn from Hong Kong’s land premium scheme, according to members of the Legislative Assembly. The assembly’s first standing committee met yesterday to discuss revisions to the land law. The current proposal before the committee would factor into the calculation of land premiums the previous prices at auction, as well as the block’s location, land use and inflation. Committee president Kwan Tsui Hang said its members were more “inclined to agree that Hong Kong’s policy on setting a land premium is worth taking reference”. The government there holds an official valuation conference to set land premiums for any given block. An appeals mechanism is available to corporates if they disagree with the government-set premium. “We think that Hong Kong’s valuation system in setting a premium has strong credibility,” Ms Kwan told reporters after a closed-door meeting with government representatives. “But Hong Kong has a long history

of developing a qualification system for valuation professionals.” The city may not be “mature enough to copy the Hong Kong format”, she said. When calculating land premiums the Macau government relies on official property transactions statistics, private valuation companies and the property sector’s views. The government is aware of criticism that its formula to calculate land premiums might lag behind swift changes in the open market. “But at least we have better statistical data to support a more accurate calculation in recent years, which helped a lot in getting the land premium level closer to the market trends,” Ms Kwan said. The formula for calculating land premiums was last adjusted in 2011. It is due to be tweaked again this year, although the government has not set a date. The formula has been adjusted every three years since the handover in 1999. Government officials have said they would shorten the interval between formula revisions, committee members have told Business Daily.

Firms, investors rush in for Hengqin swoop L

ocal investors have put forward about 50 investment projects for Hengqin Island since 2011, the Macau Trade and Investment Promotion Institute announced. In December 2011 the institute opened an office to advise Macau individuals and firms interested in investing in the island, in cooperation with the Administrative Committee of Hengqin New Area. Up to Tuesday, 214 people or companies had asked for information on how to open a business in the 5-square kilometre Guangdong-Macau Cooperation Industrial Park, the institute said in a statement. But only 50 took their interest further, presenting projects on Chinese traditional medicine, creative industries, tourism, education, retail, hospitality, entertainment, conventions and exhibitions and social services. The committee in charge of assessing those projects was created last month and met for the first time on Monday. The investments must fit Macau’s “adequate economic diversification,” as well as have “sustainability and scale to allow the joint involvement of local SMEs [small and medium enterprises],” the institute said. The committee includes Jackson Chang, head of the institute, Kou Hoi In, president of the Macau Chamber of Commerce, and António Chui Iok Lam, head of the Industrial Association of Macau.

May 9, 2013

Macau

‘Regrets’ at Alfastreet’s absence from G2E Asia Casino game maker says accepts realities of LT Game patents in Macau Vítor Quintã and Michael Grimes newsdesk@macaubusinessdaily.com

lfastreet Gaming Instruments – a maker of electronic casino games that decided to boycott this year’s Global Gaming Expo Asia trade show in Macau – tells Business Daily it will hold its own event in Malaysia in June for regional customers. “Our special event is still being organised and the plan is for it to happen in June,” Albert Radman, Alfastreet’s sales director for Asia told us. Alfastreet chose to stay away from the Macau show held later this month because under the local interpretation of a Macau patent issued to local manufacturer LT Game Ltd, Alfastreet would not be able to display its own multi-game electronic tables. Although LT Game’s patent has been challenged here by another manufacturer – Nevada-based SHFL entertainment Inc. via its local subsidiary – that court action is still pending. For the first full day of last year’s G2E Asia show, SHFL was ordered by Macau customs to keep its Rapid Baccarat product covered because of a temporary injunction

obtained by LT Game from a Macau court. SHFL succeeded in getting a stay on the order the following day. Alfastreet says it is keeping away from G2E Asia this year because it recognises the realities of the current situation. “We have no dispute with LT. Even if the patent is unjust and could be disputed at any point, we do recognise their ability to obtain it. We are not going to move our products into the ‘patented’ area,” stated Mr Radman. He added: “We will remain absent from G2E [Asia] solely because of the fact that we cannot show our products at this international show – even with no intent to breach anybody’s legal right or patents. Our perception is that a show like G2E Asia should be a way to present our products to the visitors from any part of the world.”

‘Respect’ decision See Lay Eng, assistant vice president of Reed Exhibitions, one of the co-organisers of G2E Asia, said the company “respected” Alfastreet’s decision.

“Alfastreet is an extremely valued customer of G2E and we were obviously disappointed by their decision not to join us in Macau this year. That said we respect their position and hope to bring them back for future G2E Asia instalments,” she stated. “They will be missed, but this year’s G2E Asia event is the largest in recent years offering an extensive array of world-class suppliers who will be showcasing the industry’s latest products and technologies,” added the show executive. Asked whether Reed Exhibitions had discussed with LT Game its position on local enforcement of its patents at this year’s show, the Reed executive said: “LT Game has been supportive of our efforts to produce a productive event absent of conflict, and we appreciate their cooperation. We will continue to work closely on this matter to ensure an even playing field during the days of our events while in turn remaining compliant with local laws.” G2E Asia will be held at CotaiExpo at The Venetian Macao from May 21 to 23.

Up to HK$5.3 bln ‘connected person’ deal for Louis XIII HK-listed casino developer also plans share consolidation to raise list price Michael Grimes michael.grimes@macaubusinessdaily.com

Boutique casino planned for land near One Oasis (Photo: Manuel Cardoso)

subsidiary of a listed company that is developing a boutique casino on the Cotai-Coloane border plans to do a deal worth up to HK$5.3 billion (US$683 million) with an investor in the same casino project. But the ‘connected person’ deal is “fair and reasonable so far as the independent shareholders are concerned,” says a Hong Kong-based independent financial advisor. Under the deal PYE Group – a 51 percent owned unit of Louis XIII Holdings Ltd – will provide business services to ITC Properties Holdings Group – an indirect 11.22 percent owner in Louis XIII – under a threeyear arrangement due to expire in April 2016. Until late February Louis XIII Holdings was known as Paul Y. Engineering Group Ltd. On February 5, Paul Y. Engineering Group announced it had raised HK$3.2 billion on the Hong Kong Stock Exchange toward the US$800 million (6.39 billion patacas) cost of the casino scheme. It will be known as Casino Louis

Jay Chun U.S.lodged patents to raise HK$740 mln Paradise Entertainment Ltd – controller of the LT Game brand – says Jay Chun, a 10.14 percent shareholder, is to sell electronic game patents lodged in the United States to Solution Champion Ltd, a British Virgin Islands firm, for HK$740 million (US$95.4 million). The proposed deal – confirmed in a regulatory filing in Hong Kong yesterday – involves HK$60 million in cash from the purchaser, HK$200 million in a promissory note, and HK$480 million by the issuing and allotment of consideration shares to the vendor. The deal must be approved at a special general meeting of Paradise Entertainment on June 3, 2013.

A recent edition of G2E Asia in Macau (Photo: Carmo Correia)

XIII and is expected to open in late 2015 or early 2016 according to Stephen Hung – Louis XIII Holdings’ chairman – in comments to Chinese media in Hong Kong in early April. Casino Louis XIII is expected to operate on the licence of an existing Macau casino concessionaire or subconcessionaire under what’s known in Macau as a ‘service agreement’. Mr Hung said last month it was “not convenient to reveal at the moment” which operator would supply the gaming licence. An independent advisor – RHB OSK Capital Hong Kong Ltd – in a letter filed with the Hong Kong exchange yesterday cites several reasons for recommending the ‘connected person’ deal. They include the fact that any payments to Paul Y. Engineering (BVI) Ltd would be capped at HK$5.3 billion over the course of the agreement. The advisor adds: “The PYE Group does not and would not provide preferential pricing to ITC Properties Holdings Group in respect of the services, and the pricing is determined based on normal commercial terms and similar to those comparable services provided by the Group to independent third parties.” Yesterday’s filing also says Louis XIII Holdings plans a share consolidation to increase the nominal value of its shares. “…this may remove the constraint and/or restriction of financial institutions on investing in a company with a trading price of less than HK$1.00 per share,” says the filing. Shareholders of Louis XIII Holdings at a special general meeting in Hong Kong on May 24 must approve all the changes.

May 9, 2013

Macau

Melco Crown Q1 net income down 56 pct Due to one-off costs linked to paying off debt and refinancing Michael Grimes

michael.grimes@macaubusinessdaily.com

Lawrence Ho – EBITDA margins up 150 basis points

elco Crown Entertainment Ltd’s net income fell by 56 percent in the first quarter. On a U.S. GAAP (generally accepted accounting principles) basis, it was US$53.8 million

(430 million patacas), or US$0.10 per American depository share, compared with US$122.1 million, or US$0.22 per ADS, in the first quarter of 2012. The firm said the year-on-

Corporate Sands Rewards Club adding 200 outlets Casino operator Sands China Ltd has extended its player rewards programme beyond the gaming floor. Sands Rewards Club points can now be earned via purchases at more than 200 outlets at its four Macau properties, Sands Macao, The Venetian Macao, The Plaza Macao and Sands Cotai Central. “Every type of visitor – from those looking for gaming floor excitement to shoppers and diners – can now take advantage of Sands Rewards Club to earn points and redeem benefits across Cotai Strip Resorts and Sands Macao,” said the company in a statement. Points are earned at a rate of three per cent of total spending in participating outlets, rounded down to the nearest whole number. For example, a member spending HK$110 (US$14.17) or 110 patacas would earn three points. Each point earned is worth one pataca when redeemed in participating outlets. Sands China also recently branded its three Cotai venues as Cotai Strip Resorts.

iV8 bill validator at G2E Asia JCM Global – a Japanese company specialising in cash handling technology – will be displaying products including its iVIZION bill validator during the Global Gaming Expo Asia trade show in Macau from May 21 to 23. The most common use of bill validators on Macau casino floors is for slot machines. But bill validators also play a role in table games. Asian casinos typically handle larger-size table games bets and higher volumes of cash for buy-ins at the table than do Western ones. Premium mass play with minimum bets of HK$2,000-plus (US$250-plus) has added to the volumes. Having the dealers count large amounts of cash at the table isn’t ideal for players or the house, as it slows the game speed. JCM now has technology that incorporates its bill validation technology at tableside. Its iV8 table game bill validator, “can instantly and dramatically increase the number of games played per hour”, says the firm.

year decrease in net income was primarily attributable to one-off charges relating to the paying off of existing debt and refinancing of the company’s 10.25 percent senior notes. It was also due to increased net interest expenses and other finance costs resulting from Studio City’s financing, “partially offset by strong growth in underlying operating performance”. First quarter net revenues rose 11 percent year-on-year to US$1.14 billion. The company said that increase was primarily attributable to higher group-wide rolling chip volumes and mass market gross gaming revenues, partially offset by a lower groupwide rolling chip win rate. Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) amounted to US$273.5 million for the first quarter – a 13 percent gain on the US$242.5 million adjusted EBITDA achieved in the first quarter of 2012.

Altira Macau located on Taipa and originally conceived as a VIP-focused property, saw its adjusted EBITDA fall 27 percent to US$40.1 million in the first quarter, compared with adjusted EBITDA of US$55.1 million in the first quarter of 2012. The firm said the reduction in adjusted EBITDA was primarily a result of a lower rolling chip win rate, partially offset by improved rolling chip volumes. “Our group wide luck-adjusted EBITDA margin expanded 150 basis points to approximately 24 percent,” said Lawrence Ho Yau Lung, the firm’s co-chairman during an earnings conference call with analysts. Mr Ho also commented – in response to a question – on an investigation by the Taiwan authorities into US$179 million in allegedly illegal cross-straits transfer of customer cash by a unit of Melco Crown Entertainment. Business Daily first reported the inquiry by the public prosecutor’s office in Taipei in January. “The company hasn’t been implicated right now. We’ve had employees who were questioned. We will continue to work with [the] authorities,” stated Mr Ho. “We maintain the fact we’ve done everything properly and according to the law and how we conduct ourselves in Taiwan is carbon copy identical to all of our competitors, whether it’s U.S. or Australia or Macau [companies]. So I don’t think this issue would have any effect in terms of our Taiwan aspirations,” he added.

May 9, 2013 April 19, 2013

Macau

Homebuyers struggling to make down payment Pre-sales rules will slash housing supply in the short-term, says fund partner Vítor Quintã

vitorquinta@macaubusinessdaily.com

There are just 1,400 hotel rooms in the budget category in Macau

ven with the help from their parents, some residents here are having trouble finding the money for a down payment, says Philip Pang, partner at Telok Real

Estate Partners. The Hong Kong-based investment fund has sold all of the units at its three residential projects here, including the 160-unit Cerese near

Mong Há Hill. The units were sold for HK$3 million (US$387,000) to HK$4 million amid high demand thanks to the lack of housing supply, he told Business Daily. The projects, including the recently approved Lazarus Verde, were aimed at first-time homebuyers, namely “young couples with stable jobs in the gaming, hospitality industry,” the executive said. With the average wage of dealers reaching nearly 16,000 patacas, Mr Pang believes monthly instalments “of around HK$12,600 are pretty comfortable” for such couples. But it was not all smooth sailing, the Telok partner admitted. “Before we launched the last block from Cerese we asked the opinion from young couples and they told us that the down payment – 30 percent or HK$1.2 million – was quite a lot,” he said. Two homebuyers told Business Daily in a feature story published last month that they had to reach into their family’s savings to match the down payment. In response Telok launched a different payment plan requiring a smaller down payment of 20 percent “to make it more palatable,” Mr Pang said. Even though this plan involved

MGTO blames landowner for stalled budget hotel Licensing tangle and poor communication have plagued ZAPE hotel development since 2006 Vítor Quintã

vitorquinta@macaubusinessdaily.com

budget hotel built in the ZAPE district remains closed years after its completion because it does not meet the technical requirements, the Macau Government Tourist Office said. Hong Kong-based operator Rosedale Hotel Holdings Ltd said last week it was giving up on waiting for a licence and had sold the building at a loss of HK$6.3 million (US$811,700). The hotel “has been erected for a number of years” but it “has not yet been in operation, pending the grant of a hotel licence”, Rosedale told the Hong Kong Stock Exchange. The tourist office is in charge of granting hotel licences and has brushed off Rosedale’s criticism. The tourist office said it had not granted a licence to the project “because of the many amendments

made to the hotel design” and “more importantly, because the applicant was inactive in following up its application”. The authorities told Business Daily it received the original licence application for the three-star hotel in October 2006. The tourist office had since restart “the relevant analysis and license approval procedures” several times as it received “amended versions of the hotel design”. In February 2010, the tourism office received the final draft of the project. But “the design did not meet the statutory technical requirements” and the landowner was notified in July 2010, the city’s tourist bureau said. Licensing procedures ground to a halt afterwards because the hotel

landowner failed to reply to the office. The bureau said “several” reminders were issued “in vain”.

paying an extra 3 percent, “one out of four” buyers of Cerese units chose it, the executive revealed.

Pre-sales hit Telok is seeking to buy two more land plots here, probably again in older neighbourhoods of Macau peninsula. “It’s more driven by the availability of plots reasonably priced,” he explained. The fund will consider whether to offer the 20-percent down-payment plan when selling its future projects in Macau. But a lot will depend on the final version of the home pre-sales regulation that is being discussed at the Legislative Assembly, Mr Pang stressed. “I wouldn’t be surprised if there are government instructions on how much and when they [homebuyers] should pay to developers,” he said. In October the government promised to introduce a provision in the bill that links investors’ instalments to construction progress. The bill will for the first time regulate sales of unfinished units and Mr Pang believes “it’s a good thing for Macau”. “It will make the market more transparent and less risky. Currently the availability of flats can vary quite a lot,” he added. But the executive warned that in the short-term the new rules could mean “even less supply,” thus pushing home prices even higher. Several developers have rushed to sell their residential projects before the new rules become law. Once that happens, they will have to finish the foundations and a temporary horizontal property registration before they can sell flats. The financial impact on developers will not be “significant,” Mr Pang said, because most rely on bank loans, not pre-sales, to finance residential developments.

No progress was “made for over two years” until January, when the authorities received a reply, the office said. The office says it was “concerned about all hotel projects (including those of budget hotels). “But whether a hotel licence can be successfully granted depends also greatly on the active follow-up and collaboration of the applicant.” Business Daily requested a comment from Rosedale but did not receive a reply before last night. The tourist office told Business Daily in February it was reviewing six applications for budget hotel projects that would add 452 rooms. Currently there are 1,400 budget hotel rooms in Macau.

Currently there are only 1,400 budget hotel rooms available in Macau

May 2013 April9,19, 2013

Macau

LT Game wins new order at Crown Melbourne casino

live dealer baccarat. In Macau other manufacturers have supplied stadium-style gaming without live dealer baccarat, but those products have not been as popular.

Trade dispute

Local gaming equipment company also installing product on cruise ships, says analyst Michael Grimes

michael.grimes@macaubusinessdaily.com

T Game Ltd – controlled by Hong Kong-listed Paradise Entertainment Ltd – has won a new order to supply electronic table games [ETGs] to Crown Ltd’s Crown Melbourne casino in Australia. The news is given in a report by Union Gaming Research Macau. The research house says of LT Game: “The company currently has [ETG] market share in excess of 50 percent in Macau (2,483 out of 4,764 seats), and we believe has a near-term order backlog of at least a few hundred additional ETG seats in Macau.” It adds: “We note that the company has also begun to install its ETGs in jurisdictions outside of Macau, including on certain Royal Caribbean [cruise] ships and at the Crown Casino in Melbourne Australia (where the installed base is going from 20 seats to approximately 100 seats).” The most popular form of ETG in Macau is stadium-style baccarat featuring a live dealer. Union

Crown Melbourne

Gaming says that “LT Game is the exclusive provider of stadium-style ETG seats in Macau due to its hold

on relevant patents” – understood to be a reference specifically to LT Game’s multigame product offering

MIN

As Business Daily reported two weeks ago, LT Game’s intellectual property rights in Macau are disputed. The brand is currently “a party to proceedings” in a criminal case brought by Macau’s Public Prosecutions Office over an alleged infringement of an LT Game patent by market rival SHFL Entretenimento (Ásia) Lda – a local unit of Nevada-based SHFL entertainment Inc. SHFL denies infringement and the case is pending. The ETG segment is growing in importance in Macau and other regional markets in terms of its contribution to gaming revenue and to casino profitability, says Union Gaming. In Macau there is currently a government cap on the number of traditional live dealer tables allowed in the market. The cap is for 5,500 live tables up to December 31, 2012, and then three percent annual compound growth for ten years thereafter. But for the purposes of the table cap, the Gaming Inspection and Coordination Bureau (DICJ) is allowing local operators to count 50 or in some cases 60 ETG terminals as equal to one live baccarat table. DICJ is also regulating ETG games as table games for the purposes of player payouts.

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May 9, 2013 April 19, 2013

Greater China Air China to add 100 Airbus planes Air China Ltd, Asia’s biggest carrier by market value, plans to add 100 additional Airbus SAS planes as it expands its fleet to meet rising travel demand in the world’s most populous nation. The airline’s board approved the expansion for Air China and its units, the company said in a statement to the Shanghai Stock Exchange yesterday. It didn’t give a time frame or the type of aircraft it intends to introduce. Airbus won approval from China last month for orders of 60 planes valued at US$8 billion. Air China’s stock has risen 2.3 percent this year.

Esprit plummets after forecasting annual loss Esprit Holdings Ltd, the apparel seller whose two top executives quit last year, fell the most in six months in Hong Kong trading after forecasting a loss on store closures and a drop in the value of goodwill. The clothing maker and retailer dropped as much as 7.3 percent to HK$10.10 before closing at HK$10.38 in Hong Kong trading. Revenue dropped 7.9 percent to HK$6.72 billion (US$866 million) in the three months ended March from a year earlier, Esprit said in a stock exchange statement. The annual loss will come partly from a goodwill impairment of as much as HK$2 billion related to China investments, it said.

CNPC in talks to buy Brazil’s Barra China National Petroleum Corp., China’s largest oil producer, is in talks to acquire Barra Energia Petróleo e Gás, a Brazilian oil start-up, for about US$2 billion, people with knowledge of the matter said. The negotiations are under way and a deal could be reached as soon as this month, said the people, who asked not to be identified because the discussions are private. “It looks like CNPC can gain access to one of the largest offshore reserves in the world through the deal, and build a foundation for long-term development in South America,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai.

Alibaba profit more than doubles Alibaba Group Holding Ltd, China’s largest e-commerce company, had profit that doubled in the three months ended in December after commissions likely increased on surging sales. Net income at Alibaba jumped to US$642.2 million in the quarter ended December from US$236.9 million a year earlier, according to a Yahoo! Inc. filing to the Securities and Exchange Commission. Revenue rose 80 percent to US$1.84 billion, Yahoo, which owns about a 24 percent stake in Alibaba, reported.

SGX, CBMX tie up on iron ore The Singapore Exchange and the operator of China’s physical iron ore trading platform have agreed to cooperate, the bourse said, in a move that could increase the influence of the world’s biggest buyer over the market. The deal between SGX and the China Beijing International Mining Exchange (CBMX) will involve cooperation in product and market development as well as exploring a medium-term plan to improve the ability of traders to transfer risk between the spot and derivatives markets, SGX said. The Singapore bourse clears more than 90 percent of globally traded iron ore swaps, and CBMX runs China’s first physical iron ore trading platform, which was set up a year ago.

Latest bailo of local govt

Regulator tightens approvals for bonds

Estimates omit governme

China has ordered greater scrutiny of bond sales by local government finance vehicles with higher levels of debt, three people with knowledge of the matter said. The National Development and Reform Commission, which approves bond sales by companies that local governments set up to finance projects, will more strictly review applications for debt with credit ratings below AA+ sold by issuers with debt-to-asset ratios exceeding 65 percent, said the people. China’s central government has sought to rein in borrowing by local governments on concerns that slowing economic growth could result in some financing vehicles being unable to repay debt, saddling banks with bad loans.

Local govt in Hubei paid off debt for steel company

Chinese local government has apparently used public funds to repay the debt of a private firm, in a case that raises fresh questions about whether recent estimates of local government debt properly account for the full range of local liabilities. It is not the first time local officials have bailed out a private enterprise, but the fact that the municipal government had formally guaranteed the debt highlights the lack of visibility on the extent of localities’ hidden commitments. Dealing with the systemic risk posed by local government debt is seen as one of the key priorities for the administration of China’s new president, Xi Jinping. Asked if credit guarantees by local governments creates upside risk to his and other estimates of overall local debt, Dong Tao, chief regional economist for non-Japan Asia at Credit Suisse, said: “Yes, but it’s hard to quantify.” In the latest case of an apparent bailout, CITIC Trust announced late last month that an unnamed party had agreed to purchase 1.3 billion yuan (US$210.87 million) in high-interest loans to a steel plate manufacturer

China’s trade growth accelerates Trade data beats expectations but scepticism remains Langi Chiang and Jonathan Standing

hina’s exports and imports grew more than expected in April, offering the possibility of a better outlook for the world’s second-largest economy, but the figures failed to put an end to scepticism that financial manoeuvring by exporters and speculative capital inflows are masking weakness in real demand. China’s exports rose 14.7 percent in April, while imports grew 16.8 percent, leaving the country with a trade surplus of US$18.16 billion for the month, the Customs Administration said yesterday. That compared with market expectations for a 10.3 percent rise in exports, a 13.9 percent increase in imports and a trade surplus of US$15.1 billion. From a month earlier, exports edged up 2.7 percent while imports fell 7.7 percent. Chinese export data in recent

months has seemed to signal to a gradual revival of external demand, though some analysts suspect exporters may have overstated their business to sneak funds into the country and avoid capital restrictions. “I have no strong conviction whether the data reflects reality. We’ll focus on next Monday’s activities data,” said Zhiwei Zhang, chief China economist at Nomura Holdings Inc. in Hong Kong. “China’s SAFE recently launched new rules to crack down against capital inflows disguised as trade payments. I’m suspicious about the trade data,” Mr Zhang said, referring to the State Administration of Foreign Exchange. The regulator released new rules on Sunday to crack down on hot money inflows disguised as trade payments. A Reuters estimate of hot money flows based on official data indicates

that US$181 billion in speculative cash entered China in the first quarter, fuelled in part by loose monetary policy from the United States and Europe.

Signs of weakness Adding to the scepticism over the trade data, a pair of PMI surveys last week showed growth in China’s vast factory sector eased in April as new export orders shrank. However, in the trade figures, manufacturers were among the sectors reporting increases in exports in the month. In addition, the customs figures showed a 57 percent jump in exports to Hong Kong and a 250 percent rise in exports to bonded areas, adding weight to theories that goods are not being exported to final destinations. “In 1Q13, China’s export data were heavily distorted due to overreporting by exporters who might

May 2013 April9,19, 2013

Greater China GM to build US$1.3 bln Cadillac plant Chinese authorities have approved a US$1.3 billion General Motors Co plant to make luxury Cadillac cars, the U.S. auto giant said as it seeks more premium sales in the world’s biggest vehicle market. Construction of the plant – which will have annual capacity of 150,000 vehicles – will start in June in the commercial hub Shanghai, GM China said in a statement. It will be run by Shanghai GM, a joint venture with China’s SAIC Motor Corp Ltd. Manufacturing in China should help GM bring down the cost of its cars, not least because Beijing imposes a steep duty imports of luxury vehicles.

out reveals risk t’s hidden debts

ent guarantees for corporate credit in Hubei province, in central China. CITIC had packaged the loans into a wealth management product (WMP) for sale to wealthy investors at an expected yield of 10 percent. The investors will now be repaid in full. Official media cited unnamed sources predicting the government of Yichang city, Hubei, was the buyer. A senior CITIC Trust executive had previously told Reuters it expected the city government to step in and pay the debt.

Shadow banking Trust lending and other forms of shadow banking have exploded in China in recent years, as banks strive to reduce their on-balancesheet risk and savers flock to WMPs as a higher-yielding alternative to traditional bank deposits. A large portion of trust loans have flowed to local governments, which use them to pay for infrastructure projects. Estimates of local government debt range from Standard Chartered Plc’s 15 percent of GDP at end-2012 to Credit Suisse Group AG’s 36 percent. Fitch put the figure at 25 percent when it downgraded China’s sovereign debt rating last month.

But the latest near-default highlights how localities may also be on the hook for a large amount of ostensibly corporate debt. Analyst estimates don’t include contingent liabilities such as pledged collateral and other credit guarantees. The central government banned localities guaranteeing corporate debt at the end of 2012, but no one knows how many previously issued guarantees remain outstanding. The CITIC case follows previous instances where Chinese local governments have stepped in to repay corporate debts incurred by both state-owned and private firms. Many of the bailed-out borrowers hail from industries like solar, steel, and textiles that suffer from overcapacity. China is still waiting for the first case where investors in a bond or trust product suffer actual losses. Credit Suisse’s Mr Dong believes defaults on shadow banking products are likely to rise over the next two years. “For bank loans, it’s easier for the banks to roll them over if the loans go bad. That can cover [non-performing loans] for a while. But when it comes to shadow banking, it’s harder to do that,” said Mr Dong. Reuters

Gold imports to keep growing C

hinese gold imports are likely to swell further after more than doubling to an all time high in March as retail consumers pounced when prices plunged to a two-year low last month. China is the world’s second largest buyer after India, and in both countries the steep fall in international gold prices in April unleashed years of pent up demand for coins, bars and jewellery. That will help bolster prices for the metal, which has been abandoned by funds in other parts of the world in the wake of its historic fall. “Physical demand picked up significantly over the last couple of weeks. Consumers and industrial users tend to see price drops as buying opportunities,” Zhang Bingnan, secretary-general of the China Gold Association, told Reuters. “Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives,” said Mr Zhang, adding that gold sales and processing volumes both spiked in April. Net gold flows from Hong Kong to China jumped to 223.519 tonnes in March from 97.106 tonnes in February, smashing a previous record of 114.372 tonnes in December, data from the Hong Kong Census and Statistics Department showed. That makes up more than half of record gold exports to China from Hong Kong in 2012, which stood at 557.478 tonnes.

In March, Shanghai gold futures fetched premiums of more than US$30 to global prices, making it cheaper to buy the metal overseas. April could see imports swell further after the drop in international prices spurred frenzied buying in Asia, leading to a shortage of gold bars and coins in Singapore as well as Macau and Hong Kong, which is China’s main source for gold imports. Appetite for gold from India and China is a major factor in international gold prices. The two countries account for more than a third of global demand, according to the World Gold Council. China produced 403 tonnes of gold in 2012, but consumption was more than double at 832.2 tonnes. Gold tumbled to around US$1,321 an ounce on April 16, its lowest in more than two years, after a fall below US$1,500 and fears of central bank sales led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds. It stood at around US$1,460 on Tuesday. “April imports will be stronger than March,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. “The world was buying gold and China was no different at all.” The drop in prices has prompted a gold rush in China, with Chinese shoppers flocking to retailers to buy jewellery and bars. A spokesman for Hong Kong jewellery chain Chow Tai Fook Jewellery Group Ltd, the world’s largest jewellery retailer by market value, told Reuters that traffic at its China stores jumped by 50 percent during the May Day holidays. Reuters

KEY POINTS April shipments abroad rose 14.7 pct Imports point to strong domestic demand Swings back to trade surplus of US$18.16 bln Analysts raise questions about the accuracy of the data Gains in imports may ease concern that domestic demand is slowing down

bring in hot money through fake exports and arbitrage the differential between CNH/USD and CNY/USD by moving goods in and out of HK,” Bank of America Merrill Lynch economist Lu Ting wrote in a report on yesterday’s data, referring to offshore and onshore yuan currency rates. “The evidence includes the abnormally strong exports to bonded areas and Hong Kong.” The latest export figures also don’t chime with those from other regional economies. South Korea

and Taiwan posted weaker-thanexpected exports for April, showing the fragility of global demand. However, there were positives in the data. While China’s exports to the United States fell 0.1 percent in April and those to the EU fell 6.4 percent, the rates of decline were much less than March’s declines of 6.5 percent and 14 percent, respectively. Exports to ASEAN countries rose 37.3 percent and those to South Korea were up 7.2 percent. Reuters

PBOC signals it may resume bill sales C

hina’s central bank may be preparing to change the way it manages monetary policy by reintroducing bills as a liquidity management tool for the first time since 2011, dealers said, as the country struggles to keep rising capital inflows at bay. The People’s Bank of China (PBOC) routinely asks primary dealers in the country’s interbank market about demand for various money instruments, and this morning the central bank surveyed demand for 3-month bills, dealers said. That suggests it might begin issuing such instruments during upcoming open market operations tomorrow. “If the PBOC really does resume bill issuance, it will be primarily to target hot money inflows,” said Liu

Junyu, bond and money market analyst at China Merchants Bank in Shenzhen. While the change would impact liquidity in the interbank market, it does not necessarily signal an overall monetary tightening is in the works, he said. Yuan positions at Chinese financial institutions stemming from foreign-exchange transactions, a gauge of money flows, rose by 1.22 trillion yuan (US$199 billion) in the first three months of 2013, more than four times as much as in the same period last year, central bank data showed. “The central bank’s gauging of demand shows it will resume bill sales soon,” said Shi Lei, Beijingbased head of fixed- income research at Ping An Securities Co. “Foreign capital inflows are too big. The central bank needs more tools to mop up excess liquidity.” The central bank has not issued bills since late 2011, instead relying primarily on shorter-term bond repurchase agreements to manage the short-term money supply in the market. Reuters

May 9, 2013

Asia Seoul warns over won’s fast appreciation South Korea’s finance ministry warned yesterday against what it called “one-way bets” on the won and said it was closely watching the markets for possible attempts to push the Korean currency higher. “The foreign-exchange authorities are closely watching whether there are any attempts to exacerbate foreign-exchange rate volatility,” the Ministry of Strategy and Finance said in a statement, a form of intervention aimed at smoothing the won’s rapid appreciation. The won rose for a fourth straight day to a two-month high yesterday despite the warning.

Kuroda stimulus backfires as mortgage costs rise

Toyota net income doubles on weak yen T

Yields higher to reflect volatility risk, says economist

Lower borrowing costs needed to boost housing demand

ank of Japan Governor Haruhiko Kuroda’s stimulus policies are backfiring in the housing market, where mortgage rates are rising even as the central bank floods the financial system with cash. Fixed 35-year home-loan costs rose to 1.81 percent this month, the first increase since February and up from an all-time low of 1.8 percent in April, according to data compiled by the Japan Housing Finance Agency. Federal Reserve Chairman Ben S. Bernanke’s monetary easing almost halved 30-year U.S. mortgage rates since 2008 to 3.35 percent on May 2. The BOJ’s April 4 announcement that it would double bond buying to generate 2 percent inflation unleashed the highest government-debt volatility in a decade and pushed 10-year yields up by five basis points. The benchmark lending rate for large corporations, known as the prime rate, increased five basis points from its record low to 1.2 percent on April 10, despite the BOJ’s aim of stoking the economy through cheaper funding. “It makes little economic sense for rates to decline when the BOJ says it will raise consumer prices,” said Toru Suehiro, a market economist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest publiclytraded bank. “Yields are higher than before the monetary easing to reflect the volatility risk, and lending rates have risen because they are set based on bond yields.”

‘Reducing liquidity’ Volatility, as measured by the gap between the 10-year yield’s daily high and low, jumped to 30 1/2 basis points on April 5, the most since July 2003, after Mr Kuroda unveiled a plan to buy more than 7 trillion yen (US$70.7

billion) of Japanese government bonds a month, accounting for more than half of the total amount that the government plans to sell in the market this fiscal year. “The BOJ’s buying is reducing the liquidity of government bonds, preventing market participants from finding appropriate yield levels,” said Satoshi Okagawa, a senior global-markets analyst in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-largest financial group by market value. “That situation will make the market dependent on the BOJ’s purchases just like a morphine addict.” The 35-year mortgage rate in Japan was at 2.92 percent in August 2008, the month before the collapse of Lehman Brothers Holdings Inc. that froze global credit markets. The prime rate was at 2.25 percent at that

Yields are higher than before the monetary easing to reflect the volatility risk, and lending rates have risen because they are set based on bond yields Toru Suehiro, Mizuho Securities Co.

time, figures from Mizuho Corporate Bank Ltd. show. Japan’s 10-year bond yield was at 0.6 percent yesterday, compared with 0.55 percent on April 3. The average U.S. 30-year mortgage rate was at 6.4 percent in August 2008, based on a Freddie Mac survey of 125 lenders.

Wage outlook Further housing demand hinges on the BOJ’s ability to keep borrowing costs lower and whether household incomes will gain. Economy Minister Akira Amari said on May 4 that wages need to rise in Japan to spur inflation, while Prime Minister Shinzo Abe has urged companies to consider increasing salaries. Minutes of the BOJ’s April 3-4 meeting showed some board members said a “great opportunity” existed to overcome deflation. A few members said that while wages of full-time employees are starting to increase in some big companies, more time is needed for a broader range of workers to see raises. An index for Japanese wages rose for a second month in March after falling in January to the lowest level since 1992, figures from the labour ministry show. “I expect the BOJ to maintain its stance of supporting the economy” by keeping a lid on yields, said Yasuhide Yajima, the chief economist at NLI Research Institute Ltd in Tokyo, an affiliate of Nippon Life Insurance Co., Japan’s biggest life insurer. “Yields won’t rise at least until summer because 10- year rates are affected by both inflation expectations and purchases” by investors driven by the BOJ’s bond buying, he said. Bloomberg News

oyota Motor Corp’s profit more than doubled in the three months to March as a weakening yen and improved sales boosted the carmakers comeback. Net income rose to 313.9 billion yen (US$3.2 billion) up from 121 billion yen for the same period the previous year. The company posted an annual operating profit of 1.32 trillion yen (US$13.32 billion), with an operating margin of 5.98 percent, beating a market that had expected 1.26 trillion yen profit, according to Thomson Reuters StarMine’s SmartEstimates. But the company refuses to be tempted away from its low-risk growth strategy, even as the world’s bestselling carmaker met its midterm profit goals in the year ended March, aided by the weaker yen. Toyota forecast a smaller annual profit than analysts estimated as it faces fiercer competition in the U.S. and falling demand in China. Net income may increase 42 percent to 1.37 trillion yen (US$14 billion) in the fiscal year ending March 2014, the Toyota City, Japanbased automaker said in a statement yesterday. The carmaker expects sales to rise 6.5 percent to 23.5 trillion yen this year. While the weakening yen is bolstering profits, President Akio Toyoda is facing a resurgent Detroit as General Motors Co., Ford Motor Co. and Chrysler Group LLC offer their best line-up of vehicles in a generation. Toyota’s market share in the U.S. has fallen to a 15-month low and deliveries in China have fallen for three straight quarters. “There’s no guarantee the weaker yen will last,” said Yuuki Sakurai, president of Tokyo-based Fukoku Capital Management Inc., which oversees about 1.5 trillion yen in Tokyo. “So it’s difficult to take for granted that earnings will rise in the coming years.” Reuters

May 9, 2013

Asia Japan revises Q4 GDP slightly up Japan’s Cabinet Office revised nominal gross domestic product, exports and imports for the fourth quarter of last year after discovering errors in the way it adjusted the exports and imports for seasonal factors. It corrected nominal seasonally adjusted exports to show they fell 1.7 percent in the fourth quarter from the previous quarter, more than a 0.3 percent decline previously reported. Nominal seasonally adjusted imports rose 0.5 percent, less than a 3.0 percent increase previously reported. As a result, nominal GDP fell 0.1 percent, less than prior data showing a 0.3 percent decline.

No more rewards for N.Korea, U.S. says South Korea’s Park vows unity in confronting Pyongyang

resident Barack Obama and South Korean President Park Geun-hye showed a solid front in the face of threats from North Korea, with Mr Obama saying the two longtime allies are “as united as ever”. North Korea will no longer be rewarded for provocative behaviour, Mr Obama said at a joint news conference with South Korea’s leader. “The days when North Korea could create a crisis and elicit concessions, those days are over,” Mr Obama said. He added: “President Park and myself very much share the view that we are going to maintain a strong deterrent, we’re not going to reward provocative behaviour, but we remain open to the prospect of North Korea taking a peaceful path. Ms Park said North Korea has “no choice but to change” and urged the world to send a message that the communist country would be rewarded if it drops its nuclear ambitions. South Korea’s new leader met with Mr Obama on Tuesday, three months into her presidency, as the U.S. and South Korea mark the 60th anniversary of their alliance. The two leaders discussed strategy

toward North Korea under the regime of its new leader, Kim Jongun, as well as economic issues and the crisis in Syria. “North Korea is isolated at the moment,” Ms Park said. “So it’s hard to find anyone that could really answer” what Kim’s intentions are. On Tuesday, the Bank of China Ltd has stopped doing business with a large North Korean bank, falling into line with a U.S.-led sanctions push to restrict funding for Pyongyang’s nuclear programme. The decision to close the bank account follows an increase in tensions on the Korean peninsula and may be a sign that Beijing is willing to place more pressure on Pyongyang. The U.S. Treasury hit the Foreign Trade Bank, North Korea’s main foreign exchange bank, with sanctions in March, saying it was “a key financial node” in North Korea’s nuclear and missile proliferation activities. The bank had not been named among the institutions targeted for asset freezes by expanded UN Security Council sanctions introduced in January and March. Other countries such as Japan and Australia have since joined the U.S.

Ms Park and Mr Obama say North Korea is more isolated than ever

in applying sanctions against Foreign Trade Bank, but co-operation from banks in China, North Korea’s closest economic partner, is essential in the efforts to choke off cash flows. “Bank of China has sent North Korea’s Foreign Trade Bank a notice

that it has closed its account and has also halted all fund transfers related to this account,” Bank of China said. It declined to provide any details about how much money was affected or the timing of the move. Bloomberg News/Reuters

Petronas agrees to first ever Brazil buy Malaysian producer to buy a 40 percent stake in two blocks

Petronas – leading overseas acquisitions by Malaysian firms

etroliam Nasional Bhd has agreed to pay US$850 million for a stake in a Brazilian offshore oil field, bolstering its billionaire owner Eike Batista who is

unloading assets to keep his energy businesses afloat. Malaysia’s state-owned producer known as Petronas, which is expanding abroad to shore up future

earnings as production slows at home, also said it has an option to buy a 5 percent stake in OGX Petróleo e Gás Participações SA the company that controls the fields. The purchase of 40 percent of two blocks off the coast of Rio de Janeiro extends a Petronas buying spree that included a US$5.1 billion acquisition of Canadian oil and gas firm Progress Energy Corp. Mr Batista was Brazil’s richest man until lower than expected output from OGX, an oil exploration and production company founded in 2007 and the flagship of his EBX Group, sent the company’s shares plunging. Troubles at OGX also pulled down the market value of other EBX companies, cutting Mr Batista’s fortune by US$20 billion in the past year. He is now under pressure to divest up to half of his 60 percent to 70 percent stake in EBX so that his firms can find funds for expansion. Petronas has the option to buy 5 percent of OGX for 6.3 reais a share. That stake would be worth US$160 million, based on calculations from its shares outstanding. “The interest demonstrated by Petronas… to acquire 5 percent in our company in the future shows the

quality of our team of executives and our opportunities for growth,” OGX chief executive Luiz Carneiro said in a statement. Petronas is leading a rise in overseas acquisitions by Malaysian firms, as they outgrow their home economy and look to generate more profits. World Bank data shows Malaysian investment abroad steadily rose to 5 percent of GDP in 2011, the latest year for which data is available, after a drop to 3 percent in 2009 at the height of the financial crisis. Outbound M&A from Malaysia so far this year would reach US$2.27 billion with Petronas’s latest buy. The deal will also be Petronas’s first foray into Brazil, which has one of the world’s largest hydrocarbon reserves, including 145 billion barrels of estimated oil reserves. In contrast, Malaysia’s reserves amounted to 5.9 billion barrels at the end of 2011. Petronas said it will take up 40 percent of OGX’s interest in Blocks BM-C-39 and BM-C-40, located in shallow waters 95 km (59 miles) offshore from Rio de Janeiro state and containing the Tubarao Martelo field, which is currently under development. Reuters

May 9, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

35.6

0.5649718

21207118

CHINA UNICOM HON

ALUMINUM CORP-H

3.04

0.330033

19357515

CITIC PACIFIC

BANK OF CHINA-H

3.77

1.344086

347621036

BANK OF COMMUN-H

6.25

0.8064516

32848382

BANK EAST ASIA

31.65

0.1582278

1199122

BELLE INTERNATIO

12.88

0.155521

NAME

PRICE

DAY %

VOLUME

11.26

1.441441

26485528

POWER ASSETS HOL

10.1

1.405622

13414570

SANDS CHINA LTD

CLP HLDGS LTD

68.65

0.2189781

1516569

CNOOC LTD

14.78

1.371742

44821295

COSCO PAC LTD

10.46

0.3838772

8346944

14573160

ESPRIT HLDGS

10.38

-4.770642

29514087

BOC HONG KONG HO

27.75

0.5434783

17468850

HANG LUNG PROPER

30.35

-1.300813

7065606

CATHAY PAC AIR

14.36

2.86533

8409595

HANG SENG BK

129.9

0.6976744

852686

CHEUNG KONG

HENDERSON LAND D

118.4

0.1692047

3222379

CHINA COAL ENE-H

5.95

0.8474576

81638637

CHINA CONST BA-H

6.58

0.304878

254452765

CHINA LIFE INS-H CHINA MERCHANT CHINA MOBILE

22.3

3.240741

64783502

2.669405

8496501

57.3

0.3502627

2787214

HENGAN INTL

80.55

0.436409

2224310

HONG KG CHINA GS

23.25

0.867679

6157457

HONG KONG EXCHNG

134.3

-1.104566

5722552

87.7

1.740139

23425424

85.35

-0.3502627

4253458

5.6

0.9009009

219308931

10.2

2.204409

60372531

HSBC HLDGS PLC

85.8

0.2922268

14315441

HUTCHISON WHAMPO

24.25

0.4140787

15063486

IND & COMM BK-H

CHINA PETROLEU-H

8.68

2.117647

146475784

CHINA RES ENTERP

2283364

MTR CORP

1.265823

2595406

24.05

0.6276151

4565078

NEW WORLD DEV

14.18

0.4249292

10817305

CHINA RES POWER

25.4

PETROCHINA CO-H

10.26

2.908726

134301337

CHINA SHENHUA-H

27.6

1.470588

18619830

PING AN INSURA-H

64.15

1.342812

14257002

PRICE

DAY %

VOLUME

3.756708

15478505

CHINA OVERSEAS

CHINA RES LAND

LI & FUNG LTD

NAME

PRICE

DAY %

77.1

1.71504

1804192

1.083032

7673040

SINO LAND CO

12.98

0.309119

3193291

SUN HUNG KAI PRO

111.9 -0.08928571

4243722

SWIRE PACIFIC-A

VOLUME

99.7

1.064369

951796

274.6

-0.2180233

1712909

TINGYI HLDG CO

20.05

-0.4962779

7367298

WANT WANT CHINA

12.08

-1.30719

15274410

WHARF HLDG

72.95

0.8990318

2805739

TENCENT HOLDINGS

MOVERS

5 23250

INDEX 23244.35 HIGH

23246.5

LOW

22880.11

52W (H) 23944.74 22870

(L) 18056.4 6-May

8-May

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.84

1.319261

128449737

AIR CHINA LTD-H

6.79

1.343284

16271362

CHINA PETROLEU-H

8.68

2.117647

146475784

ALUMINUM CORP-H

3.04

0.330033

19357515

CHINA RAIL CN-H

8.39

4.094293

29634026

ANHUI CONCH-H

29.1

8638160

CHINA RAIL GR-H

4.26

3.1477

29693613

BANK OF CHINA-H

3.77

1.344086

347621036

CHINA SHENHUA-H

27.6

1.470588

18619830

CHINA TELECOM-H

NAME CHINA PACIFIC-H

6.25

0.8064516

32848382

4.08

2.255639

55936262

29.65

3248336

DONGFENG MOTOR-H

12.64

3.099511

20207395

CHINA CITIC BK-H

4.52

1.801802

35995932

GUANGZHOU AUTO-H

6.88

4.08472

7176141

CHINA COAL ENE-H

5.95

0.8474576

81638637

HUANENG POWER-H

9.47

2.600217

15469534

CHINA COM CONS-H

7.82

0.7731959

16313260

IND & COMM BK-H

5.6

0.9009009

219308931

CHINA CONST BA-H

6.58

0.304878

254452765

JIANGXI COPPER-H

16.34

0.9888752

14245350

CHINA COSCO HO-H

3.46

-2.259887

16099949

PETROCHINA CO-H

10.26

2.908726

134301337

CHINA LIFE INS-H

22.3

3.240741

64783502

PICC PROPERTY &

10.42

1.361868

12429404

CHINA LONGYUAN-H

7.19

-1.506849

15713000

PING AN INSURA-H

64.15

1.342812

14257002

CHINA MERCH BK-H

16.88

0.5959476

14643394

SHANDONG WEIG-H

7.5

-0.2659574

7564864

CHINA MINSHENG-H

10.66

1.52381

36538860

SINOPHARM-H

23.35

2.412281

5229067

CHINA NATL BDG-H

9.52

1.276596

55298256

TSINGTAO BREW-H

52.65

1.25

1581800

16.46

0.8578431

6354895

WEICHAI POWER-H

30.05

2.385009

3663838

BANK OF COMMUN-H BYD CO LTD-H

CHINA OILFIELD-H

NAME

PRICE

DAY %

VOLUME

YANZHOU COAL-H

8.21

44384137

ZIJIN MINING-H

2.33

0.8658009

37582422

ZOOMLION HEAVY-H

8.3

6.410256

44959122

ZTE CORP-H

1.744186

6404870

MOVERS

2 11300

INDEX 11284.74 HIGH

11298.76

LOW

10963.22

52W (H) 12354.22 10960

(L) 8987.76 6-May

8-May

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.75

0.7326007

85803032

AIR CHINA LTD-A

5.51

1.473297

7839575

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

6.39

-0.9302326

8657724

QINGHAI SALT-A

22.68

0.7104796

8269516

CITIC SECURITI-A

12.72

-0.7025761

98318162

SAIC MOTOR-A

16.39

5.537669

65850131 36888855

CHONGQING WATE-A

NAME

VOLUME

4.05

-0.4914005

10764370

CSR CORP LTD -A

4.13

1.22549

39624463

SANY HEAVY INDUS

9.69

2.21519

ANHUI CONCH-A

18.27

-0.5984766

16862855

DAQIN RAILWAY -A

7.31

1.527778

31594961

SHANDONG GOLD-MI

32.13

4503942

BANK OF BEIJIN-A

9.01

1.122334

30844060

DATANG INTL PO-A

4.57

0.8830022

13762635

SHANG PHARM -A

12.19

0.7438017

9595677

BANK OF CHINA-A

2.91

0.3448276

37522265

EVERBRIG SEC -A

14.22

-1.25

21501621

SHANG PUDONG-A

10.05

-0.09940358

72153519

BANK OF COMMUN-A

4.73

1.068376

54415326

GD MIDEA HOLDI-A

14.68

-1.27774

20330374

SHANGHAI ELECT-A

3.8

-0.2624672

3047333

10.46

0.1915709

10459580

GD POWER DEVEL-A

2.92

-0.6802721

37681350

SHANXI LU'AN -A

16.43

-0.7250755

14390059

BAOSHAN IRON & S

4.96

0.4048583

37392061

GEMDALE CORP-A

7.43

36842807

SHANXI XISHAN-A

10.78

-0.7366483

13360094

BEIJING TONGRE-A

24.48

3.553299

23174433

GF SECURITIES-A

13.6

-0.2932551

23925632

SHENZEN OVERSE-A

5.95

-0.5016722

31901568

BYD CO LTD -A

29.67

0.712831

15353513

GREE ELECTRIC

27.31

2.208084

14999357

SICHUAN KELUN-A

66.54

1.727565

2072278

4.4

0.456621

21782668

GUANGHUI ENERG-A

19.17

1.482266

21748026

SUNING COMMERC-A

5.87

-0.170068

35137916

ALUMINUM CORP-A

BANK OF NINGBO-A

CHINA CITIC BK-A CHINA CNR CORP-A

4.27

0.7075472

33890520

HAITONG SECURI-A

10.94

-1.530153

116388644

TASLY PHARMAC-A

80.41

3.474456

2639940

CHINA COAL ENE-A

6.78

0.1477105

6793917

HANGZHOU HIKVI-A

36.38

0.5250069

5774268

TSINGTAO BREW-A

37.56

-0.02661698

1869986

CHINA CONST BA-A

4.85

1.25261

39121474

HENAN SHUAN-A

41.03

-0.291616

4268672

WEICHAI POWER-A

22.85

2.881585

7527745

CHINA COSCO HO-A

3.38

7647702

HONG YUAN SEC-A

22.21

-0.6263982

26114098

WULIANGYE YIBIN

22.73

-0.6121557

22595049

CHINA EAST AIR-A

3.06

0.6578947

8076816

HUATAI SECURIT-A

9.91

-0.9

30108405

YANGQUAN COAL -A

12.47

-0.4788508

8875645

CHINA EVERBRIG-A

3.14

68753119

HUAXIA BANK CO

10.69

-0.09345794

27727326

YANTAI WANHUA-A

18.73

0.1068947

7686636

17.11

0.8249853

16568640

IND & COMM BK-A

4.1

0.2444988

58091323

YANZHOU COAL-A

14.53

-0.5475702

4460779

CHINA MERCH BK-A

12.5

0.08006405

54553571

INDUSTRIAL BAN-A

18.42

-0.4324324

86846921

YUNNAN BAIYAO-A

89.03

1.158959

1419027

CHINA MERCHANT-A

12.61

-1.407349

26512089

INNER MONG BAO-A

28.88

-0.6535948

30987271

ZHONGJIN GOLD

12.35

-0.5636071

14264646

CHINA LIFE INS-A

CHINA MERCHANT-A

27.64

-0.2886003

7755329

INNER MONG YIL-A

29.65

1.367521

13250335

ZIJIN MINING-A

3.13

-0.3184713

37125095

CHINA MINSHENG-A

10.37

0.1932367

185766925

INNER MONGOLIA-A

4.87

-0.408998

31907540

ZOOMLION HEAVY-A

7.47

1.909959

45668368

CHINA NATIONAL-A

9.66

-0.2066116

36236855

JIANGSU HENGRU-A

32.29

1.127466

5633499

12.92

0.7014809

21771440

CHINA OILFIELD-A

15.84

0.1264223

4152312

JIANGSU YANGHE-A

58.98

-0.8406187

4326467

CHINA PACIFIC-A

7769124

19.38

2.811671

22698055

JIANGXI COPPER-A

21.27

-0.1408451

CHINA PETROLEU-A

6.85

28242039

JINDUICHENG -A

10.49

-0.6628788

6603485

CHINA RAILWAY-A

5.41

1.310861

23960406

KANGMEI PHARMA-A

17.9

0.7882883

27460978

CHINA RAILWAY-A

2.95

1.027397

25868688

KWEICHOW MOUTA-A

188.89

0.6393521

4241606

CHINA RESOURCE-A

30.65

3.863097

5191062

LUZHOU LAOJIAO-A

25.43

-0.5475166

7480488

CHINA SHENHUA-A

20.78

0.4349928

9642706

METALLURGICAL-A

2.06

0.4878049

20030175

CHINA SHIPBUIL-A

4.34

1.165501

53552499

NARI TECHNOLOG-A

19.02

2.699784

18251360

14954301

NINGBO PORT CO-A

2.47

0.8163265

8420164

8.56

0.3516999

13722302

CHINA SOUTHERN-A

3.46

CHINA STATE -A

3.73

86124127

PETROCHINA CO-A

CHINA UNITED-A

3.71

0.5420054

66107200

PING AN BANK-A

20.38

0.6419753

62878713

CHINA VANKE CO-A CHINA YANGTZE-A CHONGQING CHAN-A

11.74

1.381693

80520426

PING AN INSURA-A

41.68

0.8712488

24775242

7.4

-0.5376344

17583399

POLY REAL ESTA-A

12.23

41590974

11.45

-0.4347826

27421857

QINGDAO HAIER-A

13.28

10586180

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

ZTE CORP-A

MOVERS 169

108

23 2560

INDEX 2542.798 HIGH

2553.94

LOW

2502.98

52W (H) 2791.303 (L) 2102.135

2500

6-May

8-May

FTSE Taiwan 50 Index NAME ACER INC

24.85

2.263374

18761632

FORMOSA PLASTIC

73.3

2.089136

10777378

ADVANCED SEMICON

25.85

17708075

FOXCONN TECHNOLO

81.9

1.73913

8412771

37.5

5504258

FUBON FINANCIAL

40.85

1.113861

22560737

ASIA CEMENT CORP ASUSTEK COMPUTER

NAME

PRICE DAY %

TAIWAN MOBILE CO TPK HOLDING CO L TSMC

Volume

109.5

1.388889

600

0.1669449

5657126 3070404

114.5

1.777778

41122709

2.564103

9873868

12.1

4.310345

172431157

348

-0.286533

3079116

HON HAI PRECISIO

79.8

2.967742

87759664

AU OPTRONICS COR

13.75

2.230483

117096725

HOTAI MOTOR CO

274

4.580153

534102

CATCHER TECH

156.5

2.287582

14738434

HTC CORP

278 -0.5366726

9633378

WISTRON CORP

29.45

1.202749

13363233

CATHAY FINANCIAL

39.75

0.6329114

24740525

HUA NAN FINANCIA

17.3

0.5813953

7286220

YUANTA FINANCIAL

15.2

0.9966777

11839373

CHANG HWA BANK

17.15

0.8823529

9627781

LARGAN PRECISION

842

0.2380952

1043263

YULON MOTOR CO

51.6

0.5847953

2288968

CHENG SHIN RUBBE

100

1.936799

9852947

LITE-ON TECHNOLO

52.5 -0.3795066

6531400

CHIMEI INNOLUX C

19.3

3.485255

133160303

MEDIATEK INC

376

1.347709

10368469

CHINA DEVELOPMEN

8.35

0.9673519

45064629

MEGA FINANCIAL H

23.5

37272515

CHINA STEEL CORP

25.95

0.776699

14672020

NAN YA PLASTICS

4.065041

23546234

CHINATRUST FINAN

18.25

0.5509642

33218354

PRESIDENT CHAIN

191

0.5263158

1380728

95.7

0.6309148

8828254

QUANTA COMPUTER

3.278689

12367526

1.06383

17960781

SILICONWARE PREC

34.8

0.1438849

9038366

CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC

149

3.472222

6310239

SINOPAC FINANCIA

15.15

1.337793

19763058

FAR EASTERN NEW

32.05

1.746032

8892694

SYNNEX TECH INTL

49.75

2.156057

5398658

FAR EASTONE TELE

73.4

0.273224

4032797

TAIWAN CEMENT

38.7

0.78125

8218638

FIRST FINANCIAL

18.2

0.8310249

14235108

TAIWAN COOPERATI

17.05

0.2941176

9111244

FORMOSA CHEM & F

2.240896

11574852

TAIWAN FERTILIZE

72.7

0.137741

2720334

FORMOSA PETROCHE

1.99005

2701118

TAIWAN GLASS IND

29.9

0.3355705

2178389

UNI-PRESIDENT UNITED MICROELEC

MOVERS

3 5810

INDEX 5805.53 HIGH

5805.91

LOW

5698.53

52W (H) 5813.589844 5690

(L) 4719.96 6-May

8-May

May 9, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 64.6

38.20 37.85

19.3 19.2

64.2

37.50

19.1 63.8

37.15

Max 38.15

average 37.7

Min 36.9

36.80

Last 38

19.0 Max 64.5

average 63.716

Min 63.45

63.4

Last 64

42.2

42.1

42.0

Max 42.15

average 42.052

Min 41.95

41.9

Last 42

Max 20.6

average 20.520

Commodities PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Jun13

95.61

-0.010458063

2.267622206

101.4199982

BRENT CRUDE FUTR Jun13

104.15

-0.239463602

-3.511209931

116.6699982

90.91999817

GASOLINE RBOB FUT Jun13

282.37

-0.342344886

-1.345119139

324.119997

235.9499931

865.5

-0.716948666

-5.098684211

992.75

799.25

3.9

-0.510204082

11.17445838

4.457000256

3.203999996

291.01

-0.60115449

-3.241787472

323.8899946

258.589983

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

Last 20.6

81.34999847

Gold Spot $/Oz

1454.09

-0.49

-12.6389

1796.08

1322.06

Silver Spot $/Oz

23.806

0.3245

-20.9366

35.365

22.0713

Platinum Spot $/Oz

1487.5

-0.1007

-1.9931

1742.8

1374.55

Palladium Spot $/Oz

685.85

-0.3704

-1.9738

786.5

553.75

1882

-9.213699952

2200.199951

1809 6762.25

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

ASIA PACIFIC

CROSSES

-0.068775791

-8.397427815

8422

-0.663129973

-9.975961538

2230

1745

15195

-0.197044335

-10.93200469

18920

14609

15.395

-2.222927914

17.07500076

14.79500103

641.75

0.2734375

-7.959842237

824

527

WHEAT FUTURE(CBT) Jul13

710.5

0.211565585

-10.48818898

900

664.75

SOYBEAN FUTURE Jul13

1390.5

0.596852957

-0.340440781

1605.75

1217.75

COFFEE 'C' FUTURE Jul13

141.95

-0.525578136

-5.081912404

202.1999969

132.6999969

NAME

17.18000031

ARISTOCRAT LEISU

69.94999695

CROWN LTD

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

SUGAR #11 (WORLD) Jul13

17.58

COTTON NO.2 FUTR Jul13

87.08

-0.340136054 -0.080321285

-10.94224924 13.28216469

23.05999947 94.19999695

World Stock Markets - Indices

20.55

24.65

20.50

24.50

20.45

24.35

20.40

Max 24.75

average 24.477

Min 24.2

Last 24.45

24.20

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

1.019 1.5486 0.9391 1.3117 98.84 7.9935 7.7606 6.1413 54.1375 29.38 1.2301 29.445 40.785 9727 100.713 1.23183 0.84702 8.0466 10.485 129.65 1.0301

0.0589 -0.309 0.0532 -0.0152 0.4249 0 0.0103 0.2019 0.0139 0.6127 0.1626 0.2411 0.2697 0.0308 0.3654 0.0723 -0.2916 0.0298 0.0143 0.4396 -0.0194

-1.8115 -4.2656 -2.5237 -0.5534 -12.8895 -0.1289 -0.1289 1.4541 1.5839 4.0844 -0.7073 -1.3992 0.5394 0.6785 -11.3054 -1.9767 -3.7307 2.1239 0.433 -12.4026 -0.0194

1.0625 1.6381 0.9972 1.3711 99.95 8.0111 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 131.12 1.032

0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1401 51.3863 28.56 1.2152 28.913 40.54 9210 74.482 1.20054 0.77553 7.7018 9.6245 94.12 1.029

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.07

29.20635

4.1

2.29

VOLUME CRNCY 3236244

-0.1536098

21.83693

13.12

8.06

1007045

AMAX HOLDINGS LT

0.83

1.219512

-40.71428

1.9

0.75

190025

BOC HONG KONG HO

27.75

0.5434783

15.14523

27.9

20.85

17468850

0.3

-3.225806

13.20755

0.42

0.215

7250

5.96

-0.8319468

-0.5008309

6.74

2.8

71282

CHINA OVERSEAS

24.25

0.4140787

4.978353

25.6

14.624

15063486

CHINESE ESTATES

13.84

1.615272

14.10275

13.92

7.697

987257

CHOW TAI FOOK JE

10.46

1.553398

-15.9164

13.4

8.4

4301400

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15056.2

0.5832764

14.89652

15056.67

12035.08984

NASDAQ COMPOSITE INDEX

3396.626

0.1077817

12.48917

3402.242

2726.68

FTSE 100 INDEX

6562.29

0.07609839

11.26655

6569.44

5229.76

HANG SENG BK

DAX INDEX

8192.46

0.1305339

7.620075

8213.71

5914.43

HOPEWELL HLDGS

NIKKEI 225

14285.69

0.7436404

37.42611

14421.38

8238.96

HSBC HLDGS PLC

HANG SENG INDEX

23244.35

0.8558998

2.592716

23944.74

18056.4

HUTCHISON TELE H

CSI 300 INDEX

2542.798

0.5083129

0.7866259

2791.303

2102.135

EMPEROR ENTERTAI

2.39

26.45503

2.49

1.1

1275800

FUTURE BRIGHT

2.42

6.140351

98.36065

2.75

0.77

13916000 17739059

GALAXY ENTERTAIN

2.98103

25.20593

38.2

16.94

129.9

0.6976744

9.435555

131.5

99.2

852686

-0.9584665

-6.766917

35.3

19.049

1800636

87.7

1.740139

7.872075

88.45

59.8

23425424

4.33

-1.590909

21.62922

4.45

2.98

2672000

LUK FOOK HLDGS I

22.2

1.369863

-9.016392

30.05

14.7

850100

MELCO INTL DEVEL

16.34

1.997503

81.35405

16.54

5.12

8485222

TAIWAN TAIEX INDEX

8267.09

1.2744

7.371775

8284.089844

6857.35

MGM CHINA HOLDIN

19.16

-0.3121748

44.2958

19.3

9.509

4178841

KOSPI INDEX

1956.45

0.1074526

-2.033004

2042.48

1758.99

MIDLAND HOLDINGS

3.49

1.15942

-5.675677

3.249

1500000

S&P/ASX 200 INDEX

5199.75

1.088995

11.84783

5201.9

3985

5089.335

0.923021

17.8991

5089.335

3635.283

FTSE Bursa Malaysia KLCI

1774

-0.1536531

5.035676

1826.22

1526.6

NZX ALL INDEX

989.462

0.3671988

12.17716

990.38

PHILIPPINES ALL SHARE IX

4473.62

0.2673875

20.94199

4525.92

JAKARTA COMPOSITE INDEX

18.9

Macau Related Stocks

CENTURY LEGEND

NAME

Last 19.16

24.80

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

7265

3MO ($)

CORN FUTURE

Min 18.92

20.60

COUNTRY MAJOR

1872.5

LME ZINC

average 19.027

Currency Exchange Rates

NAME ENERGY

Min 20.4

Max 19.22

NEPTUNE GROUP

0.157

3.289477

0.226

0.084

10410000

NEW WORLD DEV

14.18

0.4249292

17.97005

15.12

7.95

10817305

SANDS CHINA LTD

1.083032

23.71134

43.7

20.65

7673040

SHUN HO RESOURCE

1.5

7.142859

1.67

1.03

755.149

SHUN TAK HOLDING

4.21

0.7177033

0.4773256

4.65

2.56

2557350

3238.77

SJM HOLDINGS LTD

HSBC Dragon 300 Index Singapor

658.87

-0.12

6.08

STOCK EXCH OF THAI INDEX

1619.73

1.160416

16.36576

1620.12

1099.15

HO CHI MINH STOCK INDEX

485.07

-0.105029

17.24313

518.46

372.39

Laos Composite Index

1387.64

0.2210056

14.23068

1455.82

980.83

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

20.6

1.228501

14.44444

22.15

12.34

8171274

SMARTONE TELECOM

14.02

-0.7082153

-0.4261358

17.38

12.5

2602382

WYNN MACAU LTD

24.45

0.4106776

16.70644

24.75

14.62

6308387

ASIA ENTERTAINME

4.4299

0.6795455

44.76798

5.52

2.4

121231

BALLY TECHNOLOGI

53.04

0.6451613

18.63118

54.92

41.74

437938

BOC HONG KONG HO

3.56

1.136364

15.96091

3.59

2.7

9055

GALAXY ENTERTAIN

4.8

2.651839

20.9068

4.93

2.25

13700

INTL GAME TECH

17.37

0.1152738

22.58292

17.58

10.92

2113224

JONES LANG LASAL

99.93

0.170409

19.04932

101.46

61.39

414618

LAS VEGAS SANDS

56.77

0.08815233

22.98527

57.88

32.6127

2995233

MELCO CROWN-ADR

24.46

-1.13177

45.2494

25.15

9.13

4689021

MGM CHINA HOLDIN

2.29

23.78378

2.44

1.36

5000

MGM RESORTS INTE

14.71

-0.6752194

26.37457

14.9

8.83

9322097

SHFL ENTERTAINME

15.83

0.3804692

9.172414

17.2199

11.75

153501

SJM HOLDINGS LTD

2.65

2.713178

14.71862

2.85

1.65

13375

138.84

0.1153735

23.42431

140.34

84.4902

1064180

WYNN RESORTS LTD

AUD HKD

USD

May 9, 2013

Opinion

The Japanese experiment

Mohamed A. El-Erian

CEO and co-CIO of PIMCO, and the author of When Markets Collide

fter years of tweaks, Japan has now initiated a major shift in its policy paradigm, with reactions ranging from great optimism that the country may finally be lifted out of a quarter-century of economic stagnation, to concerns that the authorities’ dramatic change of course may in fact end up making things worse. But, while debate naturally focuses on Japan’s economic, financial, and political manoeuvres, the tipping point could well lie abroad. Prime Minister Shinzo Abe’s new government has embraced a revolutionary (rather than evolutionary) economic-policy approach that engages several initiatives, some of which were once deemed implausible, unthinkable, or even undesirable. From the doubling of the money supply to additional fiscal stimulus and wideranging structural reforms, the new policy paradigm is nothing less than one of the boldest economic-policy experiments in Japan’s postwar history. To demonstrate their seriousness, Japanese officials moved quickly to commit to measurable metrics. On the policy input side, they have specified and begun to implement purchases of securities totalling US$75 billion per month (three times as much, in relative terms, as the U.S. Federal Reserve currently purchases under

its unconventional monetarypolicy regime). On the output side, and after many years of persistent deflation (prices fell 0.5 percent last month), Japan is now targeting a 2 percent inflation rate within two years, thus underscoring its commitment to avoid a pre-mature withdrawal of monetary support for growth. Already, financial markets have responded with alacrity. The Japanese equity market is up an impressive 55 percent since hints of the paradigm shift started hitting investors’ radar screens. At the same time, the Japanese yen has depreciated sharply, including by more than 20 percent against the struggling euro. This response is part of the transmission mechanism for the Japanese government’s policies.

Meeting conditions The surge in the stock market benefits domestic investors, making them likelier to spend more (what economists call the “wealth effect”). This, in turn, should revive corporate “animal spirits,” leading to higher investment in new plants and equipment, together with higher wages and salaries. These are, of course, the same mechanisms that the Fed has targeted for almost three years in its own efforts to stimulate higher growth in the U.S. The macroeconomic outcomes have consistently

fallen short of expectations, and there is reason to believe that it will be even more difficult in Japan for monetary policy alone to gain sufficient traction. Japan’s ageing population mutes the potential impact of both the wealth effect and animal spirits. Resource flexibility is lower than in the U.S. Interest rates are already low. The experience of deflation is well entrenched. And, given Japan’s high level of public indebtedness, the risks of collateral damage and unintended consequences are potentially higher. With gross overall government debt already at 238 percent of GDP, some worry that Japan would face the threat of economic and financial dislocation were a failed policy experiment to lead its private sector – which traditionally has displayed an enormous home bias – to disinvest from Japan. This does not mean that Japan’s policy revolution will necessarily disappoint. But, critically, it does mean that even if you believe that the BOJ’s actions are necessary for Japan to emerge from its economic malaise, they certainly are not sufficient. Japan’s experiment requires meeting two additional conditions if it is to avoid going the way of previous failed policy initiatives: meaningful structural reforms that essentially change how segments of the economy respond and operate; and other countries’ continued

acquiescence in the currency depreciation needed to boost the impact of slower-moving domestic dynamics through meaningful gains in global market share.

Growing pie Meeting the first condition is in the hands of Japanese citizens and their elected representatives. The required reforms, though achievable, will test the government’s resolve and implementation capabilities, as well as the population’s willingness to face immediate disruptions in exchange for the promise of longer-term gains. The second requirement is very different. It can be achieved only if other countries are willing to sacrifice output, either because they have no choice, or because they believe that, over the medium-term, a stronger Japanese economy will benefit them as the longerterm income effects offset the impact of immediate market disruptions. But will the rest of the world accommodate Japan’s bold policy experiment, or will it take protective steps and thus impede the operation of a crucial policy transmission mechanism? While initial indications are encouraging, the jury is still out. Many affected countries – including those hit by the trade effects (such as China, South Korea, Taiwan, and euro zone members) and those

susceptible to the capitalflow channel (such as Brazil, Indonesia, and Mexico) – have not yet had enough time to react. Japan’s policy change was big and abrupt, and several of the countries on the receiving end have been focused on complex domestic challenges. A few countries – particularly Brazil, China, and South Korea – have noticed. But their reactions have been generally muted by Japan’s success in getting a U.S.led initiative at the G-20 to classify its policy response as constituting the use of “domestic tools” to pursue “domestic objectives”. It is just a matter of time until the rest of the world catches up with the reality of how Japan’s experiment affects them.

… there is reason to believe that it will be even more difficult in Japan for monetary policy alone to gain sufficient traction

The hope is that, bolstered by evidence of Japan’s serious pursuit of structural reforms, they will accommodate the experiment in two ways: by not retaliating, and by undertaking their own domestic reforms that compensate for the output lost to Japan. In other words, a growing pie for all better accommodates all. The fear is that neither Japan’s subsequent actions nor the affected countries’ domestic realities will justify the risk of lost market share, especially at a time when the global economy as a whole – and global policy coordination – is struggling. Here the risk involves currency wars and other beggar-thy-neighbour disruptions. There is currently insufficient data to predict either outcome confidently. As we await additional evidence, let us appreciate how rarely we witness, in real time, such a momentous policy shift. © Project Syndicate

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 9, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

ECB’s parking fees show its weakness

Taipei Times Exports last month declined by 1.9 percent from a year earlier, after posting a rise in March, leading the Ministry of Finance to be less optimistic over export momentum in the second quarter. Outbound shipments totalled US$25.05 billion last month, down 1.9 percent from a year earlier and 8 percent from a month earlier, the ministry said. “Demand in Asia did not continue picking up, while that in the European market showed a significant decrease, making exports last month turn weak,” Yeh Maantzwu, the ministry’s statistics department director, told a press conference.

Megan Greene

Bloomberg View columnist and chief economist at Maverick Intelligence

Mario Draghi, European Central Bank president

Jakarta Post Coordinating Economic Minister Hatta Rajasa said Indonesia’s economy was expected to grow only within a 6.4 percent range this year due to ongoing weakness in the global economy. “We have to be realistic in observing the global economy, which is still showing uncertainty, while at the same time, we have to make some adjustments in our revised state budget,” said Mr Hatta. The 2013 state budget set a 6.8 percent economic growth target. The Central Statistics Agency said on Monday that Indonesia’s GDP increased 6.02 percent in the first quarter from the same period last year.

Korea Herald The leaders of South Korea and the U.S. pledged stern action against any provocation by North Korea while leaving the door open for dialogue. U.S. President Barack Obama expressed support for President Park Geun-hye’s trustpolitik policy of reengaging the North and deterring its military threat. The leaders also adopted a joint declaration to set the new direction for a broader cooperation in security, economics, culture, regional and global issues.

The Age Australia’s Reserve Bank cut the rate by another quarter of a percentage point to 2.75 percent and, importantly, signalled that rates could fall even further from this unprecedented low. It sees the mining investment peaking towards the end of this year, and says there are signs that the non-mining economy is responding to earlier rate cuts and becoming more active. It notes the recent benign inflation numbers put inflation back in the middle of its 2 percent to 3 percent target range, and there is no doubt that with inflation quiet, there is room for what might be a precautionary additional cut.

business lending, that’s not necessarily good. If it prompts banks to make risky investments at a time when most of them already have a number of bad loans on their books, it could damage their balance sheets further. There are better ways for the ECB to encourage banks to lend. Banks might make more business loans, for example, if the ECB made it easier to use those loans as collateral for cheap central-bank credit. The ECB could do so by loosening requirements for the amount and type of business loans that it accepts in exchange for liquidity, and by lending more against a given value of loans. The central bank could go a step further and agree to purchase business loans in the secondary markets. Banks would be more willing to accept the risk of lending to small and medium- sized enterprises if they knew they could turn around and sell those loans to the ECB. For now, the ECB is unwilling to accept this degree of risk on its own balance sheet. That could change as the recession in the euro area deepens further.

Beyond remit

uropean Central Bank president Mario Draghi surprised markets and analysts last week by saying the central bank is open to an unconventional stimulus tactic: pressuring banks to lend by charging them a fee for parking cash at the ECB. The development does more to highlight the limits of the ECB’s powers than to demonstrate its boldness in dealing with the euro area’s economic slump. The euro immediately slumped against the U.S. dollar after Draghi’s statement. This might have been his aim: A weaker currency can help euroarea countries trying to export their way out of the crisis. But it is also possible that Draghi was doing something unusual for a central banker: being candid about the tools under consideration for unblocking the flow of credit in the region. Most of the euro area’s businesses are small and medium-sized enterprises, responsible for about 60 percent of gross value added and from 60 percent to 80 percent of employment in the European Union in 2012. In the few years leading up to the global financial crisis in 2008, borrowing costs for such businesses rose and fell roughly in line with the ECB’s short-term target interest rate and differed only slightly from one country to the next.

Excess reserves More recently, the ECB’s control over credit has weakened in peripheral euro area countries such as Spain

and Italy. In these countries, borrowing costs for small and medium-sized businesses, which are entirely dependent on banks for funding, have risen significantly over the past few years even as the policy rate has dropped.

The ECB is, without a doubt, the most powerful institution in the euro area. But it can’t fix bank lending and stimulate growth on its own

Meanwhile, bank lending has contracted throughout the euro area as financial institutions deleverage and shy away from risk. In its efforts to get banks lending again, the ECB is looking at excess reserves – some 120 billion euros (US$157 billion) the banks have been holding on deposit at the

central bank for safekeeping. If the ECB were to introduce a negative interest rate on deposits, effectively charging a fee, the banks might choose to lend the money out rather than watch it lose value. This logic is far from ironclad. Instead of lending the money to businesses and individuals, the banks could simply park it elsewhere – for example, in the sovereign bonds of Germany and other countries perceived to be financially healthy. This might benefit Germany by further pushing down its borrowing costs, but would do little to unblock credit to businesses. Banks might even try to cover their losses on the ECB deposits by charging higher interest rates on business loans, precisely the opposite of the desired outcome. Even if negative deposit rates did spur more

Even if the ECB could encourage banks to lend, though, that doesn’t mean businesses will borrow. The primary issue in the euro area isn’t the cost of funding. The main problem is that few businesses want to borrow at any cost. According to a recent ECB study on access to financing in the euro area, “finding customers” is the No. 1 concern for businesses in the region. If businesses are worried about demand, they will not seek loans to grow. Reviving consumer demand and business confidence in the euro area falls beyond the ECB’s remit. That’s up to government policy makers, and would probably require real progress toward establishing an effective banking, political and fiscal union. Unfortunately, market calm has inspired complacency, and there currently seems to be little political will to take the steps necessary to achieve a more viable union. The ECB is, without a doubt, the most powerful institution in the euro area. But it can’t fix bank lending and stimulate growth on its own. Bloomberg View

May 9, 2013

Closing HKEx Q1 net profit inches up

U.S. setting rules for Bitcoin

Hong Kong Exchanges & Clearing Ltd, Asia’s largest stock exchange by market value, reported a slight gain in first-quarter net profit. First-quarter net profit of HK$1.2 billion (US$154.64 million) was 1 percent higher than a year ago. Turnover in shares traded on the exchange rose in January-March to HK$74.4 billion from HK$63.2 billion a year earlier. The average daily volume of derivatives, stock options and metals contracts all rose from the previous year. The exchange, the buyer of the London Metal Exchange, also said contributions from its US$2.2 billion acquisition will be limited in the next two years as costs offset gains in trading fees.

The top U.S. derivatives regulator is considering whether the Bitcoin virtual currency should be subject to its rules. Bart Chilton, one of five commissioners at the Commodity Futures Trading Commission, said he had asked staff to explore whether consumers needed more protection from any mishaps with Bitcoin, whose value collapsed last month. Bitcoin, a digital currency that can be moved via computer or smartphone without a financial intermediary, has gained in prominence. It shot up in value in March but the price of one “coin” plunged to US$130 from a record high of US$260 on April 10.

WTO names Azevedo as new head Brazil becomes first BRICS nation to head global body

razil’s Roberto Azevedo has won the race to become the next head of the World Trade Organisation, the first candidate from the BRICS club of emerging economies to take the job. The career trade diplomat now faces a huge challenge to reinvigorate the global body, which has failed to wrap up the Doha trade liberalisation talks after years of stalemate and risks becoming irrelevant without a breakthrough. Mr Azevedo beat Mexico’s Herminio Blanco, widely seen as the favoured choice of the United States, in the final round of the contest to succeed France’s Pascal Lamy, who steps down on August 31. The result of the selection process was meant to be secret until a formal announcement yesterday, but the Brazilian government confirmed on Tuesday that Mr Azevedo, 55, won by a wide margin. Mr Azevedo will become the first Latin American and the first representative of a BRICS nation to head the Geneva-based trade body since its creation in 1995, a sign of the rising clout of emerging economies as developed countries struggle to recover from the 2008 financial crisis. “For Brazil it is clear that, given his commitment and experience, he would be able to lead the organisation toward a path of a fairer and more dynamic global economic order,”

Brazilian President Dilma Rousseff said in a statement. “This is not a victory for Brazil, nor for a group of countries, but for the World Trade Organisation.” Brazil and Mexico, often seen as regional rivals, had pushed the case for their candidates, seeking to cement their status as growing powers. Mr Azevedo, who has been Brazil’s ambassador to the WTO, had touted his ability to listen to all sides in a negotiation and to find solutions by quietly building consensus, a contrast with Mr Blanco’s idea of using the business sector to force governments to make deals happen.

Herculean task “Selecting Roberto Azevedo means a lot to many in the WTO system who have been looking for a non-dogmatic perspective on trade liberalisation,” said Ricardo Melendez-Ortiz, a former Colombian trade negotiator who now heads the International Centre for Trade and Sustainable Development in Geneva. “He’s probably more likely to be sympathetic to the views of African countries and developing countries that have been expecting delivery from the WTO on their issues… That doesn’t mean his job is going to be simple,” he added. In Washington, the National

Mr Azevedo becomes first Latin American to head WTO

Foreign Trade Council, a leading U.S. business group, praised Mr Azevedo’s experience and the focus he had placed on consensus-building in Geneva, but warned that there was a big job ahead. “The next head of the WTO faces two critical tasks in steering the membership toward a successful outcome to the ministerial conference this December in Indonesia and

Companies ‘cook’ the books to meet tough targets Top managers aware of ‘some irregular financial reporting’ – survey

ard-pressed company bosses across much of the world are under so much pressure to deliver on growth that many have resorted to cooking the books, Ernst & Young says in its latest Fraud Survey published this week. One in five of almost 3,500 staff quizzed in 36 countries in Europe, the Middle East, Africa and India said they had seen financial manipulation in their companies in the last 12 months, the accounting and consultancy firm said. In addition 42 percent of board

directors and top managers surveyed said they were aware of “some type of irregular financial reporting”. And despite scandals and regulatory failures in the wake of the credit crunch, almost a quarter of top financial services staff surveyed said they were aware of manipulation and almost 10 percent of all staff said their companies had understated costs, overstated revenues or used unprincipled sales tactics. Meanwhile, almost half of the sales staff surveyed across all sectors did not consider anti-corruption

policies to be relevant and more than a quarter thought it acceptable to offer personal gifts or services to win or retain business. In India, over a third felt justified in offering cash – triple the number in western Europe. “Our survey shows that to find growth and improved performance in this environment, an alarming number appear to be comfortable with or aware of unethical conduct,” said David Stulb, head of E&Y’s fraud investigation and dispute services practice.

building consensus toward a broader agenda to modernize trade rules for the digital age,” said the group’s vice president, Jake Colvin. He beat eight other candidates in a contest overseen by three WTO ambassadors, who totted up the support of the 159 member countries to settle on a single winner after three rounds of competition. Reuters

In Spain, ranked alongside Russia and just below Nigeria and Slovenia, 61 percent of staff believed companies often exaggerated results, compared with only 7 percent in Finland. And E&Y said the vast majority of managers from Norway to Nigeria and Russia to Greece were feeling the pressure to deliver a good financial performance over the next 12 months, despite little optimism that business conditions would improve. They were now forced to balance the risks of expanding into rapidgrowth markets, where winning contracts can go hand-in-hand with corruption, cutting costs further and piling pressure on staff or suppliers – or distorting results, the firm said. E&Y warned multinationals based in mature markets they could be more vulnerable to the risks of unethical behaviour. One quarter of those asked thought watchdogs in rapid-growth markets focussed more on the behaviour of foreign businesses. Reuters