Macau Business Daily, April 20, 2012 by Business Daily

Year I | Number 15 | April 20, 2012 Editor-in-chief | Tiago Azevedo Deputy editor-in-chief | José I. Duarte MOP $ 6.00 www.macaubusinessdaily.com

Taxing times for city’s air travellers

New rector for University of St Joseph

Another payday for Sands China investors

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been notified of its readmission, and a second consortium led by Waterleau Group NV and including Beijing Origin Water Technology Co. Ltd. was also back in consideration. But Hélder Santos, managing director of Consulasia, one of the original unsuccessful bidders, said he had little faith there would be a

different outcome. “This is a very complex process that has been filled with illegalities,” Mr Santos said. “I doubt this new evaluation will be able to change anything.” Page 3

Wastewater tender to be revisited

COME CLEAN ON BID PROCESS GOVT URGED G

overnment officials have promised to revisit the bidding process for Macau peninsula’s wastewater plant, pledging to assess two bids that the courts say were wrongfully excluded from the tender. A government report called for the creation of a new committee to assess the excluded bids, together with

the two proposals that were originally accepted. The five-year contract, worth MOP604.9 million, was awarded to a consortium composed of CESL Asia Investments & Services Ltd., Portugal’s Indaqua - Indústria e Gestão de Águas SA - and the mainland’s Tsinghua Tongfang Co. Ltd. The winning consortium has been

operating the plant since October, even though a contract has not been signed. The modernisation of the plant remains on hold as legal disputes continue. CESL Asia has received no payment for its work. Lawyer Ana Soares confirmed to Business Daily that Indian-Austrian company Va Tech Wabag Ltd. had

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HANG SENG INDEX 21000

20940

20880

20820

20760

Diplomacy 101, Macau’s Taiwan office

Jones Lang LaSalle ‘assisting’ graft buster

In a sign of warming ties between Taiwan and China, Macau is officially inaugurating its representative office at the Taipei 101 building in the island’s capital. Secretary for Social Affairs and Culture Cheong U will attend the opening ceremony in mid-May, along with Macau government spokesperson Alexis Tam Chong Weng Page 4

Property brokerage Jones Lang LaSalle says it is assisting Macau’s corruption watchdog in the new trial of disgraced government official Ao Man Long. The New York-listed company was mentioned in court this week in connection with the sale of land near Macau’s airport in 2005. Mr Ao is accused of acting corruptly in the transaction. Page 5

Sands and Playboy in amicable divorce Sands China Ltd has ended its relationship with U.S.-based Playboy Enterprises, SCL said last night. Yesterday former Bunny Girls at the Bellini Lounge in The Venetian Macao had handed in their ears and fluffy tails and were working as more demurely dressed cocktail waitresses, while others were preparing to leave the city. The Playboy Club originally opened at Sands Macao in November 2010 but was moved to The Venetian in February this year when SCL decided to use the Sands Macao space for more profitable VIP gambling. “Sands China Ltd and Playboy Enterprises have amicably agreed to end their relationship at the end of March 2012. The decision was based on both parties’ mutual decision to explore new opportunities in reaching Macao’s visitors,” said SCL in a statement.

20700

April 20

HSI - Movers Name

%Day

CHINA LIFE INS-H

3.92

PING AN INSURA-H

2.97

HENGAN INTL

2.48

SWIRE PACIFIC-A

1.95

CHINA UNICOM HON

1.81

MTR CORP

-0.36

POWER ASSETS HOL

-0.77

ESPRIT HLDGS

-1.19

TINGYI HLDG CO

-1.40

CHINA RES POWER

-2.65

Source: Bloomberg

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2012-4-20

2012-4-21

21˚ 25˚

20˚ 27˚

2012-4-22

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business daily April 20, 2012

MACAU

Mainland hikes airport tax on Macau flights Increased airport tax on passengers is unlikely to discourage mainland tourists from coming to Macau, the Civil Aviation Authority says Cláudia Aranda

assengers boarding flights in the mainland now have to pay an airport tax ranging from 50 yuan (63.40 patacas) to 90 yuan, the Centre for Asia-Pacific Aviation has reported. Passengers on international flights – including flights to Macau, Hong Kong and Taiwan – are charged 90 yuan. “The air routes between the city and mainland cities are, in principle, domestic routes,” a spokeswoman for Macau’s Civil Aviation Authority said.

90 yuan

new airport tax for passengers on international flights in the mainland

She added that routes between Macau and the mainland were “being operated in accordance with international standards and practices”. That means passengers flying from the mainland to Macau will have to pay the airport tax charged for international flights. The proceeds of the new airport tax should contribute to the civil aviation development fund recently set up by the mainland’s Ministry of Finance, the Centre for Asia-Pacific Aviation said. The fund was established to finance the construction or improvement of civil aviation facilities in the mainland and subsidise airport operators. The aviation authority believes “that the increased fee will not discourage mainland Chinese travelling outbound to other places”, the spokeswoman said. “The airport tax or fee usually only [accounts for]

Photo by Manuel Cardoso

claudia.aranda@macaubusinessdaily.com

Passengers flying from the mainland to Macau will have to pay the airport tax charged for international flights

a small proportion of the total ticket price.” The authority said the new airport tax was 24.80 patacas higher than the previous fee. The spokeswoman said the increase was relatively small, compared to the cost of a ticket.

The new airport tax replaces the old airport construction fee and civil aviation infrastructure fee. It must be paid by mainlandregistered passenger and cargo airlines, as well as general aviation enterprises operating business flights using mainland aviation resources.

The new airport tax was introduced on April 1 and is scheduled to remain in place until December 31, 2015. Air Macau flies from at least 12 mainland airports. Business Daily asked Air Macau for comment but had not received a reply by press time.

April 20, 2012 business daily | 3

Photo by Manuel Cardoso

MACAU

New commission to revisit rejected water plant bids A commission will evaluate two bids excluded from the tender for Macau peninsula wastewater treatment plant Vítor Quintã vitorquinta@macaubusinessdaily.com

he government has pledged to assess two bids that the courts say were wrongfully excluded from the tender to operate the Macau peninsula wastewater treatment plant. But companies involved in both the bids are pessimistic that the review will change anything. Lawyer Ana Soares confirmed to Business Daily that Indian-Austrian company Va Tech Wabag Ltd. had been notified of its readmission, and a second consortium led by Waterleau Group NV and including Beijing Origin Water Technology Co. Ltd. was also back in consideration. Chief Executive Fernando Chui Sai On made the decision on March 8, accepting a recommendation from the Infrastructure Development Office. The same report from the development office also called for the creation of a new committee to assess the excluded bids, together with the two proposals that were originally accepted, Consulasia managing director Hélder Santos told Business Daily.

The Consulasia consortium also submitted a failed bid to operate the wastewater plant, although it wasn’t excluded from the tender. The company is part of a joint venture that operates the Pac On waste incinerator. To date, there has been no update on the status of the evaluation committee. “The procedures of the Macau wastewater treatment plant tender are moving along, though conditioned by the lawsuits filed by two bidders,” the Infrastructure Development Office said. The five-year contract, worth 604.9 million patacas (US$75.6 million), was awarded to a consortium composed of CESL Asia Investments & Services Ltd., Portugal’s Indaqua - Indústria e Gestão de Águas SA and the mainland’s Tsinghua Tongfang Co. Ltd. The consortium has been operating the plant since October, even though a contract has not been signed. The modernisation of the plant remains on hold as legal disputes continue. CESL Asia has received no payment for its work.

Little change Any revision of the competing bids could lead to a different final outcome. Industry insiders contacted by Business Daily said Va Tech Wabag’s proposal was the most expensive among the seven bids that were originally lodged. Waterleau’s was the cheapest. The government has not publically explained how the committee will compare the revisited bids. The tender programme said price would be the final criteria to choose a winner among the proposals that scored a minimum of 65 points out of 100 in the first phase, which focused on a company’s experience and technical solutions. Business Daily understands that the two re-admitted tenders will be compared head-to-head in a first round. If they ensure a score of 65 they will continue into a second round, where they will be compared to the two bids that made it to the final stage previously –

Jobseekers rebound after lengthy decline A

fter falling for the two previous quarters, the number of jobseekers registered with the Labour Affairs Bureau has rebounded in the first quarter of this year. Official data shows nearly 2,000 people were looking for a job in the past three months, a 4-percent increase from the fourth quarter of last year. These figures are still below the 5,013 jobseekers that registered in the second quarter of 2010. The latest set of statistics high-

lights a high turnover rate. About 52 percent of registered job hunters had either been fired or their contracts had not been renewed. Only 34 percent had quit in search of a change in work environment. A slim majority of all jobseekers, 53 percent, were aged 45 to 59. And the most sought after jobs were clerical work, building security, unskilled work in construction, retailing and cleaning. Just 10 percent of registered jobhunters were under 25 years old – a group that is usually dominated by

fresh entrants into the labour market. Half of all jobseekers had completed at least a high school education, while one-third had attended just primary school. There is still a gap between the wages sought and offered. While workers most often sought monthly salaries between 6,981 (US$873) patacas and 10,463 patacas, the majority of companies were only willing to pay between 5,902 patacas and 10,016 patacas. V.Q.

CESL ASIA and Consulasia. Both Va Tech Wabag and Consulasia are suspicious of the government’s intentions and believe CESL Asia will retain the contract to manage the wastewater plant. “This is a very complex process that has been filled with illegalities,” Mr Santos said. “I doubt this new evaluation will be able to change anything.” Ms Soares agreed that an evaluation under the existing circumstances would not be ideal. “I fear the evaluation will not be truly independent because CESL Asia is already operating the plant,” she said. Both Va Tech Wabag and Waterleau have asked the government to put the contract out to a new tender or to strike a compensation deal. Waterleau has said it spent more than 1 million patacas preparing its bid. CESL Asia chief executive António Trindade told Business Daily earlier this month the company was confident it would be allowed to continue operating the Areia Preta plant.

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business daily April 20, 2012

macau Brought to you by

HOSPITALITY

Base opens for Taipei diplomats next month

Tracking the tourist dollar Surveys of visitor spending are difficult exercises, as the sample and the reliability of the results can be questionable. Any results should be taken with a pinch of salt. These statistics are most useful as gauges of trends and indicators of the behaviour of tourists. One problem with the data for Macau is that the authorities changed the way they calculated tourist spending in 2010. This change is represented in the graph by the gap between the lines for that year.

VISITORS’ eXPeNDITUReS

(MOP)

4200

Secretary Cheong U to attend opening ceremony as representative office strengthens trade, education and tourism ties with Taiwan

3700 3200 2700 2200 1700 1200 2008 Total1

2009

2010 CN1

2011 Total2

2012 CN2

There are two noteworthy trends that can be distinguished in the past four years. Spending is generally stable in the first part of this period, oscillating around an average of 1,700 patacas (US$213) a day. This average now seems to be rising. Spending by visitors from the mainland, by far Macau’s biggest source of tourists, falls into a more pronounced pattern. They have spent progressively less from 2008 until the middle of 2010. Spending has since increased and the rebound seems to have accelerated in recent quarters. Since 2010, the divergence between average spending by mainland visitors and average spending by all visitors is less pronounced.

acau’s Secretary for Social Affairs and Culture Cheong U will attend the opening ceremony of the Macau representative office in Taiwan next month, Business Daily has learned. The representative offices for Macau and Hong Kong were established in Taipei on a temporary basis last December. The official opening will take place in mid-May, according to reports quoting Taiwan’s Mainland Affairs Council. Macau government spokesperson Alexis Tam Chong Weng will also attend the ceremony, a government spokesman

told Business Daily, adding that a formal opening date has not been set. The opening of the Macau Economic, Trade and Cultural Office and Hong Kong Economic, Trade and Cultural Office will further cement ties with Taiwan, the Mainland Affairs Council said. The office will assist Macau residents living, working, studying, travelling and doing business in Taiwan. Nadia Leong Kit Chi was appointed head of the office last year and leads a team of about 15 people. She was previously the secretary-general of the Tourism Development Committee.

The government signed a lease for two offices on the 56th floor of the Taipei 101 building last year. It pays a monthly rent of MOP380,000 for the 1,595-square-metre space. In July 2011, Taiwan’s Hong Kong and Macau representative centres were upgraded from semi-official establishments to Taipei Economic and Cultural Offices. Hong Kong Financial Secretary John Tsang is expected to attend the opening ceremony of the Hong Kong office, according to the Taiwanese government media service. T.A.

St. Joseph to welcome new rector in May Ruben Freitas Cabral’s replacement as head of university to arrive next month Cláudia Aranda claudia.aranda@macaubusinessdaily.com

he University of St. Joseph will have a new rector next month, sources close to the matter have confirmed. The new head of the university will be the vice-rector of the Catholic University of Lisbon, Father Peter Stilwell, as reported on Wednesday by the Portuguese Catholic broadcaster, Radio Renascença. In the last three years, he was also visiting professor at the

University of St. Joseph. Rev. Stilwell told the radio station he had been appointed the rector of St. Joseph. He is expected to leave Lisbon on May 1. The present rector, Ruben de Freitas Cabral, was appointed in 2003 to lead the Macau InterUniversity Institute, which subsequently became the University of St. Joseph. Mr Cabral told Business

Daily he presented his resignation recently “for personal and family reasons” and will enjoy one year of sabbatical leave, starting May 1. He will then resume his position as professor at the Catholic University of Portugal. The outgoing rector has spent the past few days making farewell calls on the chief executive, the Portuguese consul and other members of

Macau’s consular corps. The Fundação Católica de Ensino Superior Universitário, established by the Catholic University of Portugal and the Diocese of Macau, founded the University of St. Joseph in 1996. The university has about 2,000 students. It offers undergraduate and postgraduate programmes leading to licentiate’s, master’s and doctoral qualifications.

April 20, 2012 business daily | 5

MACAU

Jones Lang LaSalle aiding graft buster Jones Lang LaSalle says it is currently assisting Macau’s corruption watchdog in the new trial of disgraced government official Ao Man Long

Dealings around the residential property La Scala are in the spotlight at the Ao Man Long third corruption trial

roperty brokerage Jones Lang LaSalle has said it is assisting Macau’s Commission Against Corruption with its inquiries into issues raised in the new trial of jailed former government official Ao Man Long. “Jones Lang LaSalle are currently assisting CCAC with its inquiries,” Jo Soo, head of marketing for Hong Kong and Macau, said yesterday in an email reply to a Business Daily query. “We prefer not to comment further at this stage.” Ao is currently serving a sentence of 28-and-a-half years for taking bribes to expedite construction deals in Macau. His third trial, over a new set of graft charges, started in the Court of Final Appeal this week.

He is charged with bribery in the award of public contracts linked to the Zhuhai-Macau Cross-Border Industrial Park and the Coloane Wastewater Treatment Plant. The new charges have also engulfed the concession of land where the residential project La Scala is being built. Jones Lang LaSalle, which is listed on the New York Stock Exchange, was named in connection with the sale of the 78,742-square-metre plot near the airport in 2005. Jones Lang LaSalle was acting on behalf of Moon Ocean, a company registered in the British Virgin Islands and controlled by Hong Kong businessmen Steven Lo Kit Sing and Joseph Lau Luen Hung. In court on Wednesday, the Public

Prosecutor’s Office claimed the Macau government sold the plot for at least 830 million patacas less than its market value. Savills Hong Kong said the land was worth about 2.2 billion patacas when it conducted its appraisal in 2004. The following year, Ao put in motion a process that led to the land being sold for 1.37 billion patacas. According to Infrastructure Development Bureau official André Sales Ritchie, Jones Lang LaSalle made the highest bid for the plot and its proposal was “obviously much better” than the other two. “It included a lot of drawings, three-dimensional images, stuff that takes a lot of work,” he said in court on Wednesday.

Fears ignored, trade swamps taxi licence bids

nitial fears among the taxi trade over the terms for 200 new cab licences have been overwhelmed, with more than 2,172 bids lodged with the Transport Bureau by the end of yesterday’s deadline. The bids will be opened on Sunday. Each had to meet a base price was 200,000 patacas (US$25,000). The Transport Bureau has decided to issue the eight-year, nonrenewable licences in four batches of 50 between July and November, following criticism from the cab companies that issuing 200 licences at once would strain already limited human resources. The bid deadline was deferred for a week earlier this month after additional complaints that the government’s environmental compliance standards for the new fleet were unrealistic and would force the taxi trade to import expensive vehicles. The government has insisted that the taxis have a 2,000cc engine and meet the Euro 4 standards on gas emissions. European Union emission standards are measured on a scale from 1 to 6, moving from higher to lower emissions. The government issued 150 new licenses in 2008 and the bidding price reached 1 million patacas. But industry executives believe the figures will be much lower this time because the new licences are neither renewable nor transferable. After eight years, the taxi will not be allowed to circulate and its license plate will be cancelled. There are currently 990 taxis licensed in the city, including 100 yellow taxis, according to bureau statistics.

End to dual licence plan to hit Zhuhai flat sales Mainland real estate agents lose valuable marketing angle for would-be buyers Terina Cao

tting@macaubusinessdaily.com

Zhuhai developer has forecast that the number of Macau residents buying homes in its nearest neighbouring city will drop by half once a scheme offering dual licence plates ends. Guangdong Provincial Transport Department stopped handing out dual licence plates with the purchase of a home in Zhuhai on Wednesday.

About 70 percent of Macau residents who buy property in Zhuhai do so to get the dual licence plate, the manager of a Zhuhai real estate agency, told the Chinese-language newspaper Macau Daily News. “To give dual licence plates with the purchase of a home has always been our selling point to Macau people.” The end to the scheme may also lead

to a dip in Zhuhai home prices, the paper reported. In fact, another Zhuhai real estate agency has already planned to reduce house prices in the city’s western district by 2,000 yuan (US$317) a square metre. A second developer said the change would not affect prices. He said only a fraction of the 20,000 homes sold

in the city each year were bought by Macau residents. A survey on a Zhuhai website found that 57 percent of interviewees agreed that the scheme should end. About one-third would like to see it extended. About 40 percent of respondents thought the government would allow Macau residents to apply for dual licences plates in the future.

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business daily April 20, 2012

macau

New social housing flats ready by September

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Authorities say building in Mong Ha will have 346 flats and 350 parking spaces Terina Cao

tting@macaubusinessdaily.com

A RMB still one-way bet Deposits made in renminbi in the city’s banking system have a relatively short history, having started only in late 2004. At first they were made only in accounts held by individuals, and for most of the next five years the amounts were relatively small. Only after October 2009 did institutions begin making deposits in renminbi. For the first couple of months, the amounts were mainly symbolic: 50,000 yuan (now US$7,933) here, 60,000 yuan there. One year later, though, the growth in the amounts deposited exploded. In February, the amount on deposit in renminbi was about 90,000 times what it had been two years before. In contrast, the amount on deposit in yuandenominated accounts held by individuals grew by a relatively feeble 18 percent over the same period.

new social housing building in Rua de Francisco Xavier Pereira will be ready for occupancy in the third quarter of this year, deputy director of the Land, Public Works and Transport Bureau Shin Chung Low Kam Hong said yesterday. Construction work on the project named Mong In started towards the end of 2010. The bureau said the basic structure was complete. Apart from 346 two-bedroom units, the 32-floor building will

have and 350 parking spaces, 210 for motorcycles and 140 for cars. The deputy director said the parking area on the ground floor would be open to the public in August, before the project is complete. Housing Bureau president Tam Kuong Man said: “As we finish the building, we will soon arrange for the people who are waiting for social housing to move in. Of course, we will follow the order

of the waiting list.” There were 7,209 families on the waiting list for social housing until last week, down from 11,216 at the end of September last year. The government pledged to build 19,000 public housing units over a five-year period ending this year. He also confirmed that apartments at the affordable housing projects at Alameda da Tranquilidade, in Areia Preta, and TN27 in Taipa were still available.

Free TV scores soccer rights TDM keeps three-year deal for UEFA Champions League and Europa League, for less than MOP10 million a year

CNy DePOSITS 60000 50000 40000 30000 20000 10000 0

Nov 04 Individual

Fev 12 Other

The rapid growth in deposits was driven mostly by the expectation that the yuan would appreciate. Recent changes in the management of the currency that will allow its value to fluctuate within a wider range may have an effect on the rate of growth on deposit. The changes will add some uncertainty to shortterm changes in the exchange rate. The new fluctuation band allows for increased volatility. But it is unlikely to change fundamentally the factors behind the growth in renminbi deposits or their continued upwards trend.

TDM wins UEFA deal until 2015

eledifusão de Macau (TDM), Macau’s publicly-funded but privately managed television channel, has secured a new three-season deal for the rights to show a limited number of

European soccer games on a freeto-air basis. UEFA announced the award of 2012–15 UEFA Champions League and UEFA Europa League media rights to Teledifusão de

Macau late on Wednesday. For the UEFA Champions League, commercial broadcaster TDM will show one live match on every matchnight as well as a highlights programme. Each matchweek, TDM will also screen one UEFA Europa League live match per kick-off slot as well as a highlights programme. All will be broadcast on free-to-air channel TDM Desporto. Details of the agreement between a media rights broker and TDM are said to be subject to a confidentiality clause. But Business Daily understands TDM is paying not more than MOP10 million (US$1.25 million) per year for the period 2012-2015. According to UEFA’s TEAM Marketing, all rights have been granted on a platform-neutral basis, with the rights being exploited on the internet – via www.tdm.com.mo – and on mobile.

Weather Beijing 23/13o C Changchun 16/11o C

Harbin 19/9o C

Xian 22/8o C Shanghai 20/15o C Chengdu 26/15o C Kunming 23/11o C Haikou 30/22o C Sanya 32/26o C

Guangzhou 23/21o C

MACAU (16-21 April) Day

Temperature

Humidity

04/16

23/27o C

75/95 %

04/17

21/26o C

80/95 %

04/18

21/25o C

80/95 %

04/19

21/24o C

85/95 %

04/20

19/23o C

70/95 %

04/21

18/25o C

50/85 %

Shenzhen 31/22o C

ASIA (today)

Hong Kong 28/24o C

Manila

Macau 21/25o C

TOKYO

Jacarta

31/26 C

29/24o C

15/12o C

30/25o C

Bangkok

SEOUL

K. lumpur

32/28 C o

SINGAPORE

22/9o C

29/25o C

taipei

26/22o C

April 20, 2012 business daily | 7

MACAU

Lucky numbers

Feng shui – SCL’s first dividend based on lucky numbers

Sands China expected to announce second dividend payment today Associate Editor

ands China Ltd (SCL) is expected to announce the second payment of its biannual share dividend from Macau gaming operations after a board meeting in Macau today. The first-ever Sands China dividend – announced on January 31 this year - was for HK$0.58 (US$0.075) per share. An analyst said today’s dividend was likely to be the same amount, making HK$1.16 for the year. Sheldon Adelson, the chairman and chief executive of SCL’s parent Las Vegas Sands Corp., cited “feng shui practice” in choosing the numbers five and eight for the first pay out. In Chinese the word ‘eight’ sounds similar to the Chinese word for ‘prosper’ or ‘wealth’. The annual dividends paid by the LVS parent and SCL combined would cost US$800 million on a fully diluted basis, said Mr Adelson in January. But he added that dollar for dollar it was a quicker and more effective way of pleasing investors than share buy backs. “We become more attractive to those who have a mandate to invest only in dividend paying stocks,”

he stated. That’s helpful when you have ambitions – as LVS does – for further global expansion and need strong investor appeal to do it. Spain was again mentioned as a target when the board gathered at last week’s opening of Sands Cotai Central, the company’s US$4.4 billion new resort in Macau. Japan has also been discussed as a target many times. LVS still owns 70 percent of Sands China even after SCL’s flotation in Hong Kong in November 2009. So paying Macau dividends benefits the parent. “The issuance of a dividend from SCL is seemingly an efficient way to transfer cash to the LVS corporate level,” says Union Gaming Research in a note issued by its U.S. office. “Given the (39 percent) tax on gross gaming revenues in Macau, we believe that by issuing a dividend through the SCL entity, LVS would not be subject to any significant repatriation fees, which would be shielded by foreign tax credits,” adds Union Gaming. Praveen Choudhary of Morgan Stanley Research Asia/Pacific says in his latest published note

Sharing the spoils The dividend trend reaches Macau gaming stocks

he Macau dividend trend was started by SJM Holdings, the least indebted and least capital-intensive of the Macau concessionaires. After listing in Hong Kong in July 2008, SJM Holdings in March 2009 declared a dividend for 2008 of HK$0.06 per share. In November last year Wynn Macau said it would issue a special dividend of HK$1.20 (US$0.154) per share, payable the following month. On February 1 this year Las Vegas Sands Corp. (LVS) - the parent of Sands China – went a step further by committing itself to a recurring annual dividend, citing as the reason “the strong cash flow, liquidity and financial position of the company”. In late February MGM China Holdings Ltd, majority-owned by MGM Resorts International,

declared a dividend of HK$0.816 a share, or a total of HK$3.10 billion, as its first dividend since listing in Hong Kong in June 2010. In March, Galaxy Entertainment Group said it would not be recommending a dividend for 2011. It cited a preference for supporting long-term investor value. It said it could achieve that by paying for Galaxy Macau phase two via cash reserves and operations rather than fresh equity. Melco Crown Entertainment has not so far paid a dividend on its operations. While it is now generating high levels of cash from its City of Dreams and Altira casinos, it too has a need for capital to fund its pending Studio City project. A.E.

on Macau: “Most of the [Macau] operators are generating around seven percent to ten percent FCF [free cash flow] yield, and the key question for them is whether to invest or pay dividend. “We believe that due to historically

high ROIC [return on invested capital] (20-80 percent) in casino business, most of the operators are hoping to plough back the cash into new projects, potentially in Cotai once they get government approval,” the note adds.

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business daily April 20, 2012

GREATER CHINA

InBrief Economic growth seen picking up steadily

Beijing ‘willing to discuss’ IMF funding

China is willing to discuss means for funding the International Monetary Fund, Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing yesterday. Liu was responding to a question about how much money China is willing to provide to the body. IMF Managing Director Christine Lagarde said yesterday she has received pledges worth about US$320 billion to increase the fund’s lending resources.

Ford to invest in Hangzhou Ford Motor Co is investing US$760 million to build a new plant in eastern China as part of its effort to catch up with U.S. rival General Motors Co in the world’s largest auto market. Ford said the new plant in Hangzhou in Zhejiang province will initially boost the U.S. automaker’s annual capacity in China by 250,000 vehicles when production begins in 2015. Construction is expected to begin later this year. The announcement comes two weeks after Ford said it would invest US$600 million to build a third plant at its Chongqing complex. Ford has now announced or begun building eight assembly and powertrain plants in Asia.

HK jobless rate steady at 3.4 pct Hong Kong unemployment rate held steady at 3.4 percent for the first quarter of 2012, information showed yesterday. “As labour demand held broadly firm, total employment rose for a fifth consecutive month, up by 1,000 to a record high of 3,649,600 in January-March,” said Secretary for Labour and Welfare Matthew Cheung. “Nevertheless, since this was outpaced by a larger increase in the labour force, the number of unemployed edged up during the period. On a seasonally adjusted basis, the unemployment rate remained unchanged at 3.4 percent.”

Economists expect China’s economy to grow over 8 percent this year, as house prices are likely to fall

Home prices likely to fall by a further 10 to 20 percent, a Reuters poll showed

hina’s economy has weathered the worst after reporting its slowest quarterly growth since the tail-end of the great financial crisis in the first three months of 2012. It is heading for a rebound in coming months, a Reuters poll showed. Economists expect the world’s secondbiggest economy to grow 8.4 percent this year, unchanged from their forecast in the last poll in January, and expect growth to steadily tick higher in subsequent quarters to reach 8.7 percent by April-June 2013. All 30 economists expect China to at least meet and probably exceed the government’s target growth rate of 7.5 percent this year, with only four predicting a growth rate below 8 percent. “Our forecast of 8 percent growth this year remains realistic. Even if growth is slightly lower than that, a hard landing is a distant prospect,” said Dariusz Kowalczyk, a senior economist at Credit Agricole. “Worries among international investors appear unjustified, as it would be easy for the government to re-accelerate growth if it chose to do so,” he added. Price pressures are expected to remain

under control. The median forecast for inflation this year was 3.4 percent, comfortably below Beijing’s 4 percent target and unchanged from January.

House prices to fall China’s home prices likely will fall by a further 10 to 20 percent between now and the end of the year, after slipping 5 percent in the first quarter, a Reuters poll showed, enough to slow broader economic growth but not trigger a hard landing. “We are seeing a significant correction in the Chinese property market, but property is still overvalued and still wildly detached from the fundamentals,” said Alistair Thornton, a Beijing-based economist at IHS Global Insight. “A 10-20 percent fall from its peak last year is what the government wants to see and brings the market slightly back towards the area it should be,” Thornton said. “I don’t think we will see a hard landing, purely because the government retains enough levers of control over the economy and the property market that it can

avoid one,” Thornton added, noting that tight credit conditions were already easing. The 2012 price decline of 15-25 percent predicted by most of the 20 analysts in the latest poll is slightly sharper than the 10-20 percent seen in the last poll in January, when many market watchers believed Beijing would soon ease some of its property measures to shore up domestic demand in the face of cooling global growth. Those hopes were doused in March, when Premier Wen said that home prices remained “far from reasonable levels”, though Chinese leaders have offered no definition of what that is. Poll respondents still see Chinese home prices as expensive. On a scale of 1 to 10, where 1 is extremely cheap and 10 is extremely overvalued, the median reply was 7, unchanged from January. New home prices fell by 0.7 percent in March from a year earlier, the first time since the property tightening battle started two years ago. On a monthly basis, they have been falling since October. Reuters

Central bank said to boost liquidity XCMG buys majority of Schwing China’s Xuzhou Construction Machinery Group (XCMG) has agreed to take a majority stake in privately-held German machinery manufacturer Schwing as Chinese companies race to get their hands on German industrial know-how. The German concrete pump maker, which is one of the world’s leading suppliers in its field, did not disclose a price for the investment in its statement yesterday. “The premium brand Schwing is a central part of our strategic development,” XCMG head Wang Min said in the statement, which also said the German management would remain in charge.

hina will increase liquidity via open market operations and cutting banks’ required reserves to steer the economy towards a soft landing, the official Xinhua news agency quoted an unnamed central bank official as saying late on Wednesday. The People’s Bank of China will “increase reverse repo operations and cut the reserve requirement ratio at an appropriate time ... to release liquidity,” the official was quoted as saying in an interview with the state news agency. “We will take comprehensive and effective measures to make pre-emptive policy adjustment at

appropriate time and pace so as to guide steady and appropriate growth in money and credit supply, to keep banking system liquidity at a reasonable level and to support stable and relatively fast economic growth,” the official said. The remarks - consistent with the easing policy bias that has been in place since autumn 2011 when Premier Wen Jiabao unveiled his “fine-tuning” campaign to support growth - came after China’s bank lending surged in March to 1.01 trillion yuan (US$160 billion), the biggest credit extension since January 2011. The unnamed central bank official also told Xinhua that almost 800

billion yuan of liquidity will be unlocked in the second quarter and liquidity supply will remain sufficient. Meanwhile, the central bank would support the financing demand of the central government’s key investment projects, affordable housing construction as well as mortgage loans for people buying their first homes for self use, the official said. The central bank would also create easier and more diversified channels to meet funding demand from small companies, such as allowing them to issue bonds, the official said. Reuters

April 20, 2012 business daily | 9

GREATER CHINA

IPO: HK moves closer to bank liability Financial market watchdog plans tougher code of conduct, liability for IPO prospectus Rachel Armstrong

The Hong Kong market was the world’s biggest for IPOs in 2009 and 2010 when US$89 billion was raised there

ong Kong’s financial market watchdog will launch a public consultation in the next couple of weeks that seeks to toughen rules for banks sponsoring initial public offerings, including holding them liable for faulty deal documents. The move is likely to draw strong opposition from foreign investment banks worried about increased risk in a market that has been the world’s biggest for listings in two of the past three years, but has also seen a number of scandals. According to sources with direct knowledge of the matter, the

Securities and Futures Commission (SFC) is set to issue a two-part consultation paper, with one section proposing to toughen the code of conduct for IPO sponsors and the second making them liable for the contents of listing prospectuses. “Everyone will be taking a step back and revisiting whether it makes economic sense to even pursue those deals,” said Bonnie Chan, a partner at law firm Davis Polk & Wardwell and former head of Hong Kong Exchange’s IPO transactions department. The initiative follows a string of scandals at Chinese companies

that went public, only to then face accusations - and in some cases proof - of fraud shortly after listing. Sponsors, usually banks or smaller corporate finance houses, prepare a company’s listing documents and perform due-diligence to ensure they comply with Hong Kong’s listing rules. If accepted, the rules are likely be some of the toughest for IPO sponsors or deal managers in Asia. In Singapore for instance, lawyers say that while prospectus liability can extend to underwriters, the onus usually rests with the listing company and its directors.

“This could make it more expensive to list in Hong Kong,” said a capital markets lawyer in Singapore. Liability could leave investment banks, and possibly some of their employees, open to massive legal cases and fines if a deal went wrong. The SFC estimates that the total income derived from IPO sponsorship in Hong Kong was HK$4.8 billion (US$618.50 million) and HK$2.2 billion for the years ended September 30, 2008 and 2009, respectively, the most recent years available. Reuters

Taiwan’s CPC cutting Iran oil imports

aiwan’s state-owned oil firm CPC Corp is reducing imports from Iran and will follow the schedule of U.S. sanctions in deciding when to cut them completely, its chair-

man said, joining other Asian buyers in scaling back dealings with Iran. The United States will impose sanctions from the end of June on buyers of Iranian oil as part of action against

Iran’s nuclear programme. Taiwan is one of the smaller Asian customers of Iran, but will face the same difficulties as bigger buyers Japan and South Korea as sanctions make it tough to pay, ship and insure Iranian oil. “If the U.S. sets a timeframe, CPC and the Taiwan government will conform to that,” CPC Chairman Chu Shao-hua told Reuters in an interview, adding he was not aware of a specific timeframe. The company is discussing the issue with the United States, he said. CPC imports about 22,000 barrels per day from Iran, Chu said, a figure he said was much lower than in the past. It will increase its crude purchases from Oman, Kuwait, Saudi Arabia and Angola to make up for the loss of Iranian oil, Chu said, though the effect on CPC is small as Iran makes up only about 5 percent of its total imports after progressive cutbacks in recent years. Chu said paying for Iranian oil and get-

ting insurance for tankers were the two biggest current headaches for CPC, which is still under contract to Iran for oil purchases. A European Union oil embargo on Iran, set to take effect in July, will prohibit EU insurers from covering Iranian oil exports anywhere in the world. Those insurers cover the majority of the world’s tankers. CPC had used an account at a local Taiwanese bank, with U.S. approval, to hold money owed to Iran for oil. Money in that account was used to pay other Taiwanese exporters who could not receive money from Iran. This arrangement won’t continue after the latest sanctions take effect, said Chu. He could not say what the situation was in regard to insuring CPC’s own tankers should foreign vessels become unable to bring the contracted Iranian oil to Taiwan. Reuters

10 |

business daily April 20, 2012

ASIA

EU to suspend Myanmar sanctions

InBrief Won edges down, Korean bonds flat

The 12-month suspension period opens way to a potential trade with over 800 firms Claire Rosemberg

U nations are set to suspend sanctions against Myanmar for a year, opening the way to a potential trade and investment bonanza with over 800 firms, European Union diplomats told AFP yesterday. “There is now agreement in principle” to “a suspension of all sanctions, except for the arms embargo,” said a diplomat close to the talks who asked not to be identified. A formal announcement is expected at a meeting of EU foreign ministers on Monday in Luxembourg. Despite reforms by Myanmar’s military leaders, EU nations long remained split over whether to remove sanctions, with Germany urging a swift lifting but hawkish former colonial power Britain keen to maintain leverage in the still army-dominated country. But in a joint policy-making call last week, British Prime Minister David Cameron and opposition leader Aung San Suu Kyi urged the suspension of all EU measures - though not the scrapping of the sanctions. Suu Kyi’s endorsement of the

suspension was seen as crucial. The 12-month suspension period “gives us time to assess the sustainability of reform,” a diplomat said. The ministers are expected to also agree to include the possibility of reviewing the decision in six months. Western nations eager to reward sweeping reforms that culminated in Suu Kyi’s election to parliament in April 1 by-elections, have already made some reciprocal gestures to encourage Myanmar’s government. Once in place, the suspension opens up what many investors see as the next big frontier to European firms. In all, the 27-nation bloc had slapped a travel ban and assets freeze on 491 people but early this year eased the measures, notably suspending visa bans against members of the government. A total 59 firms and utilities remained targeted by an asset freeze while trade and investment restrictions were imposed on more than 800 companies, many involved in lucrative logging and

mining, as well as on 52 enterprises controlled by the regime. The bloc’s foreign policy chief Catherine Ashton this week said she would travel to Myanmar on April 28-30 and had invited the Southeast Asian state’s foreign minister to Brussels. “I do hope that what we are now seeing is an opportunity for this country to go forward,” she said of the country’s reforms. “We will now enter into an active collaboration with Myanmar, to assist the reform process and to contribute to economic, political and social development.” Japan meanwhile is to waive Myanmar’s 300 billion yen (US$3.7 billion) debt and plans to resume suspended assistance to the country, a report said yesterday. Japanese Prime Minister Yoshihiko Noda is expected to announce the debt waiver during a planned meeting with Myanmar’s President Thein Sein tomorrow in Tokyo, the evening edition of the Asahi Shimbun reported. AFP

The South Korean won finished domestic trade slightly lower yesterday, as mounting concerns about Spain’s rising sovereign debt costs kept investors cautious ahead of a key bond sale by the country. The won was quoted at 1,138.1 against the U.S. dollar at the end of domestic trade, compared with 1,137.3 at Wednesday’s close. The won traded as low as 1,141.8 but recouped some losses to settle below the top of the daily Ichimoku cloud of around 1,139.0. The benchmark Korea Composite Stock Price Index ended 0.2 percent lower, with foreign investors net sellers of 94.1 billion won worth of shares. Local bonds held steady, supported by renewed risk aversion and continued demand from foreign investors.

Thailand hits two-week high

File photo

Thai stocks surged to a two-week high yesterday led by banking shares but most other stock markets in the region ended flat or lower amid renewed concern over the debt crisis in the euro zone. Foreign inflow of US$43.35 million also helped boost sentiment on the Thai bourse with the jumping 1.5 percent to its highest since April 4. Both Siam Commercial Bank PCL and Kasikornbank PCL were among the big gainers.

EU’s foreign policy chief Catherine Ashton (R) to travel to Myanmar on April 28-30

Philippine central bank holds rate

he Philippine central bank kept its main policy rate steady yesterday, as expected, while citing more positive growth prospects for the economy, bolstering market views that it would hold rates possibly for the rest of 2012. Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said that the Monetary Board noted that “while global economic conditions remain fragile, prospects for overall domestic economic activity are gradually strengthening.” Monetary authorities said there were risks to inflation from high oil prices and foreign exchange inflows, but these may be offset by the general weakness in the global economy and a stable peso currency. They left the overnight borrowing rate unchanged at a record low of 4 percent, as predicted by all 11 ana-

lysts in a Reuters poll. Most of the polled economists forecast that the rate will be kept at that level for the whole year after annual inflation cooled to its lowest in 2-1/2 years in March, helping keep the three-month average near the low end of the central bank’s 3 to 5 percent target. Statements from the BSP seem to support the view that thee will be a “pause for an extended period,” Aninda Mitra, economist at ANZ in Singapore. Edward Teather, an economist at UBS in Singapore, summed up his view: “No more policy rate action this year, inflation will be low enough.” The central bank kept its average inflation forecast for 2012 at 3.1 percent but trimmed its 2013 forecast to 3.3 percent from 3.4 percent.

Reuters

Toyota funding at lowest rate in 9 years Toyota Motor Corp., the world’s biggest automaker by revenue, is taking advantage of falling Japanese government bond yields and rebounding sales in the U.S. to borrow at the lowest rate in nine years. The financing unit of Asia’s biggest carmaker sold 15 billion yen (US$184 million) of five-year bonds with a 0.415 percent coupon, the lowest for the company since April 2003, according to data compiled by Bloomberg. Toyota’s bond offering on April 17 also included 10 billion yen of 0.272 percent three-year notes, priced to yield 10 basis points more than the government debt.

April 20, 2012 business daily | 11

ASIA

Japanese exports pick up U.S. economy pushing up exports, businesses still cautious

apan’s exports rose in March from a year earlier for the first time in six months, mainly on the strength of U.S. sales. However, high fuel imports pushed the trade balance back into deficit and manufacturers remain cautious about business in months ahead. Reflecting rekindled worries about Europe’s debt crisis and concerns the yen could rally again, manufacturing confidence dipped in April after a sharp rebound the previous month, a Reuters poll showed. The subdued sentiment suggested the Bank of Japan will remain under pressure to ease monetary policy further when it meets on April 27 to support the fragile economic recovery. Exports rose 1.2 percent in seasonally adjusted terms in March and 5.9 percent from a year earlier, compared with economists’ median forecast of a steady reading, as U.S.-bound shipments grew at the fastest pace in nearly two years on auto demand. Imports soared 10.5 percent in the 12 months to March, pushing the trade balance into deficit after it posted a surplus in February. However, the gap of 82.6 billion yen (US$1.0 billion), came well below analysts’ forecast of 220 billion yen. In January, Japan recorded its biggest ever trade deficit of 1.476 trillion yen. “While there is a clear boost from reconstruction, uncertainties remain about the Japanese economy’s outlook,” said Yuichi Kodama, economist at Meiji Yasuda Life Insurance. “Higher raw material costs, a renewed yen rise and the

Exports rose 5.9 percent from a year earlier

lack of bright signs in China’s markets have caused recovery in manufacturer sentiment to pause.” Japan’s trade balance is expected to remain in deficit in coming months as it imports more oil and natural gas to offset the loss of nuclear power supply, which could start eroding its vast savings and hamper its ability to finance huge public debt. “Exports to the United States grew

but shipments to China remained weak, so Japanese exports will struggle unless China, which is Japan’s biggest export destination, achieves economic recovery,” said Takeshi Minami, chief economist at the Norinchukin Research Institute in Tokyo. “These indicators will further back up calls for monetary easing by the Bank of Japan.” Manufacturers face a worsening

plight in trade with other countries due to oil price rises, which boost raw material costs, and the yen’s stubborn strength, he said. Last year Japan logged its first annual trade deficit in 31 years following the March earthquake that crippled supply chains, boosting fuel imports to make up for loss of nuclear power. Reuters

Japan: Foreign CEOs in need of survival kit Dwindling numbers of foreign CEOs highlight adaptation woes Olympus Corp. was one of the last companies to have a foreign CEO

nd then there were three. Nissan Motor Co.’s Carlos Ghosn, Aozora Bank Ltd.’s Brian Prince and Trend Micro Inc.’s Eva Chen are the only non-Japanese chief executive officers leading Nikkei 225 Stock Average companies after Nippon Sheet Glass Co. announced that CEO Craig Naylor quit because of a clash

with the board. Howard Stringer relinquished Sony Corp.’s presidency this month and Olympus Corp. - the camera maker that covered up US$1.7 billion in losses over 13 years - fired President Michael Woodford in October for questioning past takeovers and accounting practices. The dwindling number of

foreign executives may help illustrate the difficulties non-Japanese nationals face working in a country that the World Bank says is so bureaucratic that it’s harder to do business there than Malaysia or Thailand. The challenges may be more cultural, according to investors such as Ichiro Takamatsu.

“There is a huge gap in culture,” said Takamatsu, a fund manager who helps oversee US$2 billion at Tokyo-based Bayview Asset Management Co. “It takes too long to make decisions at a Japanese company, which may look ridiculous to nonJapanese.” Japan ranks 20th among 183 economies in terms of ease of

conducting business, based on the World Bank’s latest “Doing Business” report, which says Singapore and Hong Kong are the world’s easiest places to conduct business. By comparison, separate data compiled by Bloomberg ranks Japan as the seventh-best place to do business. Bloomberg

12 |

business daily April 20, 2012

MARKETS Ticker NAME

Hang SENG INDEX Ticker NAME

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

HUTCHISON WHAMPO

75.1

0.4010695

5661020

93.1

53.6

1398

IND & COMM BK-H

5.26

1.153846

171598289

6.75

3.46

494

LI & FUNG LTD

16.92

1.438849

25125310

20.15

10.82

1299

AIA GROUP LTD

1.265823

16386423

29.9

19.84

MTR CORP

27.35

-0.3642987

1688439

28.85

22.45

2600

ALUMINUM CORP-H

3.78

1.069519

8312988

7.74

3.2

NEW WORLD DEV

9.34

1.082251

7565941

12.767

6.13

3988

BANK OF CHINA-H

3.28

0.9230769

232784852

4.43

2.2

857

PETROCHINA CO-H

11.44

1.238938

37365391

11.94

8.59

3328

BANK OF COMMUN-H

5.98

0.8431703

16209741

7.709

4.15

2318

PING AN INSURA-H

64.15

2.969502

15435868

37.35

BANK EAST ASIA

1880

BELLE INTERNATIO

2388

BOC HONG KONG HO

293

CATHAY PAC AIR

CHEUNG KONG

101.8

0.8919722

1898

CHINA COAL ENE-H

8.81

1.148106

939

CHINA CONST BA-H

6.08

1.672241

2628

CHINA LIFE INS-H

21.2

29.4

0.5128205

1868249

34.45

21.85

POWER ASSETS HOL

57.9

-0.7712082

2463577

64.8

14.96

0.9446694

12601124

17.54

11.38

SINO LAND CO

13.64

-0.1464129

5640849

14.16

8.482

-0.2169197

10226345

24.7

14.24

SUN HUNG KAI PRO

93.85

0.1066667

7842539

124.4

85.45

13.44

0.9009009

5339458

20.15

11.8

SWIRE PACIFIC-A

88.8

1.95178

1852644

102.539

69.321

3508638

127

79.1

700

TENCENT HOLDINGS

237.2

0.1689189

3404837

240.2

139.8

12591310

11.66

6.59

322

TINGYI HLDG CO

21.2

-1.395349

8357627

17.84

198112464

7.55

4.41

151

WANT WANT CHINA

8.95

1.359003

9062950

9.07

6.03

3.921569

81708750

29.85

17.04

WHARF HLDG

44.65

1.132503

4252271

33.15

144

CHINA MERCHANT

25.25

0.7984032

1247051

37.6

941

CHINA MOBILE

86.15

0.3494467

7644938

87.5

68.05

688

CHINA OVERSEAS

16.08

0.5

14264203

17.86

9.99

386

CHINA PETROLEU-H

8.36

1.703163

59451145

9.67

6.22

291

CHINA RES ENTERP

28.1

0.1782531

3079602

35.5

1109

CHINA RES LAND

14.62

1.106501

7614100

15.6

7.28

836

CHINA RES POWER

13.94

-2.653631

6371073

16.2

10.82

1088

CHINA SHENHUA-H

34.25

1.331361

13884856

40.2

27.1

762

CHINA UNICOM HON

13.48

1.812689

20343281

17.68

12.6

267

CITIC PACIFIC

13.02

0.1538462

2506329

23.85

10.26

CLP HLDGS LTD

66.75

0.3759398

1539275

75.2

62.1

883

CNOOC LTD

16.34

1.616915

37866873

20.1

11.2

1199

COSCO PAC LTD

11.12

-0.3584229

4760000

17.16

7.52

330

ESPRIT HLDGS

16.58

-1.191895

4842316

34.2

7.55

101

HANG LUNG PROPER

29.4

0.6849315

3887705

35.3

20.85

105.1

0.4780115

925662

125

84.4

45.3

1858981

54.4

33.2

82.65

2.479851

1565444

82.75

56.8

HANG SENG BK

HENDERSON LAND D

1044

HENGAN INTL

HONG KG CHINA GS

388

HONG KONG EXCHNG

HSBC HLDGS PLC

20.4

0.7407407

4504602

20.65

16.68

129.9

0.2314815

3213822

182.6

99.15

69.2

1.243599

11354193

85.35

Shanghai Shenzhen CSI 300 NAME

INDEX 20995.01 52W (H) 24260.76 (L) 16170.35 MOVERS 39 8 1

IN FOCUS Hang Seng Chinese Enterprises Index 11200 11040 10880 10720 10560

19-Apr-2012

20-Mar-12

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.71

59553641

AIR CHINA LTD-A

6.25

-0.1597444

7971215

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

CHINA UNITED-A

4.26

-0.4672897

43842096

PANGANG GROUP -A

7.71

0.7843137

66149837

CHINA VANKE CO-A

8.59

-0.5787037

34145945

PETROCHINA CO-A

9.87

-0.2022245

10822106

ALUMINUM CORP-A

6.89

-0.2894356

10053031

ANGANG STEEL-A

4.41

-0.6756757

8014768

ANHUI CONCH-A

17.31

0.9329446

46284285

CSR CORP LTD -A

BANK OF BEIJIN-A

9.93

0.1008065

10413887

DAQIN RAILWAY -A

CHINA YANGTZE-A CITIC SECURITI-A

NAME

10400

VOLUME

6.52

7944022

PING AN INSURA-A

41.01

2.550638

56905543

13.29

-0.746826

130055879

POLY REAL ESTA-A

12.21

0.1640689

26168809

4.8

-0.8264463

44727132

QINGHAI SALT-A

33.9

-1.137358

5214734

7.46

33129024

SAIC MOTOR-A

15.29

-1.545396

22169500 28580817

BANK OF CHINA-A

3.05

-0.974026

31379493

DATANG INTL PO-A

5.07

-0.5882353

6743447

SANY HEAVY INDUS

14.49

-0.5490734

BANK OF COMMUN-A

4.82

0.4166667

41313979

DONGFANG ELECT-A

22.29

0.6775068

8635180

SHANDONG GOLD-MI

32.92

4485720

BAOSHAN IRON & S

4.91

0.6147541

30489777

EVERBRIG SEC -A

13.48

-0.2220577

23372871

SHANG PUDONG-A

9.12

48488000 3729995

BBMG CORPORATI-A

8.45

-0.7050529

40349352

GD MIDEA HOLDING

13.44

1.204819

24933229

SHANGHAI ELECT-A

5.53

0.3629764

28.79

-8.165869

19824616

GD POWER DEVEL-A

2.59

51374439

SHANXI LU'AN -A

27.19

-0.9110787

8279206

CHINA CITIC BK-A

4.45

13260173

GF SECURITIES-A

30.8

-2.222222

16324889

SHANXI XISHAN-A

16.72

-1.065089

17481718

CHINA CNR CORP-A

4.35

-0.4576659

46052465

16.36

0.6150062

13739186

CHINA COAL ENE-A

9.2

-0.6479482

8735276

7.46

13049336

BYD CO LTD -A

21.41

-0.9254975

6407791

SHENZ DVLP BK-A

GUIZHOU PANJIA-A

GREE ELECTRIC

30.6

3919041

SHENZEN OVERSE-A

CHINA CONST BA-A

4.72

-0.4219409

27796758

HAITONG SECURI-A

10.09

-2.133851

122435945

CHINA COSCO HO-A

5.23

-0.3809524

10677767

HANGZHOU HIKVI-A

42.7

-1.83908

1036533

CHINA CSSC HOL-A

33.01

-0.960096

5117422

3.07

-0.9677419

17527805

TSINGTAO BREW-A

34.06

-1.532235

2167745

CHINA EAST AIR-A

3.8

0.2638522

13648182

66.66

-2.686131

4479858

WEICHAI POWER-A

31.97

-0.1873244

4434796

CHINA EVERBRIG-A CHINA LIFE INS-A

HEBEI IRON-A HENAN SHUAN-A

SINOVEL WIND-A SUNING APPLIAN-A

16.6

2.028273

3818563

10.85

-1.631913

61914303

2.91

-0.3424658

23333245

HUATAI SECURIT-A

10.11

0.6972112

31952123

WULIANGYE YIBIN

33.97

-0.6725146

23318663

17.67

3.092182

28441335

HUAXIA BANK CO

10.97

-0.2727273

22171620

XIAMEN TUNGSTEN

44.55

0.4962779

11408385

CHINA MERCH BK-A

11.96

-0.4163197

45691192

IND & COMM BK-A

4.35

-0.6849315

29994718

XINJIANG GUANG-A

25.47

-0.3131115

9108791

CHINA MERCHANT-A

13.02

0.462963

34651188

INDUSTRIAL BAN-A

13.57

0.9672619

58824039

YANGQUAN COAL -A

18.86

-0.9453782

10970811

CHINA MERCHANT-A

22.53

0.3563474

6625634

INNER MONG BAO-A

70.03

0.7191141

40621414

YANTAI CHANGYU-A

94.35

-0.2431804

408223

CHINA MINSHENG-A

6.45

0.1552795

74002706

INNER MONG YIL-A

22.09

-3.705318

26239857

YANTAI WANHUA-A

14.51

0.1380262

7596701

6.7

-0.1490313

19568450

INNER MONGOLIA-A

6.15

-2.689873

92090370

YANZHOU COAL-A

23.55

-0.7585335

3976042

CHINA OILFIELD-A

CHINA NATIONAL-A

17.36

1.22449

8843845

JIANGSU HENGRU-A

27.28

-1.445087

2316390

YUNNAN BAIYAO-A

48.8

0.2053388

2226995

CHINA PACIFIC-A

20.98

4.847576

74348456

JIANGSU YANGHE-A

156.01

-1.818754

1429199

ZHONGJIN GOLD

22.68

16242932

7.23

-0.8230453

37060768

JIANGXI COPPER-A

25.35

0.1976285

10610495

ZIJIN MINING-A

4.31

-0.9195402

37243760

9.92

-0.5015045

42392982

16.82

2.623551

32435411

CHINA PETROLEU-A CHINA RAILWAY-A

2.63

25656773

JINDUICHENG -A

14.18

0.8534851

13596175

CHINA RAILWAY-A

4.34

-0.6864989

19353076

JIZHONG ENERGY-A

19.57

0.05112474

6757798

CHINA SHENHUA-A

26.64

0.414625

13051084

KWEICHOW MOUTA-A

CHINA SHIPBUIL-A

6.14

1.655629

32360888

LUZHOU LAOJIAO-A

209.48

-2.048069

2182370

41.01

-1.180723

3669544

CHINA SHIPPING-A

3.21

15698920

METALLURGICAL-A

2.61

-0.7604563

22691322

CHINA SOUTHERN-A

4.67

26515391

NARI TECHNOLOG-A

19.92

-1.434933

9938133

CHINA STATE -A

3.22

0.625

80188139

NINGBO PORT CO-A

2.66

1.526718

50816320

Hang SENG CHINA ENTREPRISE INDEX NAME

NAME

ZOOMLION HEAVY-A ZTE CORP-A

INDEX 2596.056 52W (H) 3334.91 (L) 2254.567 MOVERS 100 173 27

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

CHINA LONGYUAN-H

6.15

-1.6

4652000

PETROCHINA CO-H

11.44

1.238938

37365391

CHINA MERCH BK-H

16.5

0.4872107

16466461

PICC PROPERTY &

9.87

1.752577

21609322

CHINA MINSHENG-H

7.64

-0.6501951

27795044

PING AN INSURA-H

64.15

2.969502

15435868

CHINA NATL BDG-H

10.38

1.964637

43519610

SHANDONG WEIG-H

8.6

3.241297

4086228

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.58

1.129944

107713084

AIR CHINA LTD-H

5.12

0.3921569

16761500

CHINA OILFIELD-H

12.04

2.555366

11956085

SINOPHARM-H

20.7

-0.4807692

779696

ALUMINUM CORP-H

3.78

1.069519

8312988

CHINA PACIFIC-H

26.1

3.777336

13174860

TSINGTAO BREW-H

45.3

-0.8752735

1527553

CHINA PETROLEU-H

8.36

1.703163

59451145

WEICHAI POWER-H

36.95

0.1355014

1244478

5.8

-2.356902

7140270

YANZHOU COAL-H

1.311085

14754243

ANHUI CONCH-H

25.2

1.204819

9869627

BANK OF CHINA-H

3.28

0.9230769

232784852

CHINA RAIL CN-H CHINA RAIL GR-H

BANK OF COMMUN-H

5.98

0.8431703

16209741

3.04

-0.9771987

28587675

ZIJIN MINING-H

3.09

0.9803922

12581645

BYD CO LTD-H

21.8

-4.385965

9088485

CHINA SHENHUA-H

34.25

1.331361

13884856

ZOOMLION HEAVY-H

11.44

-0.3484321

13788709

CHINA CITIC BK-H

4.79

0.4192872

37223356

CHINA TELECOM-H

4.22

1.199041

25486759

ZTE CORP-H

18.98

0.6362672

11929527

CHINA COAL ENE-H

8.81

1.148106

12591310

DONGFENG MOTOR-H

14.94

-0.5326232

10798765

CHINA COM CONS-H

7.72

1.71278

14189238

GUANGZHOU AUTO-H

8.17

1.364764

3619209

CHINA CONST BA-H

6.08

1.672241

198112464

HUANENG POWER-H

4.39

0.6880734

5870000

CHINA COSCO HO-H

4.78

0.2096436

16859000

IND & COMM BK-H

5.26

1.153846

171598289

CHINA LIFE INS-H

21.2

3.921569

81708750

JIANGXI COPPER-H

18.76

7896940

NAME

PRICE DAY %

FTSE TAIWAN 50 INDEX NAME

PRICE DAY %

Volume

ACER INC

35.9 -0.8287293

15101076

ADVANCED SEMICON

Volume

INDEX 11047.43 52W (H) 13721.26 (L) 8058.58 MOVERS 30 9 1

NAME

PRICE DAY %

Volume

FAR EASTERN NEW

33.5

1.669196

2954140

SINOPAC FINANCIA

2.354145

12092502

FAR EASTONE TELE

-1.386749

7012704

SYNNEX TECH INTL

69.6

-2.247191

4829385

17.35

1.461988

17694357

TAIWAN CEMENT

0.5586592

8541001

FORMOSA CHEM & F

84.7

1.194743

3793602

17.35

1.166181

3080400

FORMOSA PETROCHE

0.811124

631646

71.9 -0.4155125

1426602

0.7109005

3174218

TAIWAN GLASS IND

30.85

-1.751592

1785148

99.1

-1.393035

14558454

TAIWAN MOBILE CO

91.1

1.222222

8821664

FIRST FINANCIAL

TAIWAN COOPERATI TAIWAN FERTILIZE

29.35

9272424

FORMOSA PLASTIC

ASIA CEMENT CORP

36.6

2.09205

4850385

FOXCONN TECHNOLO

ASUSTEK COMPUTER

284.5

1.245552

3982435

FUBON FINANCIAL

-1.273885

24924859

TPK HOLDING CO L

417

0.120048

4302251

AU OPTRONICS COR

14.3

1.060071

43987207

HON HAI PRECISIO

105.5

-2.314815

42524965

TSMC

85.8

0.9411765

31478511

UNI-PRESIDENT

42.2

0.9569378

4792429

UNITED MICROELEC

14.5

2.473498

24965202

CATCHER TECH

198.5

-0.75

17320995

HOTAI MOTOR CO

190

1.06383

2110862

CATHAY FINANCIAL

31.2

0.6451613

11342066

HTC CORP

462

-3.75

14295935

CHANG HWA BANK

16.4

0.9230769

6322139

HUA NAN FINANCIA

16.3

1.242236

3995994

WISTRON CORP

42.2

0.3567182

12268908

CHENG SHIN RUBBE

70.5

1.002865

10415060

LARGAN PRECISION

568

1.428571

2211938

YUANTA FINANCIAL

14.3

28463804

CHIMEI INNOLUX C

13.55

0.3703704

22234425

LITE-ON TECHNOLO

34.4

0.2915452

2495204

YULON MOTOR CO

48.85

2.62605

12711981

1.1378

15970826

MEDIATEK INC

276.5 -0.3603604

5545254

CHINA STEEL CORP

28.95

0.6956522

8928011

MEGA FINANCIAL H

1.382488

40097914

CHINATRUST FINAN

18.2

1.675978

30197324

NAN YA PLASTICS

60.7

0.6633499

3064631

CHUNGHWA TELECOM

88.3

-1.340782

28547069

PRESIDENT CHAIN

158

751282

COMPAL ELECTRON

32.8

1.234568

5159750

QUANTA COMPUTER

76.7

1.455026

14661988

3.448276

11125234

SILICONWARE PREC

34.5

-1.146132

8242285

CHINA DEVELOPMEN

DELTA ELECT INC

INDEX 5294.64 52W (H) 6265.48 (L) 4643.05 MOVERS 34 13 3

April 20, 2012 business daily | 13

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

Max 24.00

average 23.53

MeLCO CROWN eNTeRTaINMeNT

Min 23.20

24.0

38.50

14.7

23.8

38.22

14.6

23.6

37.94

14.5

23.4

37.66

14.4

23.2

37.38

14.3

23.0

Last 23.55

Max 37.40

SaNDS CHINa LTD

Max 33.00

average 32.69

MgM CHINa HOLDINgS

average 36.91

Min 36.35

Last 37.40

37.10

SJM HOLDINgS LTD

Min 32.40

Last 32.70

14.2

Last 14.60

17.40

24.29

32.87

17.24

24.15

32.75

17.08

24.02

32.64

16.92

23.88

32.52

16.76

23.74

32.40

23.60

16.60 Max 17.36

average 17.20

Min 16.84

Last 17.34

Max 24.30

average 23.93

Min 23.65

Last 23.65

CURRENCY EXCHANGE RATES PRICE 0.0135

MAJORS

0.0131 0.0127 ASIA PACIFIC

0.0123 0.0119 0.0115

20-Oct-2012

19-Oct-11

MACAU RELATED STOCKS PRICE

DAY % YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

ARISTOCRAT LEISU

3.15

-0.6309148

43.18182

3.25

1.88

3103572

CROWN LTD

8.98

11.00123

9.2

7.45

1706138

AMAX HOLDINGS LT

0.092

4.545455

5.747129

0.147

0.06

62786000

BOC HONG KONG HO

-0.2169197

24.7

14.24

10226345

CENTURY LEGEND

Min 14.20

32.99

Japanese Yen - US dollar exchange rate

CHEUK NANG HLDGS

average 14.38

WyNN MaCaU LTD

IN FOCUS

NAME

Max 14.62

0.26

4.83871

13.04348

0.41

0.204

102000

3.2

0.6289308

14.28572

4.79

2.3

95000 14264203

CROSSES

AUD HKD

DAY %

YTD %

(H) 52W

(L) 52W

AUD

1.0385

0.164

1.724

1.1081

0.9388

GBP

1.6059

0.4692

3.3198

1.6747

1.5235

CHF

0.9141

0.5798

2.6255

0.9596

0.7071

EUR

1.3146

0.5276

1.4274

1.494

1.2624

JPY

81.57

-0.2207

-5.7129

84.18

75.35

MOP

7.9932

0.01

0.0801

8.0449

7.9823

HKD

7.7604

0.0168

0.0902

7.8113

7.7529

CNY

6.3038

-0.0127

-0.1396

6.5391

6.2846

INR

51.855

-0.1446

2.3334

54.305

43.855

THB

30.89

-0.1619

2.1366

31.96

29.63

SGD

1.2506

0.08

3.6782

1.3199

1.1992

TWD

29.499

0.0814

2.6442

30.716

28.48

PHP

42.633

-0.0164

2.8311

44.35

41.879

IDR

9181

-0.0218

-1.2199

9367

8458

AUDJPY

84.707

-0.3825

-7.4079

89.601

72.057

EURCHF

1.20169

0.0574

1.2566

1.29654

1.00749

EURGBP

0.8186

-0.0489

1.8067

0.90835

0.8165

EURCNY

8.2894

-0.304

-1.8723

9.6769

7.9674

EURMOP

10.5076

-0.5015

-1.4808

11.9509

10.1031

EURJPY

107.23

-0.7461

-7.0596

121.84

97.04

1.03

-0.0097

0.0097

1.0311

1.0288

HKDMOP

CHINA OVERSEAS

16.08

0.5

23.8829

17.86

9.99

CHINESE ESTATES

10.96

1.107011

-12.32

14.88

10.2

288144

CHOW TAI FOOK JE

11.86

-0.3361345

-14.79885

15.16

11.66

3081600

EMPEROR ENTERTAI

1.41

0.7142857

27.02703

2.09

0.97

2175000

FUTURE BRIGHT

0.79

2.597403

88.09524

0.81

0.3

4428000

GALAXY ENTERTAIN

23.55

-0.8421053

65.37922

24.35

8.69

16253842

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

HANG SENG BK

105.1

0.4780115

14.05317

125

84.4

925662

DOW JONES INDUS. AVG

13032.75

-0.6312359

6.672286

13297.11

10404.49

HOPEWELL HLDGS

20.8

-0.2398082

4.733129

24.903

18.56

668019

NASDAQ COMPOSITE INDEX

3031.45

-0.3736665

16.36374

3134.17

2298.89

HSBC HLDGS PLC

69.2

1.243599

17.28814

85.35

11354193

HUTCHISON TELE H

3.33

0.3012048

11.37124

3.6

2.13

4696043

4791.01

LUK FOOK HLDGS I

21.8

4.30622

-19.5572

46.15

19.2

4984009

World Stock MarketS - Indices NAME

FTSE 100 INDEX

5782.66

0.6504458

3.775481

6103.73

DAX INDEX

6778.22

0.6861229

14.91722

7600.410156

4965.8

9588.38

-0.8159499

13.40016

10255.15

8135.79

8.08

0.3726708

40.03466

10.76

4.3

7992024

NIKKEI 225

MGM CHINA HOLDIN

14.36

-1.643836

49.70569

17.183

7.6

4817960

HANG SENG INDEX

20995.01

1.031148

13.89045

24260.76953

16170.35

MIDLAND HOLDINGS

4.03

-0.7389163

-0.2475238

5.976

2.95

516020

NEPTUNE GROUP

0.11

1.851852

-0.9009022

0.158

0.08

240000

CSI 300 INDEX

2596.056

-0.1481591

10.67099

3334.912

2254.567

NEW WORLD DEV

9.34

1.082251

49.20127

12.767

6.13

7565941

TAIWAN TAIEX INDEX

7622.69

0.2326101

7.785685

9099.75

6609.11

SANDS CHINA LTD

MELCO INTL DEVEL

32.7

0.770416

48.97494

33.05

14.9

17946516

SHUN HO RESOURCE

1.2

1.32

0.82

SHUN TAK HOLDING

3.23

1.253918

26.21485

4.686

2.241

7532874

SJM HOLDINGS LTD

17.34

2.240566

36.75079

10.22

29109298

SMARTONE TELECOM

16.24

-0.1230012

20.83334

18.5

9.8

2136594

WYNN MACAU LTD

23.65

1.72043

21.28205

27.48

14.807

15313486

ASIA ENTERTAINME

5.96

-1.973684

1.360542

10.8692

4.72

42039

BALLY TECHNOLOGI

47.07

0.3624733

18.98382

47.6

24.74

219760

BOC HONG KONG HO

2.91

21.39226

3.21

1.81

4485

GALAXY ENTERTAIN

3.07

64.17112

3.09

1.08

40235

INTL GAME TECH

16.42

-0.4244997

-4.534888

19.15

13.38

1764616

JONES LANG LASAL

79.81

-1.444801

30.28077

107.84

46.01

224390

LAS VEGAS SANDS

59.63

1.033548

39.55067

62.09

36.08

8406099

MACAU CAPITAL IN

0.11

9.999998

0.11

500

MELCO CROWN-ADR

14.87

3.768318

54.57381

16.15

7.05

9782459

MGM CHINA HOLDIN

1.9

59.43701

2.21314

1.00254

16000

MGM RESORTS INTE

13.75

-0.4344678

31.83125

16.05

7.4

9065694

SHUFFLE MASTER

16.94

0.1182033

44.53925

18.77

7.35

188079

2.19

4.087452

34.35583

2.64

1.28

24668

130.28

4.416126

17.91113

165.4931

101.02

3983206

SJM HOLDINGS LTD WYNN RESORTS LTD

KOSPI INDEX

1999.86

-0.2329723

9.536955

2231.47

1644.11

S&P/ASX 200 INDEX

4362.73

0.3234557

7.547513

4930.6

3765.9

JAKARTA COMPOSITE INDEX

USD

4163.716

-0.06051024

8.940989

4232.923

3217.951

FTSE Bursa Malaysia KLCI

1596.62

-0.1400998

4.304483

1609.33

1310.53

NZX ALL INDEX

785.125

0.04829588

7.580801

814.431

700.441 2695.06

PHILIPPINES ALL SHARE IX

3425.43

-0.2411386

12.49211

3465.89

HSBC Dragon 300 Index Singapor

581.28

0.38

17.12

N/A

STOCK EXCH OF THAI INDEX

1185.34

1.480245

15.60684

1214.31

843.69

HO CHI MINH STOCK INDEX

467.08

-1.075906

32.86304

488.02

332.28

Laos Composite Index

1026.88

1.948871

14.16628

1348.88

876.33

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

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business daily April 20, 2012

Opinion perienced significant economic decline. As a result, Pakistan’s judiciary, media, and many civil-society organizations are now engaged in attempts not only to keep the soldiers in their barracks, but also to constrain the political establishment’s rapacious behavior.

Towards a rule of law

Healing the Sick Man of South Asia

Shahid Javed Burki

Former Finance Minister of Pakistan and Vice President of the World Bank, currently Chairman of the Institute of Public Policy in Lahore

akistan is undergoing three transitions simultaneously. How they unfold matters not only for Pakistan, but also for much of the Muslim world, particularly as the Arab Spring forces change upon governments across the wider Middle East. Most Muslim countries were governed for decades by autocrats who had either emerged directly from the armed forces, or had strong “khaki” support. That was the case in Egypt, Libya, Yemen, Syria, and, of course, Pakistan. The Arab Spring drained away whatever spurious legitimacy that style of governance ever had. But, in Pakistan, delegitimation of military rule had actually occurred three years earlier, and the pressure for change came from much the same source – a restive and mobilized new middle class. Several decades ago, the American political scientist Samuel P. Huntington argued that economic prosperity in developing countries with weak governing institutions would not necessarily lead to political stability.

On the contrary, economic growth in such contexts can be – and often is – politically destabilizing. That proved to be the case in Turkey and Pakistan in the 1990’s and early 2000’s, and later in much of the Arab world. Indeed, the rising aspirations of Arab youth in Egypt and Tunisia, the wellspring of the Arab Spring, followed impressive economic growth that had failed to trickle down. And such rising expectations have been visible in all large Muslim countries.

the Revolutionary Guards control roughly one-third of the economy, was affected when the result of the presidential election in 2009 triggered large anti-government protests in Tehran and other major cities. But demilitarization means more than transferring power and policymaking from the armed forces to elected parliaments. In their recent book Why Nations Fail, the economists Daron Acemog-

Demanding participation As Huntington suggested, when young people see their economies grow, they begin to demand participation in decisions that affect all aspects of their lives, not just their economic well-being. Military-dominated political systems precluded such participation, so, with economic growth, demilitarization of politics became a rallying cry in all large military-led Muslim states, from Indonesia to the Mediterranean coast. Even Iran, where

If Pakistan’s transformation of its political system succeeds, it could serve as a model for other Muslim countries that are attempting to move from extractive to inclusive systems of governance

lu and James Robinson suggest that elections – even those that are free and fair – do not necessarily move societies from what they call “extractive” to “inclusive” systems. Indeed, extraction of a country’s wealth for use by the elite can occur even in democratic societies when those who dominate the political system face no constraints other than periodic elections. This is where the effort to devise institutional mechanisms to check and balance elite behavior enters the picture. Indeed, the search for such mechanisms is precisely what is now underway in Pakistan. In Pakistan, a discredited military was forced by public opinion to withdraw from power, creating political space for elected representatives. They assumed control (though not over the military), but did not govern wisely. While their personal wealth increased, living standards for everyone else either stagnated or, for lower-income groups, declined. So, as Pakistan negotiated its political transition, it ex-

Three cases before the country’s increasingly assertive Supreme Court promise to take Pakistan from the phase of demilitarization to a system in which meaningful checks can be exercised on those who wield power. One case is an attempt to force Prime Minister Yusuf Raza Gilani’s administration to reopen proceedings in a Swiss court that were examining charges of money-laundering and misuse of public funds by President Asif Ali Zardari. The Swiss proceedings were stopped at the request of the Pakistani government when Zardari became president. In the second case, the Supreme Court wants Pakistan’s military intelligence agencies to account for hundreds, if not thousands, of missing people who were detained as part of the agencies’ campaign to contain the rise of Islamic extremism, or to undermine separatist aspirations in restive Baluchistan. The third case opened an old complaint lodged by a politician decades ago against the “troika” – composed of the president, the prime minister, and the chief of army staff – that then governed Pakistan. The plaintiff alleged that large amounts of funds were channeled to the troika’s favored candidates to contest the 1990 general election, in which Nawaz Sharif’s party won a big victory over Benazir Bhutto’s Peoples’ Party. Finally, Pakistan is undergoing a transition in which power is moving from the central administration to sub-national governments. The 18th amendment to the constitution, adopted in 2010, does precisely that, but implementation is being delayed by parties that prefer a highly centralized political structure. If Pakistan’s transformation of its political system succeeds, it could serve as a model for other Muslim countries that are attempting to move from extractive to inclusive systems of governance. Turkey has already traveled some distance along this path. If Pakistan also advances, demilitarization of politics elsewhere in the Islamic world might not be far behind. © Project Syndicate

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April 20, 2012 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Austerity according to St. Augustine Andrés Velasco

Former finance minister of Chile

The Straits Times The Singapore government has tightened the requirements permitting wealthy individuals to invest in exchange for gaining permanent residence more quickly. The Global Investor Programme, managed by the Economic Development Board, is meant for individuals that hold at least S$10 million (63.92 million patacas) worth of assets in Singapore for five years. The programme is blamed for spurring property prices and fuelling voter anger.

Jakarta Globe Singapore government investment company Temasek Holdings (Pte) Ltd. may emerge the biggest winner in the takeover by DBS Group Holdings Ltd. of Bank Danamon Indonesia Tbk PT. Temasek, the parent company of DBS, will sell its 67.4 percent stake in Bank Danamon for 45.2 trillion rupiah (39.4 billion patacas) of new shares in DBS. The transaction will increase Temasek’s stake in DBS, Southeast Asia’s biggest bank by assets, to 40.4 percent from 29.5 percent.

Asahi Shimbu Trading companies Mitsubishi Corp. and Mitsui & Co. Ltd. agreed on Tuesday to import shale gas from the United States. They will jointly import liquefied natural gas from the US as Japan pushes to diversify its sources of energy after last year’s accident at a nuclear power station in Fukushima. Japan’s two largest trading companies said they would each order 4 million tonnes of gas a year from Cameron LNG, a subsidiary of Sempra Energy, beginning as soon as 2016.

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he guardians of austerity in Europe are striking back. Their emerging narrative goes like this: When some economists spoke of panic and confidence crises, they meant their own. Bailout funds and Eurobonds were an invitation to moral hazard. Throwing money at the problem turned out to be unnecessary. Europe’s problem was an oldfashioned one: too much spending. Now that technocrats have replaced populists in the eurozone’s Mediterranean members, sustained fiscal austerity will get us out of trouble. Sounds good, right? If only it were true. To see how misguided this narrative is, imagine Europe today without the big gun of cheap three-year loans from the European Central Bank to the continent’s commercial banks. You do not have to be a dyed-in-the wool Keynesian to conjecture that southern European country risk would remain sky-high, and that talk of default would still be heard everywhere. Such massive central-bank intervention was necessary because a confidence crisis gripped much of the eurozone, with government bonds and banks on the losing end of a slow-motion speculative attack. The relevant logic is at the core of modern macroeconomics – precisely the kind of thinking that European leaders have ignored at their peril. A country with a large public debt (say, more than 50% of GDP) is safe if everyone thinks the debt will be serviced; the interest rate charged on the debt remains

low, and the country can indeed pay it, following a path of virtuous self-fulfilling expectations.

In debt, in doubt But everything changes if markets come to doubt that the debt will be repaid; then the interest rate demanded by investors can rise so high that the country cannot pay. Default follows, owing to a vicious self-fulfilling panic. If a country’s bond market is about to move from virtuous to vicious dynamics, there

is only one solution. Fans of firearms refer to it as the big bazooka; followers of Colin Powell advocate deploying overwhelming force; pyrophobes call it a firewall; sailors like to tie themselves to the mast. But, ultimately, it comes down to the same thing: having enough money at hand that no one can doubt, not even for a second, that the debt will be repaid. If European leaders had deployed a rescue fund endowed with overwhelming financial force in early 2010, Europe and the world would have been spared two years of agony. In the end, it was the ECB that stepped into the breach, drowning eurozone banks with liquidity to make sure that they purchased every government bond that moved – and then some. So the speculative attacks were stopped, at least temporarily (though interest-rate spreads in Spain and elsewhere have begun to creep up again). That was the first task. But there remains a second one, and here the guardians of austerity are getting it wrong again.

Virtue, but not too fast

A fiscal compact like the one approved recently is useful to anchor expectations of future adjustment, but only if the new system is flexible enough to be politically credible

With a small public debt, a country cannot be the victim of a debt run. This is where Greece, Portugal, Italy, and Belgium differ from Canada, Norway, Singapore, and Chile. In the past, some European countries spent too much and taxed too little, and are paying for it today. To prevent a repeat of the last two years, they must reduce their public debt dramatically.

The question is how. In Greece, debt forgiveness was the only answer. Some has been accomplished; more will be necessary down the road. For the rest of Europe, massive upfront austerity of the kind advocated by German Chancellor Angela Merkel – and supported by the prevailing German orthodoxy – will not do the trick. Spain is a case in point. Spending has been cut and taxes raised. A new conservative government has reaffirmed Spain’s commitment to austerity. Yet deficit targets continue to be missed. The fiscal gap was a whopping 8.5% of GDP in 2011, and, after much haggling with Brussels, the target has been reset at 5.3 percent of GDP for this year. With output flat or falling, the debt-toGDP ratio will keep rising. The key to the solution lies in St. Augustine’s plea: “Grant me chastity and continence, but not yet.” A fiscal compact like the one approved recently is useful to anchor expectations of future adjustment, but only if the new system is flexible enough to be politically credible. Up-front gradualism must be the name of the game. And adjustment must be wedded to a growth strategy. Revenue will grow consistently only if the tax base – that is, the economy – grows. And that growth requires higher public investment in infrastructure and human capital. The guardians of orthodoxy are not about to put forward such a growth strategy. Will anyone else? © Project Syndicate

16 |

business daily April 20, 2012

CLOSING Nokia promises more cuts after Q1 loss

Sony-EMI deal set to get nod from EU

Struggling Finnish cellphone maker Nokia promised more, substantial cost cuts and said its sales chief was leaving after reporting a slightly bigger than expected first-quarter loss. Nokia, which has switched to Microsoft’s Windows operating system but is still struggling to compete with smartphone rivals Apple and Samsung Electronics, said yesterday it would announce details of the extra cost cuts soon. The company reported a loss of 0.08 euros per share for the quarter. Chief executive Stephen Elop said sales results of new Lumia phones have been mixed.

A Sony-led consortium won EU approval yesterday to buy EMI’s music publishing business for US$2.2 billion, on the condition that it sell the worldwide publishing rights of artists including Robbie Williams and Lenny Krativz. Sony, with Blackstone Group, Abu Dhabi’s Mubadala Development Co., Raine Group and music and film mogul David Geffen, won the bidding for EMI Publishing last year in a deal that will put Sony top in global music publishing. The catalogues are likely to be auctioned off in the coming months, sources close to the negotiations said.

Lagarde sees deal in making on IMF funding

Asia to weather global storms: IMF

‘We expect our firepower to be significantly increased as an outcome of this meeting’: IMF chief

IMF director said she expects more contributions after landing pledges of about US$320 billion in her campaign for bigger reserves Lesley Wroughton

nternational Monetary Fund chief Christine Lagarde said yesterday she expects to win a big boost in funding to help the lender safeguard countries from the euro zone debt crisis now that Europe had taken significant steps on its own. Calling the euro zone the “epicenter of potential risk” for a world economic recovery that is “timid and fragile,” Lagarde also urged European Union policymakers to directly inject some of their bailout funds into troubled

EU banks. “We expect our firepower to be significantly increased as an outcome of this meeting,” she said at a news conference to kick off the spring meetings of the IMF and World Bank. The IMF wants to secure at least US$400 billion in new funding, which would double its firepower to deal with the euro zone debt crisis and any spillover to other countries. So far, it has raised US$320 billion - all from Europeans

and Japan. It wants additional contributions from the leading emerging economies, which are resisting until they get some further assurance they will get a larger say in running the international lender. A larger IMF war chest to safeguard countries outside of Europe that might run into trouble if the euro zone’s troubles widened could help ease concerns in financial markets over the risk of global contagion. Finance ministers from the

France, Spain clear bond auction hurdle There was relief at the result of Spain’s bond auction in which there was strong demand, even though some borrowing costs rose Paul Day and Alexandria Sage

rance and Spain sold all the bonds they wanted at auction yesterday, though for Spain the cost was rising yields, indicating growing concerns the government will not be able to tame its deficit. After a brief respite fuelled by a trillion euros of cash the European Central Bank (ECB) lent Europe’s banks in December and February, markets are becoming nervous again about euro zone debt loads, with fears that Spain might follow Greece, Ireland and Portugal in needing a bailout from international lenders.

That has put pressure on bond yields in the region, notably for Spain and Italy. The Spanish treasury said it sold 2.5 billion euros (US$3.3 billion) of two bonds, taking its issuance to half its gross target for the year. It received bids for 3.3 times the offer on the shorter of the two bonds, and 2.4 times the longer, both up on previous auctions, suggesting Spanish banks were making the most of the ECB’s bounty. France shifted 7.97 billion euros of medium and long-term bonds, with

BRICS group of leading emerging market nations - Brazil, Russia, India, China and South Africa were scheduled to gather in Washington later yesterday, and the prospect of further IMF financing was certain to be discussed. China, Brazil and Russia have said they are willing to chip in but they want to get more voting power at the IMF in return. When Japanese Finance Minister Jun Azumi said on Tuesday that Japan would

investors bidding for nearly three times the amount on offer, despite jitters on the secondary market before a presidential election that polls suggest will be won by Socialist Francois Hollande in the second round on May 6. Spain, which has seen debt costs jump since early March, when Prime Minister Mariano Rajoy abandoned the deficit target previously agreed with its European partners, sold 1.1 billion euros of a bond maturing October 31, 2014, at an average yield of 3.463 percent. It also tested market appetite for a longer-term benchmark bond, due January 31, 2022, selling 1.4 billion euros at a yield of 5.743 percent, up from 5.403 percent at the last primary auction in January. Yields on the 10-year bond also rose after the auction, suggesting investors remain concerned about the country’s long-term fiscal sustainability. “A reasonable set of results, which will go some way to allaying fears the

contribute US$60 billion in loans, he said there was no gap between China and Japan on IMF funding. The Group of Seven developed nations were set to talk about bulking up the IMF’s resources at an informal meeting later yesterday, and the topic was set to be taken up by the Group of 20 developed and developing nations at a dinner and again at a meeting today. “Ensuring that the fund has sufficient resources to tackle rises and to promote global economic stability is in the interests of all our members,” Lagarde said as she announced the latest in funding commitments. In addition to bulking up its own bailout funds, the euro zone has said it would provide about US$200 billion to the IMF. Sweden said it would commit US$10 billion and increase the amount to US$14.7 billion later, while Denmark said it would give US$7 billion. Norway pledged about US$9.3 billion. While Europe won some praise from Lagarde yesterday, she said the region should enable its bailout fund to inject capital directly into banks. “The European Stability Mechanism and European Financial Stability Facility could actually help in terms of recapitalization anywhere in the euro zone,” she said. “What we are advocating is that this be done without channeling through the sovereigns.” Reuters

domestic bid for Spanish bonds has dried up. That said, as evidenced by the accepted yield on the 10-year, this support does come at a price,” rate strategist at Rabobank Richard McGuire said. Reuters