Macau Business Daily, May 11,2012 by Business Daily

Year I | Number 30 | Friday May 11, 2012 Editor-in-chief | Tiago Azevedo Deputy editor-in-chief | José I. Duarte MOP 6.00

Wynn’s plot – and counterplot

l a u s u n u ss as

busine

STARTUP INVESTORS FLOCK TO MACAU C

hinese and foreign investors are pumping money into new Macau businesses – seeing the city as one of the few places in the world capable of double-digit growth this year - says a local economist. A total of 198.6 million patacas (US$24.8 million) in business start up

capital was injected into the Macau market in the first quarter – two and a half times more than in the equivalent period last year. The biggest portion, 61.8 million patacas, went to retailing - a boom sector as Chinese visitors get more disposable income – and to wholesaling. Taiwan companies put up

more than a quarter of the capital invested in new businesses in the first quarter according to data from the Statistics and Census Service - and close to the all-time quarterly record set in 2009. Domestic investors put up 34.6 percent and mainland Chinese investors 13.7 percent. Macau “is one of the

Gimme shelter yachts seek haven

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Nice big earner Galaxy Macau

very few economies that can achieve double-digit growth in the world”, said Henry Lei Chun Kwok, professor of business economics at the University of Macau. This was the “main reason for not only Taiwan, but also foreign investors to come to Macau,” said Mr Lei.

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HANG SENG INDEX 20400

Food manufacturers or sellers could face up to five years in prison or a daily fine of 600 patacas (US$75) if a product is found to have caused bodily harm to consumers. Medical products, Chinese traditional medicines or medical materials sold in traditional Chinese pharmacies would be exempted from the food statute.

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HSI - Movers

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Sands China on Hang Seng June 4

ands China Ltd, which owns and operates casinos and resorts in Macau, is set to become the 49th constituent of Hong Kong’s benchmark Hang Seng Index; the first Macau casino stock to do so, the index reviewer said in a statement yesterday. News of the inclusion came after the close of Hong Kong trading and is effective from June 4. The addition of Sands China to the Hang Seng could push up the company’s share price said

Grant Govertsen of Union Gaming Research Macau. “Every time we see a company included in an index – while it doesn’t change any fundamentals of the business – it oftentimes results in an increase in share price,” explained Mr Govertsen adding, “that happens as investment funds that mirror various indices are required to buy positions to reallocate funds and rebalance their portfolios in order to include whatever stock has been added to the index.”

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More on page 3

Bill of fare - food safety law Legislators yesterday approved in principle a food safety law. It’s not yet in the can, but a big step forward, having been discussed since 2008. Food safety rules are currently fragmented and depend on a variety of laws and bylaws. The bill will put the Civic and Municipal Affairs Bureau in sole charge of this public health essential. It also sets penalties for breaching food safety rules.

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%Day

ESPRIT HLDGS

5.42

HENGAN INTL

3.45

CHINA RES ENTERP

2.13

CHINA RES LAND

1.61

NEW WORLD DEV

1.41

CHINA PETROLEU-H

-1.78

PETROCHINA CO-H

-2.05

HANG LUNG PROPER

-2.96

SWIRE PACIFIC-A

-3.75

CATHAY PAC AIR

-6.29

Source: Bloomberg

Brought to you by Sands China’s parent Las Vegas Sands Corp. launched its Macau operating unit on the Hong Kong bourse in November 2009, raising around US$2.5 billion (MOP19.9 billion) in an initial public offering. The stock formally

listed on November 30 that year. Sands China shares closed in Hong Kong yesterday at HK$28.45, down 0.8 percent from the HK$28.70 recorded at the start of business. A.E.

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business daily May 11, 2012

macau

Plot and counter plot The second ‘owner’ lurking in the background of Wynn Resorts’ Cotai land deal Associate Editor

Have and hold – nearly half Wynn Cotai’s 21-hectare site once belonged to someone else

ehind the headlines of Wynn Resorts’ land concession for a new Macau resort on Cotai lurks a secondary property deal worth US$50 million (400 million patacas) that some observers regard as ‘old school’ Macau. By old school they mean opaque, confused and confusing, with no clear public perception of with whom the deal was made, or why it was even necessary. Steve Wynn will spend up to US$4 billion on building Wynn Cotai and in likelihood generate even more revenue from it in the years from its completion in 2015-16 to the formal expiry of his Macau concession in 2022. So paying someone US$50 million to sign away earlier claimed rights to part of his Cotai plot seems like a relatively cheap deal – even if it looks to some in the investment community like a shakedown perpetrated upon him by some locals. The Wynn chairman spoke at length to our sister publication Macau Business magazine to set the record straight on the so-called Tien Chiao deal. He stressed the U.S. Securities and Exchange Commission examined the transaction to check it hadn’t breached the U.S. Foreign Corrupt Practices Act – which prohibits American companies from bribing foreign officials – and gave it a clean bill of health. The full interview with Mr Wynn and his plans for Cotai, appears in the May edition of Macau Business. Here we give an extract of Steve Wynn’s comments on the background to the Cotai land deal. “I came to Cotai late,” the Wynn Resorts chairman says. “In early 2006, I started asking, as a concessionaire, for consideration to acquire land in Cotai for future use”. At the same time Wynn staff also began looking for Cotai sites that had been provisionally allocated to projects but not yet developed. The company became aware of Tien Chiao’s lot - on the eastern side of the Cotai land reclamation area and close to Macau International Airport. But there was a snag. The land had already been in Mr Wynn’s words “committed [by the government] to some people from

Beijing, for a ‘Taiwan House’.” Tien Chiao Entertainment and Investment Company Ltd was incorporated in Macau in 2005 with the goal of investing in entertainment and tourism, according to its registry documentation. It has two stakeholders; Hong Kong ID-holder Ho Hoi, who is the controlling shareholder, and Zhang Luchuan from Beijing. There is very little other official information available on the company. Mr Wynn said the project had

been given a commitment by the government for 10.9 hectares (27 acres). The idea behind the scheme, he says, was to foster relationships between the Chinese communities in Taiwan – which declared itself an independent republic after the end of the civil war in 1949 – and the Chinese mainland.

Handshake deal Although the agreement between Tien Chiao and the Macau

government was never official, Mr Wynn says that was how things worked in Macau back then. “Nothing was on paper for anybody,” he says, recalling Las Vegas Sands Corp. only received the official land grant for The Venetian Macao a few months ahead of opening. That’s a very different process to the one currently in place, where concessionaires are told they must have land permission followed by design approval and then a construction permit before they can pour any concrete in the ground. “The government suggested that I get involved with negotiating with the Taiwan House people,” Mr Wynn says, recalling the old informal system of six years ago. Eventually, a deal was reached. Wynn would pay Tien Chiao US$35 million and give the company a 12-percent stake in its Cotai property. Tien Chiao would keep two hectares to build the Taiwan House. “As time went by, they [Tien Chiao officials] were more and more anxious about when I’d get started in Cotai,” Mr Wynn says. His decision to focus first in building Encore on Macau peninsula - as in effect an extension to Wynn Macau – only added to that. Mr Wynn says a potential hurdle was turned into an opportunity when he offered to buy out Tien Chiao by paying US$50 million. Later, Wynn Resorts was able to get a government commitment to expand the lot to 21 hectares – the consolidated site that was formally gazetted by the Macau government on May 2. Mr Wynn dismissed rumours about connections between Tien Chiao and any government officials. “We vetted the people in the group. We did investigations. We had them sign papers that nobody was involved with any governments,” he said, adding the matter had been cleared by the U.S. Securities and Exchange Commission.

Okada ‘to be interviewed’ on Wynn’s university donation Japanese slot king says U.S. regulator probing Macau bequest – court filing

teve Wynn’s Macau regulatory headaches haven’t gone away with the resolution of the Tien Chiao land deal on Cotai. A former business partner, Japanese slot machine maker Kazuo Okada, said in an unrelated filing to the Nevada state court in Las Vegas on May 3 that the U.S. Securities and Exchange Commission has asked to interview him in connection with its inquiry into Wynn Resorts Ltd.’s US$135 million (1.1 billion patacas) donation to the University of Macau. Mr Okada has applied via the Nevada courts to examine Wynn company records relating to the university donation. “If ever there were a time when a director needed inspection, it is now,” Mr Okada’s lawyers said in the filing. “The other directors, under the control of Mr Wynn, and for their own financial self interest, have closed ranks against Mr Okada.” Robert Shapiro, a lawyer for Wynn Resorts, countered that Mr Okada had tried to avoid Wynn’s own legal proceedings against him. The company sued in February claiming a Philippines casino planned by Mr Okada was aimed at

luring “high-limit, VIP gamblers” from China in direct competition with Wynn’s casino in Macau and in contravention of an earlier agreement. “Mr Okada has refused to allow his attorneys to accept service of the lawsuit filed against him,” said Mr Shapiro in a telephone interview. “This is his attempt to obtain discovery [evidence from the other party] without submitting to the jurisdiction of the court.” Mr Okada held the largest single stake in Wynn Resorts through his Tokyobased Universal Entertainment Corp. until February. Then, in an escalating battle with founder and chief executive Steve Wynn, his 19.5 percent holding in Wynn Resorts was forcibly redeemed at a US$800 million discount to Wynn’s valuation of US$2.77 billion because, the company said, he was “unsuitable”.

In a further twist in the PhilippinesMacau debate, yesterday China told its citizens they were not safe in the Philippines and its state media warned of war, as a month-long row over rival claims in the South China Sea threatened to spill out of control. A.E.

Kazuo Okada

May 11, 2012 business daily | 3

MACAU

Taiwan invests 50m patacas in new Macau businesses Record investment by Taiwan in new businesses here in the first quarter puts mainland investors in the shade Vítor Quintã

vitorquinta@macaubusinessdaily.com

Retailers made up the biggest number of new companies created in the first quarter

aiwan investors ploughed 50.3 million patacas (US$6.3 million) into new businesses here in the first quarter, having invested only 160,000 patacas a year earlier. The Statistics and Census Service says this is a new record, by far the highest sum in any quarter since the bureau began collecting data on sources of capital in 2006. It is even close to the annual record of 53.6 million patacas, set in 2009. Taiwan companies put up more than a quarter of the capital invested in new businesses in the first quarter. Domestic investors put up 34.6 percent and mainland Chinese investors 13.7 percent. “This is [a sign of] the impressive economic growth and the continuous improvement in purchasing power that contributes to the increase in incoming investment from Taiwan,” said Henry Lei Chun Kwok, professor of business economics at the University of Macau. Macau “is one of the very few economies that can achieve doubledigit growth in the world”, Mr Lei said, and this was the “main reason for not only Taiwan, but also foreign investors to come to Macau”. The amount of capital put into new businesses in the first quarter was 198.6 million patacas, 2.5 times more than a year before, with the biggest slice, 61.8 million patacas,

going into wholesaling and retailing. Of the new companies created, 327 were retailers, more than any other kind of company. Annual retail sales grew by 44 percent to 12.6 billion patacas last year. “Retail and tourism-related businesses should be more attractive to Taiwanese investors than the other sectors,” said Mr Lei.

Hong Kong conduit Despite measures to integrate the Greater Pearl River Delta region, investment here by the nine mainland provinces amounted to only 5.7 million patacas, of which 4.7 million patacas came from Guangdong. But Mr Lei thinks the numbers may be deceptive. “We have to be careful in identifying the source of the capital,” he said. “In fact, quite a lot of companies from Guangdong may invest in Macau through their subsidiaries in Hong Kong. Then the official record may just show an increase in incoming investment from Hong Kong.” The amount of capital from Hong Kong grew by 9.4 percent to 18.7 million patacas. “Investors from China or Guangdong are very keen in developing their projects in Macau,” Mr Lei said. The city could be more attractive

to investors from the Greater Pearl River Delta region if it offered them more incentives, he said. “If the Macau government could provide more information and support to investors, for example assigning some key sectors to match Macau’s economic diversification, it may be able to attract more investors,” he said. More than two-thirds of the new investment – about 145 million patacas – was made by 29 companies with capital of at least one million patacas each.

MOP 198.6m Capital put into new businesses in Q1

About one-third was made by just 16 real estate companies. The investment created 881 new companies, 156 in the business services sector and 82 in the real estate industry. It established 40 new financial services companies, with combined capital of 53.9 million patacas. And it created 16 transport, storage or communications companies, with combined capital of 35.9 million patacas.

Making nothing The capital of companies that closed their doors in the first quarter amounted to 31.4 million patacas. The combined capital of companies that closed their doors in the first quarter of last year was 13 million patacas. The number of companies wound up dropped by seven to 130. The once-dominant manufacturing sector continues to shrivel. The capital of factories that shut down in the past three quarters amounted to nearly 10.3 million patacas, while the combined capital of newly created manufacturing companies was less than 900,000 patacas. Four offshore companies with combined capital of 1.9 million patacas stopped operating in the first quarter.

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business daily May 11, 2012

macau

Yachts yearn for moorings

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HOSPITALITY

A shortage of berths is a concern as Macau seeks to enlarge its yacht fair later this year Photo by Manuel Cardoso

Consumer interactions The goods included in the tourist price index (TPI) are sensitive, almost by definition, to the flows and whims of visitors. Their demand for certain kinds of goods adds to the demand of resident consumers. Goods with this kind of dual demand are likely to be especially sensitive to oscillations in demand, and their prices to be more volatile. It so happens that some of them are also essential elements of domestic consumption. Consequently, external demand affects us all and has an effect on the consumer price index. In the charts, all indices have been rebased to 2002. 195

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The marked rise in the TPI is likely to presage increased upward pressure on consumer prices generally, adding to the inflation coming from China via imports and the rise in the yuan. The breakdown of the TPI into some of its main components highlights, in some cases, aspects relevant to resident consumers. First, two components had extremely fast rises in prices: lodging and “various expenditures”. Lodging is not relevant to resident consumers. “Various expenditures” is a residual category, difficult to analyse. Next, some of the other items directly relevant to resident consumers show noticeable increases in price between 2002 and 2011. 200

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The increases range from 16 percent for medicines and personal care goods to 78 percent for restaurants. Food and beverages and clothing and shoes are important items in the resident consumer’s basket. Food and beverage prices rose by 44 percent, and clothing and shoes prices rose by 28 percent. The upswing in the prices of clothing and shoes is especially marked since 2005. Only in transport and communications, where visitors may benefit from policies directed at residents, has price growth been less steep. J.I.D.

Macau Yacht Club has 40 private berths, all full up

he scale will be grander when Macau hosts its second International Yacht Import and Export Fair at the Fisherman’s Wharf between October 25 and 28, it was announced on Wednesday. Last year’s show, spread over 100,000 square metres, attracted more than 30 yacht manufacturers and 75,000 visitors. More than 40 manufacturers from over 30 countries are expected to take part this year, along with hundreds of yacht clubs, thousands of distributors, private buyers and industry connoisseurs. Yacht sales are expected to grow rapidly, with the number of wealthy people in Macau and neighbouring cities on the rise. Figures from the mainland Chinese state-run media indicate that there are only about 1,300 private yachts in the mainland. In the United States, the world’s largest yacht market, industry figures show there are 17 million privately owned recreational boats. This year’s fair will also feature yachting and boating competitions to attract sailing enthusiasts from all over the world. The Maritime Administration said last month it planned to institute an “individual travel scheme” for yachts from Guangdong, Hong

Kong and Macau to facilitate smoother passage across each other’s territorial waters. The Maritime Administration said Macau could be developed as an important sailing centre. The government is now studying the necessary regulations with its counterparts in Guangdong and Hong Kong. The government also wants to increase the number of yacht berths and simplify the paperwork for berthing. However, the process has not been fast enough for some interested parties. “Macau’s yacht berths are currently running at full capacity. There are still a few hundred yachts waiting to get berths,” Vicente Ó Man Seng, president of Macau Yacht Club, told Business Daily. However, he said Hong Kong had similar problems, the berths there being inadequate for its 5,000 private yachts. Mr Ó said the Macau Yacht Club had applied to the government for more berths about eight months ago and was waiting for approval. The club has 40 private berths, all full, and can host about 30 temporary visitors. “Even if the government implements the individual travel

scheme, there will be no place to [tie up],” he said, comparing the paucity of berths here to the lack of hotel rooms. Eric Crowter, director of the Macau Yacht Sailing Academy and a committee member of the Associação De Vela de Macau, feels the same way. The academy, which teaches sailing to schoolchildren, has found it difficult to secure berths. It has to pay to keep its 20-odd boats in storage facilities. He said the government had built a sailing centre near Hac Sac beach, which could accommodate 100 small boats on dry land, but that the government had yet to grant access to it, and that it remained empty. He said his was the only training academy of its kind in Macau and that it was frustrating not to be able to teach for want of facilities. He wrote to the government two weeks ago and is waiting to hear back. He hopes the government will pay more attention to sailing as a sport and provide more venues, as it has done for other sports such as squash or fencing. “Macau is surrounded by water. Sailing is part of Macau’s history and it doesn’t pollute the water,” Mr Crowter said. X.C.

May 11, 2012 business daily | 5

MACAU

Galaxy triples first quarter EBITDA Cotai resort Galaxy Macau turbo charges balance sheet Associate Editor

acau casino operator Galaxy Entertainment Group more than tripled its first quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) compared to a year earlier. Just over 60 percent of that came from Galaxy Macau, the company’s Cotai resort. Galaxy Macau – the company’s first casino to have a big mass-market floor – opened on May 15 last year at a cost of HK$16.5 billion (US$2.1 billion). That addition of up to 450 tables – most of them on the main floor - nearly doubled the company’s mass table inventory in the territory. Galaxy’s first purposebuilt property StarWorld Hotel & Casino on Macau peninsula has 250 mass-market tables but was conceived as principally a high roller venue. In March for example – thanks largely to Galaxy Macau, there was a near 300 percent rise in Galaxy’s mass segment revenue, from HK$243 million in 2011, to HK$947 million. The industry average yearon-year growth in the mass for that month was 39.7 percent. But Galaxy also significantly outperformed the market in the VIP table games business during the first quarter. Its junket revenue grew by 99 percent year-on-year in March 2012, to HK$3.87 billion, compared to the market average of 20 percent for that month.

Heading north Galaxy Macau’s contribution backed by continued solid performance from StarWorld all added up to a 154 percent climb in net win in the first quarter. The figure excludes City Clubs, which operate on a Galaxy gaming licence but where the company shares the economic benefit with third party managements. The company also had its 14th consecutive quarterly growth in EBITDA, which reached HK$2.15

Galaxy Macau contributed 60pct of group EBITDA in Q1

KEY POINTS Q1 adjusted group EBITDA up 202pct y-o-y to HK$2.15b Galaxy Macau EBITDA up 6pct y-o-y to HK$1.3b 14th consecutive quarter of EBITDA growth Net win (excluding City Clubs) up 154pct y-o-y Outperforms market in VIP and mass segments

billion from HK$712 million a year earlier. This measure of performance is popular among casino operators as it takes account of the capitalintensive nature of resort building. On April 23 Galaxy started work on Galaxy Phase 2, which will cost a further HK$16 billion and roughly double the resort’s size, with up to 500 more gaming tables and 1,300 more hotel rooms. In the first quarter the number of visitors from mainland China to Macau rose 15.5 percent from a year earlier, to 2.33 million, representing 62 percent of all tourist arrivals. Most of the Chinese visitors – around 70 percent – came from neighbouring Guangdong province according to the city’s Statistics and Census Service. Several analysts have cautioned however that the rate of VIP gambling growth has been

decelerating in April even with the extra supply of tables from the opening of Sands Cotai Central early in the month. Gary Pinge and Elaine Lai of Macquarie Capital Securities Ltd said in a client note: “May is a critical month for bullish investors to believe in a consistent upgrade cycle.” And Kenneth Fong of J.P. Morgan Securities (Asia Pacific) added in another note: “While a strong mass market was a bright spot [in April], as a result of Sands Cotai Central’s opening that drove visitor numbers, VIP junket chip volume (not affected by luck) slowed to a 13 percent year-on-year growth, despite the new junket working capital injected by SCC. This supports our view that the VIP growth is no longer constrained by supply (i.e. junket working capital), but by demand.”

CotaiJet temporarily suspends four daily services Pays off ferry finance loan early saving HK$68 million Associate Editor

CotaiJet – seven-week suspension of some services

otaiJet, the ferryoperating brand of Macau casino operator Sands China Ltd, says it is suspending four daily services until June 30 for what it describes as “ferry maintenance”. Normally ferry and aircraft fleets are maintained on a rolling basis in order to minimise the amount of time they spend out of service and to minimise any loss of passenger fare revenue. But Sands China said in a statement to Business Daily: “This is a ferry maintenance scheduled to take place over a comparatively quiet period so that full fleet capacity could be ready for the busy summer traffic.” The suspended services are:

the 9:40 am from Hong Kong International Airport SkyPier to Macau Taipa Temporary Ferry Terminal; the 12 pm Macau Outer Harbour Ferry Terminal to Hong Kong China Ferry Terminal; the 5 pm Macau Outer Harbour Ferry Terminal to Hong Kong Macau Ferry Terminal and the 5:20 pm HKIA SkyPier to Macau Outer Harbour Ferry Terminal. Union Gaming Research Macau said in a note: “This represents only two percent of their capacity (four out of plus or minus 220 services).” Sands China said on Wednesday it intends to prepay all of the remaining balance of its Macau ferry

financing facility before the end of June to simplify the company’s capital structure. SCL said in a statement the outstanding amount of the facility – which is scheduled to mature in December 2015 – was HK$1.02 billion (US$131.4 million) as the end of April. The company plans to repay the debt from internal cash and expects total interest expense savings of HK$68 million it added. Cotai Ferry Co. Ltd – trading as CotaiJet – owns 14 high-speed catamarans built by Austal Shipyard of Australia. The 47.5 metre long vessels have an operational speed of 43 knots and can carry up to 417 passengers.

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business daily May 11, 2012

macau

Scooters to get exclusive lane on Sai Van Bridge

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Investment plans One of the most important things a government does in the long term is shown in its budget under the heading of investment. The foundations of future prosperity, namely the infrastructure that will support economic development and quality of life, are to be found there. The government’s Investment Plan – often identified by its Portuguese acronym, PIDDA – is an essential element in our understanding of its long-term view. Naturally, it is the major component of the government’s capital expenditure. Capital transfers or financial transactions are negligible when compared with the volume of resources allocated for investment. The recent boom demanded and still demands continuous improvement of the city’s infrastructure. Besides, several important projects are underway or expected to start in the near future: the trans-delta bridge, the light rail system, public housing and the new hospital, to name just a few.

A trial of a lane reserved for scooters on the Sai Van Bridge begins in August amid rising concern about traffic safety on the city’s three bridges

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Although most of these projects have been on the public agenda for several years, they did not really seem to need money until last year. The level of budgetary execution over the last two years has been around three-quarters of the original budget, suggesting some optimism in budgeting, or scheduling slips. Nonetheless, even that level of execution is a marked improvement on previous years.

A trial of an exclusive scooter lane on the Sai Van Bridge will start in mid-August

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The impression given is that this year, at last, public investment will be in tune with public expectations. The budget for investment is now growing fast, in a way that suggests a narrowing of the gap between the announcement through the years of various public investments and the execution of these investments. J.I.D.

he government plans to have a scooters-only lane on the Sai Van Bridge, and a trial will begin in mid-August, it was announced on Wednesday. The speed limit in the special lane will be 60 kilometres per hour. The general limit on the bridge is 80 kph. The measure comes after two scooter accidents, one fatal, on the Friendship Bridge earlier this year. The measure is meant to make it safer for scooter riders and motorcyclists going between Macau and Taipa, Transport Bureau chief Wong Wan said on Wednesday. The Sai Van Bridge is the bridge most used by two-wheelers, according to official data. In the first three months of 2012,

it carried an average of 17,900 motorcycles per day, 250 percent more than the Friendship Bridge. Even so, it is on the Friendship Bridge that accidents are most common. There were 786 accidents on Macau’s three bridges from January 2011 to the end of last month. Three out of four accidents took place on the Friendship Bridge and four people lost their lives there. The bridge with the lowest accident rate is the Governor Nobre de Carvalho Bridge, with only five accidents reported since January 2011. Only public buses, taxis and emergency vehicles are authorised to use that bridge. There have been calls to ban

scooters from using the Friendship Bridge, and the government is studying this idea, along with proposals to reduce the general speed limit on the bridge. The Transport Bureau says such changes can be made only after public discussion. The government has considered opening the lower deck of the Sai Van Bridge to motorcycles, but lack of adequate ventilation and lighting rendered the idea unfeasible. The lower deck of the Sai Van Bridge is open to the public only when typhoon signal number eight is hoisted and normal traffic on all other bridges is suspended. C.A.

Weather Beijing 24/14o C Changchun 24/13o C

Harbin 23/9o C

Xian 25/10o C Shanghai 27/19o C Chengdu 25/19o C Kunming 27/16o C Haikou 35/24o C Sanya 32/28o C

Guangzhou 30/25o C

MACAU (7 May-12 May) Day

Temperature

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26/32o C

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27/32o C

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Shenzhen 30/25o C

ASIA (today)

Hong Kong 29/26o C

Manila

TOKYO

Jakarta

34/26o C

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Macau 28/24o C

Bangkok

SEOUL

K. lumpur

36/28 C o

SINGAPORE

26/12 C o

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taipei

27/21o C

May 11, 2012 business daily | 7

MACAU

Legislators pass food safety bill The Civil and Municipal Affairs Bureau is set to take charge of food safety

he Legislative Assembly approved yesterday a bill that seeks to put the Civic and Municipal Affairs Bureau in sole charge of food safety. The legislation has been in the pipeline since 2008. The more than 20 legislators in attendance gave their approval and took the food safety bill a step closer to becoming law. Grey areas are still to be found in the bill, but there is general agreement that it would provide for better food safety arrangements than the present laws. Many lawmakers raised questions of definition and liability in the proposed law. For example, if a restaurant purchases substandard ingredients from food distributors, who should be liable if the consumer is harmed? The bill seeks to give the Civic and Municipal Affairs Bureau power to manage and supervise the safety of all food products, either imported or made here, except medical products, Chinese traditional medicines or medical materials sold in traditional Chinese pharmacies. This would not affect the administrative powers of other bureaus. The Government Tourist Office and Economic Services can continue to inspect restaurants and food production facilities for licensing purposes. However, they would have to inform the Civic and Municipal Affairs Bureau if they detected

Food manufacturers or sellers could soon face up to five years in prison if their products are found to cause bodily harm

any irregularity. The bill says the Civic and Municipal Affairs Bureau would have the right to issue new licences. At the moment food safety arrangements are fragmented and depend on a variety of laws and bylaws. The bill is meant to create more comprehensive arrangements. A food safety centre, under the Civic and Municipal Affairs Bureau’s supervision, would be created. The centre would be in charge of all administrative tasks related to food safety and would act as the communication channel between the government and the public, and deal with other

government departments and international organisations. The bill also spells out penalties for breaking the food safety rules. Food manufacturers or sellers could face up to five years in prison or a daily fine of 600 patacas (US$75) if a product is found to have caused bodily harm to consumers. Serious offences could lead to both civil and criminal penalties onethird heavier than the present ones. If products are found to have led to life-threatening conditions, the penalty could be up to eight years in prison. The bill also seeks to penalise the manufacture and sale of products that do not meet health standards.

The penalties are a fine of between 20,000 patacas and 250,000 patacas and imprisonment for six months to two years. Several Taiwan-made ingredients and food products were recalled here last year because they contained toxic plasticisers. This caused food security concerns here, in mainland China and Hong Kong. The Legislative Assembly also passed the bill on bonuses for public security forces. The assembly rejected member Au Kam San’s request for a general hearing on public representation in electoral committees.

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business daily May 11, 2012

GREATER CHINA

Foxconn targets 10pct sales growth InBrief Company expands manufacturing and sales in China amid stronger consumption

oxconn Technology Group, the world’s largest contract manufacturer of electronics, aims for at least 10 percent revenue growth this year as it expands manufacturing and sales in China amid stronger domestic consumption. “Foxconn’s development, especially in China, is like a microcosm of what China has gone through in reform and development in the last 30 years,” chairman and founder Terry Gou said yesterday in Shanghai. Mr Gou, who was at the groundbreaking for the Taipei-based company’s new China headquarters, didn’t explain why the growth figure is lower than an earlier target. Hon Hai Precision Industry Co., Foxconn Technology Group’s Taipei-listed flagship, on April 28 posted first-quarter net income which missed estimates by 31 percent amid narrower profit margins and losses at its Hong Kong-listed unit. Mr Gou, who halved his long-term target from 30 percent in 2010, said in December that revenue would climb “not less than 15 percent” this year. “Yes, our first-quarter results were not as good as what some had expected,” he said, without explaining why earnings missed expectations. “We are a manufacturing company, not a financial one. The numbers we focus on are not quarterly numbers but on numbers over the next three years, even 30 years.” Hon Hai, which gets about 40 percent of its revenue from making Apple Inc. products such as iPads and iPhones, reported a 15 percent increase in consolidated sales last

year, slower than the 53 percent pace in the previous year.

Revenue forecasts cut Consolidated revenue will probably climb 16 percent this year to NT$4 trillion (US$136 billion), according to the average of 12 analysts’ estimates compiled by Bloomberg over the last 28 days. Eleven analysts have cut their estimate by an average NT$179 billion over the past four weeks, according to data compiled by the Bloomberg. Foxconn Technology Group, which includes Hong Kong-listed handset supplier Foxconn International

Chen says authorities targeting relatives

Holdings Ltd and Miaoli, Taiwanbased display panel supplier Chimei Innolux Corp., is expanding its resources in research and development to focus on sales and services for its customers, Mr Gou said yesterday. Its new 80,000 square meter building in Shanghai’s Pudong district to be completed by 2015 will devote a sizable amount of space to allow the company’s customers to display products tailored for the China market, Mr Gou added. The building will also be a test bed for Foxconn’s new businesses including electronic commerce, he said.

Blind activist Chen Guangchen yesterday accused authorities in his home province in eastern China of seeking revenge for his escape by detaining his nephew and threatening other relatives. Mr Chen, whose daring flight from house arrest to the US embassy in Beijing sparked a diplomatic crisis, said his nephew Chen Kegui was in police custody in Yinan county in Shandong province after attacking an intruder last month. “The Shandong authorities are retaliating against me,” the selftaught blind lawyer told AFP.

Bloomberg

Taiwan president’s popularity plummets

Foxconn’s consolidated revenue will probably climb 16 percent this year to US$136 billion

Taiwan President Ma Ying-jeou’s popularity has plunged to its lowest level in nearly three years, just ten days before he is due to begin a second term in office, a poll showed yesterday. Amid increasing public anger over a string of controversial policies, Mr Ma’s approval rating fell to 19.5 percent in the poll of 1,086 people conducted by Wealth Magazine. The figure is the lowest since August 2009, when a poll gave him a 16 percent rating. In the latest survey, about half of those questioned said they were angry at government decisions to hike electricity and petrol prices.

Money rates fall on reverse repo

Petrochina close to acquire Valero’s Aruba refinery Final signing of the agreement could happen in about a month - sources Janet McGurty and Charlie Zhu

etroChina Co Ltd is in talks to buy Valero Energy’s shuttered refinery in Aruba, sources said, the latest move by China’s oil giants to take advantage of a global refining downturn to beef up supply. PetroChina, Asia’s largest oil and gas producer, has made a string of overseas refinery acquisitions in the past few years to strengthen its global refinery foothold and boost its trading and marketing capabilities. In a filing with the U.S. Securities and Exchange Commission, Valero said it had received a nonbinding indication of interest for the 235,000 barrel-per-day Aruba plant for US$350 million plus working capital, but did not identify the interested party. Sources familiar with the negotiations said the approach had been

made by PetroChina. It was the second time in two years the Chinese company had discussed the purchase of the plant, which is located near Venezuela, China’s fourth largest crude supplier, sources said. A local media website, Amigoe, reported that PetroChina signed a memorandum of understanding with the government of Aruba on April 30, 2012, but details of the deal had not been made public yet due to the sensitive nature of the negotiations. “The agreement is 90 percent completed,” a plant source with knowledge of the negotiations said. He added that the final signing of the agreement, which also includes the refinery docks, storage tanks and other assets in the Caribbean prized for its strategic location, could happen in about a month. PetroChina was not immediately

available for comment. The company has said it wants to double its global trading and marketing of oil – including crude oil and refined fuel – to 8 million barrels a day by 2015 from 2010 levels. PetroChina bought a 50 percent stake in chemical group Ineos’ European refining business last year for US$1 billion, its third overseas refinery deal after acquisitions in Singapore and Japan for more than US$2 billion combined. Sources said PetroChina has reached a deal with Petroleos de Venezuela (PDVSA) to supply the Aruba plant with heavy crude. “PetroChina has a presence in the Venezuelan upstream. This is related to them looking for an upgrader for that heavy crude,” said John Auers, a refinery specialist with Houston-based Turner Mason. Reuters

China’s money rates fell yesterday after the central bank injected funds into the market via seven-day reverse repos and sent a signal that it intended to keep the key seven-day money rate between 3.0 to 3.5 percent. China’s central bank will inject 24 billion yuan (US$3.80 billion) into the money markets through seven-day bond reverse repurchase agreements, at a yield of 3.30 percent. Dealers said the People’s Bank of China had sent a strong signal that it would keep monetary conditions relatively ample, using the reverse repo rate to guide money rates.

YGM in talks to buy Aquascutum Trading in shares of fashion retailer YGM Trading Ltd, which was in talks to buy failed British label Aquascutum Ltd, was suspended yesterday pending a statement on pricesensitive information, according to a filing from the Hong Kong bourse. It gave no further details. YGM Trading, which already owns licences for the Aquascutum brand in Asia, had said it was in exclusive talks to buy the 161-year-old British luxury clothes maker that has dressed Queen Elizabeth II and Winston Churchill. Aquascutum is the latest highprofile fashion name to be hit by the country’s retail downturn.

May 11, 2012 business daily | 9

GREATER CHINA

he world’s top four accounting firms will have to bring in Chinese citizens to run their operations in China and end the dominance of foreign partners under new rules announced by the Finance Ministry yesterday. The Big Four auditors - Deloitte Touche Tohmatsu, Pricewaterhousecoopers, Ernst & Young and KPMG - must start to convert their practices this August and comply with all the new rules by the end of 2017. The rules require them to “localise” their operations so that they are led by Chinese citizens and dominated by accountants holding China’s accountancy qualifications. The changes come at a difficult time for the Big Four, grappling with the fall-out from a string of accounting scandals at Chinese companies listed in the U.S that has left investors questioning the quality of auditing in China. On Wednesday, U.S. securities regulators charged Deloitte’s China practice for refusing to provide audit work papers related to a U.S-listed Chinese company under investigation for accounting fraud. The new rules will force the proportion of foreign partners at the Big Four to be a maximum of 40 percent when the structure is adopted in August this year, and fall to under 2 0 percent by 2017. This is likely to come as a relief to the firms, as there had been concerns that China could force them to convert more quickly to Chinesedominated practices. “This is an excellent compromise China is provid-

Beijing demands Big Four auditors to restructure Top four accounting firms forced to bring in Chinese citizens to run their operations in China Koh Gui Qing and Rachel Armstrong

KPMG, one of the Big Four auditors, must comply with all the new rules by the end of 2017

ing for a transition for the transfer of power from the expatriate partners to the local partners,” said Paul Gillis, Professor of Accounting at Peking University and author of the China Accounting Blog. “If the firms handle this responsibly, it allows them a period of time to further develop their local partners for senior management responsibilities,” he added.

New partner Tougher though, will be the requirement that each

of the Big Four’s senior partner be a Chinese citizen. All are currently led by foreigners. None of the accounting firms immediately responded to requests for comment. The foreign joint venture arrangements currently used by the Big Four were signed 20 years ago and allowed foreign-qualified accountants to dominate their China practices. Since then, the firms have come to dominate the country’s accounting industry, having won much of the lucrative work to

audit the books of stateowned enterprises when they first listed. In 2010, their audit practices, excluding their consultancy businesses, had combined revenue of more than 9.5 billion yuan (US$1.5 billion), according to the Chinese Institute of CPAs (CICPA). However, their market share has slipped in recent years to about 70 percent of the revenue among the top10 auditors, down from 85 percent in 2006. Including consulting, the four firms say they each

China’s trade surplus widens, adds easing pressure‎ T rade surplus widened in April as imports barely budged, adding pressure on the government to ease policies to spur expansion China risks a fresh downturn in demand for goods from its massive factory sector, with weaker than expected exports and stalling headline import growth signalling that government spending is the crucial factor keeping the economy moving. China’s exports and imports rose less than estimated in April as weakness in Europe and a domestic slowdown weighed on trade, adding pressure on the government to ease policies to spur expansion. Overseas shipments rose 4.9 percent from a year earlier, the customs bureau said yesterday. That compares with the 8.5 percent median estimate in a Bloomberg News survey of 33 analysts. Shipments to emerging economies experienced a drop alongside wellflagged European weakness. Import growth of 0.3 percent trailed forecasts for a 10.9 percent gain. The iron trade Sino-Brazilian wars surplus was US$18.4 billion, almost double

estimates of US$9.9 billion. “We know the external climate is not particularly conducive to strong export growth and digging into the data you can see primarily it is a euro zone story, which is to be expected,” Alistair Thornton, China economist at IHS Global Insight in Beijing, told Reuters. “But the headline number on import growth is less expected and more worrying. It does point to a real weakness in the domestic economy and shows that we have not yet turned the corner into a sustained recovery.” The risks to China’s factory-focused economy of weakness in private sector final demand were underscored by a drop-off in shipments from Asian economies that feed China’s export-oriented assembly lines, while robust imports from Australia and solid annual volume growth in raw material imports indicate that stateled infrastructure spending underpins economic activity.

Stimulus needed? The question now being asked by investors is whether the Chinese

government, which has ramped up spending on social housing and basic infrastructure as part of its progrowth policy bias since the autumn of 2011, should take further steps. Chinese stocks reversed gains following the report, while the yuan weakened a fifth day. The Shanghai Composite Index closed at 2,410.2 points, after it produced its worst loss in six weeks on Wednesday. The yuan yesterday fell less than 0.1 percent to 6.3125. Growth in outbound and inbound trade so far this year is the slowest since the global financial crisis three years ago, increasing incentives for Premier Wen Jiabao to build on two cuts in banks’ reserve requirements since late November. “At the moment the evidence is not yet decisive enough to say that the government needs to do more,” Wang Tao, China economist at UBS in Hong Kong, said. “We think government easing has already been coming through in social housing construction and infrastructure spending,” Ms Wang said, adding that the gathering consensus view that China’s economy had bottomed out remained valid.

employ around 10,000 people in mainland China, Hong Kong and Taiwan. Singapore’s accounting industry went through similar changes in the 1980s, as did Hong Kong’s in the late 1990s. In those cases the local partners used their enhanced voting power to force out many foreign partners. “I’m hoping China will have a smoother path than was seen before but human nature being what it is, I think that’s unlikely,” said Mr Gillis. Reuters

Other economists agreed that yesterday’s data alone was insufficient to trigger fresh easing steps, such as a quick cut to the reserve ratio requirements (RRR) for banks that would give them more money to lend. “It doesn’t change much for monetary policy,” Yao Wei, China economist at Societe Generale in Hong Kong, said. “The PBOC is experimenting with a new approach to manage liquidity. Instead of using required reserve ratio cuts, they are conducting reverse repos, which gives them more flexibility. I don’t think this report changes the outlook that much.” Still, some analysts argued that more action may be needed. “Given the rising political uncertainties in Europe, the weak data should push Beijing to gear up easing strength in no time,” Li Wei, a Shanghai-based economist with Standard Chartered Plc, told Bloomberg. “There is weakness in domestic demand and that should be a wakeup to policymakers to do more to stimulate domestic demand,” Darius Kowalczyk, an economist at Credit Agricole-CIB in Hong Kong, added. “Domestic demand is weak and that means we could see GDP growth start to slow.” China is likely to see its slowest year of economic growth in a decade in 2012, according to the consensus forecast of 8.4 percent in a Reuters poll. Reuters/Bloomberg

10 |

business daily May 11, 2012

ASIA

SingTel considers China, India acquisitions Net income climbed to US$1 billion in the three months ended March 31 Sales at SingTel rose 3 percent from a year earlier

ingapore Telecommunications Ltd, Southeast Asia’s biggest phone company, may buy non-phone businesses in China, India or the U.S. as it shifts focus from slower-growing core markets in Singapore and Australia. SingTel, as the company is known, may raise its stakes in associates in Asia and Africa and make other “strategic investments,” the carrier said in a statement yesterday, while reporting a 30 percent jump in fourth-quarter profit. Net income climbed to S$1.29 billion (US$1 billion) in the three months ended March 31, beating the S$966 million average of seven analysts’ estimates, helped by a one-time tax credit. The Singapore-based carrier plans to boost investments in emerging markets and add businesses at its digital services division as the Optus unit in Australia faces “continued intense competition” and growth

slows at home. The company would benefit from acquiring operations such as mobile advertising, according to Carey Wong, an analyst at OCBC Investment Research Pte. in Singapore. “Being a pure carrier doesn’t cut it at this stage,” Mr Wong said before the earnings announcement. SingTel needs to “come up with something new that can monetise the changing trends we’re seeing among consumers.” The carrier, which in March announced an agreement to acquire Redwood City, Californiabased mobile advertising company Amobee Inc. for US$321 million, said it planned to add assets at its Digital Life division.

‘Different places’ “When we look at acquiring the technology know how in the start up space, we could be looking

at quite a few different places,” Chief Executive Officer Chua Sock Koong told a media conference in Singapore yesterday. It could be startups in Silicon Valley, California or in countries such as India and China, she said. Group revenue at the Singapore and Australia operations are forecast to grow at “low singledigit” rates this year while earnings before interest, tax, depreciation and amortisation may be stable, SingTel said. Dividends from associates in Asia and Africa “are expected to grow,” it said. SingTel owns all of its domestic business and Optus, Australia’s second-largest phone company, and has minority stakes in associated carriers in more than 10 countries in Asia and Africa. Sales at SingTel rose 3 percent from a year earlier to S$4.78 billion in the three months ended March 31. Profit was boosted in the fourth-

quarter by a S$270 million tax credit, it said. Excluding the one-time items, the result was “consistent with expectations”, William Bratton, an analyst at Deutsche Bank AG in Hong Kong, said by phone. The company and its associates added about 12 million mobile subscribers in the quarter, SingTel said. The additions boosted total customers to 445 million at the end of March, 11 percent more than a year earlier. Full-year net income rose 4.3 percent to S$3.99 billion. Excluding the tax benefit, items and exchange differences including at associates, profit declined 3.3 percent to S$3.68 billion. Full-year profit before tax at its domestic business, which has a 46 percent share of Singapore’s mobile-phone market, fell 2 percent to S$1.67 billion. Bloomberg

Bank of Japan signals pause in easing

Indian rupee led gains among Asian currencies

Europe’s sovereign debt crisis, strong yen and rising cost of oil remain key risks to Japan’s economy

The rupee jumped as much as 1.6 percent on RBI move

he Bank of Japan’s monetary easing in April took into account risks from Europe’s simmering debt woes, board member Sayuri Shirai said, signalling that the central bank prefers to stand pat for now to examine the impact of its action on the economy. The central bank boosted asset purchases by 10 trillion yen (US$125 billion) on April 27, its second monetary easing in just over two months, in a move seen aimed at convincing impatient politicians and investors of its resolve to end deflation that has plagued Japan for more than a decade. But French and Greek elections at the weekend cast fresh doubts on how much progress Europe can make in resolving its debt problems, hurting global stocks and pushing up the yen, Ms Shirai told reporters after meeting with business leaders in Akita, northern Japan, yesterday.

Ms Shirai said Europe’s sovereign debt crisis remains among key risks to Japan’s economy, along with a strong yen and the rising cost of oil, stressing that the central bank will not rule out any policy options to support a fragile recovery. But she added that sufficient firewalls have been installed to prevent Europe’s debt woes from escalating into a global crisis, giving the BOJ time to take a thorough look at how its latest policy action will affect the economy. “It takes a long time, roughly 1.5 to two years, for the effect of monetary policy to appear on the economy,” she said. “We took into account risks from Europe, including [the likely outcome of elections in] Greece and France, when we eased policy last month. We’d like to examine the effect of our action and hope it helps achieve our forecast [of a moderate economic recovery],” she said. Reuters

he Indian rupee led gains among emerging Asian currencies yesterday after the central bank took dramatic regulatory measures to support the currency, while the Singapore dollar rose amid expectations of possible intervention by the authorities. The Reserve Bank of India (RBI) raised the intraday open position trading band to five times the available net position limit for banks. It also said exporters would be required to convert 50 percent of their foreign exchange holdings into rupees, a move traders said could boost the sagging rupee. The rupee jumped as much as 1.6 percent against the dollar after the measure, although dealers said the central bank had been spotted buying. Other central banks in the region, including Bank Indonesia, have also been spotted intervening to support their currencies, according to dealers. Expectations of official bids for regional currencies by central banks has provided some relief to the units. There was some talk that the

Monetary Authority of Singapore had bought the city-state’s currency at around 1.2550 per U.S. dollar, dealers said. But other central banks were unlikely to follow the RBI’s regulatory step, dealers and analysts said. “While this kind of intervention could boost the currencies in the short-term, it is actually a negative for investor confidence,” said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong. “Other policymakers will be very cautious in considering such restrictions.” Yesterday most units started on a weaker tone as the political deadlock in Greece threatens its rescue deal. Casting a further economic shadow, China reported that import growth stalled unexpectedly in April and that exports were weaker than expected. But emerging Asian currencies found some relief from data showing Australian employment unexpectedly rose last month. Reuters

May 11, 2012 business daily | 11

ASIA

Sony posts record US$5.7b full-year loss Company vowed to swing back into the black this year as it embarks on a huge restructuring plan

ony Corp., cutting 10,000 jobs after four straight years of losses, forecast a profit that was less than half of what analysts estimated as TV and PlayStation 3 sales slump. Net income in the year ending March 31 may be 30 billion yen (US$377 million), the Tokyo-based maker of Bravia TVs and Cyber-shot cameras said in a statement yesterday. That compared with the 61.4 billionyen average of 18 analyst estimates compiled by Bloomberg. Sony will lose about 80 billion yen selling TVs, marking a ninth straight year of losses in that business. Kazuo Hirai, 51, who took over as chief executive officer last month, is eliminating about 6 percent of the workforce at Japan’s largest electronics exporter after losing customers to Samsung Electronics Co. and Apple Inc. Mr Hirai is turning to mobile devices, games and digital imaging to revive Sony, which has lost about 90 percent of its value since 2000 while failing to deliver trend-setting products like the Walkman. “It’s still not clear how Sony can post this profit,” said Ichiro Takamatsu, a fund manager

at Tokyo-based Bayview Asset Management Co., which manages US$2 billion. “It needs something really innovative, but that won’t just pop out all of a sudden.” Sony predicts selling 17.5 million TVs this year, down from 19.6 million last year, according to the statement. Sales of the PlayStation game consoles may drop to 16 million units from 18 million units. Compact-camera sales will remain little changed at 21 million units. Sales this year may be 7.4 trillion yen, Sony said, compared with the 6.8 trillion-yen average analysts’ forecast.

Shares decline The company’s shares fell 1.2 percent to 1,213 yen in Tokyo trading yesterday, extending the losses this year to 12 percent. Shares traded in Germany were up as much as 2.1 percent to 11.80 euros. Samsung has gained 25 percent in Seoul trading and Apple has jumped 41 percent in New York trading. “Sony needs real restructuring, rather than cutting costs on the surface,” said Mitsushige Akino, who oversees about US$627

million at Ichiyoshi Investment Management Co. in Tokyo. “Sony’s position globally has dropped a lot and the direction won’t turn positive right away under the current environment.” The loss in the year ended March 31 was 457 billion yen (US$5.7 billion), lower than the 520 billion yen it predicted last month. Sony’s total liabilities stood at 10.8 trillion yen as of March 31, according to the statement. Sony, which lost 856 billion yen combined in the past four years, predicted an operating profit of 180 billion yen for the year that began in April, compared with analysts’ estimates for 166 billion yen. The company based its full-year earnings on 105 yen to the euro and 80 yen to the dollar. Mobile-phone unit earnings will worsen, Chief Financial Officer Masaru Kato said. “There are uncertainties over Europe’s outlook and China’s growth,” said Keita Wakabayashi, an analyst at Mito Securities Co. “Whether Sony will be able to get what it expects to get this year still needs to be monitored.” Bloomberg

Genting posts 33pct fall in profit Genting Singapore PLC, which owns one of Singapore’s two multibilliondollar casino complexes, posted a 33 percent fall in first quarter net profit, due to lower gaming revenues, the company said yesterday. The Singapore unit of Malaysia’s Genting Bhd earned S$205.5 million (US$163.9 million) in the JanuaryMarch period, down from S$305.4 million a year earlier. Higher depreciation with the opening of new attractions in Genting’s theme park in Singapore, as well as new hotels and a museum, also hit its earnings. Its Singapore casino, Resorts World at Sentosa, made S$376.4 million (US$300.24 million) in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) last quarter, down from S$5 28.4 million a year earlier. Genting’s EBITDA was lower than the US$472.5 million reported by Singapore rival Marina Bay Sands, owned by U.S. casino giant Las Vegas Sands. Resorts World’s net revenue for the first quarter was S$787 million ($627.8 million), 14 percent below a year earlier, due to the casino’s lower win percentages and business volumes in the premium player business, Genting said. Marina Bay Sands and Resorts World are the world’s second and third most expensive casino complexes after MGM’s CityCenter in Las Vegas, and their profits and profit margins are among the highest globally.

Ringgit rebounds from 4-week low Sony said it will lose about 80 billion yen selling TVs

Olympus may raise capital ratio after loss Japanese endoscope and camera maker posts US$620m annual loss

lympus Corp, the Japanese endoscope and camera maker struggling to recover from a US$1.7 billion accounting scandal, said its operating profit fell 7.5 percent in the fiscal year to March amid declining camera sales. The firm said it lost 48.99 billion yen (US$620 million) in the period, after a scandal that sparked lawsuits and the arrest of former executives. Olympus said the annual loss, which reversed a small profit of 3.87 billion yen in the year earlier and was bigger than forecast, was largely attributed to costs related to the damaging cover-up. The company booked sales of 848.55 billion yen in the latest period, up 0.2 percent from the previous year. Olympus did not present a forecast

for the year to next March, as it is in the process of compiling a business strategy plan, which could be released as early as this month. Consensus forecasts see operating profit nearly doubling to 63.4 billion yen in the year to next March. Olympus admitted last year it used improper accounting to conceal huge investment losses under a scheme that began in the 1990s, and Japan’s biggest corporate scandal in recent years wiped off about half of Olympus’ market value. The company, valued at around US$3.9 billion, is now under new management, led by former engineer Hiroyuki Sasa, after shareholders last month approved a new board to restore Olympus’ tarnished reputation. Olympus had a capital ratio of 4.6 percent as of March 31,

the company said yesterday in a statement. Olympus is “considering” moves to raise that, Mr Sasa told reporters in Tokyo. The company will present its outlook for annual earnings and a mid-term plan before its planned shareholders meeting at the end of June, Mr Sasa added. He’s “neutral” on whether the company should sell shares, he said. Rating and Investment Information Inc., a Tokyo-based credit-rating company, on April 24 reiterated its BBB- issuer rating, the lowest investment grade, after cutting it two steps last year. Olympus gained 1.4 percent to 1,130 yen at the close in Tokyo trading before the company’s announcement. The shares have climbed 12 percent this year. Agencies

Malaysia’s ringgit rose for the first time in six days, reversing earlier losses, on speculation the Federal Reserve will opt for more stimulus that boosts the supply of dollars. The currency earlier sank to a fourweek low as Greek political leaders failed to form a coalition government following a May 6 election, fanning concern the nation will renege on bailout terms and leave the euro. Malaysia’s industrial production rose 0.6 percent in March from a year earlier, less than the median estimate for a 3.3 percent increase in a Bloomberg survey, data showed yesterday. Fed Chairman Ben S. Bernanke said on April 25 the central bank was prepared to add more stimulus if necessary to support the U.S. recovery. “One of the catalysts now is potential quantitative easing and that’s what’s on the minds of investors,” said Syhiful Zamri Abdul Azid, director of investment, research and advisory at Kenanga Investors Bhd. in Kuala Lumpur. The ringgit climbed 0.2 percent to 3.0680 per dollar as of 4:37 pm in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 12 basis points to 6.38 percent. Malaysia’s government bonds were little changed. The yield on the 3.314 percent notes due October 2017 held at 3.32 percent, according to Bursa Malaysia.

12 |

business daily May 11, 2012

MARKETS Ticker NAME

Hang SENG INDEX Ticker NAME

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

HUTCHISON WHAMPO

1398

IND & COMM BK-H

494

LI & FUNG LTD

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

71.95

-0.6901311

4983311

93.1

53.6

4.96

-0.2012072

307643789

6.56

3.46

15.72

-1.007557

14461797

20.15

10.82

1299

AIA GROUP LTD

26.95

0.07426662

26831129

29.9

19.84

MTR CORP

26.5

-0.9345794

2606430

28.8

22.45

2600

ALUMINUM CORP-H

3.37

0.297619

19005464

7.18

3.2

NEW WORLD DEV

9.34

1.411509

16095546

12.418

6.13

3988

BANK OF CHINA-H

3.03

0.3311258

467388327

4.35

2.2

857

PETROCHINA CO-H

10.52

-2.048417

103212778

11.92

8.59

3328

BANK OF COMMUN-H

5.53

-0.8960573

25470845

7.409

4.15

2318

PING AN INSURA-H

61.7

-0.483871

10657117

84.7

37.35

BANK EAST ASIA

28.9

3537324

34.45

21.85

POWER ASSETS HOL

58.4

3028302

64.8

52.25

1880

BELLE INTERNATIO

14.7

-0.4065041

13946845

17.54

11.38

SINO LAND CO

12.36

0.1620746

16511305

14.16

8.482

2388

BOC HONG KONG HO

23.7

-1.25

14484087

24.65

14.24

SUN HUNG KAI PRO

89.25

-0.6124722

3824024

122

85.45

293

CATHAY PAC AIR

12.52

-6.287425

15553694

19.4

11.8

SWIRE PACIFIC-A

87.2

-3.752759

4381585

102.539

69.321

CHEUNG KONG

99.7

0.3522899

3682335

122.4

79.1

700

TENCENT HOLDINGS

223.2

-0.7117438

4863041

248.8

139.8

1898

CHINA COAL ENE-H

8.28

-0.4807692

17549000

11.66

6.59

322

TINGYI HLDG CO

20.2

-0.9803922

7972815

17.84

939

CHINA CONST BA-H

5.67

-0.5263158

242740424

7.36

4.41

151

WANT WANT CHINA

9.41

0.4268943

8129757

9.78

6.03

2628

CHINA LIFE INS-H

20.15

37148595

28.1

17.04

WHARF HLDG

43.85

0.2285714

3200478

33.15

144

CHINA MERCHANT

23.8

4524799

35.2

941

CHINA MOBILE

88.6

0.05646527

21254348

89.85

68.05

688

CHINA OVERSEAS

-0.1248439

12895522

17.86

9.99

386

CHINA PETROLEU-H

7.73

-1.778907

107146222

9.67

6.22

291

CHINA RES ENTERP

28.8

2.12766

2173855

35.5

1109

CHINA RES LAND

13.92

1.605839

6543589

15.6

7.28

836

CHINA RES POWER

13.76

1.176471

3076000

16.2

10.82

1088

CHINA SHENHUA-H

31.4

-1.72144

18743100

40.2

27.1

762

CHINA UNICOM HON

13.08

0.6153846

19653706

17.68

12.6

267

CITIC PACIFIC

12.18

-1.456311

4927600

10.26

CLP HLDGS LTD

65.7

-0.3034901

3047063

75.2

62.1

883

CNOOC LTD

15.22

-0.9114583

49824402

19.7

11.2

1199

COSCO PAC LTD

10.16

-1.550388

8370992

16.3

7.52

330

ESPRIT HLDGS

14.78

5.420827

18171630

31.35

7.55

101

HANG LUNG PROPER

26.25

-2.957486

7437411

34.65

20.85

HANG SENG BK

105.7

-0.7511737

1514463

125

84.4

HENDERSON LAND D

41.25

-0.1210654

4550559

52.95

33.2

1044

HENGAN INTL

80.9

3.452685

2677000

83.45

56.8

HONG KG CHINA GS

19.64

0.1019368

6172216

20.65

16.68

388

HONG KONG EXCHNG

117.2

-1.429773

5205025

176

99.15

HSBC HLDGS PLC

69.05

-0.647482

14140934

83.9

INDEX 20227.28 52W (H) 23707.94 (L) 16170.35 MOVERS 15 29 4

IN FOCUS

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.74

0.7352941

55757365

CHINA YANGTZE-A

AIR CHINA LTD-A

6.34

-1.705426

21215421

CITIC SECURITI-A

ALUMINUM CORP-A

NAME

7.19

0.5594406

30691762

CSR CORP LTD -A

ANHUI CONCH-A

16.29

-1.152913

28492778

DAQIN RAILWAY -A

PRICE

DAY %

VOLUME

PRICE

DAY %

6.68

0.3003003

13948750

NAME PING AN INSURA-A

41.37

-0.1930036

VOLUME 18233400

12.98

0.7763975

78480536

POLY REAL ESTA-A

12.79

0.3137255

11068866

4.8

-0.2079002

28641245

QINGHAI SALT-A

33.82

-0.5001471

4762987

7.54

0.5333333

23735262

SAIC MOTOR-A

15.49

-0.257566

12087283 18992061

BANK OF BEIJIN-A

10.26

-0.3883495

18827576

DATANG INTL PO-A

5.43

1.685393

7438643

SANY HEAVY INDUS

14.26

-0.349406

BANK OF CHINA-A

3.07

0.6557377

23997964

DONGFANG ELECT-A

21.98

1.430549

9167741

SHANDONG GOLD-MI

34.89

-0.0286533

5882717

BANK OF COMMUN-A

4.88

-0.204499

133272118

EVERBRIG SEC -A

13.38

0.2998501

8151135

SHANG PUDONG-A

9.16

-0.4347826

67576254

4.96

0.2020202

20226349

GD MIDEA HOLDING

13.6

0.1472754

7654994

25.59

-0.9291521

4366592

GD POWER DEVEL-A

2.61

0.3846154

26927260

BAOSHAN IRON & S BYD CO LTD -A CHINA CITIC BK-A CHINA CNR CORP-A

4.5

7906733

4.32

-0.2309469

44572730

5.64

0.5347594

5193117

SHANXI LU'AN -A

SHANGHAI ELECT-A

27.57

-0.7916517

8440649

GF SECURITIES-A

31.97

0.09392611

9663506

SHANXI XINGHUA-A

76.83

0.1564333

772795

GREE ELECTRIC

21.97

0.2281022

9653758

SHANXI XISHAN-A

18.09

0.3884573

21926975

SHENZ DVLP BK-A

16.13

-0.1856436

12942834

7.47

-1.581028

16455515

CHINA COAL ENE-A

9.46

0.1058201

5579735

GUIZHOU PANJIA-A

32.38

0.247678

4816566

CHINA CONST BA-A

4.69

-0.4246285

55060492

HAITONG SECURI-A

9.86

46610130

47.99

2.149851

1989212

3.09

0.3246753

31231946

CHINA COSCO HO-A

5.18

-1.145038

13015277

HANGZHOU HIKVI-A

CHINA CSSC HOL-A

36.45

-5.127538

23726752

HEBEI IRON-A

SHENZEN OVERSE-A SINOVEL WIND-A SUNING APPLIAN-A

16.65

1.092896

2569412

9.86

-1.596806

41835063 13597016

CHINA EAST AIR-A

4.19

-1.873536

23243859

HENAN SHUAN-A

65.16

-0.3669725

1115773

TONGLING NONFE-A

22.16

-0.493938

CHINA EVERBRIG-A

3.05

0.3289474

41116025

HUATAI SECURIT-A

10.12

0.7968127

18716041

TSINGTAO BREW-A

36.73

2.626432

2298349

CHINA INTL MAR-A

15.38

-0.7741935

9489674

HUAXIA BANK CO

10.7

18656720

WEICHAI POWER-A

-0.8413462

3912989 18447653

CHINA LIFE INS-A

18.28

-1.028695

10758749

IND & COMM BK-A

4.4

0.456621

39506628

WULIANGYE YIBIN

35.59

-0.2522422

CHINA MERCH BK-A

12.11

-0.08250825

51752022

INDUSTRIAL BAN-A

13.95

-0.3571429

39725342

XIAMEN TUNGSTEN

46.49

1.99649

9568527

CHINA MERCHANT-A

12.96

-0.2309469

7870379

INNER MONG BAO-A

44.9

2.769512

113128868

XINJIANG GUANG-A

27.7

15398295 11467062

CHINA MERCHANT-A

23.21

0.2591793

3439986

INNER MONG YIL-A

22.9

-0.4347826

9794210

YANGQUAN COAL -A

19.93

0.2011061

CHINA MINSHENG-A

6.65

-1.041667

104619711

INNER MONGOLIA-A

6.94

9.984152

334058050

YANTAI CHANGYU-A

97.88

-1.081354

768235

CHINA NATIONAL-A

6.73

-0.443787

12803977

JIANGSU HENGRU-A

28.39

2.15905

4049502

YANTAI WANHUA-A

14.79

-0.2697235

6408061

CHINA OILFIELD-A

19.39

1.998948

21622119

JIANGSU YANGHE-A

168.2

-0.6497342

1650170

YANZHOU COAL-A

0.5025126

4692278

CHINA PACIFIC-A

21.29

-0.2343018

13613491

JIANGXI COPPER-A

26.44

0.8775277

10742422

YUNNAN BAIYAO-A

53.18

4.29496

5539507

CHINA PETROLEU-A

7.12

0.140647

33037955

JINDUICHENG -A

14.35

0.7724719

9097431

ZHONGJIN GOLD

22.87

0.1752081

6217686

CHINA RAILWAY-A

2.68

-0.3717472

23268268

JIZHONG ENERGY-A

20.59

0.1459144

9776829

ZIJIN MINING-A

4.26

-0.4672897

41687651

KWEICHOW MOUTA-A

227.7

-1.355976

3057404

ZOOMLION HEAVY-A

10.02

-0.5952381

36114292

43.9

-1.059274

6172675

ZTE CORP-A

16.85

-0.8823529

13840555

16406785

CHINA RAILWAY-A

4.3

-0.921659

20925195

CHINA SHENHUA-A

26.91

-0.1854599

8094944

CHINA SHIPBUIL-A

6.25

-1.450646

56479598

METALLURGICAL-A

2.65

-0.3759398

4.8

0.2087683

30823654

NARI TECHNOLOG-A

20.91

-0.286123

4656908

CHINA STATE -A

3.34

37054960

NINGBO PORT CO-A

2.62

-0.7575758

15468056

CHINA UNITED-A

4.26

0.7092199

51532483

PANGANG GROUP -A

8.43

1.934704

84808981

CHINA VANKE CO-A

8.93

30703900

PETROCHINA CO-A

9.66

-0.7194245

34839203

CHINA SOUTHERN-A

Hang SENG CHINA ENTErPRISE INDEX NAME

LUZHOU LAOJIAO-A

NAME

INDEX 2657.214 52W (H) 3164.65 (L) 2254.567 MOVERS 149 128 28

PRICE

DAY %

VOLUME

CHINA LONGYUAN-H

5.89

1.551724

4115000

PETROCHINA CO-H

CHINA MERCH BK-H

15.64

-1.012658

14305484

PICC PROPERTY &

CHINA MINSHENG-H

7.85

1.948052

26678159

NAME

PRICE

DAY %

VOLUME

10.52

-2.048417

103212778

9.3

-1.06383

15789400

PING AN INSURA-H

61.7

-0.483871

10657117

SHANDONG WEIG-H

8.34

0.968523

942000

18.34

-0.4343105

3963811 1090000

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.4

-0.5847953

90474160

CHINA NATL BDG-H

9.05

-2.896996

114117511

AIR CHINA LTD-H

5.55

-3.979239

15846636

CHINA OILFIELD-H

11.4

-0.6968641

7230930

SINOPHARM-H

ALUMINUM CORP-H

3.37

0.297619

19005464

CHINA PACIFIC-H

23.9

-0.4166667

5258242

TSINGTAO BREW-H

1.694915

ANHUI CONCH-H

22.85

-1.72043

16903378

CHINA PETROLEU-H

7.73

-1.778907

107146222

WEICHAI POWER-H

-0.5681818

1348442

BANK OF CHINA-H

3.03

0.3311258

467388327

CHINA RAIL CN-H

5.4

-1.818182

9942376

14.94

0.1340483

10361638

BANK OF COMMUN-H

YANZHOU COAL-H

5.53

-0.8960573

25470845

CHINA RAIL GR-H

2.67

-1.476015

10410800

ZIJIN MINING-H

2.32

48094009

18.34

-0.5422993

4631100

CHINA SHENHUA-H

31.4

-1.72144

18743100

ZOOMLION HEAVY-H

10.16

0.5940594

15048200

CHINA CITIC BK-H

4.61

-0.8602151

25520318

CHINA TELECOM-H

3.97

1.794872

82469288

ZTE CORP-H

17.96

4224700

CHINA COAL ENE-H

8.28

-0.4807692

17549000

DONGFENG MOTOR-H

13.76

-0.7215007

9076135

CHINA COM CONS-H

6.74

-1.173021

12630570

GUANGZHOU AUTO-H

6.92

-3.755216

6017226

CHINA CONST BA-H

5.67

-0.5263158

242740424

HUANENG POWER-H

4.64

3.111111

22430300

CHINA COSCO HO-H

3.82

-5.445545

39608385

IND & COMM BK-H

4.96

-0.2012072

307643789

20.15

37148595

JIANGXI COPPER-H

17.34

-1.027397

18931086

NAME

PRICE DAY %

BYD CO LTD-H

CHINA LIFE INS-H

FTSE TAIWAN 50 INDEX NAME ACER INC ADVANCED SEMICON ASIA CEMENT CORP ASUSTEK COMPUTER AU OPTRONICS COR

PRICE DAY %

Volume

NAME

PRICE DAY %

Volume

FAR EASTERN NEW

0.9463722

5294822

SINOPAC FINANCIA

0.9081736

7423047

FAR EASTONE TELE

64.6

0.1550388

4950398

SYNNEX TECH INTL

70.8

0.2832861

1914629

17.35

1.166181

5927669

TAIWAN CEMENT

35.05

0.1428571

8205202

FORMOSA CHEM & F

-1.477833

6035614

TAIWAN COOPERATI

17.8

1.424501

2490292

2.298851

1087836

TAIWAN FERTILIZE

70.9

1164922

79.5

0.1259446

9634932

TAIWAN GLASS IND

28.85

1336902

102.5 -0.9661836

4077052

TAIWAN MOBILE CO

94.1

1.291712

5502742

TPK HOLDING CO L

365

-1.617251

2823151

TSMC

85.3

0.8274232

28423623

FIRST FINANCIAL

32.2

-3.303303

18695358

FORMOSA PETROCHE

29.15

0.1718213

11699495

FORMOSA PLASTIC

0.5747126

3180262

FOXCONN TECHNOLO

313 -0.1594896

2872795

FUBON FINANCIAL

30.2

1.003344

7485453

13.05 -0.3816794

36645297

HON HAI PRECISIO

87.7

0.4581901

24850574

HOTAI MOTOR CO

184.5

0.2717391

988829

UNI-PRESIDENT

47.65

2.034261

14880978

449 -0.7734807

5857245

UNITED MICROELEC

14.55

0.6920415

16518164

42.45 -0.7017544

CATCHER TECH

193

-1.78117

9742910

CATHAY FINANCIAL

30.2 -0.6578947

13849477

CHANG HWA BANK

Volume

INDEX 10289.81 52W (H) 13317.51 (L) 8058.58 MOVERS 10 27 3

0.623053

4176757

HUA NAN FINANCIA

16.45

1.230769

3046159

WISTRON CORP

CHENG SHIN RUBBE

71.8 -0.6915629

3532854

LARGAN PRECISION

490

1.871102

2277959

YUANTA FINANCIAL

13.4

0.3745318

15505883

CHIMEI INNOLUX C

12.2

27202136

LITE-ON TECHNOLO

36.3

1.966292

3867319

YULON MOTOR CO

49.1 -0.7077856

5110086

CHINA DEVELOPMEN

7.52

-0.265252

48224834

MEDIATEK INC

264 -0.3773585

4278710

28.4 -0.3508772

CHINA STEEL CORP CHINATRUST FINAN CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC

16.15

HTC CORP

16413648

MEGA FINANCIAL H

22.25

1.830664

14231555

18.65

1.634877

19057730

NAN YA PLASTICS

59.2

3216269

89.4

-0.886918

15542567

PRESIDENT CHAIN

160.5

0.6269592

524723

33.75

1.503759

7926788

QUANTA COMPUTER

-0.990099

9735588

93 -0.5347594

4412015

SILICONWARE PREC

33.5

0.6006006

5835352

INDEX 5156.08 52W (H) 6247.96 (L) 4643.05 MOVERS 28 18 2

8662498

May 11, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GaLaXy eNTerTaINMeNT

Max 22.90

average 22.27

MeLCo CroWN eNTerTaINMeNT

Min 21.65

23.00

37.10

13.20

22.72

36.82

13.12

22.44

36.54

13.04

22.16

36.26

12.96

21.88

35.98

12.88

21.60

Last 21.65

SaNDS CHINa LTD

Max 29.25

average 28.73

Max 37.05

average 36.60

Min 35.80

Last 36.25

Min 28.35

Last 28.45

29.1

16.32

22.48

28.9

16.24

22.36

28.7

16.16

22.24

28.5

16.08

22.12

28.3

16.00 Max 16.38

average 16.23

Min 16.04

22.00

Last 16.36

Max 22.60

average 22.27

Last 22.05

Min 22.05

CURRENCY EXCHANGE RATES %

EN BA TER T LL YT AINM BO ECH E C H NO ON LO GA G K GI O LA XY NG EN HO IN TER TL TA JO GAM IN NE ET S LA ECH N LA G LA SV SA EG L ME A LC S S A O M CR NDS GM OW CH NA M INA DR GM HO L RE SO DIN R SH T UF S IN FL E M TE SJ M AS H TE W OLD YN IN R N GS RE SO LTD RT S LT D

60 50 40 30 20 10 0 -10 -20

MAJORS

ASIA PACIFIC

AS IA

(H) 52W

(L) 52W

VOLUME CRNCY

2.91

0.3448276

32.27272

3.25

1.88

1712940

CROWN LTD

9.11

0.5518764

12.60816

9.29

7.45

1773099

AMAX HOLDINGS LT

0.089

-1.111111

2.298854

0.131

0.06

4764000

BOC HONG KONG HO

23.7

-1.25

28.80435

24.65

14.24

14484087

0.255

10.86956

0.41

0.204

3.15

12.5

4.79

2.3

47000

CHINA OVERSEAS

-0.1248439

23.26657

17.86

9.99

12895522

CHINESE ESTATES

10.96

0.1828154

-12.32

14.3

10.2

124500

-0.990099

-13.7931

15.16

11.46

2867400

EMPEROR ENTERTAI

1.31

0.7692308

18.01802

2.09

0.97

540000

FUTURE BRIGHT

1.03

145.2381

1.09

0.3

3750000

CHOW TAI FOOK JE

12.80

Last 13.04

22.60

ARISTOCRAT LEISU

CHEUK NANG HLDGS

Min 12.88

WyNN MaCaU LTD

MACAU RELATED STOCKS DAY % YTD %

average 13.00

16.40

Year-to-date performance relative to the Dow Jones Industrial Average

CENTURY LEGEND

Max 13.14

29.3

Macau related equities in the US

PRICE

35.70

SJM HoLDINGS LTD

IN FOCUS

NAME

MGM CHINa HoLDINGS

GALAXY ENTERTAIN

21.65

-1.814059

52.03652

24.95

8.69

32236000

HANG SENG BK

105.7

-0.7511737

14.70428

125

84.4

1514463

HOPEWELL HLDGS

20.55

-0.2427184

3.474317

24.903

18.56

529000

HSBC HLDGS PLC

69.05

-0.647482

17.0339

83.9

14140934

HUTCHISON TELE H

3.47

-1.977401

16.05351

3.6

2.13

6200000

LUK FOOK HLDGS I

18.84

1.290323

-30.47971

46.15

18.38

2495000

CROSSES

AUD HKD

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

AUD

1.0104

0.5273

-1.0285

1.1081

0.9388

GBP

1.6118

-0.062

3.6994

1.6618

1.5235

CHF

0.9271

0.2049

1.1865

0.9596

0.7071

EUR

1.2956

0.2088

-0.0386

1.4697

1.2624

JPY

79.74

-0.1254

-3.549

84.18

75.35

MOP

7.9956

0.0113

0.05

8.0449

7.9823

HKD

7.763

0.009

0.0567

7.8113

7.7529

CNY

6.3142

-0.0697

-0.3041

6.5098

6.2769

INR

53.4088

0.784

-0.6437

54.305

43.855

THB

31.1

0.0965

1.4469

31.96

29.63

SGD

1.2498

0.24

3.7446

1.3199

1.1992

TWD

29.36

-0.0238

3.1301

30.715

28.548

PHP

42.386

0.3515

3.4304

44.35

41.879

IDR

9251

0.0865

-1.9674

9367

8458

AUDJPY

80.569

-0.6591

-2.6524

88.637

72.057

EURCHF

1.20115

-0.0067

1.3021

1.26935

1.00749

EURGBP

0.80377

-0.2588

3.6851

0.90835

0.80028

EURCNY

8.1749

0.2092

-0.4979

9.514

7.9674

EURMOP

10.3575

-0.1796

0.1197

11.7768

10.1015

EURJPY

103.31

-0.3291

-3.5331

117.9

97.04

1.03

-0.0097

1.0311

1.0288

HKDMOP

World Stock MarketS - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

NAME

12835.06

-0.7503041

5.054201

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

2934.71

-0.3923605

12.65033

3134.17

2298.89 4791.01

FTSE 100 INDEX

5522.13

-0.1432175

-0.8999889

6084.08

DAX INDEX

6491.03

0.2427683

10.04823

7566.410156

4965.8

9009.65

-0.3914844

6.555622

10255.15

8135.79

7.35

1.239669

27.38302

10.76

4.3

2539503

NIKKEI 225

MGM CHINA HOLDIN

13.04

-0.6097561

35.94445

17.183

7.6

2927170

HANG SENG INDEX

20227.28

-0.5083952

9.725782

23707.94922

16170.35

MIDLAND HOLDINGS

3.63

-3.2

-10.14851

5.7

2.95

1882000

CSI 300 INDEX

2657.214

-0.01128875

13.27819

3164.65

2254.567

NEPTUNE GROUP

0.104

-5.454545

-6.306308

0.157

0.08

1270000

NEW WORLD DEV

9.34

1.411509

49.20127

12.418

6.13

16095546

TAIWAN TAIEX INDEX

7484.01

0.1110262

5.824732

9089.47

6609.11

SANDS CHINA LTD

28.45

-0.8710801

29.61275

33.05

14.9

10511862

MELCO INTL DEVEL

SHUN HO RESOURCE

1.19

1.32

0.82

SHUN TAK HOLDING

2.98

-1.324503

16.4459

4.686

2.241

5563633

SJM HOLDINGS LTD

16.36

1.741294

29.02208

10.22

18488129

SMARTONE TELECOM

15.18

-0.3937008

12.94643

18.5

9.8

738000

WYNN MACAU LTD

22.15

-1.116071

13.58974

27.48

14.807

8102019

ASIA ENTERTAINME

5.16

1.574803

-12.2449

10.8692

4.72

106696

BALLY TECHNOLOGI

46.69

-0.3415155

18.02325

49.32

24.74

365565

BOC HONG KONG HO

3.11

-1.269841

29.73537

3.15

1.81

24005

GALAXY ENTERTAIN

2.89

-1.365188

54.54545

3.24

1.08

11867

INTL GAME TECH

14.87

-0.4685408

-13.54652

19.15

13.38

2824258

JONES LANG LASAL

77.58

-0.9701302

26.64055

101.362

46.01

272120

LAS VEGAS SANDS

51.45

-1.850439

20.40721

62.09

36.08

12181531

MELCO CROWN-ADR

13.94

-0.3573981

44.90645

16.15

7.05

11478954

MGM CHINA HOLDIN

1.71

-3.932584

43.49331

2.21314

1.00254

1800

MGM RESORTS INTE

11.65

-1.354784

11.69702

16.05

7.4

11289056

SHUFFLE MASTER

16.05

-3.138202

36.94539

18.77

7.35

581575

2.05

-3.301887

25.76687

2.64

1.28

5200

115.37

-3.23744

4.416691

165.4931

101.02

3321167

SJM HOLDINGS LTD WYNN RESORTS LTD

KOSPI INDEX

1944.93

-0.2748309

6.528315

2192.83

1644.11

S&P/ASX 200 INDEX

4295.551

0.4788213

5.89145

4784.6

3765.9

JAKARTA COMPOSITE INDEX

USD

4122.161

-0.167084

7.853737

4234.734

3217.951

FTSE Bursa Malaysia KLCI

1589.13

0.2668938

3.815175

1609.33

1310.53

NZX ALL INDEX

795.558

0.227527

9.010367

814.431

700.441 2695.06

PHILIPPINES ALL SHARE IX

3422.13

-0.7597881

12.38374

3518.96

HSBC Dragon 300 Index Singapor

560.84

-1.34

STOCK EXCH OF THAI INDEX

1189.09

-1.504245

15.97258

1247.72

843.69

HO CHI MINH STOCK INDEX

486.07

-0.3178705

38.26484

492.44

332.28

Laos Composite Index

1034.88

0.257697

15.0557

1307.87

876.33

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

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business daily May 11, 2012

Opinion

Giving the well-performing state its due Ana Palacio

Former Spanish foreign minister and former Senior Vice President and General Counsel of the World Bank

he triumph of democracy and market-based economics – the “End of History,” as the American political philosopher Francis Fukuyama famously called it – which was proclaimed to be inevitable with the fall of the Berlin Wall, soon proved to be little more than a mirage. However, following China’s intellectual pirouette to maintain one-party rule while embracing the capitalist credo, history’s interpreters shifted their focus to the economy: not everybody would be free and elect their government, but capitalist prosperity would hold sway worldwide. Now, however, the economic tumult shaking Europe, the erosion of the middle class in the West, and the growing social inequalities worldwide are undermining capitalism’s claim to universal triumph. Hard questions are being asked: Is capitalism as we know it doomed? Is the market no longer able to generate prosperity? Is China’s brand of state capitalism an alternative and potentially victorious paradigm? The pervasive soul-searching prompted by such questions has nurtured a growing recognition that capitalism’s success depends not only on macroeconomic policy or economic indicators. It rests on a bedrock of good governance and the rule of law – in other words, a well-performing state. The West overlooked the fundamental importance of this while it was fighting communism. The standard bearers of the Cold War were not just the United States and the Soviet Union, but, in ideological terms, the individual and the collectivity. When competing in newly independent or developing countries, this ideological opposition became Manichean, fostering a fierce suspicion, if not outright rejection, of rival principles. As a result, strengthening state institutions was too often seen in the West as communist subterfuge, while the Soviet bloc viewed the slightest notion of individual freedom and responsibility as a stalking horse for capitalist counter-revolution. Leading economists have long argued that the West’s greater reliance on markets resulted in faster and more robust economic growth. But viewing the state and the market in terms of their inherent conflict no longer reflects reality (if it ever did). Indeed, it is increasingly obvious that the threat to capitalism today emanates not from the state’s presence, but rather from its absence or inadequate performance.

Strong institutions Consider recent events in Argentina, which is facing certain economic losses as anxious investors have second thoughts about the country

in the aftermath of the government’s nationalisation of energy giant YPF. That response is only logical, as investors seek the security of a well-functioning legal system to protect them from capricious political decisions. Mexico provides further proof that the market alone is not enough. An efficient judiciary and effective policing are necessary for capitalism to thrive. In Brazil, the government is daring, for the first time, to address the lawlessness of the overcrowded favelas that ring the country’s large cities. Or consider Ghana’s prosperity and how, like Brazil’s, it is going hand in hand with improved governance. At the opposite extreme, Venezuelan President Hugo Chávez’s undermining of his country’s institutions, prodding it onto a narco-state trajectory, places Venezuela alongside Haiti as an exception to Latin America’s recent economic success. More generally, the world’s thriving countries are those with strong and effective institutions, backed by legal frameworks that guarantee the rule of law. Latin America and Africa are not the only examples that prove the point. The European Union’s internal problems, and its ongoing sovereigndebt crisis, are clearly linked to the weakness of its institutions, and, on Europe’s periphery, it still confronts feckless democracies.

Indeed, on Europe’s doorstep, the show trial and imprisonment of former Ukrainian Prime Minister Yulia Tymoshenko is jeopardising her country’s international economic standing. In particular, President Viktor Yanukovich’s contempt for the rule of law has put Ukraine’s relations with the European Union in cold storage, with a comprehensive free-trade and association agreement on hold pending the release of Tymoshenko and other political prisoners. Meanwhile, political trials

Adam Smith, that icon of market theory, argued that wealth is created when public institutions enable the ‘invisible hand’ of the market to align interests

in Egypt are attracting international attention and deterring foreign investment.

Markets and laws In Asia, China is exposing the fallacy of looking at state capitalism as a competing alternative to liberal capitalism. Approaching them as alternatives is, in fact, little more than an intellectual remnant of the Cold War, much like the concept of “state capitalism” itself. With its remarkable ability to adapt, China is making strides to accommodate the rising power of its markets and people. In the process, officials are acknowledging the importance of good governance, as demonstrated by recent efforts to justify the purge and investigation of Bo Xilai as an example of the Communist Party “safeguarding the rule of law.” Adam Smith, that icon of market theory, argued that wealth is created when public institutions enable the “invisible hand” of the market to align interests. The Cold War distorted that wisdom. In a world free of that era’s ideological constraints, it is time to say loud and clear that the future of capitalism is linked to effective governance and the rule of law, and thus to the consolidation of wellfunctioning states. © Project Syndicate

editorial council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça, Cris Jiang Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief José I. Duarte Chief REPORTER Vitor Quintã Newsdesk Cláudia Aranda, Kristy Chan, Kelsey Wilhelm, Cherry Lee, Terina Cao, Tony Lai Creative Director José Manuel Cardoso Designer Janne Louhikari Photography Carmo Correia, John Si, 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 11, 2012 business daily | 15

OPINION

Nobody immune wires from income volatility Business Leading reports from Asia’s best business newspapers

Inquirer Business Japanese pachinko tycoon Kazuo Okada – who is embroiled in a bruising intracorporate dispute with his former partner, U.S. gaming magnate Steve Wynn – has vowed to beat Wynn’s casino operations. The chairman of Japan-based Universal Entertainment reaffirmed his commitment to invest US$2 billion in the Entertainment City of the Philippine Amusement and Gaming Corp. “My dream is to create the best casino in the world here in the Philippines,” he told reporters on Thursday. “This is why I’m focusing on the Philippine gaming to make it the best in the world and to beat Wynn Resorts,” Mr Okada.

Taipei Times Taiwan’s Bureau of Foreign Trade on Wednesday signed a memorandum of understanding with Standard Chartered PLC, as the government plans to use the UK lender’s regional resources to help foster trade with India. “The bureau hopes Standard Chartered’s wellestablished service network in India and its years of business experience there can help Taiwanese businesses to develop and seize business opportunities in that country,” it said in the statement. Trade between Taiwan and India totaled US$7.56 billion last year, up 16.98 percent from the previous year.

Straits Times The bid by the consortium led by Singaporean Bill Ng to land embattled Scottish Premier League giants Glasgow Rangers is on again, following the shock pull-out of American Bill Miller, who just last week had been named as the preferred bidder. And in a surprising twist, Mr Ng could now have the club at just half of his group’s initial offer of £20 million (US$32.3 million). Mr Miller withdrew his bid on Tuesday, which left Rangers, already mired in debts of about £55.4 million, hanging by a thread as they are expected to run out of money by the end of this month.

Peter Orszag

Vice chairman of global banking at Citigroup

ver the past three decades, the highest incomes in the U.S. have risen dramatically, and that has appropriately received lots of attention. At the same time, however, these high incomes have also become much more volatile, and that has gone almost unnoticed. Conventional wisdom suggests that low-income households experience the greatest changes in response to macroeconomic conditions – their income falls the most when the economy weakens, and it picks up the most when the economy recovers. That conventional wisdom is in need of some updating. Today, the impact of macroeconomic events on household incomes forms a Ushaped curve – it is greatest at the bottom and the top of the income distribution and smallest in the middle. The strengthening link between high incomes and macroeconomic activity provides some insight into a stunning set of statistics: in 2010, according to research by Emmanuel Saez, an economist at the University of California, Berkeley, households in the top 1 percent of income distribution accounted for an astonishing 93 percent of aggregate income gains. During the slump from 2007 to 2009, according to the same data set, that group also accounted for a very large share of aggregate income losses – almost half of the total decline. The tighter connection of the affluent to the macroeconomy isn’t limited to income. The Bloomberg same-store retail-sales indexes show a disproportionate decline for high-end stores in 2009, and then particularly rapid growth since 2010.

Thirty-year change These recent data won’t be particularly surprising to those who have read an impressive, but little-noticed, study published in 2010 in the Brookings Papers on Economic Activity by Jonathan Parker and Annette Vissing-Jorgensen. The two Northwestern University economists carefully document the increased “cyclicality “of high incomes over the past 30 years. Since the early 1980s, the income of the top 1 percent has fluctuated more than average over the business cycle, rising five percentage points more per year than the overall average during economic expansions and falling 3.7 percentage points more per year during recessions. Before 1982, the highestincome category fluctuated

One of the best ways to damp income volatility is to make the tax code more progressive, cushioning the blow from declines in income, while limiting some of the upside from gains. The tax system in the U.S. is highly progressive at the bottom of the income. For the very top of the income distribution, however, the tax code is not progressive

less than the average. Parker and Vissing-Jorgensen show that the increased cyclicality holds under a variety of income definitions, can’t be explained by capital gains or stock options, and also applies to consumption. And they demonstrate that the connection between incomes and the macroeconomy is even tighter for the top 0.1 percent than for the top 1 percent, and even more so for the top 0.01 percent. The impact of the business cycle on income thus now has a different shape from what it had 30 years ago. The “beta” (that is, the percentage change in family income in response to a 1 percent change in national income) is now 0.76 for families in the bottom quintile of the income distribution and 0.90 for families in the second quintile. For middle-income families in the third and fourth quintiles, it is less than 0.70. That’s consistent with the conventional wisdom: The impact declines as income increases over that range. What’s new is that beta now

rises again as we move further up the income distribution, reaching 1.01 for families in the 95th to 99th percentiles and 2.16 for families in the top 1 percent. So the bottom and top are most affected by the macroeconomy, with the impact on the top, if anything, actually larger than the bottom. In another paper, released this week by the National Bureau of Economic Research, the economists Fatih Guvenen of the University of Minnesota, Serdar Ozkan of the Federal Reserve Board and Jae Song of the Social Security Administration use data from Social Security earnings records to examine how people are affected by the macroeconomy. Their analysis, like the Parker and Vissing-Jorgensen results, shows that the business cycle now affects very top earners much more strongly than in the past. As the authors note, “the fortunes of very high income individuals require a different classification, one that varies over time: more recent recessions have seen

substantial income losses for high-income individuals, unlike anything seen in previous ones.” Four points follow from this change in the way incomes fluctuate over the business cycle. First, we shouldn’t expect a high-pressure economy, despite its other attractive features, to reduce inequality in the same way it has in the past – at least if the metric of inequality is how the top 1 percent fares relative to the middle. High incomes rising Second, a common cause may be triggering both the increased incomes and the increased sensitivity to macroeconomic conditions at the very top. Parker and VissingJorgensen, for example, argue that changes in technology may be causing both the rapid surge in income and the increased cyclicality at the top. Erik Hurst, an economist at the University of Chicago, says higher incomes could even be viewed as compensation for the additional volatility: “Households with very high incomes may have anticipated the increase in risk,” he writes, “and if so one would expect them to have demanded compensation for bearing that risk.” Third, one of the best ways to damp income volatility is to make the tax code more progressive, cushioning the blow from declines in income, while limiting some of the upside from gains. The tax system in the U.S. is highly progressive at the bottom of the income distribution – which is why the betas on after-tax income for families at the bottom are substantially smaller than those on pretax income. For the very top of the income distribution, however, the tax code is not progressive. In 2009, taxes rose as a share of income up to about US$1 million or so. At that point, according to Internal Revenue Service data, the effective income-tax rate stabilised before declining a bit for families with incomes of more than US$10 million. Introducing more progressivity into the tax code above US$1 million would help to reduce aftertax income volatility at the very top. Finally, if anything, highearning households should be the ones most in favor of aggressively boosting the economy in the short run – and not just out of benevolence. Yet I suspect, without definitive proof, that support for additional stimulus declines as one moves up the income scale. Bloomberg View

16 |

business daily May 11, 2012

CLOSING ICBC gets Fed nod

Trade strains The European Union is planning new trade defences to counter subsidies and dumping by trading partners such as China, the bloc’s trade chief said yesterday. These moves will intensify the fight by the EU and the United States against what they say are unfairly priced and subsidised imports from China. The EU has become more active in the past year in fighting what it sees as unfair trade practices. This year has already seen several accusations. Trade between the two is forecast to reach a record high of 500 billion euros this year.

Industrial & Commercial Bank of China Ltd won approval to buy a U.S. lender in the biggest opening of the American banking market to Chinese companies. The Federal Reserve allowed ICBC to operate as a bank holding company, buying a controlling stake (80 percent) in Bank of East Asia Ltd’s U.S. unit. The US$140 million acquisition gives Beijing-based ICBC 10 branches in California and three in New York. The Fed also allowed Bank of China Ltd and Agricultural Bank of China Ltd to open U.S. branches, the regulator said on Wednesday.

Tension rising in the South China Sea, talk of war Chinese government directs travel agencies to suspend tours to the Philippines

hina told its citizens yesterday they were not safe in the Philippines and its state media warned of war, as a month-long row over rival claims in the South China Sea threatened to spill out of control. Chinese travel agencies announced they had suspended tours to the Philippines, under government orders, and the embassy in Manila advised its nationals already in the country to stay indoors ahead of planned protests. “Avoid going out at all if possible, and if not, to avoid going out alone. If you come across any demonstrations, leave the area, do not stay to watch,” the embassy’s advisory said. The safety alerts came as governmentcontrolled media in China warned the country was prepared to go to war to end the stand-off over Scarborough Shoal – small islands in the South China Sea that both nations claim as their own. “No matter how willing we are to discuss the issue, the current Philippine leadership is intent on pressing us into a corner where there is no other option left but the use of arms,” the China Daily said in an editorial. “Since ancient times, our nation has deemed war the last resort in handling state-to-state relations. But Manila is living in a fantasy world if it mistakes our forbearance for timidity.” The editorial echoed other warnings in recent weeks in the state-run media that China was prepared to

use its massive military advantage to crush the Philippines’ challenge for the shoal. The two nations have had nonmilitary vessels stationed at the shoal since April 8 in an effort to assert their sovereignty to the area. The dispute began when Philippine authorities detected Chinese ships fishing there. They attempted to arrest the crew, but were blocked by Chinese surveillance vessels that were quickly deployed to the area.

Claims and counterclaims The shoal sits about 230 kilometres from the Philippines’ main island of Luzon. The nearest major Chinese landmass is 1,200 kilometres northwest of the shoal, according to Filipino navy maps.

The Philippines insists its claims to the area are backed by international law, as the shoal is well within its 200-nautical-mile exclusive economic zone. But China claims virtually all of the South China Sea as its territory, even waters close to the coasts of the Philippines and other Asian countries. Taiwan, Brunei, Vietnam and Malaysia also claim parts of the sea, which is believed to sit atop vast oil and gas resources. The rival claims have for decades made the waters one of Asia’s potential military flashpoints. More than 70 Vietnamese sailors were killed in 1988 when China and Vietnam battled for control of the Spratlys, an archipelago south of Scarborough Shoal. The Philippines, which admits to

having an extremely weak and poorly resourced military, has repeatedly said it wants to solve the stand-off over the shoal through diplomatic means. But it has also said it secured a pledge from the United States, its main military ally, to protect the Philippines from attacks in the South China Sea. A coalition of Filipino activist groups is planning to hold rallies at Chinese embassies around the world today to support the Philippines in the dispute. Organisers are hoping thousands of people will attend what they expect to be the biggest of the rallies, in Manila, and the Chinese embassy’s safety alert was circulated chiefly to warn its nationals about that protest. AFP

Hutchison to make revised offer for Eircom Offer for Irish phone company revised to US$2.6 billion

illionaire Li Ka Shing’s Hutchison Whampoa Ltd made a revised two billioneuro (US$2.6 billion) bid for Eircom Group, the Irish phone company in supervised credit protection, according to people with knowledge of the matter. The formal cash offer by Hutchison’s Three Ireland unit removes a number of conditions that were attached to an initial bid last week, which was rejected by an Irish court-appointed examiner, said the people. The offer for Dublin-based Eircom remains subject to due diligence, said one of the people. Eircom filed for examinership, an Irish version of bankruptcy protection, on March 30 as it seeks to restructure the 3.8 billion euros of debt accumulated following five ownership changes in the past 13

years. Mr Li, Hong Kong’s richest man, is adding to the more than US$31 billion that Hutchison has invested in wireless operations in the past decade, as European companies seek capital to weather the sovereign debt crisis. “The crisis in Europe makes this a good time for Hutchison to expand its footprint,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “Hutchison is wellcapitalised, and can raise more funds for deals if necessary.” Eircom has said it supports in principle a restructuring proposal from its first-lien, or most senior, lenders, which would see this creditor class take control of the company.

Stepping up investments Hutchison, one of Macau’s mobile operators, is stepping up its

Li Ka Shing’s wealth has increased this year to US$23.4 billion

investments in Europe, where the Hong Kong company agreed to buy wireless carrier Orange Austria this year, and acquired the U.K.’s Northumbrian Water Group Plc in 2011.

The planned purchase of Orange Austria, a deal valued at 1.3 billion euros, may receive approval from the European Union by “midyear,” Hutchison said this week. There are opportunities for consolidation in the phone industry in Europe, Hutchison Managing Director Canning Fok said in March. Hutchison’s 3 Group, which owns phone businesses in Italy, the U.K., Denmark, Sweden, Austria, Australia and Ireland, has made cumulative investments of HK$240 billion (US$31 billion), according to an estimate by Morgan Stanley in 2010. Mr Li’s wealth has increased by US$1.2 billion this year to US$23.4 billion, ranking him 14th in the Bloomberg Billionaires Index of the world’s richest people. Bloomberg