Year I Number 122 Wednesday September 19, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00 www.macaubusinessdaily.com
Okada turns up heat before Nevada grilling Page 2
‘Greener’ fuel rules to push up prices M
acau’s 99,000 registered vehicles could collectively cost 130 million patacas (US$16.3 million) more per year to fuel if the government introduces Euro V diesel engine emission standards. So says Nam Kwong Petroleum & Chemicals Co Ltd, the biggest importer of fuel oils in the territory. The unit of Chinese state-owned Nam Kwong (Group) Co Ltd, says that instead of trying to match European Union emission standards in one painful leap, the Environmental Protection Bureau should think of the inflationary impact
and set its sights lower at Euro IV rules. Since September 1 the retail price for unleaded oil has been set at 12.45 patacas per litre while low sulphur oil costs 13.4 patacas per litre. The initial forecast of the diesel cost rise under Euro V would be one pataca per litre because of the need of the importers to invest in new equipment says Nam Kwong. That’s around a seven percent increase and above the current rate of inflation. But the bureau’s André Cheong Sio Kei says the new rules will dramatically improve the local environment. More on page 3
Casinos betting on mid-rollers
Page 7
Fallout widens from China-Japan dispute
PAges 8 & 9
News where it matters
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HANG SENG INDEX 20680
20655
20630
Hospital funeral deal could kill competition No matter how good a hospital is at looking after its patients, it naturally generates a lot of business for funeral companies. There’s consternation therefore at Kiang Wu Hospital’s decision to sign an exclusive deal with a single firm to conduct funerals. The hospital’s funeral home is the only one organising traditional Chinese rituals in Macau. Rival firms say they will go out of business. Page 4
Bank profits down in July Macau bank profits nosedived in July – but it’s not clear why. A number of Macau banks have significant amounts of loan capital tied up in safe syndicated loans for gaming resort construction. On the retail banking side a sluggish housing market with little new supply has limited the opportunities for home loan expansion. But loans to non-residents have picked up. Page 5
Tourism boom threat to work-life balance Businesses rarely complain they have too many customers. But the swelling numbers of Chinese tourists combined with some selective relaxation of the mainland’s outbound visa policy is a challenge for locals. Increased competition with visitors for resources – from houses to bus seats to restaurant tables – is a serious issue says Leonardo Antonio Najarro Dioko of the Institute for Tourism Studies. Page 6
20605
20580
September 18
HSI - Movers Name
%Day
CATHAY PAC AIR
1.86
NEW WORLD DEV
1.85
WHARF HLDG
1.83
SANDS CHINA LTD
1.54
HANG SENG BK
1.22
CHINA COAL ENE-H
-1.64
BELLE INTERNATIO
-2.77
HONG KONG EXCHNG
-2.81
CHINA UNICOM HON
-3.17
ALUMINUM CORP-H
-3.60
Source: Bloomberg
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business daily September 19, 2012
macau AERL buys profit rights to Bao Li junket op Asia Entertainment & Resources Ltd, a New York-listed promoter of Macau casino VIP rooms, says it has bought the rights to all the profits of Bao Li Gaming Promotion Ltd. The latter is a Macau-based VIP room gaming promoter with one room containing five tables at City of Dreams, a Melco Crown Entertainment Ltd property on Cotai. The deal is backdated to September 1. AERL’s gaming promoters have VIP rooms at four Macau casinos: Galaxy Entertainment Group’s StarWorld Hotel & Casino and Galaxy Macau; Sands China’s Venetian Macao-Resort-Hotel and City of Dreams.
Okada turns defence into attack Issues letter to Wynn Resorts’ shareholders on eve of legal grilling in U.S. Associate Editor
K
azuo Okada – a Japanese businessman disputing the forced cancellation of his shares in casino company Wynn Resorts Ltd at an US$800 million (6.39 billion patacas) discount – was due to give evidence about the matter in Las Vegas overnight Macau time. The process – known in the United States’ legal system as deposition – requires parties in civil cases to be questioned by lawyers for the opposing side without the presence of a judge. It may be used in court later when the matter comes to trial. The questioning is normally robust and things said in deposition can sometimes come back to haunt one or both of the parties. In the light of that Mr Okada, aged 69, has decided the best form of defence is attack. On the eve of his deposition hearing, he has issued a stinging open letter to the Wynn Resorts shareholders criticising the corporate governance standards of the company under its chairman Steve Wynn, aged 70. Much of what Mr Okada says in the letter is a repeat or rephrasing of earlier claims in his bruising battle with Mr Wynn. That involves multiple lawsuits including an attempt by Mr Okada via the Nevada courts to have his share cancellation declared invalid.
Shareholder appeal The letter’s new material is essentially an appeal to institutional shareholders – over the heads of the existing board – to call for a reining in of Mr Wynn’s influence over the company in order, he says, to protect shareholder value. Mr Wynn – unlike his
counterpart Sheldon Adelson at Las Vegas Sands Corp. – is not a majority shareholder in the company he founded. “In the last year, the value of Wynn Resorts’ common stock has plummeted by almost 30 percent,” says Mr Okada’s document filed on Monday with the New York Stock Exchange by Wynn Resorts. It is written on headed notepaper from Mr Okada’s casino equipment company Aruze USA Inc.
Lost confidence It adds: “We believe that current and potential investors in the company have lost confidence in the company’s management and the board. We further believe that this loss of confidence has resulted from a history of poor corporate governance and questionable actions under the direction of Stephen Wynn, chairman of the board and chief executive officer of the company, much of it driven by Mr Wynn’s personal financial and control goals.” The letter continues: “Recently, the company has come under scrutiny for a questionable donation it made to a public university in Macau at a time when the company was seeking local government approval to open a casino. That donation is currently under investigation by [U.S.] federal and state authorities and has resulted in multiple lawsuits against the company.” Mr Okada’s missive comes on the eve of Wynn Resorts’ 2012 annual meeting scheduled for November 2. Mr Okada has nominated – via his company Universal Group – two new “highly qualified” independent directors for the Wynn Resorts board.
Tit for tat Notwithstanding the disputed cancellation of
his near 20 percent in the business for a promissory note valued at US$1.9 billion, Mr Okada remains a director of Wynn Resorts Ltd. He was removed as a vice chairman and nonexecutive director of the firm’s Macau unit, Wynn Macau Ltd, in February after the publication of what Wynn Resorts described as an independent report by ex-Federal Bureau of Investigation director Louis Freeh into Mr Okada’s business dealings in the Philippines. Mr Okada is seeking to develop a casino resort there. Mr Wynn says the move is in direct competition with its operations and in contravention of an undertaking he gave. The Freeh report also claimed Mr Okada’s dealings with Philippines gaming regulators make him “unsuitable” to be a shareholder. Mr Okada says essentially this was a kangaroo court, and an attempt to silence the company’s biggest single shareholder when he started asking awkward questions about Wynn Resorts’ US$135 million donation to the University of Macau. That is currently the subject of a regulatory inquiry by the Securities and Exchange Commission in the United States – albeit an informal inquiry by a relatively obscure SEC branch office in Salt Lake City, Utah – the city that is home to the Mormon Church and probably the jurisdiction least sympathetic to casino gaming in the continental United States. A request to Wynn Resorts for comment on the contents of Mr Okada’s letter had not been answered at the time Business Daily went to press.
Open letter to Wynn shareholders
Kazuo Okada – not going quietly
You talking to me? It’s amazing how you can survive in this region, being understood and understanding just a small part of the communication. That’s ok for you but not for your business.
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September 19, 2012 business daily | 3
MACAU
Expect clean-burning diesel to be costlier The government is warned that new standards for diesel fuel will mean price rises which will need careful management Tony Lai
tony.lai@macaubusinessdaily.com
T
he Environmental Protection Bureau hopes to finish this year drawing up new standards for fuel for diesel vehicles, with a view to improving air quality, bureau director André Cheong Sio Kei says. A draft of the new standards sent to the private sector says diesel fuel should meet the Euro V emission standard. Macau’s biggest supplier of diesel fuel, Nam Kwong Petroleum & Chemicals Co Ltd, part of state-owned Nam Kwong (Group) Co Ltd, says that will mean higher prices at the pump. “This means there will be drastic changes in the cost of diesel products in the Macau market and a potential large-scale increase in diesel prices,” the company was quoted as saying in a report about the new standards. Nam Kwong predicts the higher standards will add 1.00 pataca (US$0.13) to the cost of a litre of diesel. The company estimates that altogether consumers will have to pay 130 million patacas a year extra for fuel that meets the new standards, assuming consumption of petrol remains at 60,000 tonnes a year and consumption of diesel remains at 50,000 tonnes a year. Since September 1, unleaded fuel
has cost 12.45 patacas a litre at the pump and low-sulphur fuel 13.4 patacas a litre.
Stoking inflation Nam Kwong said fuel prices would have to rise to meet the additional investment that suppliers would make in transporting and storing fuel that meets the Euro V standard.
New standards for diesel fuel may be drawn up this year
No ferry newcomer expected, govt says
T
he Macau Maritime Administration expects neither a newcomer operating a new ferry route nor an expansion from the current operators, as the sector faces huge challenges. Director Susana Wong Soi Man told reporters after a seminar yesterday that the maritime transportation was facing different short- and long-term difficulties. In the near future, the operators would face pressure from a surge in diesel prices and human resources shortage, said Ms Wong, quoted by public broadcaster TDM. After the completion of the Hong Kong-Zhuhai-Macau Bridge in 2016 and the development in the Pearl River Delta region, ferry services will also face competition from the land transportation, she said. It is time for the city’s maritime
transportation industry to consider its future development, Ms Wong added. The territory currently has just two ferry companies operating – Shun Tak Holdings Ltd, led by Macau businesswoman Pansy Ho Chiu King, and CotaiJet, run by casino operator Sands China Ltd – after North West Express Ltd suspended its service to Hong Kong’s Tuen Mun in July this year. Ms Wong said they were not in a hurry to revoke North West’s operation licence and they would first monitor the situation for some more time. The company dropped its route as it could not afford the “expensive” rent of the Tuen Mun pier but it vowed to come back again after negotiating a lower rent, North West chief operating officer Koji Chan said. T.L.
Taipa ferry contractor disputes ‘illegal staff’ claim
T
he ‘illegal’ workers caught at the construction site of the new Taipa ferry terminal in July last year were working on a sea platform, where they did not need a valid Macau work permit, the contractor’s defence argued in court. According to Portuguese-language newspaper Tribuna de Macau, Zhen Hwa Harbour Construction claims the 35 workers had been hired solely to build the sea platform and had orders not to step on MSAR ground. As such, for all purposes the staff
were working in mainland China territory, the defence told the lower court on Monday. Macau has no territorial waters of its own. The July 2011 government inspection also seized three boats. But the owners, who have been in jail ever since, said the vessels were used for these workers to sleep at night. The authorities claimed the boats had entered Macau illegally but the owners say the vessels were authorised to remain at the site. V.Q.
The adopted standard should be the less stringent Euro IV standard. The Environmental Protection Bureau does not seem likely to change its mind. The government says in the report on the public consultations that it will consider what to do about higher diesel prices. Taxi operators and logistics companies agree with the new standards. They say the government must manage the consequent price increase properly because the increase could harm their business – and make life harder for people generally by stoking inflation. “The government promised the industry during the consultation that there would be no change in the price of diesel products,” said the vicepresident of the General Association of Macau Taxi Owners, Leng Sai Vai. “The government should handle this matter cautiously.” Mr Leng expects the operating costs of taxi drivers to rise by up to 8 percent if prices increase by as much as Nam Kwong predicts. “It’s ridiculous for oil suppliers to pass on the rise in their operating costs to the consumer,” he said. “I think the government should not let one big company control the price
as it wishes.”
Subsidy demand Mr Leng said diesel should meet the Euro V standard, considering that since March new vehicles have had to meet the Euro IV standard. “It’s a step totally backwards if the diesel is set at Euro IV,” he said. “The quality of oil products should always be a step ahead compared to vehicles.” Macau Air Freight Forwarding (Logistics) Association president Tang Man Vai said more expensive diesel would make it difficult for small logistics companies to survive. He said the government should subsidise logistics companies during the early stages of the transition to Euro V diesel to help them make it through. But his association has criticised the government for failing to consult logistics companies or even inform them about the changes. Mr Leng and Mr Tang called for the government to monitor closely vehicles that are allowed to cross the border because they were more likely to use substandard fuel.
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business daily September 19, 2012
macau Brought to you by
HOSPITALITY High-rolling jobs The gambling sector is major provider of employment. The annual data for labour market from 2004 to the end of last year shows that the sector absorbed a remarkable 43 percent of the jobs added in those years. The city’s economy added 108,500 workers in the same period, with 47,200 jobs added to the gaming industry.
Over the same period, the gambling industry’s share of the workforce more than doubled, jumping from 10.5 percent to 21.4 percent. The increase was most pronounced earlier in the period. From 2004 to 2007, the number of workers in gaming industry jumped from 22,900 people to 62,600 people, which represented 21.4 percent of the workforce five years ago. Employment in the sector retreated by almost 3,700 jobs between 2008 and 2009. Then, last year there was a renewed impetus on hiring, with jobs in the industry hitting a peak. The Statistics and Census Bureau surveys twice a year, in June and December, the number of full-time paid employees in the gambling sector. Due to the way data is collected and the timing of the surveys, the two sets of figures are not directly comparable. Since 2007, the number of dealers has also been recorded, in addition to the total number of paid employees. That allows a comparison of both. Dealers are naturally a critical element in the development of the sector and an activity that is subject to specific regulations.
Dealers represent a significant share of the sector’s workforce. Since 2007, the figure has oscillated around 42 percent, give or take a couple of percentage points. The number of dealers has increased by about double the growth rate of overall employees. About three-quarter of the additional jobs created in the sector since 2007 were for dealers. Today there are today almost as many dealers as public servants in Macau. J.I.D.
Hospital deal will bury us, undertakers claim A Legislative Assembly member calls for government action on San Long Yuen’s exclusive concession to run Kiang Wu Hospital’s funeral services Vítor Quintã
vitorquinta@macaubusinessdaily.com
T
he Kiang Wu Hospital’s decision to grant an exclusive concession to run its funeral services could force many undertakers to close as soon as this month, undertakers say. The undertakers’ complaints have reached the ears of Legislative Assembly member José Pereira Coutinho who has asked the government to step in and regulate the traditional Chinese funeral business to ensure fair competition and keep prices affordable. From next Wednesday, San Long Yuen Services Funeral Co Ltd will run funeral services at the Kiang Wu Hospital. San Long Yuen won the concession after the chairman of the board of the Kiang Wu Charitable Association, Fong Chi Keong, alleged that staff of the hospital’s funeral parlour in Zhuhai had been paid to smuggle electronic equipment into Macau. The hospital’s funeral parlour is in Zhuhai because that is where the closest crematorium is. Other undertakers say the hospital gave San Long Yuen the exclusive concession without a public tender and that the Kiang Wu Charitable Association received 30 million patacas (US$3.8 million) in exchange. Business Daily tried to contact Mr Fong, who is a member of the Legislative Assembly, and other members of the board of the association but none had responded by the time we went to press.
Ultimate victims Other undertakers fear that San Long Yuen’s exclusive concession will put most of them out of business, as the Kiang Wu Hospital’s funeral parlour is the only one that arranges traditional Chinese funeral rites which, they say, are demanded for 95 percent of funerals. Mr Coutinho fears the loss of a fragile element of the fabric of the economy. He said most undertakers were family businesses that “have been working for a very long time, in some cases for several generations”. San Long Yuen would have right of first refusal to arrange any given funeral and other undertakers would have to get permission to arrange funerals the company is not interested in. “This not only hinders [the] free market but also deprives other funerary agencies of their right to operate,” Mr Coutinho said in an official inquiry released last week. He said San Long Yuen, in pursuit of profit, “will use any reason” to
The Kiang Wu Hospital’s funeral parlour is the only one in Macau that arranges traditional Chinese funeral rites
elbow other undertakers aside, so depriving them of business. Business Daily was unable to contact San Long Yuen. “The ultimate victims are the residents,” Mr Coutinho said.
Call to action A group of 10 undertakers said in a letter to the secretary-general of the Kiang Wu Charitable Association, Ng Pui Kun, that the cost of funeral services had been increasing. Mr Coutinho fears that prices here will rise now that San Long Yuen runs Kiang Wu’s funeral services. He told the government: “Launch the necessary legislative procedures to regulate the sector, ensuring fair competition and that residents benefit from the best services at reasonable prices”. The other undertakers have demanded that the government take over the hospital’s funeral parlour and give it to the Civic and Municipal Affairs Bureau or a new public body to run. Mr Coutinho also criticised the behaviour of Kiang Wu Charitable Association, considering, he said, that it is “one of the biggest beneficiaries of public money subsidies”. Since the beginning of last year,
KEY POINTS The Kiang Wu Hospital awards an exclusive concession to run its funeral service The hospital’s charitable association pockets 30 million patacas Undertakers fear they will be put out of business A legislator fears funeral prices are set to rise
the association has received 89.8 million patacas from the Macau Foundation and 1.75 million patacas from the Health Bureau. Mr Coutinho asked the government to demand that the hospital “provide free funeral services to the most disadvantaged”. In addition, the legislator called on authorities to “supervise institutions who receive public money grants”.
September 19, 2012 business daily | 5
Bank profit surge runs out of steam The pace of growth in bank lending to non-residents picked up in July, but bank profits dipped VĂtor QuintĂŁ
vitorquinta@macaubusinessdaily.com
T
he banking industry’s operating profits tumbled in July, taking some of the lustre off its best first half ever. Data released by the Monetary Authority of Macau show the combined operating profits of the banks were 404.2 million patacas
(US$50.5 million) in July, 30 percent less than a year before. The July performance contrasts sharply with the annual growth of 27.1 percent in combined first-half operating profits. The signs had been pointing toward a slowdown.
In the first quarter operating profits were 1.25 billion patacas, 50 percent more than a year before. Operating profits in the second quarter grew more slowly as growth in lending slowed. In July, operating profits fell despite lending growth accelerating. The banks lent 399.6 billion patacas in July, 4.9 percent more than the month before. The monthly rate of growth in lending was slightly faster in July than in June. Lending continued to grow faster than deposits, which rose to 491.2 billion patacas in July, 2.5 percent more than the month before. This meant loans outstanding were the equivalent of 81.4 percent of deposits at the end of July. At the end of June the figure was 79.5 percent. The July percentage is the highest in the past year. It is above the 75 percent ceiling set for commercial banks in the mainland but lower than the average of 110 percent
for banks in the European Union. If the percentage is too low, banks may not be earning as much as they could be. Loans to residents were the equivalent of 51.2 percent of deposits by residents at the end of the second quarter, 0.4 percentage point more than at the end of the first. In contrast, loans to non-residents were worth almost 1.7 times deposits by non-residents. This means money kept in the bank by residents is being lent to outsiders, which may be risky for the banking system. The amount of bad loans to non-residents rose by almost 100 million patacas in July to 519. million patacas, the most since the financial crisis of 2008. Despite the slump in July, the combined operating profits of the banks in the first seven months of this year were 3.2 billion patacas, 15.2 percent more than a year before.
Banks are lending more money deposited by residents to outsiders
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business daily September 19, 2012
macau Carrie Lam in Macau today
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The newly reappointed Hong Kong Chief Secretary for Administration, Carrie Lam Cheng Yuet-Ngor, is in Macau today. During her one-day trip the official will pay a courtesy call to Chief Executive Fernando Chui Sai On before meeting with the Secretary for Social Affairs and Culture Cheong U. According to statements from both governments, Mrs Lam will also drop by several integrated leisure resorts as well as conference and exhibition facilities in the territory before returning to Hong Kong this evening.
Credit: up and up When details of credit to individuals are mentioned, most of the time, people have in mind loans to residents. However, the banks also lend to non-residents in amounts that are not negligible. Typically, in the period shown here, these loans represent between 8 and 10 percent of the value of loans made to residents. Credit extended to non-residents covers the full gamut of activities: loans for everything from housing to cars, as well as credit card balances.
Alarm sounded about new influx of tourists Residents may need to make a trade-off between economic opportunities and quality of life, says tourism expert Xi Chen
xi@macaubusinessdaily.com
T Credit to non-residents has increased steadily since mid-2009. On a quarterly basis, the credit extended has grown by 80 percent, to more than 7 billion patacas (US$888.5 million) by the end of the second quarter of this year. Most of the money loaned, about 5.4 billion patacas, was for housing but that has slowed down somewhat recently. The share of credit for other purposes has risen from about 15 percent in the third quarter of 2009 to more than 24 percent in the second quarter of this year.
he easing of visa restrictions for mainland Chinese is likely to mean millions more tourists will head to Macau soon, having a marked impact on the quality of life here, according to a tourism expert. “The impact is likely to be considerable,” said Leonardo Antonio Najarro Dioko, the director of the Tourism Research Centre at the Institute for Tourism Studies. “Though, in the long run, such a policy may increase economic development, it may make the quality of life for residents and the quality of experience of visitors deteriorate.” Mr Dioko said the development of regional infrastructure, such as the Guangzhou-Zhuhai Intercity Railway, meant that greater integration of Macau and Zhuhai was inevitable. “The character of Macau will change
tremendously over time as increased integration happens,” he said. “Macau residents will have to consider a very different scenario in the future than in the present. Whether it will be to their liking or not remains to be seen.” Beijing is also planning to make it easier for mainland internal migrants living in six cities to get visas to enter Macau, and to allow multiple-entry visas for Zhuhai residents. Mr Dioko said the visa changes were a double-edged sword that would bring “more economic opportunities but affect residents’ quality of life tremendously”. He said residents might not be willing to make that trade-off. An opinion article in the Chineselanguage newspaper San Wa Ou said the public feared multipleentry visas would push up prices,
as Zhuhai residents shopped for better-quality products. The report said multiple-entry visas would attract more speculative investors into the property market, leading to higher prices for housing. The public was concerned that the number of illegal workers would also increase because it would be difficult to tell whether Zhuhai residents were visiting or working. Macau Federation of Trade Unions president Ho Sut Heng told Business Daily it was hard to assess the impact of the visa policy. She said illegal workers had long been a problem, and she wants the government to do more. “The government needs to have the determination to monitor and punish illegal workers,” Ms Ho said. She said stricter law enforcement was needed or there would be more complaints from workers.
In 2009, the proportion of housing loans compared to total credit was appreciably higher for non–residents, 85 percent, than it was for residents, 78 percent. However, for both groups, the share of housing loans has declined over time. Housing loans to non-residents have in relative terms declined more sharply. Loans to both residents and non-residents both stand at just over 75 percent of all loans, with values that are within about 20 basis points. This may be taken as an indication that the market is cooling. However, we should note that, in absolute terms, the volume of credit, to both residents and nonresidents, keeps growing. J.I.D.
Zhuhai residents may be soon allowed multiple-entry visas for Macau
September 19, 2012 business daily | 7
MACAU
Cash is king as casinos compete for mid-rollers Deutsche Bank says more than half of City of Dreams’ mass tables now have min bets of HK$2,000-plus Associate Editor
MPEL’s City of Dreams – chasing premium mass players
M
id-rollers – cash-only table gamblers wagering thousands of dollars per hand – are an increasingly important part of Macau’s casino clientele says Deutsche Bank in a note to investors. As well as freeing the operators of the credit risk attached to true high rollers, they are also more profitable for the casinos per dollar wagered than the whales.
They are also more numerous than the VIPs. A senior gaming executive this week told Business Daily there might be as many as 4,000 Macau casino players per day willing to bet a minimum of HK$10,000 per hand on baccarat. Deutsche Bank says competition between Macau operators to improve table yield in this so-called premium mass market is getting more intense
in an environment where table numbers are capped. “Between our June and September table counts, City of Dreams [Melco Crown Entertainment Ltd’s Cotai resort] added the most tables with minimum bets at HK$2,000 or above (from 43 percent to 53 percent of its mass tables),” said Deutsche Bank in a note to investors. “In fact, in the second quarter, CoD already overtook Wynn Macau as the new leader in mass table yield (US$8,200 per table per day) [65,500 patacas per day],” added the bank.
September rebound Kenneth Fong of J.P. Morgan Hong Kong said in another note this week that combined mass market and VIP revenue for September is on track for 25.5 billion patacas (US$3.2 billion) – a 20 percent year-on-year expansion. That’s a major rebound from the insipid performance seen in July and
August. Both months were affected by typhoons and managed only 1.5 percent and 5.5 percent revenue growth respectively year-on-year. Citigroup last week revised upwards its September revenue forecast to 24 billion patacas. In September 2011 the industry generated 21.2 billion patacas. J.P. Morgan said up to September 16 the Macau market generated 14.3 billion patacas, adding that the daily run rate for the second week in the month was 943 million patacas compared to August’s 843 million. Although month-and month comparisons are generally less reliable than year-on-year ones because of fluctuations in seasonal demand in most service industries, that’s still an improvement in daily revenue of nearly 12 percent. “…the extra weekend (fifth weekend) of September that is attached with the October 1 Golden Week [National Day] should allow it to benefit from the strong demand,” said Mr Fong. Tim Craighead, of Bloomberg’s Casinos & Gaming Team, pointed out however in a market note yesterday that Macau does face a challenge in penetrating new Chinese markets beyond its traditional customer base of neighbouring Hong Kong and Guangdong province in the People’s Republic. “While China accounts for more than 50 percent of Macau’s visitors and is near peak levels, the two most important specific regions for visitors, Hong Kong and Guangdong, have been declining since mid-2011,” stated Mr Craighead.
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business daily September 19, 2012
Greater china Zhengzhou Coal to list in Hong Kong Zhengzhou Coal Mining Machinery Group Co., the biggest maker of coal-mining equipment in China, started gauging demand for a US$600 million share sale in Hong Kong, two people with knowledge of the matter said. The company, already listed in Shanghai, may begin taking orders for stock next week and start trading in Hong Kong in early October, said the people, who asked not to be identified because the information is private. The Zhengzhou city-based company’s offering may account for about 20 percent of its increased capital, the people said.
Fresh protests in China Japan row Japan embassy, businesses hunker down
hurling water bottles, waving Chinese flags, and chanting anti-Japan slogans evoking war-time enmity. “Wipe out all Japanese dogs,” read one banner held aloft by one of thousands of protesters marching on the embassy, which was ringed by riot police standing six rows deep. Japan’s foreign ministry said some embassy windows had been smashed. Rowdy protests, fuelled by Chinese nationalism, sprang up in other major cities including Shanghai, raising the risk they could get out of hand and backfire on Beijing, which has given tacit approval to them through state media. One Hong Kong newspaper said some protesters in southern Shenzhen had been detained for calling for democracy and human rights.
Shares tumble
Protesters gathered outside the Japanese embassy in Beijing
A
nti-Japan protests reignited across the mainland yesterday, forcing Japanese firms in the country to suspend operations, as a crisis over a territorial dispute escalated on the day Chinese commemorated Japan’s 1931 occupation of the mainland China. Relations between Asia’s two biggest economies have faltered badly, with emotions running high on the streets and also out at sea where two Japanese activists landed on an island at the centre of the dispute.
China reacted swiftly to the news of the landing, which risked inflaming a crisis that already ranks as China’s worst outbreak of antiJapan sentiment in decades. Beijing described the landing as provocative, lodged a complaint with Tokyo and said it reserved the right to “take further action”. “The unlawful landing of the Japanese right-wingers on the Chinese territory of the Diaoyu islands was a gravely provocative action violating Chinese territorial
sovereignty,” Chinese Foreign Ministry spokesman Hong Lei said in a statement. The dispute over the uninhabited group of islands in the East China Sea – known as the Senkaku in Japan and Diaoyu in China – led to another day of anti-Japan protests that Japanese expatriates feared it could peak later this week. Japanese businesses shut hundreds of stores and plants across China and Japan’s embassy in Beijing again came under siege by protesters
U.S. Defence Secretary Leon Panetta, visiting China to promote stronger SinoU.S. military ties, again called for calm and restraint. Washington has said it will not take sides, although it is a strong ally of Japan. China said it wanted a peaceful outcome. “We still hope for a peaceful and negotiated solution to this issue and we hope to work together and work well with the Japanese government ... ,” Defence Minister Liang Guanglie said after meeting Mr Panetta. Well-known Japanese firms have been targeted by protesters, with car makers Toyota Motor Corp and Honda Motor Co. halting some operations after attacks on their outlets. Other Japanese companies – from Mazda and Mitsubishi Motors to Panasonic and Fast Retailing – also shuttered plants and stores in China,
Bo’s police chief confesses to defecting Wang Lijun charged with taking 3.05 mln yuan in bribes
W
ang Lijun, the former Chongqing police chief whose flight to a U.S. diplomatic post in February sparked China’s biggest political upheaval in a generation, confessed to defecting, the state-run Xinhua news agency said as his two-day trial ended yesterday. Mr Wang’s actions were “very serious” and his cover-up of the murder of British businessman Neil Heywood broke the law, Yang Yuquan, a spokesman for Chengdu Intermediate People’s Court, told reporters. Xinhua said that because of Mr Wang’s assistance in helping investigators with the murder case against Gu Kailai, the wife
of his former boss Bo Xilai, and because he surrendered to Chinese authorities and left the U.S. consulate in Chengdu, he may be shown leniency. “These acts have severely undermined the socialist rule of law” and “infringed citizens’ legitimate rights,” Xinhua said. It said Mr Wang was charged with taking 3.05 million yuan (US$482,600) in bribes.
The court will “consider the arguments from both sides and, according to the truth and the law, consult and pass judgment at a later time,” Mr Yang said in a statement. Mr Wang will probably receive a severe punishment at the trial to deter other officials from fleeing to foreign diplomatic posts as a means of protection, said Ding Xueliang, a social sciences professor at Hong Kong University
of Science and Technology. “Wang Lijun’s case is one of the worst type of things to happen to the party because he is not an ordinary provincial official,” Mr Ding said. Wang Lijun’s revelations at the U.S. Consulate in Chengdu led to the suspension of Mr Bo, the former Chongqing Communist Party Secretary, from the ruling Politburo in April. Mrs Gu was convicted and given a suspended death sentence last month for murdering Mr Heywood. The son of one of the communist country’s founders, Mr Bo was a candidate for the Politburo Standing Committee until earlier this year, and his downfall has roiled a oncea-decade leadership transition that may occur within weeks.
September 19, 2012 business daily | 9
greater china Traders see tightening heading into holiday China’s money rates were mixed yesterday, with one-day repo rates jumping on expectations of increasing tightness in the market in the run-up to a week-long holiday in early October. A central bank auction of three-month finance ministry deposits to commercial banks yielded 3.70 percent yesterday, significantly higher than the 3.52 percent in late August. Dealers said they expected rates to rise further in the coming two weeks as banks stockpile cash to meet regulatory ratio assessments and to satisfy demand during the holiday period. Markets will be closed from September 30 to October 7.
Home-price gains slowdown in August Beijing aims at soft landing for the property market
P
sending Japanese share prices falling and prompting a warning from credit rating agency Fitch that the situation could hurt some auto and tech firms’ creditworthiness. There is no talk of Japanese firms withdrawing investment from China but some experts believe anti-Japan sentiment could prompt firms to rethink China investments in the longer term. Some firms recalled workers back to Japan due to the unrest. “The situation on the ground in China is not so good and I was advised by the locals not to go out. I couldn’t get any work done,” Japanese expatriate worker Hisato Takase said on arrival at Tokyo’s Haneda airport.
Japanese restaurants, a common target of protesters, barred their doors while many Japanese expatriates stayed home, afraid that yesterday’s commemoration of Japan’s 1931 occupation of parts of mainland China could lead to outbreaks of violence. Yesterday’s brief landing by two Japanese nationals on one of the disputed islands, reported by Japan’s coast guard, has raised fears of a direct clash in an area being patrolled by ships from both nations. The activists briefly landed on one of the islands, having paddled up to it in a rubber raft and swum ashore before returning to the boat, Japanese broadcaster NHK said. Reuters
rices for newly constructed homes in China rose in fewer cities in August than the previous month, reducing the likelihood that policy makers will strengthen steps designed to constrain property prices. Thirty-five of 70 cities covered by the statistics bureau’s monthly report had price gains, compared to 49 in July, yesterday’s release showed in Beijing. The slowdown follows restrictions on mortgage credit and purchases of multiple homes. Along with data showing fixedasset investment in real estate is stabilising, the figures suggest that Premier Wen Jiabao may be making progress in cooling the market without causing a collapse in construction. A soft landing for the property market would help avoid adding risks to an economy already poised for its weakest expansion in 22 years. “If housing prices keep easing and property investments hold steady, as shown in August data, the negative effects as we have seen in the past will disappear, and that’s positive for China’s future growth,” said Ding Shuang, senior China economist with Citigroup Inc. in Hong Kong. “The government is less likely to launch any new tightening measures.” China’s property market accounts for as much as about 13 percent of the nation’s gross domestic product – and about 25 percent of GDP including related industries from construction to decoration, according to Mr Ding.
Beijing gain Nineteen cities saw price declines, while values in 16 cities were unchanged, yesterday’s data showed. The eastern city of Wuxi and the central city of Zunyi led the monthon-month gains at 0.5 percent. Among major cities, prices in Beijing and the southern economic hub of Shenzhen rose 0.1 percent from July, while those in Shanghai were unchanged. “Home prices are losing steam
after a couple of months of rallying and the market is stabilising because there is no more upcoming monetary easing and the curbs still remain in place,” Yao Wei, a Hong Kong-based economist at Societe Generale SA, said yesterday. “Buyers are keeping a wait-and-see stance.” In its more than two-year effort to curb the property market, China has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, increased construction of low-cost social housing and enacted home-purchase restrictions in about 40 cities. Even so, private data have pointed to a pickup. China’s home prices rose for a third month in August, SouFun Holdings Ltd, the nation’s biggest realestate website owner, said this month. Existing home prices in Beijing and Shanghai rose 0.3 percent from July, yesterday’s data showed. The value of home sales transactions rebounded by 0.6 percent in August after dropping 14.5 percent in July from June, according to the statistics bureau. “The gains in fewer cities reduced concerns about more property tightening measures,” Jinsong Du, a property analyst at Credit Suisse Group AG, said. “What’s happening in reality is that home prices are still rising. It’s easy for local governments to manipulate data as they could simply stop granting permits for high-price projects.” Any signs of a recovery in home prices fuels market uncertainty over the risk that Beijing may still seek to further stifle the property market through controls, including sales restrictions and an experimental tax. “China is more likely to tighten policy, probably expanding the property tax beyond Shanghai and Chongqing in the fourth quarter to other first- and second-tier cities where home prices are rising fast,” Shi Qi, a property analyst at private research house CEBM in Shanghai, said. Bloomberg/Reuters
China is more likely to tighten policy, probably expanding the The two-day trial of the former police chief of Chongqing Municipality ended yesterday
property tax … in the fourth quarter to other
“The Chinese leadership would like to settle these cases considerably well ahead of the 18th Party Congress,” said Joseph Cheng, a professor of political science at City University of Hong Kong. “Bo is at the moment a Politburo member and
people expect a verdict.” Mr Cheng expects a party decision on Mr Bo to come ahead of its congress. Mr Bo may be stripped of all his posts and may also be expelled from the Communist Party, he said. Bloomberg
first- and second-tier cities where home prices are rising fast Shi Qi, research house CEBM
Prices of newly constructed homes rose in 35 of 70 cities in August
10 |
business daily September 19, 2012
ASIA Myanmar frees political detainees Myanmar pardoned more than 500 prisoners on Monday in an amnesty that included at least 80 political detainees, according to activists. Bo Kyi, secretary-general of the Assistance Association for Political Prisoners (AAPP), a Thai-based group that tracks detainees in Myanmar, said yesterday his group had so far found 88 political prisoners were freed, possibly more. The timing of the amnesty is significant coming ahead of a U.S. visit by Thein Sein, Myanmar’s reformist president. The State Department said U.S. officials will meet the former junta general on the sidelines of the U.N. General Assembly next week.
Indonesia to join engine of global growth Country’s GDP may overtake Germany by 2030, McKinsey says Shamim Adam
I
ndonesia may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating US$1.8 trillion in annual sales for agriculture, consumer and energy companies by that year, McKinsey & Co. said. The country may add 90 million people to its “consuming class” in that period, the most after China and India, the consulting company said in a report yesterday. Energy demand may triple from current levels, convenience stores will lead a “revolution” in retail, and the largest business opportunities will be for financial-service providers, it said. President Susilo Bambang Yudhoyono is increasing spending on roads, seaports and airports as he woos investment to spur Southeast Asia’s largest economy. More than a decade after the Asian financial crisis forced the nation to seek an International Monetary Fund bailout, Fitch Ratings and Moody’s Investors Service have raised Indonesia to investment grade and the country’s growth is among the fastest in the Group of 20. “Indonesia is in the throes of a
rapid transformation,” McKinsey said. “The Indonesian economy is larger, more stable, and more advanced than many companies and investors around the world realise.” Indonesia is currently the world’s 16th-largest economy, with gross domestic product of about US$846 billion last year, according to IMF data. That may rise to US$1.8 trillion
The Indonesian economy is larger, more stable, and more advanced than many companies and investors around the world realise McKinsey & Co.
in 2017, compared with Germany’s US$3.9 trillion economy and U.K. GDP of US$3.2 trillion in the same period, IMF data shows. The McKinsey report didn’t give GDP projections for 2030.
Super-cycle Only China, the U.S., India, Japan, Brazil and Russia will be bigger than Indonesia by 2030, McKinsey said. Indonesia’s growth potential has spurred companies including Toyota Motor Corp. to boost investments in the country and prompted Standard Chartered Plc to predict the nation will join China and India as the engine of the third global “super-cycle”. The country may be among the top six of the world’s largest economies by 2030, Standard Chartered said in an October 2011 report. The bank defines a super-cycle as a period of historically high global growth lasting a generation or more, driven in part by increasing trade, high rates of investment, urbanization and technological innovation. Indonesia isn’t “a typical Asian
manufacturing exporter driven by its growing workforce or a commodity exporter driven by its rich endowments of natural resources,” McKinsey said. “The reality is that, to a large extent, it is domestic consumption rather than exports, and services rather than manufacturing or resources, which are propelling growth.”
Consuming class Annual growth of 5 percent to 6 percent in Indonesia will add 90 million people to the “consuming class,” which is defined as those with yearly net incomes of more than US$3,600 at 2005 purchasing power parity, McKinsey said. An expansion of 7 percent a year, as targeted by the Indonesian government, would
Australia downgrades iron ore revenue Resource export volumes little changed, revenue hit by price
Iron ore prices have tumbled on weakening China demand
A
ustralia, the world’s biggest exporter of iron ore, cut its revenue forecasts for the key steel making ingredient by a fifth yesterday, a fresh sign the country’s mining industry is losing steam as a slowdown in top customer China drives down prices.
Resources exports shielded Australia from recession during the global financial crisis, thanks to ongoing strong demand from China in particular as its population becomes wealthier and more urbanised. But slowing Chinese growth and falling prices have led to concerns
for Australia’s economy and prompted warnings that the mining i n d u s tr y ’ s o n g o i n g e x p a n s i o n cannot be taken for granted. The Bureau of Resources and Energy Economics (BREE) forecast revenue from iron ore, Australia’s largest single export, of A$53.2
billion (US$55.9 billion) in this fiscal year, down from a June forecast of A$67 billion and around A$63 billion last year. “Although this is not good news, it is by no means a death knell for the Australian resources industry,” Resources Minister
September 19, 2012 business daily | 11
asia LG unveils new premium phone LG Electronics Inc. unveiled its latest high-end smartphone packed with powerful hardware upgrades yesterday, as the struggling South Korean firm tries to win market share from Apple Inc and Samsung Electronics Co Ltd in the crucial holiday quarter. LG’s Optimus G, which uses Google’s Android platform, will go on sale next week in South Korea for 1 million won (US$900), and later in Japan and the United States. The Optimus G boasts a 13 megapixel camera which a user can instruct to take snaps by talking to it, plus a 4.7-inch screen.
Itochu buys Dole’s package food, Asia unit Trading house buys food assets to supply Asia’s growing population
I
Indonesia may add 90 million people to its consuming class in the coming years
increase those ranks to 170 million people from 45 million in 2010, it said. “This growth in Indonesia’s consuming class is stronger than in any economy of the world apart from China and India, a signal to international businesses and investors of considerable new opportunities,” McKinsey said. “But surging demand for a range of products and services will inevitably strain Indonesia’s natural and capital resources.” Indonesia’s GDP rose 6.37 percent in the three months through June from a year earlier, supported by investment and consumption. The central bank forecasts growth of about 6.1 percent to 6.5 percent this year, and about 6.3 percent to 6.7 percent in 2013. Bloomberg
Martin Ferguson told a mining and energy conference in Canberra. “It is useful to remember that the commodity prices experienced since last year were record-breakers,” he said. “And although it’s difficult to say when or if we might scale to those exceptional heights once more, BREE expects a rebound in some commodity prices in 2013, should global growth pick up as is expected by the International Monetary Fund.”
tochu Corp. agreed to pay US$1.69 billion in cash for two units of Dole Food Co., the world’s biggest supplier of fresh fruit and vegetables, in its biggest acquisition outside industrial commodities. Itochu, Japan’s third-largest trading house, will take over Dole’s packaged food and Asia fresh produce businesses, which earned US$2.5 billion in revenue last year, Dole said yesterday in a statement. The Tokyo-based company also gets exclusive rights to the Dole trademark on packaged foods worldwide and on fresh produce in Asia, Australia and New Zealand, Westlake Village, California-based Dole said. As Dole uses the sale to pare debts, Itochu is following a list of Japan’s major trading houses buying food assets abroad to help supply Asia’s growing population and wealth. Marubeni Corp. offered to buy U.S. grain merchandiser Gavilon Group LLC for US$5.6 billion in May, while Mitsui & Co. took control of Brazil’s Multigrain SA in 2011. “Japan’s trading houses are positioning themselves for the next round of growth in China and the broader Asia region, which will be in consumer products,” Penn Bowers, an analyst at CLSA AsiaPacific Markets in Tokyo, said.
Food profit Itochu, which was started off as a linen trader in 1858 by founder Chubei Itoh, aims to almost double profit to 40 billion yen (US$508 million) in three years from food businesses that include Japan’s third-largest convenience-store chain FamilyMart Co., according to the company’s annual report. The food division had net income of 22.4 billion yen (in the 12 months ended March 31, contributing 7.5 percent to the company’s 300.5 billion yen record profit for the fiscal year. Itochu sells wheat, vegetable oils, soybean, sugar and beverages and co-owns a Chinese beer business with Asahi Group Holdings Ltd. The agreement with Dole would make the acquisition Itochu’s biggest
outside resource commodities on record and the most it has paid by itself for an asset, according to data compiled by Bloomberg. Itochu, which earns more than half its profit from the sourcing and sale of metal and energy commodities, was part of a group of investors including KKR & Co. LP that bought oil producer Samson Investment Co. for $7.2 billion in December, the data show. The two businesses Dole is selling had earnings before interest, tax, depreciation and amortisation of US$190 million last year, the U.S. company said. That shows Itochu paid about 8.9 times Ebitda, which is more than the 8.3 times multiple that investors including KKR paid to take Del Monte Food Co. private in March last year, according to Bloomberg data. “The price is a little more expensive than we’ve seen recently, but versus the market caps of food companies out there I don’t think it’s unattractive,” CLSA’s Mr Bowers said. “Dole is a name you look to on the shelf and Itochu’s certainly a company that recognises the value of brands.” Bloomberg
US$1.69 billion
Itochu will pay for Dole’s two businesses
Prices dropping Analysts said the quarterly forecasts tended to be behind the curve but did not a see significant risk of further major falls in demand for Australian resources. “The prices have certainly come down, so customers are asking for lower prices, but I think they still see [Australia] as a secure place to get supply,” said Mark Pervan, the head of commodities research for Australia and New Zealand Banking Group Ltd in Melbourne. BREE forecast Australia’s total resources and energy exports would dip 2 percent from record levels in 2011/12 to about A$190 billion, compared to its previous forecast of A$209 billion. It sees iron ore exports in the year to June 30, 2013, of 509 million tonnes, little changed on its June
“Itochu is looking decades ahead, and they clearly have synergies with existing businesses.” Itochu plans to disclose more i n fo r m a ti o n o n th e d e a l a f t e r the “completion of required procedures,” it said in a statement on its website yesterday.
Itochu gets exclusive rights to the Dole trademark on packaged foods worldwide
forecast of 510 million tonnes and up 8 percent on the previous year. The government bureau said it expected contract prices for iron ore to be US$126 per tonne through 2012 and US$101 in 2013. The price of iron ore traded as high as $180 a tonne a year ago, but plummeted to a 3-year low of $86 earlier this month as demand in China fell before scrambling above $100.
Fortescue deal Fortescue Metals Group Ltd, Australia’s third-biggest iron ore
producer, arranged US$4.5 billion of new debt to refinance its existing bank loans, prompting the biggest jump in its shares in three years. The five-year facility, underwritten by Credit Suisse Group AG and JPMorgan Chase & Co., extends the earliest repayment date of the company’s debt to 2015, the Perthbased company said yesterday in a statement. It also removes earnings-linked covenants, which applied under the previous loans. The package eases the pressure on billionaire Andrew Forrest, the biggest shareholder, to sell more assets or shares to bolster the
company’s finances, which were strained after iron ore prices touched a near, three-year low this month. It gives Fortescue an extra about US$900 million in cash to assist with expansion projects. Fortescue, which had US$9.1 billion of debt before yesterday’s statement, this month cut its annual spending forecast by 26 percent to US$4.6 billion after prices fell. There’s no need “whatsoever” for an equity raising, chief executive Neville Power said yesterday on a conference call. The company isn’t in any rush to sell assets now, he said. Reuters
12 |
business daily September 19, 2012
MARKETS Hang SENG INDEX NAME
NAME
PRICE
Day %
VOLUME
AIA GROUP LTD
28.9
0.1733102
21916786
CHINA UNICOM HON
ALUMINUM CORP-H
3.21
-3.603604
23394606
CITIC PACIFIC
BANK OF CHINA-H
2.92
-0.3412969
241965384
BANK OF COMMUN-H
5.18
-0.5758157
25702201
BANK EAST ASIA
29.3
1.034483
2513347
BELLE INTERNATIO
14.04
-2.770083
21117227
BOC HONG KONG HO
24.15
0
9268309
PRICE
Day %
VOLUME
12.84
-3.167421
37947552
9.74
-0.9155646
5083200
1.541096
18906014 9111398 5336393
3108466
SWIRE PACIFIC-A
93.75
0
1299692
-0.770416
6338133
TENCENT HOLDINGS
255 -0.07836991
3063567
-0.5385996
5196835
TINGYI HLDG CO
23.4
-0.4255319
3148575
WANT WANT CHINA
9.44
0.2123142
12275813
COSCO PAC LTD
10.96
-0.7246377
ESPRIT HLDGS
12.88 27.7
13.12
1.863354
5528601
HANG SENG BK
116.3
1.218451
2429917
114.2
0.08764242
3652704
HENDERSON LAND D
53.75
0.6554307
3014917
CHINA COAL ENE-H
7.18
-1.643836
27404704
HENGAN INTL
76.05
0.5952381
3235504
CHINA CONST BA-H
5.17
0
254793212
18.9
-0.4214963
7398660
CHINA LIFE INS-H
22.55
-1.31291
29567294
117.5
-2.812242
8845961
CHINA MERCHANT
24.1
-1.229508
2290842
72.9
-0.7488087
19531966
83.2
0.9096422
20629300
HUTCHISON WHAMPO
73.9
-1.004689
6263868
19.56
1.137539
25999304
IND & COMM BK-H
4.44
0.4524887
204576059
CHINA PETROLEU-H
7.13
-0.8344924
84377565
LI & FUNG LTD
12.7
-0.4702194
33434809
CHINA RES ENTERP
26
-0.7633588
3575251
MTR CORP
29
-0.172117
2776944
CHINA RES LAND
29.65
0.2659574
CATHAY PAC AIR
CHINA OVERSEAS
3293872
SANDS CHINA LTD
0.5698006
76053119
CHEUNG KONG
CHINA MOBILE
VOLUME
113.1
3047446
-1.35468
HSBC HLDGS PLC
0.5533597
14.12
-0.3065134
16.02
HONG KONG EXCHNG
Day %
63.6
SINO LAND CO
65.05
HONG KG CHINA GS
PRICE
POWER ASSETS HOL
SUN HUNG KAI PRO
CLP HLDGS LTD CNOOC LTD
HANG LUNG PROPER
NAME
MOVERS
17
27
4 20760
INDEX 20601.93 HIGH
20758.49
LOW
20479.38
52W (H) 21760.33984
17
0
9161193
NEW WORLD DEV
11
1.851852
30794838
CHINA RES POWER
16.96
0.5931198
6585203
PETROCHINA CO-H
9.95
-0.4004004
74739541
CHINA SHENHUA-H
30.75
-1.6
18934575
PING AN INSURA-H
58.4
-1.016949
9949139
PRICE
DAY %
VOLUME
22.95
-1.923077
10810684
YANZHOU COAL-H
7.13
-0.8344924
84377565
(L) 16170.35
20470
14-Sep
18-Sep
Hang SENG CHINA ENTErPRISE INDEX NAME
NAME
PRICE
DAY %
VOLUME
AGRICULTURAL-H
2.92
-1.351351
86654505
CHINA PACIFIC-H
AIR CHINA LTD-H
4.67
2.188184
26763846
CHINA PETROLEU-H
ALUMINUM CORP-H
3.21
-3.603604
23394606
CHINA RAIL CN-H
6.7
-4.011461
ANHUI CONCH-H
22.95
-2.959831
15003291
CHINA RAIL GR-H
3.28
BANK OF CHINA-H
2.92
-0.3412969
241965384
CHINA SHENHUA-H
PRICE
DAY %
VOLUME
11.78
-3.915171
34347502
ZIJIN MINING-H
3.02
-0.9836066
54931376
11185619
ZOOMLION HEAVY-H
8.69
-2.905028
15795152
-4.093567
19330856
ZTE CORP-H
10.72
-2.189781
3776877
30.75
-1.6
18934575
5.18
-0.5758157
25702201
CHINA TELECOM-H
4.57
-4.989605
135311056
15.66
-4.044118
2905359
DONGFENG MOTOR-H
9.13
-5.093555
88195032
CHINA CITIC BK-H
3.64
-1.086957
42529505
GUANGZHOU AUTO-H
5.36
-1.831502
19624495
CHINA COAL ENE-H
7.18
-1.643836
27404704
HUANENG POWER-H
5.37
0.1865672
16170867
CHINA COM CONS-H
6.36
-3.636364
17163760
IND & COMM BK-H
4.44
0.4524887
204576059
CHINA CONST BA-H
5.17
0
254793212
JIANGXI COPPER-H
19.2
-2.339776
17766474
CHINA COSCO HO-H
2.97
-4.501608
30177083
PETROCHINA CO-H
9.95
-0.4004004
74739541
22.55
-1.31291
29567294
PICC PROPERTY &
9.54
0.1049318
14275250
CHINA LONGYUAN-H
5.14
-0.7722008
3980808
PING AN INSURA-H
58.4
-1.016949
9949139
CHINA MERCH BK-H
12.88
-0.770416
15707237
SHANDONG WEIG-H
9.72
7.522124
10722019
BANK OF COMMUN-H BYD CO LTD-H
CHINA LIFE INS-H
NAME
MOVERS
7
32
1 9880
INDEX 9683.89 HIGH
9884.02
LOW
9668.93
CHINA MINSHENG-H
6.2
-1.743265
44613751
SINOPHARM-H
23.65
-2.474227
2386283
52W (H) 11916.1
CHINA NATL BDG-H
8.26
-2.364066
44347424
TSINGTAO BREW-H
42.65
-1.841197
1409381
(L) 8058.58
CHINA OILFIELD-H
13.7
1.481481
11125834
WEICHAI POWER-H
23.5
-4.471545
2107488
9660
14-Sep
18-Sep
Shanghai Shenzhen CSI 300 PRICE
DAY %
VOLUME
PRICE
DAY %
VOLUME
PRICE
DAY %
VOLUME
AGRICULTURAL-A
2.44
-0.8130081
27545157
DAQIN RAILWAY -A
5.98
-0.3333333
15734812
SANY HEAVY INDUS
9.22
0.3264418
22194202
AIR CHINA LTD-A
4.73
-2.070393
9893450
DATANG INTL PO-A
4.43
-1.116071
2596662
SHANDONG GOLD-MI
38.96
-2.939711
18931064
ALUMINUM CORP-A
5.05
-3.256705
11618487
DONGFANG ELECT-A
14.12
-0.4933051
5292728
SHANG PHARM -A
11.65
-1.271186
11244273
ANHUI CONCH-A
14.63
-2.531646
25343583
EVERBRIG SEC -A
11.17
-1.499118
8852955
SHANG PUDONG-A
7.35
-0.8097166
29556474
BANK OF BEIJIN-A
7.07
-1.118881
12115603
GD MIDEA HOLDING
9.18
0
9139999
SHANGHAI ELECT-A
4.12
-0.2421308
4604459
BANK OF CHINA-A
2.66
-0.3745318
21612476
GD POWER DEVEL-A
2.43
-1.219512
18251038
SHANXI LU'AN -A
16.84
-3.606182
19850653
GF SECURITIES-A
12.05
0.4166667
39421517
SHANXI XINGHUA-A
37.09
-0.5896542
1470293
GREE ELECTRIC
20.62
0
4457178
12.7
-1.930502
8463667
NAME
NAME
NAME
BANK OF COMMUN-A
4.18
-0.7125891
30952237
BANK OF NINGBO-A
9.27
-0.4296455
5635289
BAOSHAN IRON & S
4.64
0.2159827
37535061
GUANGHUI ENERG-A
14.14
-0.2820874
22170707
SHENZEN OVERSE-A
5.5
-0.1814882
11797623
HAITONG SECURI-A
8.73
-0.908059
33573359
SUNING APPLIAN-A
6.58
0.7656968
46898961 1573691
BYD CO LTD -A
15.8
-3.951368
5489816
SHANXI XISHAN-A
CHINA CITIC BK-A
3.69
-1.336898
12414381
HANGZHOU HIKVI-A
27.41
0.5502568
1296722
TASLY PHARMAC-A
52.45
1.824888
CHINA CNR CORP-A
3.53
-1.396648
18705318
HENAN SHUAN-A
58.21
-1.338983
1023298
TSINGTAO BREW-A
31.8
-2.424056
2823108
CHINA COAL ENE-A
6.8
-2.158273
7504156
HONG YUAN SEC-A
17.46
-0.3424658
8936832
WEICHAI POWER-A
18.65
-2.458159
5665566 8819065
CHINA CONST BA-A
3.9
-1.015228
12337609
HUATAI SECURIT-A
8.85
-0.6734007
6194542
WULIANGYE YIBIN
33.3
-1.186944
CHINA COSCO HO-A
3.88
-2.756892
8249908
HUAXIA BANK CO
8.23
-0.7237636
12985291
XIAMEN TUNGSTEN
40.03
-2.886948
7433965
CHINA CSSC HOL-A
20.01
-3.93663
10038343
IND & COMM BK-A
3.7
-1.333333
18677162
YANGQUAN COAL -A
14
-3.381643
13677239
CHINA EAST AIR-A
3.18
-2.153846
13343972
INDUSTRIAL BAN-A
11.95
-0.6650042
25396387
YANTAI CHANGYU-A
48.32
-3.282626
2088749
CHINA EVERBRIG-A
2.69
-0.7380074
20865282
INNER MONG BAO-A
33.23
-3.681159
31497752
YANTAI WANHUA-A
12.64
-1.710731
4494343 2797340
18.15
0.6097561
4892543
INNER MONG YIL-A
20.47
-0.2922552
5189808
YANZHOU COAL-A
17.8
-2.144035
CHINA MERCH BK-A
9.99
-1.382034
30412407
INNER MONGOLIA-A
5.1
-0.390625
34548375
YUNNAN BAIYAO-A
61.34
-0.4705501
1537029
CHINA MERCHANT-A
9.85
-1.89243
9644953
JIANGSU HENGRU-A
30.03
-1.990862
6075042
ZHONGJIN GOLD
16.39
-2.672209
39789165
CHINA MERCHANT-A
19.18
0.156658
9182829
JIANGSU YANGHE-A
ZIJIN MINING-A
3.89
-2.261307
64982009
ZOOMLION HEAVY-A
8.21
0
43106287
10.09
-2.133851
10488679
CHINA LIFE INS-A
CHINA MINSHENG-A
5.54
-1.946903
120.48
-3.391869
1730594
60451857
JIANGXI COPPER-A
21.88
-2.538976
10951507
JINDUICHENG -A
11.75
-1.67364
5541581
JIZHONG ENERGY-A
12.15
-3.032721
16834425 8885914
CHINA NATIONAL-A
6.48
0.4651163
18901092
CHINA OILFIELD-A
16.5
-0.8413462
2375979
CHINA PACIFIC-A
19.41
-0.3081664
8412745
KANGMEI PHARMA-A
16.32
1.809108
5.94
-0.8347245
12750619
KWEICHOW MOUTA-A
240.33
-0.4019892
1827708
36.49
-2.171582
4430841
2.02
-0.9803922
12694250
CHINA PETROLEU-A CHINA RAILWAY-A
4.48
-1.754386
9404231
LUZHOU LAOJIAO-A
CHINA RAILWAY-A
2.48
-1.587302
12949496
METALLURGICAL-A
CHINA SHENHUA-A
21.97
-1.875837
6936774
NINGBO PORT CO-A
2.46
-0.8064516
8879756
PANGANG GROUP -A
3.73
-2.099738
52163484
CHINA SHIPBUIL-A CHINA SOUTHERN-A
4.96
-3.31384
54554256
3.3
-1.197605
19701633
PETROCHINA CO-A
8.78
0.4864092
12552501
13.51
-1.458789
ZTE CORP-A
MOVERS
55
236
9 2330
INDEX 2235.239
CHINA STATE -A
3.01
-0.660066
36640696
PING AN BANK-A
12250194
HIGH
2328.44
CHINA UNITED-A
3.61
-2.695418
61045554
PING AN INSURA-A
40.03
0
11393317
LOW
2231.18
CHINA VANKE CO-A
8.01
-0.6203474
34475645
POLY REAL ESTA-A
9.82
1.132853
41879975
CHINA YANGTZE-A
6.33
-0.6279435
8583568
QINGDAO HAIER-A
10.58
-1.121495
3677251
CITIC SECURITI-A
10.82
-0.733945
35179113
QINGHAI SALT-A
30.3
-2.163384
4579926
CSR CORP LTD -A
4.01
-2.195122
18764049
SAIC MOTOR-A
12.61
1.693548
19212557
PRICE DAY %
Volume
52W (H) 2781.99 (L) 2186.962
2230
14-Sep
18-Sep
FTSE TAIWAN 50 INDEX NAME
NAME
PRICE DAY %
Volume
84.8 -0.3525264
4309324
FOXCONN TECHNOLO
119.5 -0.8298755
2097050
FUBON FINANCIAL
31.85 -0.1567398
ACER INC
30.15
0.166113
37058610
FORMOSA PLASTIC
ADVANCED SEMICON
22.85
-1.508621
23906903
36.6
-1.480485
ASIA CEMENT CORP ASUSTEK COMPUTER
317 -0.3144654
414
1.222494
4993989
15244916
TSMC
85.7 -0.9248555
35584109
UNI-PRESIDENT
50.3
0.6
6745089
UNITED MICROELEC
12.2 -0.8130081
27118856
96.1
-1.435897
33271452
0.7281553
360180
0.9933775
21863207
HTC CORP
318
1.273885
30468117
-0.3125
33753949
HUA NAN FINANCIA
16.5
0.3039514
7933161
YUANTA FINANCIAL
16
0.3134796
11202990
LARGAN PRECISION
659 -0.1515152
911281
YULON MOTOR CO
74.2
-1.066667
4759853
LITE-ON TECHNOLO
36.4 -0.8174387
3536148
331 -0.1508296
10661785
31.9
CHANG HWA BANK CHENG SHIN RUBBE CHIMEI INNOLUX C
11.45
0.8810573
75417987
MEDIATEK INC
7.36
-1.208054
48714441
MEGA FINANCIAL H
CHINA STEEL CORP
26.25 -0.5681818
14648049
NAN YA PLASTICS
CHINATRUST FINAN
17.85
2.292264
60110511
PRESIDENT CHAIN
CHUNGHWA TELECOM
92.5
0
9903265
QUANTA COMPUTER
COMPAL ELECTRON
26.1 -0.7604563
6226173
SILICONWARE PREC
33.55
FAR EASTONE TELE
TPK HOLDING CO L
207.5
152.5
FAR EASTERN NEW
10296132
HOTAI MOTOR CO
CATCHER TECH
DELTA ELECT INC
0.4739336
HON HAI PRECISIO
3.097345
112.5 -0.8810573
22.95
-2.132196
45922722
57.9 -0.1724138
4211164
158.5
-1.246106
1220426
78.3 -0.8860759
5228565
0.2989537
6592929
3907988
SINOPAC FINANCIA
12.05
-2.03252
19804370
-0.872093
15671880
SYNNEX TECH INTL
66.8
-1.183432
2945982
71 -0.4207574
7647635
TAIWAN CEMENT
35.9
-2.179837
9515210
TAIWAN COOPERATI
16.8
0.2985075
7758858
80
-1.960784
6222627
29.3 -0.1703578
1243683
34.1
FIRST FINANCIAL
18.1 -0.5494505
13247859
FORMOSA CHEM & F
78.8 -0.2531646
3765790
TAIWAN FERTILIZE
FORMOSA PETROCHE
88.9 -0.8918618
1669812
TAIWAN GLASS IND
Volume
106
2808974
11.65
CHINA DEVELOPMEN
PRICE DAY %
TAIWAN MOBILE CO
74047669
AU OPTRONICS COR CATHAY FINANCIAL
NAME
WISTRON CORP
MOVERS
15
33
5037974
34.6
-1.564723
8451595
15.65
0
34729482
58 -0.5145798
6063002
2 5385
INDEX 5350.61 HIGH
5384.75
LOW
5302.45
52W (H) 5621.53 5300
(L) 4643.05 14-Sep
18-Sep
September 19, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXy ENTErTAINMENT
Max 25.85
Average 25.354
MELCo CroWN ENTErTAINMENT
Min 24.5
Last 25.45
26.0 25.8 25.6 25.4 25.2 25.0 24.8 24.6 24.4
SANDS CHINA LTD
MGM CHINA HoLDINGS 34.9
13.5
34.8
13.4
34.7 13.3
34.6
13.2
34.5 Max 34.8
Average 34.633
Min 34.5
Last 34.7
34.4
SJM HoLDINGS LTD
Max 13.46
Average 13.300
Min 13.16
Last 13.4
13.1
WyNN MACAU LTD
29.8 29.7
17.0
20.8
16.9
20.6
16.8
20.4
29.6 29.5
Average 29.677
Max 29.75
Min 29.45
Last 29.65
29.4
16.7 Max 16.92
Average 16.845
Commodities PRICE
DAY %
YTD %
(H) 52W
96.23
-0.403643138
-2.38385068
110.6499939
78.15999603
BRENT CRUDE FUTR Nov12
113.46
-0.290007909
8.834532374
122.6499939
89.5
GASOLINE RBOB FUT Oct12
295.23
0.305779227
16.81174329
307.9600096
220.5600023
GAS OIL FUT (ICE) Oct12
990.75
-1.954477981
10.3285078
1044.75
799
2.873
0.279232112
-13.51595424
4.455000401
2.299999952
HEATING OIL FUTR Oct12 Gold Spot $/Oz Silver Spot $/Oz Platinum Spot $/Oz Palladium Spot $/Oz
316
-0.107479294
10.58617673
333.8899851
252.5300026
1757.4
-0.7842
12.3004
1821.93
1522.75
34.105
-1.3023
22.5256
40.6925
26.085
1654.88
-2.5268
18.6719
1811.88
1339.25
674.5
-2.303
3.2135
725.19
537.54 1827.25
LME ALUMINUM 3MO ($)
2167
-1.5
7.277227723
2379.75
LME COPPER 3MO ($)
8301
-0.942720764
9.223684211
8765
6635
LME ZINC
2089
-1.275992439
13.22493225
2220
1718.5
3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Nov12 CORN FUTURE
Dec12
18220
2.503516174
-2.618920363
22150
15236
15.225
-0.425114454
0.131535679
17.5
14.15499973
748.5
0.06684492
27.67590618
849
499
PRICE MAJORS
ASIA PACIFIC
CROSSES
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
(L) 52W
1.0857 1.6302 0.9972 1.4247 84.18 8.0382 7.8048 6.4029 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88308 9.0277 11.4015 111.6 1.0311
0.9388 1.5235 0.8568 1.2043 75.35 7.9823 7.751 6.2769 47.8363 30.2 1.2176 29.084 41.34 8795 72.057 1.19995 0.77553 7.7018 9.6245 94.12 1.0288
MACAU RELATED STOCKS (L) 52W 1.88
939441
153.6999969
CROWN LTD
9.22
0.1085776
13.96786
9.4
7.47
1683373
25.29999924
19.47999954
AMAX HOLDINGS LT
0.061
0
-29.88506
0.119
0.055
0
101
64.61000061
BOC HONG KONG HO
24.15
0
31.25
24.95
14.24
9268309
CENTURY LEGEND
0.245
0
6.521737
0.335
0.204
0
3.51
-0.2840909
25.35714
3.55
2.3
250125
CHINA OVERSEAS
19.56
1.137539
50.86309
20.4
9.979
25999304
CHINESE ESTATES
9.98
-0.2
-20.16
13.32
8.3
0
CHOW TAI FOOK JE
10.94
-0.7259528
-21.40805
15.16
8.4
7002600 495000
1115.75
COFFEE 'C' FUTURE Dec12
173.75
-1.081696556
-26.37711864
262.8500061
SUGAR #11 (WORLD) Mar13
20.34
-2.117420597
-12.92808219
COTTON NO.2 FUTR Dec12
75.61
0.371697863
-13.92304189
NAME
CHEUK NANG HLDGS
World Stock MarketS - Indices
VOLUME CRNCY
0
35.13513
1.57
0.97
0
166.6667
1.24
0.3
450000
GALAXY ENTERTAIN
25.45
2.828283
78.72191
25.95
8.69
23290872
HANG SENG BK
116.3
1.218451
26.20727
116.8
84.4
2429917
HOPEWELL HLDGS
26.35
1.346154
32.67875
26.9
18.56
1103000
HSBC HLDGS PLC
72.9
-0.7488087
23.55932
73.5
56
19531966
HUTCHISON TELE H
3.37
-0.5899705
12.70903
3.88
2.53
5334000
LUK FOOK HLDGS I
26.05
-0.1915709
-3.87454
37.1
14.7
3285544
MELCO INTL DEVEL
7.16
0.4207574
24.09012
8.28
4.3
4101038
2186.962
MGM CHINA HOLDIN
13.4
1.055807
39.69751
14.76
7.6
2275000
6609.11
MIDLAND HOLDINGS
4.67
0.8639309
18.10684
5.217
2.887
1916000
NEPTUNE GROUP
0.202
2.020202
81.98198
0.222
0.08
21570000
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
13553.1
-0.2962474
10.93132
13653.24
10404.49
NASDAQ COMPOSITE INDEX
US
3178.674
-0.1657688
22.01502
3195.672
2298.89
FTSE 100 INDEX
GB
5857.55
-0.6103313
5.119449
5989.07
4868.6
DAX INDEX
GE
7329.87
-0.9970704
24.26984
7446.47
4973.92
NIKKEI 225
JN
9123.77
-0.3888905
7.90529
10255.15
8135.79
HANG SENG INDEX
HK
20601.93
-0.2719513
11.75813
21760.33984
16170.35
CSI 300 INDEX
CH
2235.239
-1.038914
-4.710788
2781.99
TAIWAN TAIEX INDEX
TA
7734.26
-0.3602062
9.363295
8170.72
KOSPI INDEX
SK
2004.96
0.1303468
9.816292
2057.28
1644.11
S&P/ASX 200 INDEX
AU
4394.728
-0.1771936
8.33631
4448.5
3840.2
ID
4223.894
-0.7376478
10.51551
4272.829
3217.951
FTSE Bursa Malaysia KLCI
MA
1640.33
-0.1594692
7.159981
1655.49
1310.53
NZX ALL INDEX
NZ
843.026
-0.2814036
15.51462
847.344
712.548
3558.72
DAY % YTD %
1.5
PRICE
2695.06
EMPEROR ENTERTAI
PRICE
1.12
COUNTRY
16.363
(H) 52W
2.0472 4.4715 1.1865 0.7947 -2.175 0.1816 0.1948 -0.3719 -2.0218 2.1036 5.6896 3.2039 5.0337 -4.5871 -4.2368 0.4532 3.5833 -1.5945 -0.764 -2.9695 0.0097
3.25
629.5
1789
-0.2659911
YTD %
(H) 52W
953.25
36.412705
3543.3
-1.0166 0.0062 -0.0216 -0.4344 -0.2798 -0.0088 -0.0039 -0.0206 -0.2816 -0.3236 -0.3016 -0.1091 -0.3809 -0.4314 0.7533 0.4029 0.4412 0.1016 0.4103 0.1558 0
21.36363
22.95138889
-1.572798083
PH
DAY %
1.0418 1.6238 0.9271 1.3064 78.62 7.9851 7.7523 6.3185 54.16 30.9 1.2268 29.339 41.739 9505 81.902 1.2113 0.80456 8.266 10.4317 102.71 1.03
0.754717
0.825740319
1642.75
PHILIPPINES ALL SHARE IX
Last 20.7
Min 20.25
2.67
885.25
SOYBEAN FUTURE Nov12
JAKARTA COMPOSITE INDEX
Average 20.502
ARISTOCRAT LEISU
WHEAT FUTURE(CBT) Dec12
NAME
20.2 Max 20.7
(L) 52W
WTI CRUDE FUTURE Oct12
NATURAL GAS FUTR Oct12
METALS
Last 16.8
CURRENCY EXCHANGE RATES
NAME ENERGY
Min 16.78
FUTURE BRIGHT
NEW WORLD DEV
11
1.851852
75.71884
11.06
6.13
30794838
29.65
1.541096
35.07972
33.05
14.9
18906014
SHUN HO RESOURCE
1.3
10.16949
30
1.37
0.82
704000
SHUN TAK HOLDING
3.08
1.315789
20.35348
3.51
2.241
8980476 5480000
SANDS CHINA LTD
SJM HOLDINGS LTD SMARTONE TELECOM WYNN MACAU LTD
16.8
0.3584229
34.3405
17.614
10.079
15.54
0.128866
15.625
18.5
9.8
4739500
20.6
1.728395
5.641026
25.5
14.62
10320392
HSBC Dragon 300 Index Singapor
SI
603.04
-0.05
21.5
NA
NA
ASIA ENTERTAINME
3.76
5.027933
-36.05442
7.49
2.4
85962
STOCK EXCH OF THAI INDEX
TH
1272.79
-0.4497317
24.13589
1282.22
843.69
BALLY TECHNOLOGI
46.91
-0.8664413
18.57937
49.32
24.74
583494
HO CHI MINH STOCK INDEX
VN
394.51
-1.802116
12.22017
492.44
332.28
BOC HONG KONG HO
3.23
5.555556
34.74123
3.25
1.81
18019
Laos Composite Index
LO
1047.94
-0.09723917
16.50767
1064.23
876.33
GALAXY ENTERTAIN
3.22
0
72.19251
3.24
1.08
2000
INTL GAME TECH
13.08
-1.059002
-23.95349
18.1701
10.92
3916155
JONES LANG LASAL
81.24
-3.06646
32.61509
87.52
46.01
359889
LAS VEGAS SANDS
46.57
-0.3850267
8.986662
62.09
34.72
7450876
MELCO CROWN-ADR
13.24
0.6844106
37.62994
16.02
7.05
4065254
MGM CHINA HOLDIN
1.66
0
39.2976
1.96
1.0025
5545
MGM RESORTS INTE
11.23
-1.577564
7.670179
14.9401
7.4
6935401
SHUFFLE MASTER
14.94
0
27.4744
18.77
7.55
562992
2.18
0
35.60817
2.2782
1.2624
6375
112.47
-0.4866395
1.792019
154.7051
90.108
1439443
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
SJM HOLDINGS LTD WYNN RESORTS LTD
AUD HKD
USD
14 |
business daily September 19, 2012
Opinion Will Germans pick up the tab for Deutsche Bank, too? Simon Johnson
Professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics
P
ity the German taxpayer. Recent weeks have brought a slew of bad news in terms of contingent liabilities for the German state – meaning that taxpayers are potentially on the hook for increasing amounts. Two weeks ago, European Central Bank President Mario Draghi affirmed his willingness to commit the ECB – partly owned by Germany – to take on added sovereign-debt risk. And last week the German constitutional court confirmed that the European Stability Mechanism is consistent with German law, allowing further fiscal transfers to the euroarea periphery. And most recently, Deutsche Bank AG (DBK) unveiled its revamped strategy, with a new vision for its organisation and growth. The German taxpayer should be very worried. Deutsche Bank cannot fail – in the sense of experiencing a Lehman Brothers-type bankruptcy. The German government wouldn’t allow it. With a balance sheet equivalent to about 80 percent of Germany’s gross domestic product, Deutsche Bank is too big to fail both in terms of its direct involvement with the national economy and the potential knock-on effect on confidence in German industry. But the bank can fail in the sense that it could require future taxpayer assistance. To determine how likely this is – and the scale of potential losses at any bank – you need to answer three questions.
one cannot simply look at the return on equity; one must adjust for risk,” Admati wrote in the New York Times. “A bank manager can attempt to reach a ‘target return on equity’ by taking on more risk and by using more leverage, but this, in and of itself, does not create value. It does, however, increase fragility and systemic risk.” If you invest in banks and haven’t followed this debate, you really need to catch up. The full set of Admati papers is here. Germany has deep pockets, and many people lined up to put their hands in. But the wealth and the patience of the German people is limited. The country’s gross general government debt is already almost 80 percent of GDP while net debt is 54 percent of GDP, according to the International Monetary Fund’s spring 2012 fiscal monitor. German GDP is 2.65 trillion euros. – the difference becomes a taxpayer responsibility. Seen in this light, Deutsche Bank has long been a worry because it is one of the more thinly capitalised global megabanks. Its official capital ratios might seem respectable to a casual observer: at the end of the second quarter, it reported a core Tier 1 capital ratio (a
Allowing German banks to lend recklessly within the euro
Equity financing First and foremost, how much capital does the bank have? In this context, capital is a synonym for equity financing, so the right question is: how much is the bank financed with shareholder equity rather than any form of debt? Sometimes people speak of a bank “holding” capital, but this is the wrong verb; it implies that capital is a type of asset, when it is actually a form of liability. As taxpayers view banks, equity capital is critically important because it is the buffer that absorbs losses. If losses exceed the value of equity, the bank is insolvent and – assuming there is a rescue
area will prove to be a costly mistake, no matter who pays the final bill regulatory measure of equity) of 10.2 percent of total assets. The problem with this measure is that it uses riskweighted assets. In other words, if a bank can convince itself and its regulators that it can apply lower risk weights to a given portfolio, its capital
ratio will look higher. What is considered to be a low-risk asset in the context of European banks? Typically, the sovereign debt of euro-area countries has been regarded as very low risk. But Draghi is being forced into extraordinary measures and the German constitutional court is being asked to rule on the ESM and other bailout measures precisely because sovereign debt for some euro countries has become so risky. And if you think there is a non-zero probability of the euro area breaking up, then risk-free assets have become a meaningless concept in Europe. To evaluate any global bank today, it is much more advisable to look at its leverage ratio, the total size of its balance sheet relative to its equity, without any risk adjustments. At the end of the second quarter, Deutsche Bank had total assets of 2.241 trillion euros (US$2.93 trillion). Its total shareholder equity capital was 55.75 billion euros – a little less than 2.5 percent of total assets. That is a lot of leverage. Bloomberg News reported that this is the least equity (and most leverage) “among the 24 biggest European banks.”
Risk management Second, does the bank have a good grip on risk management? None of the
recent statements from the new co-chief executive officers, Juergen Fitschen and Anshu Jain, are reassuring, primarily because they don’t address the issue of Deutsche Bank’s very high leverage. If you believe a global US$2.9 trillion portfolio cannot suffer more than 3 percent losses, I have some U.S. mortgagebacked securities, europeriphery debt, and Chinese bridges to nowhere to sell you. Or you can talk to the people at UBS AG who lost their jobs for this kind of hubris. Third, does management have a convincing vision for staying out of trouble? The really worrying issue in this regard is that Fitschen and Jain remain focused on hitting a return-on-equity target. They have set a target of a 12 percent after-tax return, a headline number that the bank says is comparable to the 25 percent pre-tax target set when Josef Ackermann was CEO, but may end up being sharply lower. But as Anat Admati of Stanford University and her colleagues have explained at length in recent years, ROE is a completely flawed target for banks, precisely because it doesn’t capture the associated risks. “Since investors must be compensated for bearing risk, higher leverage increases the required, or expected, return on equity. To judge whether a manager has created value,
Euro rescue The even bigger threat is to Germany’s influence in the escalating intra-European struggle over how to save the euro area and who will pay that bill. In the next round – the argument about potential conditionality that may be attached to ECB and ESM support – expect Spanish Prime Minister Mariano Rajoy to make the point that reckless German banks, including state-backed Landesbanken, contributed to the debt mess on the periphery. Northern lenders, pursuing foolish ROE targets, were not careful and pushed cheap credit on real-estate developers and governments alike. Allowing German banks to lend recklessly within the euro area will prove to be a costly mistake, no matter who pays the final bill. Why go down the road again of pursuing high return on equity while mismeasuring credit risk? Deutsche Bank should be instructed to raise more capital, exactly as UBS and Credit Suisse Group AG have been recently compelled to do. The Swiss authorities recognised that to act otherwise would be fiscally irresponsible. German taxpayers should be clamouring for their government to come to the same realisation. Bloomberg View
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September 19, 2012 business daily | 15
OPINION Business
wires Leading reports from Asia’s best business newspapers
Bangkok Post Malaysia’s national petroleum firm Petronas has thrown in the towel in Thailand’s oil retail market, deciding to sell all its assets to the local oil retailer Susco Plc. Executives of both sides agreed on the asset sale and purchase agreement late last week. Susco joined the bidding for Petronas Retail’s 100 petrol stations in Thailand early this month and was selected as a preferred bidder. Petronas Retail (Thailand) entered Thailand in 2005 by acquiring the assets of Kuwait Oil, whose brand is Q8.
New Straits Times The development of Pinewood Iskandar Malaysia Studios in Malaysia will position Johor at the forefront of the local creative industry and transform it into Malaysia’s movie capital, says its chief executive, Michael Lake. He said that while Pinewood was marketing Malaysia as a destination for film-making, it was also promoting it for companies to set up their infrastructure as well. By the end of 2013, he said, the development of Pinewood, a studio complex located on a 20ha site, would have created 1,500 jobs.
JoongAng Daily Households and non-profit organisations, both of which classify as retail investors, racked up combined losses of almost 21 trillion won (US$18.81 billion) from their stock investments in the second quarter and their debts continue to mount. According to the Bank of Korea, between April and June households and non-profit organisations made nearly 3 trillion won of fresh investments in the stock market. However, the stock holdings during this period shrank from 439 trillion won in the first three months of this year to 421 trillion won.
Audit the Fed? Barry Eichengreen
Professor of Economics and Political Science at the University of California, Berkeley
T
he party platform adopted at the Republican National Convention includes a number of remarkable planks. To a monetary economist, for example, the party’s proposal to restore some kind of metallic monetary standard is so outlandish as to be an almost irresistible target. More serious is the Republicans’ proposal for an annual audit of the United States Federal Reserve. This, like the gold-standard plank, is partly designed to appeal to the libertarian followers of Ron Paul, the Texas congressman and perennial presidential candidate who is hugely popular with the Republicans’ “Tea Party” wing. While Paul would go further, and abolish the Fed altogether, several bills in the U.S. Congress have mandated an annual audit; earlier this year, one such bill was passed by the House of Representatives (but not the Senate). The Republicans’ embrace of the audit idea taps into libertarians’ general distrust of government. But there is also distrust of the Fed on more specific grounds – distrust that extends well beyond the ranks of the Tea Party. The Fed, its
to ensure that the Fed remains insulated from political pressures. Indeed, it would. An audit would also reveal more details about financialmarket interventions like those in 2008, when the Fed
Undertaken by politicians, an audit might be viewed as an opportunity to score political points or steer policy in self-serving directions, with delicate information leaked in order to pressure policymakers
critics complain, has used its expansive powers to engage in a range of unprecedented interventions that have propped up large financial institutions. So the monetary authorities, they argue, must be in the pockets of powerful bankers.
Jakarta Globe
Accountability matters
Indonesia’s growing middle class is expected to fuel strong growth in the nation’s aviation sector, with air passenger numbers predicted to rise faster this year. Last year, according to Transportation Ministry data, saw 13.1 percent growth from 2010, up to 66 million air passengers. Of that total, 59 million were domestic flyers and 7 million were international travellers. Garuda, the nation’s flag carrier, said it enjoyed a 14 percent year-on-year rise in revenue in the January-July period. Its revenue rose to US$1.7 billion, from US$1.4 billion.
To be sure, central bankers should be democratically accountable for their actions. But accountability by audit would carry significant risks. Undertaken by politicians, an audit might be viewed as an opportunity to score political points or steer policy in self-serving directions, with delicate information leaked in order to pressure policymakers. While monetary policy conducted by independent bureaucrats is imperfect, handing over effective control to congressmen with one eye on the next election would be infinitely worse. The Republican platform notes that the audit would have to be “carefully implemented”
to make use of his political connections when his bank was pushed to the brink, the RFC nonetheless faced accusations of favouritism. Populist members of Congress, predictably outraged, demanded an audit and insisted on publication of a list of all banks that the RFC had aided. Publication of that list in January 1933 led to a crisis of confidence in banks that were revealed to have borrowed from the government. Bank runs started almost immediately and quickly engulfed the country, resulting in the Bank Holiday of 1933 – that is, in the forced closure of the entire U.S. banking system.
Destabilising effects purchased mortgage securities from Bear Stearns and AIG. The risk here is that providing too much information in real time about the securities that the Fed is buying and the institutions that it is helping could destabilise markets. This danger is not hypothetical. We saw an example of it the last time there were massive government interventions in U.S. financial markets – namely, during the Great Depression. In 1932, the Fed was unwilling to help stabilise a collapsing banking system. But someone had to do something. So President Herbert Hoover created the Reconstruction Finance Corporation, an independent government agency, to aid illiquid but fundamentally sound banks. The RFC’s largest loan in the summer of 1932 was to a bank run by former Vice President Charles Dawes. Not only was Dawes, like Hoover, a prominent Republican; he was also an ex-RFC official. Although Dawes refused
So it is not just political pressure that an audit must avoid. It must also avoid destabilising financial markets and institutions. That requires aggregating information and allowing for suitable delay before publishing it. Can we trust politicians to understand and respect this, especially
in an election year? It is no coincidence that the demand by Congress for the list of RFC loans occurred in 1932, also a presidential election year. Fed officials understand that their institution can remain independent only if it is accountable for its actions in the court of public opinion. That is why the Fed has been taking steps to become more transparent: it releases the minutes of Federal Open Market Committee meetings and publishes transcripts with appropriate delay, while FOMC members give speeches detailing their views. Moreover, in a recent innovation, the Fed now publishes the inflation and interest-rate forecasts of FOMC members and Reserve Bank presidents. The Fed almost certainly will move even further in the direction of transparency. Other central banks are doing likewise. No less is required to reconcile independence with accountability in a democratic society. But an audit overseen by politicians is not the right way. © Project Syndicate
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business daily September 19, 2012
CLOSING Spanish bank bad debts at record
German investor confidence rises
The value of bad debts held by Spain’s banks in July rose to 169.3 billion euros (US$ billion), according to latest figures from the central bank. The Bank of Spain said 9.9 percent of banks’ total loans were in arrears, up from 9.4 percent a month before. It was the highest bad loan ratio since the central bank began compiling the data in 1962. Despite the news, Spain raised 4.6 billion euros in 12- and 18-month loans on the bond markets yesterday. That helped 10-year Spanish yields ease back from Monday’s highs of more than 6 percent, dipping to 5.97 percent yesterday.
German investor confidence rose for the first time in five months in September after the European Central Bank unveiled a plan to buy government bonds to stem the sovereign debt crisis. The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations climbed to minus 18.2 from minus 25.5 in August. The rise in the main ZEW index “clearly reflects the positive reaction to the ECB’s announcement,” said Aline Schuiling, an economist at ABN Amro NV in Amsterdam. “Nevertheless, we expect the German economy to grow only moderately in the second half this year.”
EU votes for tough oil, gas, anti-corruption law European Parliament favours low threshold of US$105,100
E
uropean Union legislators have voted for a draft anticorruption law, echoing rigorous U.S. rules to make oil, gas and mining firms declare payments they make in resource-rich nations. Pressure has mounted on the EU to take a tough line after the U.S. regulator in August set demanding rules for U.S.-listed firms. Yesterday’s series of votes in the European Parliament backed detailed reporting to regulatory authorities starting from a minimum threshold of 80,000 euros (US$105,100), almost identical to the US$100,000 U.S. requirement and far lower than the million-dollar level some resource firms had said was practical. In contrast to the U.S. rules, the European Union is also proposing to include the forestry industry and banking, construction and telecommunication sectors on a less detailed level than for extractive industries. Non-governmental organisations were swift to welcome yesterday’s decisions, although the draft rules will only become law following further negotiations and approval by EU member states. “Today’s vote brings us one step
closer to helping citizens harness the often vast natural resource wealth of their countries to finance the fight against extreme poverty, disease and hunger, and the transformation of their economies to build opportunity for all,” said Eloise Todd, Brussels director of campaign group ONE. ONE campaigns against poverty, especially in Africa, where resource wealth is concentrated in the hands of a rich elite, meaning for millions the resources are a curse rather than a blessing. Another campaign group, Transparency International, said yesterday’s votes should help to ensure benefits of payments, such as royalties, signature and production bonuses or licence fees are shared. “Wealth in some of the poorest countries should no longer stay in the hands of corrupt elites, politicians and industry insiders,” said Jana Mittermaier, director of the Transparency International EU office.
Industry lobby Oil majors and other resource firms have said they believe in transparency and
have already signed up to international guidelines enshrined in the Extractive Industries Transparency Initiative. But some have complained that the European Parliament’s insistence on project-byproject reporting, as opposed to reporting at government level, is unnecessary and impractical, and have also taken issue with the payment threshold. Arlene McCarthy, a British Labour member of the European Parliament who led the discussions in the assembly, said it had stood firm against industry lobbying. “We have not given in to the pressure of industry and government lobbying for a weak transparency regime. We are insisting on project-by-project reporting with a low threshold,” she said in a statement. “Project-level disclosure is the only way in which local co m m u n i ti es i n r es o u r c e - r i c h countries are able to expose corruption and hold their governments accountable for using revenues towards development.” Reuters
New rules to make oil, gas and mining firms declare payments they make in resource-rich nations
Greece needs more time to pay, says negotiator Calls on Spain, Italy to request aid programmes
G
reece should get cheaper rates on its 130 billion euro (US$170 billion) aid deal and at least two more years from the European Union and International Monetary Fund to repay them, the chief negotiator of the country’s private sector creditors said yesterday. But better terms could only come after Athens delivers on commitments it has made to fiscal reform, Charles Dallara, managing director of the Institute of International Finance (IIF), told a news conference while on a trip to Beijing. “Once that has been done, and I am confident it will be done, Europe and the IMF should move quickly to extend the adjustment period for at least two years and provide the modest additional financial support for that extension to be effective,” Mr Dallara said. “Only some 15-20 billion euros is needed. This can easily be realised in part by reducing interest rates on the loans which Europe and the IMF made to Greece on more concessional terms,” he continued, adding that responses to the Greek debt crisis placed too much emphasis on shortterm austerity and not enough on improving the country’s longer-term competitiveness. Greek Prime Minister Antonis Samaras, leading a country in its fifth year of recession at a time of rising discontent at home, earlier said he wants two more years to implement economic reforms tied to the aid package to soften their impact. Inspectors from the so-called troika of the IMF, European Commission and the European Central Bank (ECB) are evaluating Greek progress on agreed targets before releasing the next, 32 billion euro (US$41.3 billion) tranche from the giant aid package. Mr Dallara welcomed the ECB’s commitment this month to launch a potentially unlimited bond-buying programme to lower the borrowing costs of struggling eurozone countries in a bid to end the debt crisis, but said it was at risk of failure. “The announcement by the ECB was very bold on the one hand, but it will come to naught, nothing, unless Spain or Italy ask for EU/ IMF endorsement of an economic programme,” Mr Dallara said. Reuters