Macau Business Daily, September 3, 2012 by Business Daily

Hengqin becomes even more special

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POWER Shift suits Sands Sands China is the casino operator currently best placed to take advantage of a power shift in gaming growth says Grant Govertsen of Union Gaming Research Macau. Sands currently has three properties on the Cotai Strip, all with tourismf o c u s e d shopping, hotels and convention space as well as VIP gambling.

Indian tours get 3-in-one visas

Cotai fuels hotel boom

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News where it matters

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HANG SENG INDEX 19550

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Call for heavier tax, more property supply Just days before official data showed home prices jumped 62 percent year-on-year in July, a government working group on the housing market admitted new measures to cool down the property market could be in the pipeline. Industry professionals and scholar tell Business Daily a different taxation scheme and an increase in housing supply is the way to stabilise prices. A stricter mortgage policy with fewer loans eligible to buyers with more than one residential property could help, as could heavier taxation on non-Macau buyers. But official figures also reveal housing supply could shrink in the near future. The number of private flats and homes under construction and of projects awaiting government approval slumped in the second quarter. Pages 5 & 7

Re-exports fail to stop trade deficit

19475

19450

August 31

HSI - Movers Name

%Day

CHINA RES ENTERP

2.67

HENDERSON LAND D

2.14

HENGAN INTL

1.89

CHEUNG KONG

1.64

BANK OF COMMUN-H

1.60

BOC HONG KONG HO

-1.56

BELLE INTERNATIO

-2.78

COSCO PAC LTD

-3.63

CHINA UNICOM HON

-4.21

CITIC PACIFIC

-7.14

Source: Bloomberg

A downward trend for domestic exports is in evidence now the July trade figures are out. Re-exports account for most sales and exports of traditional sectors keep declining, in particular the once dominant textile and garment manufacturing industries. Machines plus tobacco and wine are becoming the big hits. But with imports holding strong, the city’s trade deficit widened further. Pages 4 & 6 www.macaubusinessdaily.com

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Year I - Number 111 Monday September 3, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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business daily September 3, 2012

macau

Sands China tipped to win big

In the U.S. it’s easy for the casino to find out if a guy is good credit risk. In mainland China, that system doesn’t exist. If a gambler comes to Macau and asks for a 10 million pataca [US$1.25 million] credit line, then you have no idea if this guy is legitimate or not. That’s where the junkets come in, because these guys are on the ground in China and know who these gentleman are, what they do for a living, and therefore their ability to make good on any debts.

Get used to it: revenue from mass-market gaming will grow more quickly than revenue from VIP gaming, according to the managing partner and lead analyst at Union Gaming Research Macau, Grant Govertsen. In an interview with Business Daily, Mr Govertsen says improved public transport and the mainland’s expanding middle class make it inevitable. He says the change has been looming and is now upon us, and that Sands China Ltd stands Mass-market flair to benefit most. About the future developments in Cotai, Luciana Leitão

leitao.luciana@macaubusiness.com

projects, that I think disproportionately benefit.

Wallets growing

There has been a slowdown in gaming revenue growth, particularly in the VIP sector. Should we be concerned? Clearly, VIP revenues are slowing down. They’re not declining but they are slowing down. We’re not overly concerned. I know there has been a lot of chatter, especially in recent months, about what is happening in VIP. There are really several things going on. For one, after two years of absolutely fantastic growth, nearly 60 percent and 40 percent in 2010 and 2011, it just becomes that much tougher to post really big year-after-year increases. In that respect it’s not very surprising that we’re having a slowdown in VIP growth. Also, you do have the impact of the global macroeconomic environment and, quite frankly, it’s not great. So that’s weighing on VIP as well. Then, finally, I truly believe that at least some part of the VIP sector is being impacted by the upcoming leadership change in China, and there are clearly unknowns there. There are some VIP players who don’t want to get bigger or are holding back until it is known who is going to be in charge in Beijing. All that being said, we’re still generating near-record revenues month after month. Is this just temporary? It is largely temporary and, again, it’s not declining, but the rate of growth is slowing. I think that could happen for the next few months, especially when you think about how much revenue was generated in the same period last year. It’s very difficult to begin with, given the comparison. In August, you’ll probably see single-digit growth. In September, you might see higher growth. In October, November, it’s

going to be very modest growth. But the point is: it’s still growth. With the post-leadership environment change in Beijing and, secondly, as we see improvements in the global economy and some more clarity there, I think you’re also going to see that contributes to an uptake in VIP. Again, that is all in the context of the mass market that still is doing incredibly well and growing very much year after year.

There are some VIP players who don’t want to get bigger or are holding back until it is known who is going to be in charge in Beijing Will we see a different trend: massmarket gaming outgrowing the VIP sector? I think so. Certainly, over the foreseeable future you’re going to see the mass market continuing to grow well into the double-digit range, versus single-digit growth for VIP. That’s really good news, especially if you’re Sands China, given how focused that company is, historically, in building these massive properties with tons of the right amenities and tons of hotel rooms and gaming tables to attract those mass market consumers. It’s Sands China, Melco Crown and Galaxy, with the big Cotai

Why is the VIP sector being affected but not the mass gaming market? The mass-market consumers seem quite strong coming out of China. Not only is visitation growing but their wallets are growing too. They’re actually spending more. I think that should continue for quite a long time. And a lot of that is being driven by a significant number of infrastructure projects in China, Macau and Hong Kong, all of which will serve to improve access to Macau from mainland China, whether it’s airports in mainland China being expanded or just built in places that didn’t have airports before, the continuation of the high-speed rail network, the connection from Guangzhou right to Macau’s doorstep through the Guangzhou-Zhuhai Intercity Railway, the expansion of the border gate or the bridge from Hong Kong. It really benefits the mass market significantly more than it does the VIP. Is it better to have the majority of gaming revenues coming from the mass market instead of from VIP? Generally speaking, the more massmarket revenues gaming companies generate, the better. It tends to be a little bit more stable. VIP can be very volatile. It doesn’t take much for a single wealthy player to come to Macau and if he goes on a winning streak it could literally impact that company’s quarterly earnings. You can’t have these dramatic swings. Also, it is much more profitable for a casino operator, for every dollar of mass market revenue they generate, maybe 40 cents drops to the bottom line as profit, versus 10 or 11 cents for VIP. So they want to generate as much mass market revenue as possible, because it’s a much more profitable business. That’s why you’re seeing such a focus on Cotai now, since the operators recognise what the mass market should look like five to 10 years from now, as access to mainland China improves. And they all want to capitalise on that, hence these multi-billion-dollar hotel resorts in Cotai, whereas historically properties on the peninsula have been just a few hundred rooms and a few hundred table games. We now have a gambling system dependent on junkets, which is not a transparent business. Is it the only system possible in Macau? I think it’s the only system that will work in Macau today. In mainland China, the financial system isn’t developed like in the U.S.

it seems the government is taking too long to approve the properties. Why is this happening? From the investment community standpoint, I think there is some frustration on the part of investors. And the gaming operators are probably frustrated as well, because they have to wait for the approvals. With that being said, I don’t think there is any doubt in anybody’s mind that these approvals are eventually going to come. We just don’t know when, but we know that they will come.

Singapore didn’t have a significant impact on Macau’s growth history. We don’t think you’re going to see any big impact from any of the other regional markets, whether it’s the Philippines or Taiwan

In five years’ time what can we expect to see in Cotai? All six concessionaries are aiming to build a new property on Cotai. By 2017, you’re going to see six new mega-resorts on Cotai. And they will all have unique mass-market flair to them that we don’t see now. There’s obviously a striving to make Macau less of a gaming destination and to make it a more of an entertainment destination. You’re going to see that reflected in all these six resorts, where they might take out some of the elements we’ve seen in Singapore: theme parks, museums, massive shopping. You’re going to see benefits from Hengqin Island as well, just across the border. You’re going to have a theme park opening this year or next year, which will be driving Chinese visitation right to Macau’s doorstep.

Over the foreseeable future you’re going to see the mass market continuing to grow well into the doubledigit range, versus single-digit growth for VIP

September 3, 2012 business daily | 3

MACAU editorial

Sour grapes Associate Editor

This is all tremendously positive if you’re an operator in Cotai. You’re going to get a lot – hundreds of thousands – of people living on Hengqin. Those are all potentially future customers of Cotai, who could access Cotai perhaps in a matter of minutes, assuming they expedite the immigration procedures. Looking at other gaming markets in the region such as Singapore or Taiwan, is Macau under threat? We would view Singapore as a threat, perhaps, at the margin. They do attract a lot of Chinese VIP gamblers. A lot of their business does come from Southeast Asia. The reality is we’ve seen Singapore go fromazerodollarmarkettoaUS$7billion market within the space of two years, while Macau grew 60 and 40 percent. So, clearly Singapore didn’t have a significant impact on Macau’s growth history. We don’t think you’re going to see any big impact from any of the other regional markets, whether it’s the Philippines or Taiwan. Even though they’ll be going after the same customers, the reality is it will

There’s obviously a striving to make Macau less of a gaming destination and to make it a more of an entertainment destination be very difficult for Chinese massmarket customers to patronise these resorts relative to Macau. The good news for Macau is that Beijing will be on their side. In other words, Beijing can flip the switch on and off if they want to make it difficult for a gambler to go from mainland China to the Philippines. If you’re China you will prefer these people coming to Macau, because it’s part of China, rather than these other markets. A couple of other aspects would be that other than Taiwan these other

places don’t necessarily speak the language and they don’t have perhaps the same amenities. None of them will ever have the concentration that Macau does. It’s kind of like Las Vegas, where you’ve got 40 casinos on the strip and another dozen downtown. No place in the U.S. can match that, whereas no place in Asia can match what Macau has. There are rumours of Beijing restrictions on individual visas to Macau. Is this really happening? Certainly we’re not seeing any indication that this is actually happening. It popped up in the media a little while ago. The investment community was scared. As a result the stocks sold out. The same happened with the UnionPay rumour, which wasn’t true. We don’t think the visa restrictions are necessarily true, either. We’re still seeing visitation increase. But it could happen. It’s not clear what might trigger something like that. I don’t think Beijing would do that in advance of the leadership change but I’m not a political expert, either.

uropeans are not easy to love. When counselled over several decades by economists that their generous state welfare systems were dangerously under funded, their response was to go on one of the greatest credit-fuelled consumer spending sprees seen in human history. To fund it they used the savings of hard working Chinese and other Asian people. When things didn’t work out, they had the nerve to go back to the Chinese government and ask for handouts. That would almost be forgivable if the Europeans had exhibited any glimmer of shame or self reflection. They have not. Instead, when China took a market-based rather than charitable approach to Europe’s problems – i.e., offering to buy up distressed European assets at bargain prices, as any sensible business person would – the Europeans expressed outrage that they were losing their autonomy and their heritage. Jean-Michel Guillon, the president of the Gevrey-Chambertin winemakers’ syndicate in the Burgundy region of France recently equated the purchase of a local chateau and vineyard by Macau businessman Louis Ng Chi Sing, chief operating officer of SJM Holdings Ltd, as like “French investors buying up 10 or 50 metres of the Great Wall of China”. Thus M. Guillon managed to display arrogance and ignorance in equal measure. Without the Chinese thirst and passion for French ‘vin rouge’, champagne and other goodies, France’s economy would be in even worse shape than it is. And as the Han Chinese found out at their leisure, erecting walls – whether made of tariffs, restrictive policies or of bricks – rarely works. People find a way around them. We should take Mr Ng at his word when he says he is not a predatory asset grabber but a person with a genuine passion for French wine and who sees himself as a custodian of Chateau de Gevrey-Chambertin. Surely the real issue is the sheer wonder that Mr Ng and his compatriots retain as much respect for European culture and people as they currently do. Young Chinese women still yearn to be as pale and as white as the pith-helmeted Victorian slum dwellers sent out by Mother England to garrison Hong Kong in the 19th century. It appears they do so because they see ‘whiteness’ as a virtue not just aesthetically but morally. They continue to hold this opinion even as the very Europeans they admire are obsessively turning their own skin the colour of weathered walnut through intensive sunbathing, and adorning their bodies with ‘tramp stamps’ and other tattoos previously considered suitable only for gangsters or matelots. As debates at numerous Sino-European trade summits have hinted, some Chinese have proven themselves adept forgers of European luxury goods. But the majority of Chinese consumers still want ‘real’ Gucci loafers or a ‘real’ Prada handbag – even when most of the economic value in those items is going not to the Chinese labourers who produce them, but to the brand owner in Europe, the United States or (sometimes now) China. If all this seems too hard on the Europeans, then local Chinese here in Macau shouldn’t get too smug. Macau is perilously close to repeating one of Europe’s biggest mistakes. This is the adoption of big government as a result of politicians and legislators sleepwalking their way to an ever more nannying and invasive approach to managing their fellow citizens’ lives. There are now 26,000 public servants, data from (naturally enough) the government revealed last week. That’s one administrator for every 21 inhabitants. Or to put it another way, there’s one job-protected person allowed to take the day off work whenever there’s a Number 8 Typhoon Signal, for every 13 hard working private sector employees in Macau. Let’s hope it keeps on raining cash in the casinos.

Macau is perilously close to repeating one of Europe’s biggest mistakes. This is the adoption of big government

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business daily September 3, 2012

macau

Trade deficit grows by 23.2 pct

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HOSPITALITY

Growth in re-exports keeps its momentum in July as sales to the United States and the European Union tumble Tiago Azevedo

Mighty MICE decline

tiago.azevedo@macaubusinessdaily.com

A stubborn characteristic of tourism in Macau is the short duration in visitors’ stays. It is a feature that has proved difficult to change. A key aspect of a policy to develop the city’s MICE industry – or meetings, incentives, conferences and exhibitions – was the ability to change that. Conferences and exhibitions can help extend the length of average stay and pump up hotel occupancy rates. More hotel rooms would also help attract more of these types of events. The number of events held here has failed to live up to these expectations and has declined since 2010. The duration of MICE events has also failed to meet expectations. The peak was reached in 2010, with each event lasting an average of 2.5 days.

3.0

2.5

2.0

xport growth maintained its momentum in July, propelled by a 15.6 percent increase in re-exports. But imports also kept growing, widening the trade deficit by 7.5 percent. Exports in July increased by 10.8 percent from a year earlier, the Statistics and Census Bureau said on Friday. In June they were 4.6 percent higher than a year before. Exports were worth 638.9 million patacas (US$79.9 million) in July, after been worth 650.5 million patacas in June. July was the second-worst month for exports this year, better only than January, when they were worth 619.7 million patacas. The momentum of growth in exports was supported chiefly

by re-exports. Re-exports were worth 423 million patacas in July, 15.6 percent more than a year before. Domestic exports grew by 2.3 percent to 215 million patacas. In the first seven months of this year re-exports were worth more than 3.19 billion patacas, increasing by 22.6 percent year-on-year, while domestic exports were worth less than 1.4 billion patacas, just 1.4 percent more than a year before. Only three years ago domestic exports were almost 50 percent greater than re-exports. Economist Albano Martins told Business Daily last month that Macau was becoming a middleman, buying goods in the mainland and “adding a bit of value-added” before shipping them to other markets. Mr Martins said that although the

city might seem worse off because of this, it would not be able to produce by itself as many goods as it was now selling onwards.

MOP36.02 billion Trade deficit in the first seven months of 2012

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The first graph shows the duration of meetings according to the organising body, either government, corporate or association. The general trend has been downwards. Corporate meetings tend to be longer lasting, which suggests they better match the expectations for the sector’s development. Meetings organised by the government and associations are shorter on average and, except for the contribution they provide to overall figures, could be irrelevant when assessing the success of a policy designed to boost length of stay. The average length of corporate meetings has declined by a full day since their peak.

More housing will cool market, govt told Another jump in home prices gets estate agents and academics thinking about how to curb them, and supply is the ultimate solution Tony Lai

tony.lai@macaubusinessdaily.com

Academics say heavier taxation of non-residents that buy homes could rein in housing prices

Conferences, incentives and exhibitions are typically longer than meetings and the relationship with the duration of stay is more complex. Conferences and exhibitions are big contributors to the length of stay with average durations of 3.6 days and 4.3 days. The graph for incentives slows an increase to 2010, then a slight decrease becoming more pronounced to the end of the second quarter of this year. Conferences and exhibitions recorded a more sharp decrease last year, followed by a partial recuperation. Overall, the trend seems to be fewer events, with shorter durations. J.I.D.

axing non-resident buyers more or increasing supply would be the simplest ways to curb housing prices, estate agents and academics say. Financial Services Bureau data released on Friday show the average price per square metre of residential space reached a record 62,137 patacas (US$7,767) in July, 5.4 percent more than in June and 62 percent more than a year earlier. It was the first time the average price had exceeded 60,000 patacas. The previous record was 58,976

patacas, set in June. A government working group on the housing market, led by Secretary for Transport and Public Works Lau Si Io, said last week the market was “somewhat overheating” and did not rule out measures to curb prices on top of the special stamp duty introduced last year. The working group will research four aspects of the market: mortgages, taxation, sales of unfinished flats and the time it takes the government to approve projects. University of Macau real

estate specialist Rose Lai Neng says the government’s stance is responsible, showing that officials have acknowledged the gravity of the situation. But she says the government should act quickly. “The new measures should be scientific, based on data collection, instead of trying to please everybody,” Ms Lai told Business Daily. Estate agents would prefer the government to wait and see what happens, and then to think carefully before taking measures

September 3, 2012 business daily | 5

MACAU Imports were again above the 5.9 billion pataca mark in July, pushing the trade deficit for the month up to 5.3 billion patacas.

Machinery exports Imports in the first seven months were worth 40.6 billion patacas, widening the trade deficit to 36.02 billion patacas, 23.2 percent more than a year earlier. If trade continues this way for the rest of this year, the city will end 2012 with a deficit of about 61.7 billion patacas, 11.6 percent more than last year. The annual rate of growth in the economy was 7.3 percent in the second quarter, the slowest for almost three years, official figures released on Thursday show. Textiles exports in the first seven months were worth just 650 million patacas, tumbling by 22.8 percent from a year before. They were 26.7 percent lower in July than a year before. In contrast, exports of all other kinds of goods in the first seven months were worth 3.9 billion patacas, rising by 25.5 percent. Shipments of machinery leapt by 121 percent to 737 million patacas and sales of tobacco products and wine grew by 29.4 percent to 465 million patacas.

to rein in prices.

Lifetime investment “We welcome the government’s decision but they should wait for at least a few months before [taking] any measure, as the economy has a downward trend,” said Ronald Cheung, chief executive of Midland Realty (Macau) Ltd. Gross domestic product grew by 7.3 percent in the second quarter of this year from a year before, the rate of growth slowing sharply from 18.6 percent in the first quarter. Savills (Macau) Ltd’s managing director, Franco Liu, said: “Many people regard residential properties as a lifetime saving or investment and no-one wants to see the housing market crash.” Mr Liu wants strict rules on mortgages to make it more difficult for those that already own one home to borrow to buy a second. He sees no particular need for the government to keep foreign buyers out of the market as most homes are bought by residents, whose purchasing power has jumped. The president of the Macau Association of Economic Sciences, Joey Lao Chi Ngai, thinks otherwise. “Macau’s market is getting more ‘Hongkong-nised’, with the foreign speculators pumping up the market,” Mr Lao said. “More Macau residents

KEY POINTS Average price per square metre of residential space hits 62,137 patacas Average price 62 percent higher in July than a year before Estate agents urge government caution in face of market overheating Greater supply the obvious way to curb prices

Balance of trade (million MOP)

Jan -4,926.08 Feb -5,003.75 Mar -5,239.77 Apr -5,055.61 May -5,260.01 Jun -5,271.81 Jul -5,266.55

Re-exports accounted for 70 percent of all outbound shipments in the first seven months of this year

Exports to Hong Kong in the first seven months rose to 2.26 billion patacas, 34.8 percent more than a year before. Shipments to the mainland grew by 10.3 percent to 741 million patacas.

will end up in sublet units like Hong Kong one day if the price continues to rocket.” Hong Kong Chief Executive Leung Chun Ying announced last week 10 new measures to curb housing prices there, including speeding up the approval of sales of space in private developments, and turning industrial premises into residential premises.

But Europe’s debt crisis and the slowdown in the United States, two of the city’s main markets, are taking a toll on its exports. Sales to EU countries were 13.7 percent lower in July than a year before and sales to the United States

were 7.7 percent lower. In the first seven months, shipments to EU countries were worth 210 million patacas, 14.9 percent less than a year before, and sales to the U.S. were worth 302 million patacas, 13.4 percent less.

Patane project closer as impasse cleared

New for old Mr Lao says such measures will not work in Hong Kong and would not work here. He says homebuyers from outside Macau should be taxed more heavily. Mr Lao and Ms Lai agree that Macau could follow Singapore and impose an extra stamp duty of 10 percent on purchases of homes by foreigners. “But I don’t think the government will impose such taxation,” said Mr Lao. Estate agents and academics alike think a big increase in the supply of homes is the ultimate way to cool the overheating market. Ms Lai believes the government should speed up approval of small and medium housing projects to balance demand and supply. She says the government should simultaneously fine-tune its housing policy, beginning with the laws on rents and sales of unfinished flats. She is also keeping an eye on Iao Hon, a district that has been waiting to be redeveloped since 2006. “If the renovation is to take place in Iao Hon, a lot of taller infrastructures can be built to significantly boost the supply,” she said. “But this project remains a fairly difficult problem for the government to handle.” The head of the urban planning department of the Land, Public Works and Transport Bureau, Lao Iong, has said the problem posed by the complexity of property rights in Iao Hon can be solved only with the help of the long-awaited law on the renovation of old districts. The bill on the renovation of old districts passed its first reading in February but is still being discussed by the Legislative Assembly’s second standing committee.

he government will clear wrecked vehicles dumped on two vacant blocks of land in Patane that have been idle since 2008. Land, Public Works and Transport Bureau director Jaime Carion told reporters last week the land had been illegally occupied before the grant process was complete. The current holders of the land title, Tin Wai Investment Co Ltd, would not be responsible for cleaning up the plots. The government had previously said Tin Wai was responsible for removing the wrecks but it would help with the clean-up. Mr Carion said Tin Wai and the government were ironing out the

details of the land concession. The developer had proposed to extend the development window by another 36 months. Tin Wai’s proposal will be analysed “in due time,” Mr Carion said. The company bid 1.42 billion patacas (US$177.5 million) when the plots were auctioned in 2008. It originally wanted to develop both pieces of land as a single block. A fortnight ago, Executive Council member and former Tin Wai boss Liu Chak Wan said the company had agreed to develop the two plots separately but was waiting on the government to turn over the land. T.L.

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business daily September 3, 2012

macau

Hengqin can approve foreign investments

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Changing exports A defining characteristic of the past few years has been a decline in Macau’s exports of goods. With the casino boom, external trade in goods has dematerialised and most of the city’s exports are services, mainly related to gambling and tourism. That decline has been associated in particular with the contraction of the textile industry, which for many years was the mainstay of industry here. The liberalisation of international trade and the mainland’s entry into an open market sounded the death knell for most textile companies here. A declining textile industry has meant a declining volume of exports. That latter trend, however, seems to have been reversed. The most recent monthly data show the value of exports up until the end of July have increased by 15 percent compared to the same period last year. Is Macau becoming a manufacturing powerhouse?

Comparing the value of goods made here for export, or domestic exports, for the first seven months of this year and last year, there is little change. Domestic exports are about 1 percentage point higher last year and this year than they were in 2010. What has increased significantly is the volume of re-exports. Reexports now represent about 70 percent of all exports, up from 65 percent last year. The traditional industry is still going down. The next chart offers some additional graphical clues.

Authorities on Hengqin Island gain powers usually wielded by provincial governments Xi Chen

xi@macaubusinessdaily.com

engqin Island officials now have the same powers as provincial governments in several fields, including the power to approve foreign investments. The China Daily quoted the head of Hengqin New Area’s administrative committee, Niu Jing, as saying Hengqin was the only special economic zone allowed to approve foreign investments. “With this policy, it is much easier and more convenient to do business in Hengqin. It’s upgrading our business environment to a more competitive international level,” Mr Niu said. The Hengqin authorities are allowed to handle the business registration of foreign companies that invest up to US$300 million (2.4 billion patacas), without going through the Guangdong

Administration of Commerce. Mr Niu said new registration of a foreign enterprise now took just half a day at Hengqin’s bureau of industry and commerce. The authorities on the island intend to attract foreign investment in leisure and tourism, commercial and financial services, cultural and creative industries, traditional Chinese medicine and high-technology. Previous reports in the mainland media said 23 projects, including basic infrastructure projects, were in progress on the island. They entail investment of 120 billion yuan (151 billion patacas). Mr Niu said six projects on the island with an investment of 64 billion yuan by Hong Kong or Macau enterprises were being negotiated or are underway.

He said that, in all, 16 projects entailing the investment of 80 billion yuan were being negotiated. Hong Kong’s Lai Sun Group announced last year it would invest 18 billion yuan in creating a “creative culture city” on Hengqin. The development will focus on film and music production, the performing arts, exhibitions and conventions. The Reignwood Group, which produces the Red Bull energy drink in the mainland, announced this year that it would invest more than 5 billion yuan in various projects on the island. Last year, 225 enterprises with combined registered capital of 14.3 billion yuan set up shop there. Of these newcomers, 11 were Macau enterprises and 16 were Hong Kong enterprises.

Visa deal offered to Indian tour groups

Textile exports keep contracting. They have decreased by almost a quarter since last year. Garment exports decrease just confirms the trend from previous years. Fabrics have almost vanished as an activity. Two sectors are showing an unexpected dynamic. Machines and parts exports, which last year represented less than half of the textile sector exports, more than doubled to become the bigger exporter. Exports of tobacco and wines rose by 29.4 percent, almost reaching 80 percent of the value of exports from the textile sector. These figures represent a remarkable and apparently irreversible change in the trade patterns of the region. Macau is becoming an entrepot economy. J.I.D.

uangdong will soon offer a special six-day visa to Indian tourists visiting Macau. The Tourism Administration of Guangdong Province announced last week that Indian tour groups of less than 40 people visiting Macau or Hong Kong could apply for the new visa to enter Guangdong. The new visa arrangement was announced during a promotional tour of three Indian cities – Chennai, Mumbai and Delhi – supported by the Macau Government Tourist Office, Hong Kong Tourism Board and the Guangdong body. The deputy chairman of the Tourism Administration of Guangdong, Mei Qijie, told Indian reporters that the visa would help Indian tourists “explore the unparalleled leisure facilities” in the province. “Lots of tourists go to Hong Kong and Macau from here. Now they can also go to Guangdong. Every

destination has its own strength. We are complimenting each other,” Mr Mei said. The tour was the first organised by the three authorities to promote tourism in the Pearl River Delta, including multi-destination travel itineraries, to Indian markets. The number of Indian tourists to Macau increased from less than 10,000 in 2003 to 170,000 last year

but has fallen by 8.5 percent during the first seven months of this year. In New Delhi, representatives from Macau met representatives from the Directorate General of Civil Aviation of India. Macau International Airport has been trying to lure companies to operate direct flights to India by offering special rebates. V.Q.

Weather Beijing 26/15o C Changchun 23/12o C

Harbin 23/12o C

Xian 28/13o C Shanghai 32/23o C Chengdu 27/18o C Kunming 25/17o C Haikou 31/23o C Sanya 30/25o C

Guangzhou 30/24o C

MACAU (3-8 September) Day

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ASIA (today)

Hong Kong 31/24o C

Manila

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33/25o C

September 3, 2012 business daily | 7

MACAU Taiwan currency deal to impact Macau banks Mainland China and Taiwan signed an agreement paving the way for a cross-strait currency clearing mechanism, China’s central bank announced on Friday. The deal is expected to come into effect in 60 days, state news agency Xinhua said. The two sides will each designate a clearing bank to carry out currency settlements and liquidations for the other side. Currently, banks from both sides can choose clearing banks in Hong Kong or Macau to carry out currency settlements and liquidations, which takes more time.

Home supply running dry Number of new private homes being readied for sale has dropped, threatening to heat up prices Vítor Quintã

vitorquinta@macaubusinessdaily.com

The construction boom that changed Taipa’s landscape seems to be losing steam

he supply of housing is set to become even tighter, as the number of private dwellings under construction or awaiting the official go-ahead slumped in the second quarter. Data released by the Land, Public Works and Transport Bureau on Friday show that at the end of June fewer than 1,500 homes were waiting for a final official inspection and

almost ready to hit the market. At the same stage three months before, there were 2,300 dwellings ready to come onto the market. Of the homes in the pipeline, 1,258 had two bedrooms and 957 had a floor area of less than 75 square metres. Most were in 16 developments on the peninsula. Only one development on Taipa was awaiting approval. The number of homes under

construction had fallen to fewer than 7,200 by the end of June from more than 8,000 three months before. Taipa and Coloane was where the action is, with more than 4,400 homes being built there. Almost 3,650 will have an area of between 75 square metres and 150 square metres. The 228 housing projects waiting for government approval at the end of June are meant to contain fewer than 29,200 homes, whereas the housing projects waiting for government approval at the end of March were meant to contain almost 31,200 homes. The construction boom that has changed Taipa’s landscape in the past few decades seems to be losing steam, as only 21 housing projects are planned for the island. Another 175 projects are planned for the peninsula and 32 for Coloane. Jones Lang LaSalle predicts that for the next three years the actual supply of new homes will remain around 500 a year because many flats under construction have already been sold. The estate agency’s most recent annual property review says more than 6,100 homes are likely to be completed by the end of 2014, but that close to 5,000 flats have already

1,492 Completed flats awaiting inspection at the end of June

been sold. Jones Lang LaSalle says developers are waiting for the review of the special stamp duty. The special stamp duty is levied at a rate of 20 percent on the sale of a home within one year of it being purchased new, and at a rate of 10 percent within two years of it being purchased new. A government working group said on Wednesday that the special stamp duty “has yielded positive results” and should be maintained. An official review of the special stamp duty is due in the middle of next year.

Supply of hotel rooms to surge More than 17,000 guestrooms planned or under construction, most of them in Cotai

he number of hotel projects awaiting the official green light increased in the second quarter of this year, and four new hotels opened, official statistics show. Data released by the Land, Public Works and Transport Bureau on Friday show 22 projects for hotels containing about 17,000 rooms were waiting for government approval at the end of June. At the end of March, there were 21 projects for hotels containing about 14,000 rooms in the pipeline. Of the 17,000 rooms in the pipeline at the end of June, 80 percent were planned for just five Cotai hotels. Some of the hotels are likely to be in Macau Studio City or on Sands China Ltd’s Plot 3. The 14 hotels planned for the peninsula are much smaller, with a total of 2,200 rooms. Chief Executive Fernando Chui Sai On said in February the government would free up land for budget hotels to ensure more affordable accommodation. The city had 24,268 hotel and

guesthouse rooms at the end of June but the majority, 14,830 rooms, were in five-star hotels and only 1,471 in guesthouses or two-star hotels. Legislative Assembly member Ho Ion Sang, who is also the deputy director of the Macau Federation

of Trade Unions, warned in April that making more land available for cheap accommodation would hamper the development of a free market, increase costs and do little to curb the steep rise in room rates. He called for less red tape to encourage investment in the hotel industry, including quicker assessment and authorisations for development projects.

Cotai rising

The city’s largest hotel, the Sheraton in Sands Cotai Central, is expected to open on September 15

The Land, Public Works and Transport Bureau said 11 hotels containing about 7,320 rooms were being built at the end of June. At the end of March, 9,791 rooms were under construction. In the interval, more than 600 five-star rooms and suites under the Conrad brand and another 1,200 four-star rooms run by the Holiday Inn chain were opened in the Sands Cotai Central casino resort. Another three hotels with 6,667 rooms were under construction in Cotai at the end of June.

The city’s largest hotel, the Sheraton in Sands Cotai Central, with 3,863 rooms, is expected to open on September 15. Wynn Macau Ltd has begun construction of its casino resort in Cotai, which will have a five-star hotel with about 2,000 rooms. More than two-thirds of the hotels being built are smaller projects on the peninsula, and they account for less than 9 percent of the rooms under construction. Three hotels and one guesthouse opened in the second quarter, taking the number of lodging establishments to 99 – 66 hotels and 33 guesthouses. Macau Government Tourist Office director João Manuel Costa Antunes has said the city could have as many as 50,000 guestrooms in the next five years. Bloomberg quoted Mr Antunes as saying in May that the city needed the extra rooms because the average occupancy rate hovered around 85 percent and it was difficult to find a room at weekends. V.Q.

8 |

business daily September 3, 2012

GREATER CHINA

Once-a-decade leadership reshuffle begins Li Zhanshu to head party’s powerful Politburo general office

hina’s ruling Communist Party has announced a reshuffle to a key post, state press said. The move is seen by some China analysts as the official start of a once-a-decade leadership transition due to be completed later this year. A feature of the reshuffle process appears to be that people directly loyal to outgoing President Hu Jintao and to Premier Wen Jiabao will remain in influential positions – at least for the short- to mediumterm –thus reducing the risk that anyone within the new regime will seek political revenge on the old leadership. Li Zhanshu, 62, former head of the southwest province of Guizhou, was on Saturday named to head the party’s powerful Politburo general office, the People’s Daily reported. The job puts Mr Li in charge of the party’s day-to-day workings. The General Office is also responsible for security and logistics for China’s top leaders. Its former bosses include Premier Wen and former Vice President Zeng Qinghong. Mr Li has been a provincial leader in Hebei, Shaanxi, Heilongjiang and most recently Guizhou where he was party secretary, according to his official biography. He was the leader of Wuji county in Hebei from 1983 to 1985. Mr Li replaces Ling Jihua, President Hu’s top aide. Mr Ling

has been named to head the party’s United Front Work Department, the paper said. That department handles relations with non-party organisations and figures including the Dalai Lama, Tibet’s exiled spiritual leader.

Allies remain Mr Ling replaces Du Qinglin, who has reached retirement age, according to Xinhua. Mr Ling, 55, an ally of President Hu, remains a member of the Secretariat of the Party’s central committee, which runs the day-today affairs of the Politburo and its Standing Committee, the highest ruling body. The changes were announced late on Saturday by the official Xinhua News Agency and picked up by People’s Daily.

2,270 delegates at Party Congress to announce China’s new leader

As part of the leadership transition, President Hu will step down as the party’s general secretary – the top party post – at a Party Congress expected to take place in the coming weeks. While the party has said that 2,270 delegates will attend the meeting, the date has not yet been announced. Mr Hu will officially resign from the presidency at a parliamentary meeting due next March, ending his 10 years as China’s top leader. Vice President Xi Jinping, 59, is in line to take over from him as general secretary and state president and head the 82 million-member Communist Party. Vice Premier Li Keqiang, 57, is in line to replace China’s current premier Wen Jiabao. In reaction to Li Zhanshu’s appointment, Bill Bishop, a Beijingbased consultant and writer of the Sinocism China Newsletter, said: “The new guy has good relations with Hu Jintao and also has ties with the new incoming leader.” “He will be an extremely influential person in Beijing. The party general secretary needs someone like this who is competent and can be trusted. More importantly this is really an indication that things are on track and that the next Party Congress is reasonably imminent,” added Mr Bishop. No dates for the congress have been announced, but it is widely

Stepping down – China’s president Hu Jintao

expected to take place next month.

Opaque process China’s authoritarian politics largely take place in secret but analysts believe the ongoing transition has been hampered by the ousting of charismatic politician Bo Xilai, former party boss in the southwestern city of Chongqing. Mr Bo’s wife was given a suspended death sentence last month for the murder of British businessman Neil Heywood. Before the murder scandal broke

U.S. wants cooperation not conflict says Clinton Pacific big enough for everyone: Secretary of State ahead of Beijing trip Andrew Quinn

he United States will buttress security partnerships across the Pacific as it strengthens ties with island nations, but also hopes to work more closely with China as Beijing expands its own influence in the region, U.S. Secretary of State Hillary Clinton said at the weekend. Mrs Clinton arrived in the tiny Pacific outpost of the Cook Islands ahead of a visit to Beijing this week. She attended the Pacific Islands Forum, part of Washington’s effort to woo nations across the Asia-Pacific which are increasingly coming under China’s shadow. Mrs Clinton told the gathering, which represents 16 independent and self-governing states ranging from Australia and New Zealand to smaller islands such as Tuvalu and Nauru, that the United States was in the region for the long haul. But she also played down growing perceptions of a U.S.-China rivalry in the region, declaring “the Pacific is big enough for all of us” and dismissing the notion that expanded U.S. activity was “a hedge against particular countries.”

KEY POINTS Pacific big enough for U.S. and China China says not seeking Pacific influence, dominance US to strengthen security links in Pacific: Clinton Sec of State to visit China this week

“We think it is important for the Pacific Island nations to have good relationships with as many partners as possible, and that includes China as well as the United States,” Clinton told a news conference with New Zealand Prime Minister John Key. “We want to see more international development projects that include the participation of China,” Clinton

Hillary Clinton – in Beijing this week

said, citing disaster relief, maritime security and preserving bio-diversity. “We think that there’s a great opportunity to work with China and we’re going to be looking for more ways to do that,” she said. China’s Vice Foreign Minister Cui Tiankai is also attending the Pacific forum and told reporters Beijing’s presence in the Pacific was not about geo-political influence. “We are here in this region not to seek any particular influence, still less dominance,” Mr Cui told a news

conference before Mrs Clinton made her remarks. “We are here to work with island countries to achieve sustainable development, because both China and the Pacific island countries belong to the rank of developing countries. “Although we are far away geographically, although we have different national conditions....we are faced with very similar tasks of achieving sustainable development, of improving the lives of our peoples.” Reuters

September 3, 2012 business daily | 9

greater china

State’s railways losses hit 8.8 billion yuan

hina’s Ministry of Railways suffered an after-tax loss of 8.8 billion yuan (US$1.4 billion) in the first half of 2012 as it struggles to cope with rising operating costs and mounting debts, local media reported on Saturday. The ministry’s debt-to-assets ratio climbed to 61 percent at the end of June, Chinese financial magazine Caijing said in a report on its website, citing official figures. The ministry’s loss in the first half compared to its annual profits of 31 million yuan in 2011 and 15 million yuan in 2010, the report said. Its costs were 421.5 billion yuan in the first half of 2012 compared to 728.2 billion yuan in the whole of 2011. The ministry raised 310.8

in February this year, Mr Bo had been seen as a candidate for promotion to China’s top ruling body, the party’s Politburo Standing Committee. Li Zhanshu “made great contributions” to Guizhou’s economic development, Zhang Jinan, deputy director of the party’s Organization Department, which decides on promotions and personnel changes, was quoted as saying by the Guizhou Daily in July. Like Vice President Xi Jinping, Mr Li comes from a revolutionary family, albeit lower-profile. More

billion yuan, mainly through bank loans and bond issues, during the January-June period, trailing behind the 967.4 billion yuan it raised in the whole of 2011, it added. The ministry could not immediately be reached for comment. Beijing has announced steps to open up the vast rail sector to private investors as rail investment slowed sharply in 2011 after a fatal crash and the firing of the minister and some of the ministry’s senior staff. Chinese leaders have pledged to jump start railway spending as the country’ economic growth slowed to 7.6 percent in the second quarter, its slowest quarterly pace in more than three years. Reuters

than 20 members of his family fought in wars against Chiang Kai-Shek’s Nationalists and against Japan, according to a 2008 Xinhua report. Mr Li’s great uncle, Li Zaiwen, was deputy governor of Shandong province during the 1960s. Searches for Li Zhanshu and Ling Jihua in Chinese on China’s Twitterlike microblogging service Sina Weibo come up empty and display a message saying that based on relevant laws, regulations and policies, the results can’t be displayed. AFP/Bloomberg

Purchasing managers’ index dips in August Fall greater than expected, adding to pressure for fresh stimulus

hina’s official factory purchasing managers’ index fell to a lower-than-expected 49.2 in August from 50.1 in July, official data showed on Saturday. The result is likely to strengthen the pressure for further policy steps to bolster growth. The official PMI dipped below 50, which demarcates expansion from contraction, for the first time since November 2011, in the latest sign that the world’s second-biggest economy is struggling against global headwinds. China cut interest rates in June and July and has been injecting cash into money markets to ease credit conditions to support the economy that notched a sixth straight quarter of slower growth in the April-June period. But analysts are divided over whether that will be enough to stop the slowdown extending to a seventh quarter. The PMI’s output sub-index eased to 50.9 in August from July’s 51.8, the National Bureau of Statistics said. A flash PMI published last week by HSBC plunged to a nine-month low of 47.8 in August, as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter.

Orders down, inventories up

According to the latest Reuters poll, China’s annual economic growth could pick up to 7.9 percent in the third quarter from a threeyear low of 7.6 percent in the second quarter in response to government policy fine-tuning. A raft of weaker-than-expected July data had cooled market expectations for any quick economic recovery, especially as the central bank sticks to its “prudent” policy stance for fear of reigniting property

and inflation risks. Still, analysts believe the central bank will continue to loosen policy further by cutting interest rates and banks’ reserve requirement ratio in coming months to support growth. The HSBC PMI has been below 50 for 10 straight months, reinforcing calls from analysts and investors for further measures from Beijing to support economic growth. The official PMI generally paints a rosier picture of the factory sector

than the HSBC PMI as the official survey focuses on big, state-owned firms, while the HSBC PMI targets smaller, private firms that have limited access to bank loans. There are also differing approaches to seasonal adjustment in the surveys. The final HSBC reading will be published on September 3, as will the National Bureau of Statistics’ services PMI. Reuters

10 |

business daily September 3, 2012

asia

India soft pedals on corporate tax dodging Investors feared anti-business sentiment in world’s biggest democracy

n Indian government panel has proposed that controversial rules to clamp down on tax evasion should be deferred by three years in a move aimed at reassuring rattled foreign investors. The General Anti-Avoidance Rules (GAAR), introduced in this year’s budget, seek to curb tax evasion through tax havens, but have been widely criticised as a moneygrabbing exercise by a government battling to curb its budget deficit. “The implementation of GAAR may be deferred by three years on administrative grounds,” recommended the panel in its draft report released by the finance ministry on Saturday. The group, chaired by Parthasarathi Shome, a former adviser to Palaniappan Chidambaram, the finance minister, stressed that the rules should be used for deterrence rather than to generate revenue. The body also suggested abolishing taxes on proceeds from the transfer of listed securities, whether they are from capital gains or business income, for both Indians and non-residents. “Both of these are very significant recommendations,” said Satya

Poddar, a Gurgaon-based tax partner at Ernst & Young. “Essentially what they’re saying is that, India is not ready for GAAR and if it is applied, it should be severely constrained.” The government had earlier delayed putting GAAR into effect by one year after foreign investors

KEY POINTS New tax avoidance rules deferred for 3 yrs To abolish proceeds tax on transfer of listed securities Finance minister to clarify tax laws, issue plan tackling fiscal deficit Moves to reassure nervous foreign investors

expressed alarm that tax authorities would misuse the new rules to go after companies that had invested through legitimate routes. The government has already said the tax rules will not be imposed retroactively as some foreign investors had feared. The expert panel also said that the government should announce the implementation date for GAAR immediately to reduce uncertainty. Mr Chidambaram, appointed finance minister on July 31, has pledged to clarify tax laws and unveil a plan to contain India’s fiscal deficit as he tries to assuage concerns the nation’s economic outlook is deteriorating. The rupee has slumped 17 percent against the U.S. dollar in the past 12 months as slow growth and elevated inflation have hurt investment.

Vodafone Ruling Former finance minister Pranab Mukherjee, who resigned in June and is now the country’s president, proposed the introduction of GAAR in March to stop companies from improperly avoiding taxes. GAAR should apply for the assessment year 2017-18, the report said.

Mr Mukherjee also said in the March 16 annual budget he would seek to change the law to allow the taxation of overseas deals in which an Indian asset is transferred. The announcement followed a ruling in January by India’s Supreme Court that Vodafone Group Plc doesn’t have to pay US$2.2 billion (17.6 billion patacas) in tax on its purchase, conducted offshore, of the local business of Hutchison Whampoa Ltd. in 2007.

Australia caps carbon costs by trading EU emission credits Local policy previously double price of Europe’s anti-pollution scheme Phoebe Sedgman

ustralia’s decision to abandon setting a minimum rate for carbon permits and instead link it to the European Union market by mid-2015 will mean a lower price for carbon, the Carbon Market Institute said. “Not having a floor price means, presuming that the price does ease off, we have a lower cost of compliance with the carbon tax,” chairman Les Hosking told Australian Broadcasting Corporation’s Inside Business programme yesterday. “In 2015, it means that we have a lower price for carbon.” EU Climate Commissioner Connie Hedegaard and Australia’s Climate Minister Greg Combet announced plans last week to link the two markets. To facilitate the connection, Australia agreed to scrap a planned floor price and set a new “sub- limit” on the use of United Nations-sponsored emission credits. “Artificial prices do not work, they do not eliminate volatility and uncertainty and risk, they actually increase it,” Mr Hosking said. Still, “linking the market to a market which is in a volatile environment itself doesn’t look as though it’s an exact solution and doesn’t really solve the problem of carbon emissions.” Mr Combet said last week the two schemes will have their first links as of July 1, 2015, and a full tie-in three

Coal fired power station, Hunter Valley, New South Wales

years later. Businesses will be able to buy carbon units immediately from the EU system to comply with Australia’s new emission restrictions, he said.

Biggest polluters Australia’s fixed price on carbon was set at A$23 (US$23.74) a metric tonne for about 300 of its largest polluters on July 1. It will rise at a predetermined-rate of 2.5 percent

a year in real terms until 2015. The Australian law set a minimum price for the market phase starting at A$15 in 2015. EU permits for December delivery closed at 8.08 euros (US$10.16) on Friday. The carbon price is Prime Minister Julia Gillard’s main tool for reducing Australia’s reliance on coal and meeting its target for a five percent cut in greenhouse gas emissions from 2000 levels by 2020.

The EU created its carbon market in 2005 as a key tool to reduce greenhouse gases and has repeatedly said that it is committed to have an international network of linked emissions trading programs by the middle of this decade. In Australia, Ms Gillard has struggled to defend a carbon price more than twice as high as the one in Europe. The EU runs the world’s biggest cap-and-trade plan. Bloomberg

September 3, 2012 business daily | 11

asia Tata car plant in Saudi Arabia

ata Motors is considering building a plant next to a new aluminium smelter in Saudi Arabia to assemble Jaguar Land Rover Ltd cars. The Indian manufacturer’s chairman gave the news in a magazine interview published at the weekend. Saudi Arabia, the world’s top oil exporter and Middle East’s largest economy, has for decades aimed at using its abundant natural resources to diversify its economy into complex industries. “Given our commitment to aluminium in our products, we could have an interesting business case which we are examining today,” Tata Motors chairman Ratan Tata told Autocar India

India’s coffee lovers tempt Starbucks

S Palaniappan Chidambaram, India’s finance minister – reassuring overseas investors

Mr Shome told the business television channel CNBC at the weekend that Mr Chidambaram asked him to “look at” the Vodafone tax deal. The chances the draft suggestions won’t be implemented in the final report are “fairly” remote, suggests Satya Poddar of Ernst & Young. The panel will finalise the GAAR guidelines and an implementation plan by September 30, Prime Minister Manmohan Singh’s office said on July 13 via Twitter Inc.’s

micro blogging service. India’s ability to attract foreign investment is crucial, as it urgently needs funds to upgrade dilapidated airports, roads, ports and other infrastructure to ease bottlenecks and spur slowing economic growth. Prime Minister Singh – renowned for initiating the country’s economic liberalisation in 1991 – has admitted tax problems have fuelled a “negative mood” among investors towards India. AFP/Bloomberg

South Korea exports down in August Technology businesses feel effects of global slowdown Choonsik Yoo

Indian teachers play truant Nearly a quarter of the 800,000 teachers in India’s state primary school system are regularly absent from class according to research by the University of California. The latest study in conjunction with the World Bank, features unannounced visits to schools across the country. Some of the absences are legitimate – sickness, maternity or childcare leave, for example, but an estimated 60 percent are for questionable reasons suggests the research led by Professor Karthik Muralidharan. The overall cost of absent teachers to the government could be as much as 85 billion rupees (US$1.5 billion) a year.

Second bite for Apple

outh Korea said on Saturday its exports suffered a steep decline toward almost all regions in August while imports of both production equipment and consumer goods fell by double-digit rates over a year earlier. Exports to China fell 5.6 percent for the first 20 days of August over a year earlier, those to the European Union declined 9.3 percent and those to the United States lost 2.1 percent, data from the Ministry of Knowledge Economy showed. Imports of production equipment dropped 18.2 percent for the first 20 days of August over a year before and those of consumer goods fell 11.6 percent, the data showed. It was the sixth month of year-onyear decline during 2012, the first evidence from the regional industrial powerhouse showing a sustained slump in global demand through the second month of the quarter. Exports by Asia’s fourth-largest economy fell 6.2 percent in August from a year earlier to US$42.97 billion (343.2 billion patacas) while imports plunged 9.8 percent to US$40.93 billion, generating a surplus of US$2.04 billion, the Ministry of Knowledge Economy’s data showed.

tarbucks, the world’s largest coffee shop chain, is to invest US$78 million (623 million patacas) in India – one of the world’s largest consumers of tea, coffee’s great rival. “Coffee has changed from being a traditional beverage, consumed mainly in south India, to a mainstream beverage with a national presence,” said Starbucks’ China and Asia-Pacific president John Culver. India’s annual per capita coffee consumption of 82 grams (three ounces) is far below that of 6.79 kilograms (15 pounds) in Germany and 5.87 kg in Brazil, according to data from the International Coffee Organisation.

Keep taking the tablets – S. Korea feels sales pinch

It was slightly better than a revised 8.8 percent drop in July and in line with a median 6.3 percent decline forecast in a Reuters survey of analysts, but fell far short of providing any sign of the global slump approaching its end. The latest figures brought overseas sales for the July-August period down 7.5 percent from a year before, casting doubts on a recent government projection for a modest annual gain in exports for the second half. Imports fell for the sixth consecutive month over a year earlier in August, and set the sharpest annual decline in nearly three years, underscoring a sustained weakness in demand within the country for consumption and investment. Reuters

echnology firm Apple Inc. has asked a United States federal court to find that four additional products from Samsung Electronics Ltd – including the Galaxy S III smartphone – infringe Apple’s patents. The request follows a recent Apple victory in the U.S. against its South Korean rival. In February, Apple alleged at least 17 Samsung products infringe its patents. In a court filing made in San Jose federal court on Friday, Apple added four more products to the list of allegedly infringing products that have been released in the 12 months to August 31.

Honda to make ‘minicars’ in Japan

onda Motor Co., Japan’s third-biggest automaker, is studying the possibility of making a sports minicar for Japan because domestic demand has shifted toward mini vehicles, the firm’s president Takanobu Ito said. “We need to make cars that excite people for the sake of our brand image,” Mr Ito told reporters yesterday in Suzuka, Japan. Honda also plans to form a joint venture company in Bangladesh to assemble motorcycles, said a senior official of that country’s industries ministry at the weekend. The official cited rising production costs in Honda’s existing manufacturing locations.

12 |

business daily September 3, 2012

MARKETS Hang SENG INDEX NAME

NAME

PRICE

Day %

VOLUME

12.28

-4.212168

40652648

POWER ASSETS HOL

9.49

-7.142857

25513349

CLP HLDGS LTD

64.65

0.07739938

3992953

CNOOC LTD

14.68

-0.4070556

36188170

SUN HUNG KAI PRO

9.57

-3.625378

7958528

SWIRE PACIFIC-A

11.86

-2.467105

4165291

TENCENT HOLDINGS

PRICE

Day %

VOLUME

26.65

0.3766478

18220491

CHINA UNICOM HON

ALUMINUM CORP-H

2.97

-1.328904

13975827

CITIC PACIFIC

BANK OF CHINA-H

2.82

-1.052632

329915497

AIA GROUP LTD

BANK OF COMMUN-H BANK EAST ASIA BELLE INTERNATIO

5.07

1.603206

49722289

28.25

0.3552398

1549661

-2.777778

14434510

COSCO PAC LTD ESPRIT HLDGS

BOC HONG KONG HO

24.55

8301903

HANG LUNG PROPER

CATHAY PAC AIR

12.64

0.1584786

2775792

HANG SENG BK

CHEUNG KONG

105.5

1.637765

5396084

HENDERSON LAND D

6.46

-1.52439

21597258

CHINA COAL ENE-H CHINA CONST BA-H

5.1

-0.5847953

188563948

CHINA LIFE INS-H

20.75

-0.7177033

26503496

CHINA MERCHANT

22.25

-2.412281

4997118

CHINA MOBILE CHINA OVERSEAS

HENGAN INTL HONG KG CHINA GS

12.7

0.1577287

11757197

100.6

1.462431

5684949

91.65

0.3284072

1181758

237

-0.4201681

2566496

22.95

0.6578947

4098800

9.6

1.159115

11586971

47.75

-0.93361

7661924

TINGYI HLDG CO

47.7

2.141328

6333638

WHARF HLDG

1.894187

3482159

HSBC HLDGS PLC

67.1

-0.8130081

6461695

67.85

-0.2939015

3235294

4.2

0.2386635

242253637

IND & COMM BK-H

7777426

SINO LAND CO

WANT WANT CHINA

3184095

HUTCHISON WHAMPO

-0.3636364

1057400

7092399

12789251

27.4

5183036

0.2192982

23696404

3119633

SANDS CHINA LTD

1.338432

-0.7707129

-0.420926

VOLUME

0.9638554

0.3636364

103

-1.016949

Day %

62.85

26.5

18.28

82.8

PRICE

110.4

HONG KONG EXCHNG

17.52

NAME

MOVERS

1 19860

INDEX 19482.57

CHINA PETROLEU-H

7.3

-1.48448

37423979

LI & FUNG LTD

12.6

-2.021773

29980221

HIGH

19857.61

CHINA RES ENTERP

23.05

2.672606

2130081

MTR CORP

27.8

0.3610108

2774231

LOW

19468.44

CHINA RES LAND

14.98

0.1336898

5459303

NEW WORLD DEV

9.64

0.6263048

12974115

CHINA RES POWER

16.58

1.097561

2422294

PETROCHINA CO-H

9.35

-0.9533898

53180481

CHINA SHENHUA-H

28.25

-1.73913

8345490

PING AN INSURA-H

-0.5328597

17647426

52W (H) 21760.33984 (L) 16170.35

19460

29-Aug

31-Aug

Hang SENG CHINA ENTErPRISE INDEX NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

0.4366812

22979153

YANZHOU COAL-H

15684471

CHINA PETROLEU-H

7.3

-1.48448

37423979

ZIJIN MINING-H

13975827

CHINA RAIL CN-H

5.86

1.913043

20570000

ZOOMLION HEAVY-H

-0.2061856

7962364

CHINA RAIL GR-H

2.92

1.388889

29514997

ZTE CORP-H

-1.052632

329915497

CHINA SHENHUA-H

28.25

-1.73913

8345490

CHINA TELECOM-H

PRICE

DAY %

VOLUME

AGRICULTURAL-H

2.86

-1.038062

198086559

AIR CHINA LTD-H

4.67

-0.6382979

ALUMINUM CORP-H

2.97

-1.328904

ANHUI CONCH-H

19.36

BANK OF CHINA-H

2.82

NAME

5.07

1.603206

49722289

4.26

-1.160093

50898277

13.52

-2.028986

2478292

DONGFENG MOTOR-H

10.04

-0.1988072

17142865

3.7

0.8174387

40969400

GUANGZHOU AUTO-H

5.41

-3.736655

4944740

CHINA COAL ENE-H

6.46

-1.52439

21597258

HUANENG POWER-H

5.35

-0.1865672

8887338

CHINA COM CONS-H

5.96

-4.333868

36156325

IND & COMM BK-H

4.2

0.2386635

242253637

CHINA CONST BA-H

5.1

-0.5847953

188563948

JIANGXI COPPER-H

16.84

0.3575685

9992756

CHINA COSCO HO-H

2.94

-3.289474

20841508

PETROCHINA CO-H

9.35

-0.9533898

53180481

PICC PROPERTY &

9.33

0.974026

15675175

-0.5328597

17647426

8.54

1.787843

3806000

BANK OF COMMUN-H BYD CO LTD-H CHINA CITIC BK-H

CHINA LIFE INS-H

20.75

-0.7177033

26503496

CHINA LONGYUAN-H

5.03

2.443992

8247000

PING AN INSURA-H

CHINA MERCH BK-H

13.38

-0.1492537

14436374

SHANDONG WEIG-H

NAME

MOVERS

DAY %

VOLUME

11.06

-0.5395683

11941527

2.43

19557910

8.3

0.362757

38154380

10.26

-0.965251

5158765

1 9560

INDEX 9280.25 HIGH

9552.41

LOW

9280.25

CHINA MINSHENG-H

6.32

-1.095462

43434843

SINOPHARM-H

24.65

0.203252

1546139

52W (H) 11916.1

CHINA NATL BDG-H

7.26

-0.4115226

21815132

TSINGTAO BREW-H

41.6

-2.461899

1230614

(L) 8058.58

12.38

-1.118211

6541660

WEICHAI POWER-H

20.5

0.2444988

1558928

CHINA OILFIELD-H

PRICE

9280

29-Aug

31-Aug

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.48

-0.4016064

41167558

DAQIN RAILWAY -A

5.99

-0.3327787

24942297

AIR CHINA LTD-A

4.84

0.2070393

5044103

DATANG INTL PO-A

4.43

-0.2252252

1975330

ALUMINUM CORP-A

5.16

-3.551402

12094180

DONGFANG ELECT-A

14.12

-1.808067

-0.3067485

9092456

0.7326007

7.34

0.273224

11053867

9.18

9139999

ANHUI CONCH-A BANK OF BEIJIN-A

NAME

EVERBRIG SEC -A GD MIDEA HOLDING

NAME

PRICE

DAY %

11.35

-2.32358

9074465

SANY HEAVY INDUS

9.87

-3.988327

48704721

7180935

SHANDONG GOLD-MI

33.53

0.2691388

5085195

9997198

SHANG PHARM -A

11.69

-0.4258944

7919375

SHANG PUDONG-A

7.61

37255105 2048230

SAIC MOTOR-A

BANK OF CHINA-A

2.78

-0.7142857

10760802

GD POWER DEVEL-A

2.54

10710345

SHANGHAI ELECT-A

BANK OF COMMUN-A

4.32

-1.594533

37732434

GF SECURITIES-A

10.35

-0.4807692

25444282

SHANXI LU'AN -A

BANK OF NINGBO-A

9.58

-0.2083333

7212657

GREE ELECTRIC

20.47

1.286492

6956224

BAOSHAN IRON & S

4.36

-0.6833713

45801686

GUANGHUI ENERG-A

12.69

3.338762

11687850

SHANXI XISHAN-A

8.26

-0.3618818

29303297

SHENZEN OVERSE-A

15.65

0.6430868

8290885

HAITONG SECURI-A

CHINA CITIC BK-A

3.86

-0.5154639

7077064

HANGZHOU HIKVI-A

CHINA CNR CORP-A

3.45

-0.2890173

12518469

CHINA COAL ENE-A

6.77

-1.598837

7668108

BYD CO LTD -A

VOLUME

4.04

-0.7371007

16.87

-1.171646

8768894

36.1

1.007275

1006848

12.53

-0.4765687

5554772

5.5

0.1821494

14354417 32304431

SHANXI XINGHUA-A

26.08

-1.212121

3020171

SUNING APPLIAN-A

6.02

-0.9868421

HEBEI IRON-A

2.46

-1.204819

18024158

TSINGTAO BREW-A

32.59

-0.1225866

687897

HENAN SHUAN-A

56.5

-0.4756033

1503753

WEICHAI POWER-A

17.1

7488419

CHINA CONST BA-A

4.02

-0.7407407

9536522

HONG YUAN SEC-A

15.8

-0.3783102

9224015

WULIANGYE YIBIN

32.57

0.2770936

9485895

CHINA COSCO HO-A

3.89

-2.261307

14294605

HUATAI SECURIT-A

8.56

9039440

XIAMEN TUNGSTEN

39.36

1.652893

6250922

CHINA EAST AIR-A

3.4

-0.2932551

4853341

HUAXIA BANK CO

8.74

-1.019253

10305784

YANGQUAN COAL -A

13.88

-1.139601

5527874

CHINA EVERBRIG-A

2.77

-1.071429

22227254

IND & COMM BK-A

3.82

-0.7792208

21208757

YANTAI CHANGYU-A

49.9

0.0200441

936823

CHINA LIFE INS-A

17.84

3.121387

17817389

INDUSTRIAL BAN-A

12.31

-0.645682

16229812

YANTAI WANHUA-A

12.56

-0.4754358

3547002 1708680

CHINA MERCH BK-A

10.08

-0.4935834

29287124

INNER MONG BAO-A

31.54

-2.262163

26141526

YANZHOU COAL-A

17.19

-0.578369

CHINA MERCHANT-A

9.79

-0.2038736

5273559

INNER MONG YIL-A

20.12

-0.0496771

4893611

YUNNAN BAIYAO-A

58.1

1.929825

2066887

CHINA MERCHANT-A

19.3

1.206083

4703465

INNER MONGOLIA-A

5.11

-0.1953125

35922627

ZHONGJIN GOLD

14.08

-1.469559

11970489

CHINA MINSHENG-A

5.97

-0.5

50533799

JIANGSU HENGRU-A

30.03

-1.086957

4192614

ZIJIN MINING-A

3.68

-1.075269

29506883

JIANGSU YANGHE-A

121.99

1.160959

1409562

ZOOMLION HEAVY-A

8.13

0.1231527

53482322

JIANGXI COPPER-A

19.65

-2.578086

5469805

ZTE CORP-A

9.92

-0.5015045

15971634

CHINA NATIONAL-A

5.86

-1.013514

12951101

CHINA OILFIELD-A

16.18

1802103

CHINA PACIFIC-A

19.56

0.204918

13063759

JINDUICHENG -A

11.12

-1.679929

3045559

CHINA PETROLEU-A

6.04

-0.6578947

13653353

JIZHONG ENERGY-A

12.44

0.2417405

10472173

CHINA RAILWAY-A

4.25

0.7109005

7791422

KANGMEI PHARMA-A

14.52

-1.425662

17240949

KWEICHOW MOUTA-A

219.76

0.8628603

2248472

CHINA RAILWAY-A

2.46

1.234568

17890478

CHINA SHENHUA-A

21.45

-0.4178273

7931639

LUZHOU LAOJIAO-A

35.77

0.7605634

3171803

CHINA SHIPBUIL-A

4.81

-0.2074689

39014266

METALLURGICAL-A

2.05

0.4901961

16855606

CHINA SOUTHERN-A

3.48

-0.8547009

15377521

NINGBO PORT CO-A

2.48

13246295

PANGANG GROUP -A

3.72

-2.105263

28189824

MOVERS

111

169

20 2240

INDEX 2204.868

CHINA STATE -A

3.03

33943281

CHINA UNITED-A

3.78

-1.818182

52133938

PETROCHINA CO-A

8.81

-0.6764374

7943930

HIGH

2247.03

CHINA VANKE CO-A

8.02

0.3754693

27298519

PING AN BANK-A

14.19

-0.6302521

8561919

LOW

2190.54

CHINA YANGTZE-A

6.47

-1.070336

10111902

PING AN INSURA-A

38.85

-0.7155635

12995661

CHONGQING WATE-A

5.51

0.1818182

1723026

POLY REAL ESTA-A

9.41

3.066813

35236864

CITIC SECURITI-A

10.22

-1.160542

27790817

QINGDAO HAIER-A

10.45

3.87674

12632049

CSR CORP LTD -A

3.99

-1.724138

20639463

QINGHAI SALT-A

30.68

-0.0325839

2085058

52W (H) 2836.624 2190

(L) 2188.724 29-Aug

31-Aug

FTSE TAIWAN 50 INDEX NAME ACER INC

PRICE DAY %

Volume

26.45

1.147228

17946586

ADVANCED SEMICON

22.4

7180723

NAME

PRICE DAY %

Volume

FORMOSA PLASTIC

80.7

0.2484472

2500630

FOXCONN TECHNOLO

114

-1.298701

15082882

29.75

ASIA CEMENT CORP

34.4

0.4379562

2579569

FUBON FINANCIAL

1.018676

6615959

ASUSTEK COMPUTER

299

1.528014

9596104

HON HAI PRECISIO

84.8 -0.8187135

39672653

AU OPTRONICS COR

9.09

-2.258065

59860370

HOTAI MOTOR CO

216

CATCHER TECH

2.857143

459897

NAME

PRICE DAY %

Volume

TAIWAN MOBILE CO

111

3.738318

2918367

TPK HOLDING CO L

387

1.842105

6813654

83.3

0.7255139

13536360

TSMC UNI-PRESIDENT UNITED MICROELEC

47.95 -0.1041667

3883710

12 -0.4149378

16783450

149.5

0.6734007

5834094

HTC CORP

258

1.775148

10711061

WISTRON CORP

33.5

1.823708

CATHAY FINANCIAL

28.6

0.1751313

11155408

HUA NAN FINANCIA

16.1

0.3115265

3373072

YUANTA FINANCIAL

13.9

0.7246377

7732961

CHANG HWA BANK

15.45

0.6514658

5106422

LARGAN PRECISION

623

0.483871

919990

YULON MOTOR CO

54.4

2222665

CHENG SHIN RUBBE

72.8

0.9708738

4891409

LITE-ON TECHNOLO

36.25

3.868195

7769160

CHIMEI INNOLUX C

9.58 -0.9307135

13696394

MEDIATEK INC

320

1.105845

10382362

0.5665722

30573969

MEGA FINANCIAL H

22.55

1.121076

18668508

25.65 -0.5813953

18743077

NAN YA PLASTICS

56.3

0.1779359

3189248

PRESIDENT CHAIN

CHINA DEVELOPMEN CHINA STEEL CORP

7.1

CHINATRUST FINAN

17.9

0.5617978

17336574

CHUNGHWA TELECOM

90.5

5009137

COMPAL ELECTRON

159.5

-0.3125

1042809

QUANTA COMPUTER

77.3

-0.129199

15866628

26.25

2.539062

9636530

SILICONWARE PREC

33.8

0.7451565

5999499

DELTA ELECT INC

102

5085739

SINOPAC FINANCIA

11.9

2.586207

10707064

FAR EASTERN NEW

31.5

0.1589825

2490815

SYNNEX TECH INTL

66.8

1.674277

2917873

FAR EASTONE TELE

73.8

0.2717391

1627466

TAIWAN CEMENT

32.55 -0.1533742

6808672

17.35 -0.5730659

12424390

TAIWAN COOPERATI

16.45

0.304878

10256740

73.9

1.094391

2700471

29.75

1.018676

3418373

FIRST FINANCIAL FORMOSA CHEM & F

77.3

0.6510417

2448516

TAIWAN FERTILIZE

FORMOSA PETROCHE

85.4 -0.1169591

1227656

TAIWAN GLASS IND

MOVERS

6007223

4 5090

INDEX 5084.97 HIGH

5084.97

LOW

5052.02

52W (H) 6224.53 (L) 4643.05

5050

29-Aug

31-Aug

September 3, 2012 business daily | 13

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

MeLCo CroWN eNTerTaINMeNT

MgM CHINa HoLDINgs 30.2

22.2

13.0

22.1

12.8 30.1

22.0

Max 22.15

average 22.035

Min 21.95

Last 22.05

21.9

saNDs CHINa LTD

12.6

Max 30.1

average 30.1

Min 30.1

30.0

Last 30.1

sJM HoLDINgs LTD

Max 12.9

average 12.661

Min 12.46

Last 12.78

12.4

WyNN MaCaU LTD 16.5

27.6

18.1

16.3

27.4

17.9

16.1 27.2

average 27.197

Max 27.5

Min 27.05

Last 27.4

27.0

15.7 Max 16.44

average 16.024

Commodities PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Oct12

96.47

1.955189178

-2.140393589

110.6499939

78.15999603

BRENT CRUDE FUTR Oct12

114.57

1.704394141

9.562972172

123.2900009

89.11000061

GASOLINE RBOB FUT Oct12

297.28

2.228335626

17.62285353

304.0199995

220.5600023

GAS OIL FUT (ICE) Oct12

994.25

1.118738876

10.71826281

1044.75

799

2.799

1.855895197

-15.743528

4.670000076

2.299999952

NATURAL GAS FUTR Oct12 HEATING OIL FUTR Oct12 METALS

318.02

1.496824434

11.29308836

333.8899851

252.5300026

Gold Spot $/Oz

1691.85

2.1772

8.1116

1921.18

1522.75

Silver Spot $/Oz

31.7363

3.4008

14.0158

43.4088

26.085

1540

1.174

10.4338

1896.75

1339.25

629.75

-0.6547

-3.6343

789.28

537.54

LME ALUMINUM 3MO ($)

1902

1.331912627

-5.841584158

2476

1827.25

LME COPPER 3MO ($)

7615

0.627684176

0.197368421

9304

6635

LME ZINC

1841

0.381679389

-0.216802168

2311

1718.5

Platinum Spot $/Oz Palladium Spot $/Oz

3MO ($)

LME NICKEL 3MO ($)

15950

-0.156494523

-14.7514698

22450

15236

15.285

-0.163291966

0.526142716

17.5

14.15499973

799.75

-1.082251082

36.41791045

849

499

WHEAT FUTURE(CBT) Dec12

889.5

-1.495016611

23.54166667

953.25

629.5

SOYBEAN FUTURE Nov12

1756.5

-0.396937908

45.8584181

1771.25

1115.75

COFFEE 'C' FUTURE Dec12

164.75

0.82619339

-30.19067797

285.6499939

SUGAR #11 (WORLD) Oct12

19.78

0.151898734

-13.35961454

COTTON NO.2 FUTR Dec12

77.26

0.415908554

-12.04462659

AGRICULTURE ROUGH RICE (CBOT) Nov12 CORN FUTURE

Min 15.82

Last 16.34

Dec12

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

average 17.914

Last 17.92

Min 17.6

PRICE

DAY %

YTD %

-0.0968 0.1452 0.2618 0.287 0.2806 0.005 0.0064 0.0158 0.1914 0.2556 0.4169 0.0367 0.4805 0.1045 0.3683 -0.0083 -0.179 0.2239 -0.3233 0.0406 0

YTD %

(H) 52W

1.1069 2.0845 -1.7593 -2.9473 -1.888 0.1364 0.1521 -0.8443 -4.4347 0.7987 3.9442 1.1154 4.2866 -5.2549 -3.0722 1.3164 5.0814 2.3247 2.9845 1.1161 0.0097

(L) 52W

1.0857 1.6302 0.9972 1.4278 84.18 8.0413 7.8077 6.406 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88423 9.1104 11.435 111.6 1.0311

0.9388 1.5235 0.7821 1.2043 75.35 7.9823 7.7526 6.2769 45.785 29.87 1.2033 29.005 41.57 8518 72.057 1.1017 0.77553 7.7018 9.6245 94.12 1.0288

(H) 52W

(L) 52W

ARISTOCRAT LEISU

2.66

0.3773585

20.90909

3.25

1.88

873330

153.6999969

CROWN LTD

8.98

0.3351955

11.00123

9.29

7.47

1136077

25.5

19.23999977

AMAX HOLDINGS LT

0.061

-29.88506

0.119

0.055

102.25

64.61000061

BOC HONG KONG HO

24.55

33.42392

24.95

14.24

8301903

CENTURY LEGEND

0.225

-2.173915

0.335

0.204

3.16

1.935484

12.85714

3.57

2.3

2083

CHINA OVERSEAS

17.52

-1.016949

35.1289

19.138

9.979

23696404

CHINESE ESTATES

9.93

4.968288

-20.56

13.68

8.3

76558

CHOW TAI FOOK JE

9.28

-2.418507

-33.33333

15.16

8.4

6836919

EMPEROR ENTERTAI

1.42

27.92793

1.48

0.97

515000

FUTURE BRIGHT

1.14

3.636364

171.4286

1.24

0.3

528000

GALAXY ENTERTAIN

22.05

-1.121076

54.84551

24.95

8.69

12814862

World Stock MarketS - Indices COUNTRY

DAY %

1.0322 1.5867 0.9549 1.2579 78.39 7.9887 7.7556 6.3486 55.5275 31.3 1.2474 29.945 42.038 9572 80.918 1.20098 0.79309 7.9494 10.052 98.56 1.03

MACAU RELATED STOCKS NAME

CHEUK NANG HLDGS

NAME

17.5 Max 18.02

CURRENCY EXCHANGE RATES

NAME ENERGY

17.7

15.9

(H) 52W

(L) 52W

PRICE

DAY % YTD %

VOLUME CRNCY

DOW JONES INDUS. AVG

13090.84

0.6932698

7.147747

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

3066.965

0.5987448

17.72701

3134.17

2298.89

HANG SENG BK

110.4

0.3636364

19.80466

114.2

84.4

1057400

FTSE 100 INDEX

5711.48

-0.1393491

2.498083

5989.07

4868.6

HOPEWELL HLDGS

24.85

-0.6

25.12588

25.4

18.56

1635894

DAX INDEX

6970.79

1.092018

18.18203

7194.33

4965.8

HSBC HLDGS PLC

67.1

-0.8130081

13.72881

71.8

6461695

NIKKEI 225

8839.91

-1.601442

4.548133

10255.15

8135.79

3.8

-1.041667

27.0903

3.88

2.53

4296066

LUK FOOK HLDGS I

19.82

-5.393795

-26.86347

40.85

14.7

6063015

MELCO INTL DEVEL

6.28

0.9646302

8.838822

8.54

4.3

3241739

12.78

2.898551

33.2339

14.76

7.6

2529951 2794031

HUTCHISON TELE H

HANG SENG INDEX

19482.57

-0.3597418

5.686001

21760.33984

16170.35

CSI 300 INDEX

2204.868

-0.2940259

-6.005521

2836.624

2188.724

TAIWAN TAIEX INDEX

7397.06

0.3475576

4.595253

8170.72

6609.11

MIDLAND HOLDINGS

4.25

1.190476

7.484813

5.217

2.887

KOSPI INDEX

1905.12

-0.06609385

4.347826

2057.28

1644.11

NEPTUNE GROUP

0.168

51.35135

0.205

0.08

8703678

S&P/ASX 200 INDEX

4316.114

0.01019539

6.398357

4448.5

3840.2

NEW WORLD DEV

9.64

0.6263048

53.9936

10.96

6.13

12974115

4108.203

1.179017

7.488534

4234.734

3217.951

SANDS CHINA LTD

27.4

-0.3636364

24.82915

33.05

14.9

7777426

FTSE Bursa Malaysia KLCI

1646.11

0.03220749

7.53758

1655.39

1310.53

SHUN HO RESOURCE

1.13

1.28

0.82

SHUN TAK HOLDING

2.81

-1.403509

9.803014

3.75

2.241

4708319

NZX ALL INDEX

813.93

1.020218

11.52777

818.513

712.548

SJM HOLDINGS LTD

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3.286979

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3531.5

2695.06

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23.06548

18.5

9.8

786507

17.8

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25.5

14.62

9820573

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576.92

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49.32

24.74

679337

332.28

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28.90106

3.25

1.81

8198

876.33

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48.6631

3.24

1.08

155

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0.5728314

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18.1701

10.92

3306889

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87.52

46.01

339704

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6041138

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0.5145798

21.82952

16.02

7.05

2542077

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1.64

37.61931

1.96

1.0025

10400

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0.3051882

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14.9401

7.4

6588511

15.17

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29.43686

18.77

7.55

234730

2.1

4.477612

30.63172

2.2782

1.2624

7650

103.17

0.3111327

-6.625032

154.7051

90.108

970553

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business daily September 3, 2012

Opinion

Contrary to rumor, central banking is a political act Clive Crook Paula Dwyer Bloomberg View

entral bankers from around the world met in Jackson Hole, Wyoming, for the Federal Reserve’s annual symposium. They had a lot to discuss; more, it’s safe to say, than they like it. The experience of the past several years has assaulted the core of what central bankers once took for granted about their role. A comprehensive rethink is required. At the top of the list is a sensitive subject: how should central banks balance the goals of low inflation and low unemployment? The question is harder than economists used to think, and it’s an uncomfortable one for the Jackson Hole crowd because it’s about politics as much as economics. Before the most recent recession, the question had mostly been set aside. Economists decided that the goals of price stability and high employment weren’t really in conflict. In 1969, Milton Friedman and Edmund Phelps showed, in a seminal finding of modern macroeconomics, that there’s no long-run trade-off between inflation and output. That is, tolerating higher inflation doesn’t buy you faster economic growth. What a convenient finding that was for central banks. It meant they could be told to keep prices stable, and then be left alone to get on with it. Independent central banks would be better at keeping inflation low than would those under the political control of finance ministries, often tempted to print money to pay for their programs. And if low inflation didn’t hurt growth, why not set them free?

Price stability This thinking guided the design of the European Central Bank in the 1990s. European governments gave it a primary goal of price stability and shielded it from government interference. They told the ECB never to print money to buy public debt. Many other central banks had their rules tweaked to similar effect. The rules in the U.S. haven’t been so clear-cut. The Fed has a dual mandate of stable prices and maximum employment, and the latitude to decide what that means. This wider discretion is exactly what many of the Fed’s conservative critics in Congress now object to. They want the narrower focus on stable prices that is written into many other central banks’ rules, and then some. The recurring vogue for the gold standard — the Republican Party is calling for yet another commission to examine the idea — is all about denying the Fed discretion. With a truly fixed exchange rate, monetary policy is abolished: fixing a designated price (under a gold standard, the price of gold) puts the Fed on autopilot.

Many U.S. conservatives also want the Fed to be more strictly audited. Republican presidential nominee Mitt Romney just backed this idea. His running mate, U.S. Representative Paul Ryan, wants tougher audits, a single anti-inflation mandate and, ideally, a dollar pegged to the prices of commodities. Again, the aim is to tie the Fed down. This anti-inflation obsession borders on derangement. Inflation is very low — so low that deflation is a real concern. Falling prices disrupt an economy (especially one burdened with debt) far more dangerously than rising prices do. Also, the recent recession has shown that keeping inflation low isn’t enough. The short-term trade-off between low inflation and low unemployment is real. And in a recovery with protracted deleveraging, like this one, the short term isn’t as short as Friedman and Phelps thought.

Gold bugs Contrary to what gold bugs and other Fed-bashers say, the Fed’s dual mandate and its policy of quantitative easing — buying bonds to nudge down interest rates — have been vital strengths, not weaknesses. They have helped to support demand and bring unemployment down, albeit slowly. Fiscal paralysis in Washington made the Fed’s unorthodox measures all the more necessary. Far from being reckless, the Fed has been too timid and needs to embark on the third round of QE that Chairman Ben S. Bernanke keeps hinting is on the way. Consider the European alternative. The ECB is pushing the euro area back into recession with its preoccupation

Instead of a target for low inflation plus an additional primary or secondary target of high employment, focus on the money value of output — nominal gross domestic product unadjusted for inflation

with low inflation plus a reluctance (or inability) to use QE. But there’s a catch, and it’s a big one. If the short-term trade-off between inflation and unemployment is real, and central banks have to strike a balance between the two — putting aside concerns about inflation until the recovery is on a surer footing — how can you say central banks should be shielded from political interference? If they are making political choices, they can’t expect to stay above politics. There’s no easy answer, which is why the discussions at Jackson Hole will probably shy away from the question. We suggest looking at an old idea that is again attracting attention among monetary economists. Recast the target that the Fed and other central

banks are told to follow. Instead of a target for low inflation plus an additional primary or secondary target of high employment, focus on the money value of output — nominal gross domestic product unadjusted for inflation. This combines prices and output in a single number. Suppose the target was 5 percent. Over the longer term, with the economy growing at 2 percent or a little more, inflation would be 3 percent or a little less, similar to the inflation targets most central banks (including the Fed) have adopted. Here’s the advantage: in the short term, the Fed would be on target if the economy were growing at 5 percent and inflation were zero, or if the growth were zero and inflation were 5 percent. In other words, the system would call for faster-thannormal growth when inflation is too low, and faster-thannormal inflation when the economy is in a slump. Setting a nominal GDP target wouldn’t be telling the bank to choose between so much inflation and so many jobs, so you could still grant operational independence. It’s not quite so tidy, of course. The bank would still have to decide how quickly to bring demand back to target if it overshot or undershot, and this could be politically contentious. Targeting nominal GDP raises technical issues, including how to specify the mandate. The idea has serious academic credentials, but some scholars have expressed doubts. We think it’s worth a careful look, and we’re convinced of one important advantage: this approach would make the bank’s actions easier to understand and explain. Bloomberg View

editorial council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça, Cris Jiang Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief José I. Duarte Newsdesk Vitor Quintã (Chief Reporter) Tony Lai, Xi Chen Creative Director José Manuel Cardoso Designer Janne Louhikari Contributors Frederico Rato, Pereira Coutinho, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, John Si, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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September 3, 2012 business daily | 15

OPINION Business

An autumn abyss?

Leading reports from Asia’s best business newspapers

Joschka Fischer

wires

Germany’s foreign minister and vice-chancellor from 1998 to 2005, and a leader in the German Green Party for almost 20 years.

Daily Tribune Philippine Airlines (PAL) chairman Lucio Tan yesterday said the flag carrier has put the difficulties of the past year behind.  For the fiscal first quarter ending June, PAL reported a net income of US$11.4 million, a turnaround from a net loss of US$10.6 million registered in the same period last year. PAL incurred a net loss of US$99.79 million for its 2011-2012 fiscal year, citing labor disturbance, the Japan tsunami and volatile fuel prices amidst civil strife in the Middle East.

Korea herald The sale of the state-run Korea Aerospace Industries is expected to be further delayed as its first public bidding failed to attract bidders other than Korean Air until the deadline at 3 p.m. Friday. The leading flag carrier had submitted its letter of intent to acquire the nation’s only aircraft maker but its sole participation could not meet the legal conditions for a valid bidding process. Like other public organizations, KAI privatization plans meet resistance from labor unions and political circles.

Economic Times The banks have done away with the cash retraction system in ATMs. The system, which enabled the machine to take back the currency if it is not removed within a certain time, was withdrawn last week after the Reserve Bank of India (RBI) agreed to National Payments Corporation of India’s proposal for removing the feature from all ATMs to deal with the increasing number of fraudulent claims about non-receipt of cash. Banks have posted messages on their websites that the system has been disabled.

Jakarta Globe Bad news continues to flow from Indonesia’s East Kalimantan province, as three small-scale coal miners reported more than 200 layoffs to the Labor Ministry’s local office. Many more coal producers expected to make similar costcutting measures.   The three companies are a few of more than 430 coal companies in one small district, but other companies have suspended production, unable to afford labor costs with the price of the commodity having fallen by about one-third from a year ago.

n the coming months, several serious regional economic and political crises could combine into one mega-watershed, fueling an intense global upheaval. In the course of the summer, the prospect of a perilous fall has become only more likely. The drums of war are being banged ever more loudly in the Middle East. No one can predict the direction in which Egypt’s Sunni Islamist president and parliamentary majority will lead the country. But one thing is clear: the Sunni Islamists are decisively altering the region’s politics. This regional re-alignment need not be necessarily antiWestern, but it surely will be if Israel and/or the United States attack Iran militarily. Meanwhile, civil war is raging in Syria, accompanied by a humanitarian catastrophe. To be sure, President Bashar al-Assad’s regime will not survive, but it is determined to fight until the end. Syria’s balkanization among the country’s diverse ethnic and religious groups is a clearly predictable result. Indeed, a Bosnia-type scenario can no longer be excluded, while the prospect of the Syrian government’s loss of control over its chemical weapons poses an immediate threat of military intervention by Turkey, Israel, or the U.S.

Islamic battle Moreover, the Syrian civil war has become a proxy in an openly declared battle for

Respice finem! (“Consider the end”), the Romans used to say. World leaders need to take this timeless wisdom to heart

regional hegemony between Iran on one side and Saudi Arabia, Qatar, Turkey, and the U.S. on the other. Staying on the sidelines of this Arab-Western coalition, Israel is playing its cards close to its chest. Iran, for its part, has proclaimed Syria an indispensable ally, and is determined to prevent regime change there by all available means. Does that mean that Hezbollah’s militias in neighbouring Lebanon will now become directly involved in Syria’s civil war? Would such intervention revive Lebanon’s own long civil war of the 1970’s and 1980’s? Is there a threat of a new Arab-Israeli war hanging over the Middle East? And, as Kurds inside and outside of Syria grow more assertive, Turkey, with its large and longrestive Kurdish population, is also growing restive. At the same time, the regional struggle currently playing out in Syria is becoming increasingly entangled with the other major source of war sounds: Iran’s nuclear program. Indeed, parallel to the Syrian drama, the rhetoric in the confrontation between Israel and Iran over the program has become dramatically harsher. Both sides have maneuvered themselves into a dead-end. If Iran gives in and agrees to a sustainable diplomatic solution, the regime will lose face on a critical domestic issue, jeopardizing its legitimacy and survival. From the regime’s point of view, the legacy of the 1979 Islamic revolution is at stake. But the international sanctions are hurting, and Iran risks losing Syria. Everything points to the regime’s need for success – now more than ever – concerning its nuclear program. Similarly, Israel’s government has backed itself into a domestic policy trap of its own. Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak cannot accept a nuclear-armed Iran. They do not fear a nuclear

attack against Israel, but rather a nuclear arms race in the region and a dramatic shift in power to Israel’s disadvantage. From their point of view, Israel must either convince the U.S. to attack Iran and its nuclear plants or take on the maximum risk of using its own military forces to do so.

Diplomacy restricted Both sides have substantially reduced their options, thereby limiting the possibility of a diplomatic compromise. And that means that both sides have stopped thinking through the consequences of their actions. Everywhere there is talk of a “military option,” which means air strikes. But, while advocates speak of a limited “surgical operation,” what they are really talking about is the start of two wars: an aerial war, led by the U.S. and Israel, and an asymmetric war, led by Iran and its allies. And what if this “military option” fails? What if Iran becomes a nuclear power, the region’s democratic movements are swept away by a wave of anti-Western Islamic solidarity, and the Iranian regime emerges even stronger? Iran, too, evidently has not thought its position through to its logical conclusion. What

does it stand to gain from nuclear status if it comes at the cost of regional isolation and harsh United Nations sanctions for the foreseeable future? And what if it triggers a regional nuclear arms race? A war in the Persian Gulf – still the world’s gas station – would affect oil exports for some time, and energy prices would skyrocket, dealing a severe blow to a global economy that is teetering on the brink of recession. China, already in economic trouble, would be hit hardest, along with the whole of East Asia. With the U.S. also economically weakened and facing a presidential election, America’s leadership ability would be seriously constricted. And could a weakened Europe cope with an oil shock at all? A regional and global security shock caused by asymmetric warfare could add still further to the world economy’s troubles, causing exports to slump even more. Respice finem! (“Consider the end”), the Romans used to say. World leaders need to take this timeless wisdom to heart. And that applies doubly to Europeans. It would be absurd if we had to suffer a real catastrophe again in order to understand what European integration has always been about. © Project Syndicate

16 |

business daily September 3, 2012

CLOSING Mexico’s Calderon submits labour bill

Slovenia should fix banks: OECD

Mexican president Felipe Calderon sent Congress a labour bill that would ease the process for hiring and firing workers and a measure to increase local government transparency along with his final annual message. Mr Calderon, who’s due to leave office when his term expires in three months, will speak about the message today. During his six-year tenure, Mr Calderon has lobbied Congress to pass labour changes that would also overhaul the tax system to increase government revenue and open the oil industry to more private investment.

Slovenia should work on fixing its banks and overhauling the pension system and labour market before requesting aid, said Angel Gurria, the secretary general of the Organization for Economic Cooperation and Development yesterday. Slovenia could become the sixth euro-region member to ask for international assistance for its banking industry, which is relying on European Central Bank loans for liquidity. The exportoriented economy shrank an annual 3.2 percent in the second quarter, raising concerns over the budget gap, which swelled to 6.4 percent of total output last year.

Buyout firms probed over tax-evasion tactic

Spain wants extra aid but same condition

Probe into private equity firms, including Mitt Romney’s Bain Madrid is keen on European Central Capital, could help Democrats in November election Bank’s proposed programme to buy debt of euro zone countries

t least a dozen United Statets private equity firms have been subpoenaed by the New York state attorney general as part of a probe into whether a widely used tax strategy that saved these firms hundreds of millions of dollars is proper, a source familiar with the situation said on Saturday. Among the firms that were subpoenaed are Bain Capital LLC, KKR & Co LP, TPG Capital LP, Apollo Global Management LLC and Silver Lake Partners LP, the source said. Bain was once headed by Mitt Romney, the Republican candidate who hopes to unseat President Barack Obama in the Nov. 6 election. The subpoenas, which were sent out in July, seek documents related to the conversion of fees these private equity firms charge for managing investors’ assets into fund investments, the source said. This means the investigation predates the release last month of confidential

Bain fund documents by Gawker that revealed such a practice. The practice is known as a “management fee waiver.” As fund investments, the income would be taxed as capital gains, which attract rates around 15 percent. Without the conversion, the fees would be ordinary income, taxed at rates around 35 percent. Other firms that received subpoenas include Sun Capital Partners; Clayton, Dubilier & Rice; Crestview Partners; H.I.G. Capital; Vestar Capital Partners; and Providence Equity Partners. The investigation comes in the midst of a heated U.S. presidential election campaign. Romney has been scrutinized for his tenure as head of Bain, through which he amassed much of his estimated US$250 million (2 billion patacas) fortune. Romney’s record at Bain is already a target of attack by President Barack Obama’s campaign and has put an uncomfortable spotlight on the

industry. A probe into a potential tax dodge by the industry could further play into the Democrats’ hands. Private equity firms sometimes grant investors a waiver of their management fee - typically charged at 1-2 percent of investments - in exchange for being able to use that capital as their own investment income in the fund. The benefit for the investor is recouping its fee, while the fund manager gets extra incentive to make the fund perform well but is also taxed less on this money. The Internal Revenue Service has so far not banned such a practice, which some private equity fund managers argue is done to align their interests more with those of their investors rather than to reduce taxes. They point out that money that is secure for the fund manager as a management fee is being converted into carried interest, which is far from guaranteed.

pain will consider seeking extra aid from Europe on top of a 100 billion euros (US$126 billion) rescue of its financial sector but does not see any need for new conditions, Prime Minister Mariano Rajoy said in an interview published in European newspapers yesterday. Mr Rajoy said he wanted to see details of the European Central Bank’s (ECB) programme to buy debt of euro zone countries with high borrowing costs before deciding whether to proceed with a request. “If I believe it is good for Europe as a whole, for the euro, and for Spain, I will do it, and if not, not,” Spanish daily ABC quoted him as saying, regarding seeking more aid for Spain. ECB board member Joerg Asmussen said on Thursday the ECB should only buy sovereign bonds of troubled euro zone states if the International Monetary Fund was involved in setting conditions. Spain is already struggling to implement austerity measures to reduce its debt burden and rescue banks hit by a collapse in property prices and Mr Rajoy is reluctant to undertake any more for fear of being caught in a recessionary spiral. But Germany fears the bond buying plan to help Spain and other indebted euro zone countries lower their borrowing costs will expose it to too much risk, leaving the ECB with a delicate negotiating task. German central bank chief Jens Weidmann was reported on Friday to have threatened to resign over the bond-buying plan. ECB President Mario Draghi is trying to hammer out a deal before an ECB policy meeting on September 6. Mr Rajoy’s comments, made on Wednesday, came ahead of a scheduled visit by German Chancellor Angela Merkel later this week to the Spanish capital and as a Spanish request for a European rescue package is seen as increasingly inevitable. To receive aid, he said Spain did not need to meet any further conditions than it already is under the terms of the banks rescue and the excessive deficit procedures.

Reuters