Macau Business Daily, April 26, 2012

Foundation to nurse city’s unique nature

Population policy will boost competitiveness

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Visitor arrivals rise 7.9pct in Q1 Page 7

Year I | Number 19 | April 26, 2012 Editor-in-chief | Tiago Azevedo Deputy editor-in-chief | José I. Duarte MOP $ 6.00

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CASINO ENTRY AGE CURBS EXPECTED BY SUMMER A

new law banning under-21s and gamblers with exclusion orders from entering Macau’s casinos could be in force as soon as July 2. The statute imposes fines of up to 500,000 patacas on gaming concessionaires that do let them in. Ignorance or negligence will not be accepted as excuses, says the draft law.

The government sent

the latest version to a committee of the Legislative Assembly on Monday. The initial document was approved in June last year.

The changes come after a 16-year-old was admitted into a casino to gamble last year. The teenager was abducted by loan sharks after failing to pay back about HK$100,000 lost at the table.

Under-21s will also in

future be barred from working in casinos, although the government says only a small fraction of the current casino workforce are in the 18-20 age group.

The authorities want to encourage senior high school students to continue their education and skills training beyond 18 rather than thinking of casino dealing jobs as a fall back option. Administration of

the new law will include a transitional phase allowing current casino workers under 21 to keep their jobs.

Changes to Macau’s voluntary casino ban system are also being proposed. Self-excluded persons would be able to renew their ban at any time during its two-year lifetime – in person or at the request of relatives.

Brought to you by

HANG SENG INDEX 20800

MORE ON Page 3

Ao case implicates China state manager

Life no gas for Sinosky Energy

A manager from one of China’s state-owned companies has been named a defendant in a separate case during corruption hearings against Macau’s ex-secretary for Transport and Public Works Ao Man

A flawed contract for Macau’s natural gas supply means the delivery company is paying China more for the fuel than it gets for selling it. Sinosky Energy blames its latest losses on a disparity between import and selling prices caused by a fast-appreciating yuan. Under the present arrangement currency fluctuations are only reviewed every three years.

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Long. The revelation was made yesterday during Mr Ao’s third and final trial for passive corruption and money laundering, being heard in the Court of Final Appeal.

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www.macaubusinessdaily.com

20750

20700

20650

20600

20550

April 25

HSI - Movers Name

Govt cops blame for prison hold up

%Day

CHINA RES LAND

4.26

CHINA OVERSEAS

2.41

WANT WANT CHINA

1.28

CNOOC LTD

1.13

LI & FUNG LTD

1.10

CHINA LIFE INS-H

-1.20

TINGYI HLDG CO

-1.44

HONG KONG EXCHNG

-0.17

BANK EAST ASIA

-1.89

TENCENT HOLDINGS

-4.69

Source: Bloomberg

Brought to you by The government allowed Macau’s current overcrowded prison to be refurbished for 32.2 million patacas without a public tender – while the planned new prison faced sixmonth construction delays because of labour short-

ages. The contractor hired to build the new prison in Ká-Hó, Coloane, has been warned it must cover any additional costs due to the hold ups, including the wages of construction workers.

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business daily April 26, 2012

MACAU

SOE executive dragged into Ao-related fraud case A third defendant, Chan Ying Lun, was named in a case related to the expanding Ao Man Long corruption scandal Vítor Quintã

vitorquinta@macaubusinessdaily.com

A Hong Kong-based executive from a subsidiary of China State Construction Engineering Corp. was named as defendant in a case related to Ao’s trial

A

n executive from a stateowned enterprise (SOE) has been named a defendant in a case related to the latest corruption trial of former secretary for Transport and Public Works Ao Man Long.

The revelation was made yesterday during Mr Ao’s third trial for passive corruption and money laundering, being heard in the Court of Final Appeal.

Chan Ying Lun, the deputy general manager of China Overseas Civil Engineering Ltd. in 2000, was named a witness yesterday.

But the Public Prosecutor’s Office waived Mr Chan’s testimony, saying he always had the right to refuse to testify “as a defendant in a case related to the facts being argued in this trial”.

Mr Chan is most likely linked to the contracts for the wastewater treatment plants at Coloane and the Zhuhai-Macau Cross-Border Industrial Park.

Four contracts worth 90.5 million patacas (US$11.3 million) were won by a consortium of ATAL Engineering Ltd., Belgian company Waterleau Global Water Technology NV and China State Construction Engineering (Hong Kong) Ltd. Both China State Construction Engineering (Hong Kong) Ltd. and China Overseas Civil Engineering Ltd. are subsidiaries of state-owned contractor China State Construction Engineering Corp., the world’s third-largest contractor.

Business Daily asked for a response from both companies but had

received no reply by press time.

In December 2006, just days after Mr Ao was arrested, the head of the Central Government Liaison Office in Macau, Bai Zhijian, said any mainland companies involved in the case would be punished.

Mr Chan is the third person to be named defendant in a case related to the current Ao trial. The first two were high-profile Hong Kong businessmen: the chief executive officer of Hong Kong developer Chinese Estates, Joseph Lau Luen Hung, and entertainment tycoon Steven Lo Kit-Sing.

Money trail The Public Prosecutor’s Office claims the consortium led by Waterleau only got the contracts because it bribed Ao.

The consortium won the tender to build the Zhuhai-Macau CrossBorder Industrial Park in 2005.

The 90.5-million-pataca contract rose a further 15.5 million patacas due to additional work that was granted without a tender.

The indictment says Waterleau’s bid was ranked third among the five bids but the company still got the contract owing to Ao’s intervention.

In return, Best Choice, an offshore company controlled by Ao and Pedro Chiang – who was found guilty of corruption in another related case and is at large – allegedly got 20 percent of the shares of Waterleau’s operation in the city, Waterleau Macau Limitada.

The same consortium won the 29.4-million-pataca contract for the second phase of wastewater treatment plant, with Ao writing in

Illustration by Rui Rasquinho

one of his notebooks that he would get “three percent of the contract value, or 20 percent of the gross profit,” the Public Prosecutor’s Office says.

The financial director of China Construction & Engineering (Macau), Li Shizhong, confirmed in court yesterday that the company paid 784,348 patacas to Waterleau Asia Ltd. for “consultancy services”.

This amount was eventually exchanged into euros, a move that was not at all unusual, Mr Li said. “It depends on the other party’s demands.”

The money ended up in Ecoline, an offshore company controlled by Ao, the indictment says.

Further, the Waterleau consortium won the 8.6-million-pataca tender to operate the Coloane wastewater treatment plant in December 2005.

Five months later, it pocketed a much bigger contract to build the second phase of the plant, worth 247 million patacas.

According to the indictment, Waterleau chief executive officer Luc Vriens sent a letter to China State Construction Engineering (Hong Kong), saying the company should pay 3.9 million patacas to Best Choice.

Mr Li said he refused to carry out the transaction because there was no contract justifying the payment.

In the end, the exact same amount was allegedly paid to a subcontractor. Asked if he had not found the coincidence suspicious, Mr Li said similar events “happened very often in the construction business”.

April 26, 2012 business daily | 3

MACAU

Casinos on the hook for problem gamblers New version of draft law would penalise casinos for allowing gamblers with bans into their premises – even if by negligence Vítor Quintã vitorquinta@macaubusinessdaily.com

G

aming concessionaires could face fines of up to 500,000 patacas (US$62,600) if found negligent in preventing their staff, and gamblers aged under 21 or with an exclusion order from betting in their casinos.

The government has sent the latest version of a draft law that seeks to restrict access to and employment in gaming areas to the first standing committee of the Legislative Assembly on Monday.

The initial draft was approved in June last year. It included fines from 10,000 to 500,000 patacas for the six gaming concessionaires and sub-concessionaires.

The newest version makes it explicit that the penalties for allowing nonauthorised gamblers to gamble may be enforced even if it happens “merely due to negligence”.

In addition, a fine from 10,000 to 500,000 patacas can be imposed if concessionaires allow their workers to gamble in their casinos.

The changes come after a 16-yearold was admitted into a casino to gamble last year. The teenager was abducted by loan sharks after failing to pay back about HK$100,000 lost

at the table.

In the past 12 months, both lawmakers and the Youth Affairs Committee said casino workers should be banned from gambling altogether because they are more likely to become problem gamblers.

Renewable ban Changes to the voluntary casino ban are also being proposed. The revision would see any person able to renew their ban from entering a casino at anytime during a two-year period by submitting a request or accepting one put forward by relatives.

The second draft version says the ban can cover all casinos or specific venues.

More importantly, the gambler would be able to renew the ban after the two-year period has passed.

But the proposed changes still do not go as far as legislators had wanted.

Last July, the members of the assembly’s first standing committee warned that any casino ban relying on the gambler’s consent would risk becoming ineffective. At the time, the government promised to study

Applicants for voluntary exclusion from the city’s casinos will be able to renew their ban after a two-year period, a new version of a draft law says

the committee suggestions.

Staff in charge of supervising entry to gaming areas would have the power to ask for customers’ identification to check whether they are below 21 years. If the customers refuse to cooperate, they can be denied entry, according to the new draft.

Legislators had asked for this measure to be introduced, stressing that it was routinely applied overseas.

In Singapore, for instance, anyone

entering a casino must show identification at the entrance of the city’s two casinos. There is also a S$100 (667 patacas) daily entry fee for residents.

No date has been set for the assembly’s next meeting, in which the first standing committee of the Legislative Assembly is to discuss the new draft version.

The law could be introduced as soon as July 2, if it is approved.

New foundation to nurse city’s unique nature Legal stalwart Rui Cunha launches 50 million-pataca fund to promote the study of the city’s special legal system and the arts

N

oted lawyer Rui Cunha announced yesterday he would create a non-profit foundation in his own name “to contribute to the development of the identity of (Macau’s) separate and autonomous legal system and of the people of Macau and their unique culture”.

The lawyer came to Macau 31 years ago to work for Sociedade de Turismo e Diversões de Macau SA, a Stanley Ho Hung Sun-founded company that was the sole licensee for casinos in Macau until a little over a decade ago.

Mr Cunha has been a long-time associate and friend of Mr Ho and his name is closely associated with the development of the company and the gaming sector.

“The time has come to fulfil my duty,” he said. “I have been very fortunate. It is time to give back.”

Independent organisation The initial endowment of the Rui Cunha Foundation is set at 50 million patacas (US$6.3 million).

Mr Cunha has put forward the first endowment. Additional monthly contributions are likely.

The institution will operate from an office paid for by Mr Cunha, adjacent to, but separate from, the office of his legal practice.

In making yesterday’s announcement, he stressed the independence of the new organisation and said

it would not be looking for outside sources of finance.

According to Mr Cunha, the city’s current economic development has brought many improvements to the lives of residents but also new challenges to its unique cultural traits that risk being diluted.

His primary concern is protecting the coherence of the legal system, which he sees as the “cornerstone of Macau’s singularity”. That system “is being subject to some erosion”, he said, and the problem must be confronted urgently.

The cornerstone of the new foundation’s activities will be the Centre for the Reflection, Study and Dissemination of Macau Law. It will be open to the public and will promote easy access to legal documentary sources. It will endeavour to carry on research and support legal and educational agents undertaking studies on legal topics.

The foundation will also operate an art gallery to promote young artists across all the arts. The foundation is currently discussing ways of supporting the development of activities in music and training for young musicians.

The Rui Cunha Foundation will be formally launched on Saturday.

The launch ceremony is scheduled to start at 11.30 am.

The gallery will also open that day, with an exhibition by the Macau artist Wong Soi Lon.

Preserving and promoting the city’s unique legal system will be the primary focus of the Rui Cunha Foundation, to be launched on Saturday

Photo by Manuel Cardoso

José I. Duarte jid@macaubusinessdaily.com

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business daily April 26, 2012

macau

Contractor to bear InBrief prison delay costs Public works bureau also asks Zhen Hwa Construction to complete the project in two years Kristy Chan kristyc@macaubusinessdaily.com

April casino revenue below expectations The growth of Macau’s gaming revenue this month will likely be below market expectations, a Wells Fargo analyst said. Gross casino revenue may be up by 22 percent year-on-year this month to hit 25 billion patacas (US$3.1 billion), Wells Fargo analyst Cameron McKnight wrote in a note to investors yesterday. Consensus estimates expect April’s growth rate to stand at 25 percent. On Tuesday the company increased its 2012 Macau revenue growth forecast from 11 percent to 18 percent, due to a “much stronger-than-expected mass market growth” and “slightly stronger-than-expected VIP volume growth” in the first quarter.

Deal with financial diversity: expert Macau will attempt to diversify its economy from gaming only when competition increases and casinos are not as profitable as they are now, Portuguese news agency Lusa quoted visiting scholar Greg Richards as saying on Tuesday. The leisure studies expert at Tilburg University in the Netherlands said that “when they [Macau people] feel that need, it might be too late”. “Facing such an acute monoculture, Macau can not afford to have the casino model fail.” He added: “It’s important to give people alternatives because not all want to end up working as dealers”.

Selective pricing in supermarkets

T

he contractor hired to build the new prison in Ká-Hó, Coloane, will be responsible for any cost overruns caused by the delay, including the wage bill for construction workers, the government says.

The Land, Public Works and Transport Bureau confirmed to Business Daily that construction had been delayed by six months.

The bureau has said it will demand that Zhen Hwa Harbour Construction Co. Ltd. gets the second phase up and running this year and that it completes all construction in two years.

The contractor declined to answer Business Daily’s queries on the project, saying the issue “should be treated as confidential” and details could only be revealed with the permission from authorities.

Construction work was launched in August 2010 and is divided into four phases.

The first phase, which should have been completed last year,

is foundation work and costs about 113 million patacas (US$14.1 million).

It has been delayed for technical reasons such as the geological characteristics of the Ká Hó hill and heavy rain, apart from a lack of human resources.

The second phase of the construction was originally scheduled for the second quarter of last year but will now begin later this year.

Despite the delay, authorities believe the new prison will still open by the end of 2014, with a capacity for 2,700 inmates, including 2,300 men and 400 women.

Female section The present jail, located in Coloane village, was designed to hold 1,297 inmates and is close to capacity. At the end of last year, it housed 1,030 inmates, up by 101 from 2010.

The increase has led authorities to

Construction work was launched in August 2010

expand the female section with 100 more beds. It is 83 percent full.

The 32.2-million-pataca project was scheduled to begin last November but was only granted to Construtor Civil Lei Ka Chi last month, without a public tender.

In an inquiry sent to the government earlier this month, legislator Paul Chan Wai Chi said the delay meant that expansion works would likely be completed just months before the new prison.

The New Macau Association politician also slammed the government for allowing the expansion budget to soar from 24.8 million patacas last November to 32.2 million patacas last month.

He said each of the new beds in the female section would cost an average of 300,000 patacas.

Zhen Hwa Harbour Construct, a company co-owned by gaming operator Sociedade de Jogos de Macau S.A. and state-controlled company China Harbour Engineering Co. Ltd., has also won the contract for the expansion of the new Taipa Ferry Terminal.

The budget for that project was initially set at 1.58 billion patacas but eventually raised to 2.6 billion patacas.

The construction works were frozen last July when security forces discovered 35 illegal workers at the site.

Authorities also seized three boats that had entered Macau illegally and were allegedly used to transport the workers. Three boat owners and three subcontractors were questioned.

Population policy will boost competitiveness Education, ageing and immigration are keys to the city’s future, says director of government think-tank Cláudia Aranda

claudia.aranda@macaubusinessdaily.com

Price differences of up to 20 percent were found in the same products in shops in the same chain, according to a survey by the Consumer Council. San Miu was found to be the biggest offender, with differing prices for over 100 products.

Competitor ParknShop was also found to have selective pricing.

Prices of products overall have risen in recent months, notably the prices of dairy products and cooking oil.

Prices for cheese and butter rose by up to 3 percent in April. Rice was one of the few products registering little change in price.

M

acau’s people, their skills and development have been isolated as factors crucial to increasing the city’s competitiveness and momentum.

The director of the Policy Review Office, Lao Pun Lap, says at the core of handling each factor is a review of the city’s demographic policy.

The government think-tank is conducting a study on demographic policies, together with other public services and academic institutions.

A public consultation on proposals with regard to the city’s demographic policy is expected by the end of the year.

Population is a key to economic and social development in the long term.

“The qualities of human resources

influence the competitiveness and is interconnected with long-term development”, Mr Lao said at a press conference yesterday.

Whether Macau achieves those goals would depend on human resources and how the city’s demographic structure evolves.

One of the study’s main themes is that Macau’s demographic structure is characterised by an ageing society, stable employment, insufficient manpower and by population changes mainly related to immigration and imported labour.

Despite minor improvements in the education system, it is essential to further increase the capacity of the working population to meet longterm development needs.

Macau’s demographic policy will focus on human resources, population ageing and trends in population size, including “talent creation, strategic import of talent and optimising the management of non-resident workers”.

Mr Lao emphasised the need to import manpower for the development of the economy.

Imported labour was “an important source of human resources to alleviate the shortage of local labour and to contribute to the rise in the number of the population”, he said.

Policy Review Office researcher Tong Kai Chung said: “The government has always given priority to the local workers ... non-residents workers are an additional measure.”

April 26, 2012 business daily | 5

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business daily April 26, 2012

macau

Gas supplier takes another beating Sinosky Energy blames latest loss on disparity between import and selling prices caused by an appreciating yuan Tony Lai

tony.lai@macaubusinessdaily.com

Sinosky Energy says it is paying more for its gas than it got for selling it

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atural gas supplier Sinosky Energy (Holdings) Co. Ltd. recorded a loss of 43.5 million patacas last year, bringing the company’s accumulated losses to 92.5 million patacas over the last five years.

The company’s annual report blames the latest loss on the increases in the yuan exchange rate.

The rise in the exchange rate pushed up the price of imported natural gas, which exceeded the selling price in the contract signed with the Macau government.

The report highlights that the situation is dragging down the company’s business.

The report was published in the Official Gazette yesterday.

China Petroleum & Chemical Corp and Macau Natural Gas Co. Ltd. are equal co-owners of Sinosky.

The government awarded a 15year contract to Sinosky in 2006 to build a liquefied natural gas terminal and to supply natural gas to Macau — most is shipped to electricity provider Companhia de Electricidade de Macau Sarl.

The contract allows the company to import gas from the mainland at 2.35 yuan (2.99 patacas) a cubic metre, while the selling price is set at 2.70 patacas.

The contract says the gate price of the gas must be as close as possible to the cost, and it must be reviewed and adjusted every three years.

The importer is in talks with the government to revise the contract price and terms, the report says.

The chairman and executive director of Sinosky Energy, Michael Tong Seak Kan, told Business Daily earlier this month that his company

was paying more for its gas than it got for selling it.

Mr Tong said his company would continue to supply natural gas while it waits for the government’s answer. It said legal action was the

MOP43.5M Sinosky Energy loss last year

company’s last resort.

“We want to have peace. We don’t want to go into court with the government,” he told Business Daily.

The annual report said the company could supply gas for just 130 days last year. At around 73.6 million cubic metres last year, it came to an accumulated volume of 400 million cubic metres since it started its operation. Census Bureau data shows that the most gas Sinosky Energy has imported in one year was 154,514 cubic metres, imported in 2010.

According to the contract, the company is supposed to handle at least 520 million cubic metres of gas a year.

Excessive demand to meet construction on Hengqin Island had often forced the company to cut supply, the report said.

Weather Beijing 24/14o C Changchun 14/4o C

Harbin 13/4o C

Xian 24/9o C Shanghai 24/14o C Chengdu 29/17o C Kunming 25/15o C Haikou 30/23o C Sanya 31/24o C

Guangzhou 28/24o C

MACAU (23-28 April) Day

Temperature

Humidity

04/23

22/26o C

75/95 %

04/24

23/27o C

80/95 %

04/25

21/25o C

85/95 %

04/26

20/27o C

70/95 %

04/27

21/27o C

65/90 %

04/28

21/26o C

80/95 %

Shenzhen 26/20o C

ASIA (today)

Hong Kong 24/14o C

Manila

Macau 28/20o C

TOKYO

Jacarta

34/27 C

34/25o C

18/13o C

34/25o C

Bangkok

SEOUL

K. lumpur

o

36/26 C o

SINGAPORE

19/7o C

34/25o C

taipei

23/19o C

April 26, 2012 business daily | 7

MACAU

Visitor arrivals rise 7.9pct in Q1 About 2.3 million tourists welcomed in March alone Terina Cao

tting@macaubusinessdaily.com

V

isitor arrivals reached 6.9 million in the first quarter of the year, a 7.9 percent increase on the same time a year ago, according to data released yesterday by the city’s Statistics and Census Service.

Arrivals in March alone reached 2.3 million, an increase of 7.3 percent from March last year.

The majority of visitors in the first three months came from Asian countries.

Visitors from the mainland reached 4.2 million and, while the number from Vietnam is still growing, it is still the smallest contributor from all Asia-Pacific arrivals at 3,082 tourists.

More than 125,000 Korean tourists came to Macau in the three months ended March 31, up 18 percent.

Visitors from the Philippines also increased 15.7 percent.

However, visitors from some of Macau’s most important source markets declined.

Tourist arrivals from Hong Kong, Singapore and Taiwan fell.

Singapore registered the biggest drop – 14.4 percent – with just 48,983 tourists entering Macau.

In the January-March period, single-day visitors accounted for

The majority of visitors in the first three months came from Asian countries

54.5 percent of all arrivals.

Last week, data from the statistics bureau revealed that inflation had hit hard a standard basket of goods and services bought by tourists, with the Tourist Price Index up 10.15 percent year-on-year.

Corporate

Ice age returns to Venetian

T

he Venetian Macao will transform its CotaiExpo Hall F into the coolest place in town — literally.

Riding on last year’s success, the hotel-casino has announced the return of Ice World next month created by artisans from Heilongjiang Provincial Ice and Snow Art Development Co. Ltd. Ice World opens its doors to the public on May 19 and runs until to September 16.

Last year, the 11.2-million-pataca (US$1.4 million) investment featured ice sculptures ranging from a seven-metre-high piece representing an Ice Age fantasy world and iconic landmarks from the mainland, Macau, India, Europe and America.

The exhibition will also showcase the winning pieces of Ice World Macau’s Best, a competition in creativity for the wider community hosted by The Venetian Macao.

Melco plans to go extra mile

M

elco International Development Ltd. will “go the extra mile in 2012 and beyond” in meeting its corporate social responsibility goals, chairman and chief executive Lawrence Ho Yau Lung says.

Through a combination of more than 40 projects last year, Melco reached out to almost 24,000 people with activities that lasted up to 10 months, the company said in its annual report.

In addition, a 90 percent increase was recorded in Melco’s volunteer hours due to the Friends of Melco Volunteers programme, which brings friends and family of company workers into company efforts.

Melco plans to focus on youth development this year, particularly unschooled and jobless youths. The company says these “double loss” youths are more susceptible to abusing substances.

The average Tourist Price Index for the 12 months up to the end of March had increased by 14.24 percent from the preceding 12-month period.

Inflated prices for hotel rooms and higher prices at restaurants during

Chinese New Year were partially to blame for the increase in the index, the Statistics and Census Service said. The price index for restaurants soared by 18.6 percent year-onyear, while accommodation prices posted an increase of 9.2 percent.

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business daily April 26, 2012

GREATER CHINA

Baidu slides on revenue forecast Shares in Chinese biggest search engine fell more than 10 percent in after hours trading as it issued weaker-than-expected revenue forecast Melanie Lee and Alexei Oreskovic

with the Chinese government over Internet censorship.

Business woes

Baidu’s second-quarter revenue forecast was at the low end of expectations

B

aidu Inc, China’s leading Internet search company, set off alarm bells on Wall Street after a disappointing second-quarter revenue forecast raised doubts on its growth prospects and knocked down its shares more than 10 percent after hours.

The tepid outlook from Baidu, which had consistently blown past investors’ expectations thus far, brought up questions on whether emerging competition from the likes of Alibaba Group would wear it down and if it could make a success of recent moves

into other lucrative Internet sectors such as ecommerce.

Baidu posted on Tuesday first-quarter results that were in line with analysts’ estimates. But the second-quarter revenue forecast was at the low end of expectations, with the midpoint of the range at US$857.1 million against the US$862.8 million seen by analysts polled by Thomson Reuters I/B/E/S. “At the end of the day, people expect these companies to beat numbers.

They have a track record of usually beating,” said Raymond James analyst Aaron Kessler.

On a quarter-on-quarter basis, the revenue forecast showed 25-28 percent growth.

“Baidu has never done anything below 35 percent sequential growth in the second quarter, so to guide in the high-twenties is certainly a significant revenue deceleration,” said Hong Kong-based Nomura analyst Jin Yoon.

Baidu’s already dominant position in China’s Internet search market was cemented further when Google Inc decided in 2010 to relocate its search engine to Hong Kong after a standoff

Although Baidu is not in danger of losing its pole position in the Chinese search market, it has to contend with other strong rivals such as Alibaba Group and Sohu.com Inc’s Sogou search engine that are growing rapidly and battling with Baidu for online advertising dollars.

In the first quarter, Baidu had 30.9 percent of the online advertising market while Alibaba had 17.9 percent. In just the search market, Baidu had 78.5 percent of the market while Google had 16.6 percent, according to data from technology consultancy Analysys International.

Baidu’s phenomenal lead in search glosses over a deeper issue - its difficulties in expanding outside its core business that could bode ill for future growth.

Last week, Japanese online retailer Rakuten Inc said it would close the Internet shopping website it operates in China with Baidu due to sluggish sales.

That comes after Baidu shut down and spun off its loss-making ecommerce platform Youa with the aid of venture capital funding late last year.

Baidu shares fell more than 10 percent in after-hours trading to US$121.50 from a close of US$135.83 on the Nasdaq. The shares, a favourite of long-only funds and hedge funds, have gained 16.6 percent since the start of the year.

Reuters

April 26, 2012 business daily | 9

GREATER CHINA

HK regulator looking at criminal InBrief Mainland stocks gain liability for IPO sponsors‎ on Wen’s pledge

China’s stocks rose for the third time in four days after Premier Wen Jiabao pledged to maintain steady economic growth. China Vanke Co. and Poly Real Estate Co. led gains for real estate companies after the China Securities Journal reported investment funds bought more shares of developers in the first quarter. “The government has the tools to stem a decline in economic growth and they will act when the situation worsens,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. The Shanghai Composite Index rose 18 points, or 0.8 percent, to 2,406.81 at the close. The CSI 300 Index added 0.8 percent to 2,625.99.

Cnooc said to plan bond sale Cnooc Ltd., China’s biggest offshore oil and gas explorer, plans to issue its first bonds since January 2011, with a sale of 10- and 30-year notes denominated in U.S. dollars. The 10-year bonds are being offered to investors to yield about 210 basis points more than similarmaturity Treasuries, according to two people with direct knowledge of the matter quoted by Bloomberg. The oil explorer is marketing the 30-year notes to yield 220 basis points to 225 basis points more than similar-maturity Treasuries, the people said.

China Unicom Q1 profit jumps China Unicom (Hong Kong) Ltd, the country’s second-biggest mobile phone operator, reported a surge in first-quarter profit as subscriber demand for data offset hefty handset subsidies paid to phone makers. Net income was 1 billion yuan (US$158.55 million) for the three months ended March, compared with 145 million yuan a year earlier, the company said yesterday. As of March, China Unicom had 209.48 million mobile subscribers, a fifth of which are 3G users. China Unicom has said it plans to increase spending by a third to 100 billion yuan this year to upgrade its network and attract more 3G subscribers.

ZTE net income trails forecast China’s ZTE Corp., the world’s fifth-biggest telecommunications equipment maker, reported weakerthan-expected first-quarter profit following sluggish telecoms spending and price wars. Unaudited net income was 150.87 million yuan (US$23.92 million) in January to March, compared with 127.29 million yuan a year earlier, ZTE said yesterday. That missed an average forecast of 183 million yuan by three analysts polled by Reuters.

ZTE and its domestic rival Huawei Technologies Co Ltd have cut prices to grab market share in a slowing global telecoms equipment market, a strategy that has hit profitability,

Hong Kong’s securities watchdog showing it means business when it comes to doing initial public offerings the right way Alex Frew McMillan

I

nvestment bankers in Hong Kong may face jail if they are found to have misled investors when preparing companies to go public under tough proposals being finalised by the market regulator, but the plan is expected to face stiff opposition from the finance industry.

Securities and Futures Commission (SFC) Chief Executive Ashley Alder said yesterday a forthcoming consultation paper on initial public offering sponsors would look at making them hold criminal and civil liability for the contents of listing prospectuses.

“We are looking at both,” Alder told Reuters on the sidelines of the APREA Property Leaders Forum in Hong Kong.

If criminal liability is adopted, 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.

IPO sponsors, typically banks or corporate finance houses, prepare a company’s listing documents and perform due diligence to ensure they comply with Hong Kong’s listing rules.

Hong Kong has been the world’s biggest IPO market for two of the last three years, attracting scores of companies from China and further afield, including the likes of Prada and Rusal.

But a number of companies have run into trouble shortly after going public, and the SFC has struggled to hold foreign companies and executives accountable for any wrongdoing.

“Regulatory reach overseas is clearly not as great as it would be with Hong Kong companies.

That’s why the spotlight is on

sponsors to be the gatekeepers,” Alder said.

“The evidence is that the job they (IPO sponsors) have been doing is varied in quality,” he said.

Reuters reported last week that the SFC would consider making sponsors liable for the contents of listing prospectuses, but it was not known whether this would include making them criminally culpable for rule breaches.

On Sunday, the watchdog revoked the licence and announced a record fine for the sponsor of the troubled 2009 listing of Chinese textile maker Hontex International Holdings Co Ltd. The SFC said Mega Capital (Asia) failed to obtain materially important information from suppliers and customers and failed to act independently and impartially.

The SFC’s proposals are expected to be opposed by the banking sector, which is very important to Hong Kong’s economy and blocked a previous attempt in 2005 to bring in prospectus liability.

Alder said that the consultation paper should be published in the next two to three weeks and would contain a tougher code of conduct for sponsors to follow. If the proposals are approved, it could still take several months, if not years, for prospectus liability to become law.

Reuters

ICAC probes payment in Kwok case H

ong Kong’s anti-graft agency is looking into payments totalling more than US$2.5 million to a former top public servant as part of the city’s corruption investigation involving two billionaire brothers who run Asia’s largest property developer.

According to a source with knowledge of the investigation, the Independent Commission Against Corruption (ICAC) is investigating payments to Hong Kong’s former chief secretary, Rafael Hui. The payments are linked to Sun Hung Kai Properties, the powerful conglomerate run by Raymond

and Thomas Kwok.

Hui and the Kwok brothers were arrested on suspicion of corruption on March 29 and released on bail without charges being filed. The three men, friends since childhood through Macau family connections, have been ordered to report back to ICAC headquarters later next month, when they are expected to extend their bail agreement, the source said.

Details of the investigation have not been disclosed. The payments cited by the Reuters source reveal for the first time precise information on Hui’s role in the investigation of

the Kwoks, who rank among Asia’s richest families.

It is not clear whether the payments came from Sun Hung Kai Properties, one of its subsidiaries, or from the Kwok brothers themselves. Details on what else the ICAC is investigating are also unclear.

The Kwok brothers have denied any wrongdoing. The ICAC declined to comment while the investigation continues. Sun Hung Kai also declined to comment.

Several attempts at reaching Hui, including calls to former associates, were unsuccessful.

Reuters

10 |

business daily April 26, 2012

ASIA

InBrief S. Korea denies halting

Aquino political clan to lose family farm

Manila’s land reform agency said yesterday it was ready to carve up the vast farm of President Benigno Aquino’s clan after the Supreme Court rejected the owners’ demand for US$100 million compensation.

The Philippines’ highest tribunal on Tuesday reaffirmed an earlier ruling to sell 4,300 hectares (10,600 acres) - most of the nearly 5,000-hectare Hacienda Luisita - to its tenants for much less than the clan’s asking price. The ruling would crown the Philippines’ 14-year effort, ironically launched by the incumbent leader’s late mother, then-president Corazon Aquino, to give millions of sharecroppers land to help dig them out of poverty. The farm is run by Corazon Aquino’s Cojuangco clan.

Nippon Steel sues Korean partner Nippon Steel Corp., Japan’s largest steelmaker, said it sued Posco in Tokyo’s District Court seeking 100 billion yen (US$1.2 billion) in damages from the South Korean company for allegedly using trade secrets acquired illegally by a former employee.

Nippon Steel also sued its former employee, the Tokyo-based company said. It also stated it had filed a civil suit against Posco and a subsidiary in the U.S. for infringements of certain patents, without providing further details of that lawsuit. Posco, a long-term business partner of the Japanese firm, denies wrongdoing.

Nippon Steel is taking every measure possible to boost earnings as it battles higher costs, Credit Suisse Securities Japan Ltd.’s Shinya Yamada said.

Bakrie family’s loans threatened by share slump Coal miner Bumi Plc’s collapsing share price has for the second time in six months triggered a covenant breach for a loan to the Bakrie family, a pivotal Indonesian shareholder. This time, the notice was about a US$437 million loan for which the Bakries pledged their 23.8 percent of Bumi as collateral. The stock has tumbled 43 percent this year. The Bakries, whose scion Aburizal Bakrie has his sights on getting elected as Indonesia’s president in 2014, make no secret of their strategy of leveraging up their businesses with loans backed by the shares. They have until Friday to take action to stave off a possible declaration of default on the loan.

U.S. beef customs clearance But mad cow disease case clouds outlook for U.S. cattle farmers Sungwoo Park and Naveen Thukral

S

outh Korea has not halted customs clearance for U.S. beef shipments and they are continuing, Lee Byoung Guan, deputy director for planning and coordination at the Animal Plant & Fisheries Quarantine & Inspection Agency, said. The government will strengthen quarantine inspections as announced by the agriculture ministry, Lee said.

Earlier, Park Sang Ho, an official at South Korea’s farm ministry, said inspections would be suspended.

U.S. authorities reported the country’s first case of mad cow disease in six years on Tuesday, swiftly assuring consumers and global importers that there was no danger of meat from the California dairy cow entering the food chain.

Even though U.S. authorities have assured consumers, Asia’s top beef importers are likely to be cautious in dealing with U.S. beef imports.

Here’s how some have reacted to outbreaks of mad cow disease in the U.S. before. Some of them

imposed restrictions while others have banned imports.

Japan: the biggest export market for U.S. beef until bovine spongiform encephalopathy, or mad cow disease, hit American cows in 2003, prompting a ban on U.S. imports that has only ever been partially lifted.

After prolonged bilateral talks, Tokyo agreed in 2005 to resume U.S. beef imports but only from cattle aged 20 months or younger, one of the world’s strictest import rules on cattle age. In 2011, Australia accounted for two-thirds of Japan’s total imported beef market.

South Korea: two major South Korean retailers have halted sales of U.S. beef after the latest outbreak of mad cow disease and the country’s agriculture ministry looked set to move towards banning quarantine inspections, a move that would effectively end imports.

The country banned imports of American beef in 2003 following an outbreak of mad cow disease but eased the ban later by allowing imports of boneless

beef from cattle younger than 30 months.

South Korea imported 107,000 tonnes of U.S. beef last year, or 37 percent of total imports, according to agriculture ministry data.

Taiwan: imported 35,443 tonnes of U.S. beef in 2011, down 8 percent from a year earlier, according to U.S. Meat Export Federation Data.

Taiwan first banned imports of U.S. beef in December 2003 following the U.S. first case of BSE but in April 2005 it resumed imports of boneless U.S. beef from cattle under 30 months old, only to stop them again in June that year after another U.S. mad cow case.

In October 2009, Taiwan signed an agreement with the U.S. to allow imports of bone-in beef, ground beef and other products from cattle under 30 months old, stirring public protests among consumer activists and farmers that forced the government, two months later, to ban ground beef and beef organs imports.

Bloomberg/ Reuters

U.S. data and Apple effect aid Asian stocks Signs of a regional rally after four-day fall on equities markets Jonathan Burgos and Norie Kuboyama

A

sian stocks rose, with the regional benchmark index headed for its first advance in five days, as corporate profits beat estimates and U.S. housing data added to signs the world’s biggest economy is improving Samsung Electronics Co., Asia’s largest consumer electronics maker, rose 1.7 percent in Seoul. Hon Hai Precision Industry Co., a maker of Apple Inc. products, added 2.4 percent in Taipei after the U.S. company’s profit almost doubled.

Nomura Holdings Inc., Japan’s largest brokerage, rose 2.4 percent on speculation it may post higher net income.

“A recovery trend on earnings is being seen,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “The U.S. economy is still in mild recovery.”

The MSCI Asia Pacific Index gained 0.3 percent to 123.61 as of 5.11 p.m. in Tokyo, with almost three shares rising for every two that fell. Trading volumes in Tokyo and Hong Kong were at least 28 percent lower than the 30-day average, while those in Shanghai were 41 percent higher.

The gauge declined the past four days as political instability in Europe deepened concern governments will struggle to contain the region’s debt crisis and amid signs China’s

Apple suppliers gained on sales of the new iPad

economy is slowing. Markets in Australia and New Zealand were closed for holidays.

Technology companies posted the biggest advance among the 10 industry groups in MSCI Asia Pacific

Index. Apple suppliers gained after results from the Cupertino, California-based company reflected robust demand for iPhones in China and sales of the new iPad. Bloomberg

April 26, 2012 business daily | 11

ASIA

India’s investment grade rating at risk

Standard & Poor’s cuts debt outlook a step nearer to junk Kartik Goyal and Unni Krishnan

I

ndia’s sovereign credit outlook was lowered to negative from stable by Standard & Poor’s, taking the nation a step closer to junk status and dealing a further blow to Prime Minister Manmohan Singh’s economic agenda.

“India’s investment and economic growth have slowed, and its currentaccount deficit has widened,” S&P said in a statement yesterday, reaffirming its BBB- long-term India rating, the lowest investment grade. “We are revising the outlook on the long-term ratings on India to negative to reflect at least a one-inthree likelihood of a downgrade.”

Bonds fell, stocks declined and the rupee pared gains as S&P’s decision underscored rising concern that Asia’s third- largest economy will

fail to stem a growth slowdown and widening budget and current account deficits. Mr Singh’s push to lure investment has been hurt by corruption scandals, inflation and political opposition.

“This just lengthens the shadow that has been cast over the India story,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “It raises the big fear of losing the investment grade rating, and what that means for financing costs and the efforts for fiscal consolidation.”

The yield on the 8.79 percent note due November 2021 rose seven basis points, or 0.07 percentage point, to 8.64 percent as of 3.32 pm local time.

There is no need to panic following S&P’s move, Finance Minister

Pranab Mukherjee said in New Delhi yesterday, adding reforms will be on track and that he is confident India’s economy will expand about 7 percent in the fiscal year through March 31, 2013.

Budget estimates In last month’s annual budget, Mr Mukherjee estimated India’s fiscal deficit at 5.9 percent of gross domestic product in 2011- 2012, the widest in the so-called BRIC group of biggest emerging markets that also includes Brazil, Russia and China.

Fitch Ratings and Moody’s Investors Service also grade India one step above so-called junk status. Fitch yesterday declined to comment on whether it plans to review or revise India’s rating anytime soon and reiterated its BBB- grade, with a stable outlook, on the nation’s long-

term debt.

India’s economic expansion moderated to 6.1 percent in the quarter ended December 31, the slowest pace in almost three years, as costlier credit hurt consumer spending and dented investment.

The slowdown sapped tax receipts even as subsidies and a jobguarantee programme for rural workers fanned spending.

Reserve Bank of India Governor Duvvuri Subbarao cut the benchmark interest rate by a greater-than-forecast half a percentage point on April 17, to 8 percent, seeking to bolster growth with the first reduction since 2009.

Yesterday’s action by S&P “is a negative move and further solidifies the macroeconomic risks India is facing,” said Rajeev Malik, senior economist at CLSA Asia-Pacific Markets in Singapore.

Bloomberg

Japan rejects spending way to growth

J

Growth pledge – Japan’s PM Yoshihiko Noda

apan isn’t prepared to consider boosting spending even as a fading impact from earthquake reconstruction packages is poised to curb growth later this year.

“We’re not considering any possibility in which we would face a shortage of funds” and have to increase spending, Fumihiko Igarashi, a vice finance minister, said in an interview in Tokyo.

The central government allocated 23 trillion yen (US$283 billion) over the years through 2021, and the onus is on local officials to craft specific plans to use the money and boost spending, he said.

Morgan Stanley economists last week warned that “fiscal policy is turning contractionary,” with gross domestic product gains projected to moderate in the latter three quarters of 2012 from a gain in excess of two percent in January to March. The world’s third-largest economy

shrank last year after the record March 11 earthquake and tsunami.

Local authorities are taking time to put together reconstruction projects including the relocation of tsunami- stricken communities because such projects require a consensus of residents, Mr Igarashi, who’s served in the ministry’s number two position since 2010, said yesterday.

“Money is ready” to flow through the economy once specific construction projects start getting implemented, he said, adding that the economy is expected to keep improving through next year.

Prime Minister Yoshihiko Noda has pledged to stamp out deflation and spur growth while the government seeks to double the sales tax to 10 percent by 2015 to curb the public debt, which is twice as large as the economy.

Bloomberg

Thousands in Japan protest Asia-Pacific trade pact

T

housands of farmers rallied in Tokyo on Wednesday against an Pacific-wide free trade pact as Prime Minister Yoshihiko Noda prepares for a visit to the United States.

Mr Noda had reportedly been looking to announce Japan would become a full-fledged participant in talks on framing the Trans-Pacific Partnership (TPP) during his trip to Washington next week.

But fierce opposition, including from within his own party, means he is unlikely to be able to give Barack Obama the good news on a pact the U.S. president has pushed, partially as a way to counterbalance China’s growing economic might.

Government spokesman Osamu Fujimura said any announcement on Japan’s participation in talks aimed at abolishing tariffs and other barriers was “premature”.

Japan’s Central Union of Agricultural Cooperatives (Zenchu) has campaigned

vigorously against participation, saying a deal would reduce food security in a country where farmers - especially of rice - enjoy generous government protection, paid for by sky-high consumer prices.

“Abolishing tariffs without exceptions and reviewing regulations means that the pact forces us to fight unarmed against the United States and Australia, where farms are huge,” said Akira Banzai, the chairman of Zenchu.

Major businesses, academics and mainstream media have long pushed Tokyo to join the deal, which they say will improve access to foreign markets and boost regional trade and investment.

Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam are already signed up to take part in negotiations towards the deal.

AFP

Heavily subsidised – Japan’s rice farms

12 |

business daily April 26, 2012

MARKETS Ticker NAME

Hang SENG INDEX Ticker NAME

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

13

HUTCHISON WHAMPO

74.2

0.4739336

4254040

93.1

53.6

1398

IND & COMM BK-H

5.13

0

225724386

6.75

3.46

494

LI & FUNG LTD

16.58

1.097561

9189084

20.15

10.82

1299

AIA GROUP LTD

27.3

0

20422346

29.9

19.84

66

MTR CORP

27.1

0.1848429

1186083

28.8

22.45

2600

ALUMINUM CORP-H

3.76

-0.265252

7470850

7.45

3.2

17

NEW WORLD DEV

9.06

-0.5488474

7107980

12.675

6.13

3988

BANK OF CHINA-H

3.21

-0.310559

210004469

4.43

2.2

857

PETROCHINA CO-H

11.14

-0.7130125

37943316

11.92

8.59

3328

BANK OF COMMUN-H

5.78

-0.3448276

17268277

7.7

4.15

2318

PING AN INSURA-H

62.2

-0.1605136

5016147

86.85

37.35

23

BANK EAST ASIA

28.5

-1.893287

2393251

34.45

21.85

6

POWER ASSETS HOL

57.1 -0.08748906

1880

BELLE INTERNATIO

14.94

0.6738544

9106803

17.54

11.38

83

SINO LAND CO

2388

BOC HONG KONG HO

23.25

0.6493506

14811538

24.7

14.24

16

293

CATHAY PAC AIR

12.92

-0.9202454

4700424

20.15

11.8

19

1

CHEUNG KONG

100.3

0.6018054

2552294

127

79.1

700

1898

CHINA COAL ENE-H

8.54

-0.5820722

13390103

11.66

6.59

322

939

CHINA CONST BA-H

5.92

-0.5042017

211290092

7.55

4.41

151

2628

CHINA LIFE INS-H

20.5

-1.204819

19752518

29.4

17.04

4

144

CHINA MERCHANT

24.9

0.4032258

2390713

37.5

19

941

CHINA MOBILE

84.85

-0.5275498

12376295

87.6

68.05

688

CHINA OVERSEAS

16.18

2.405063

20714350

17.86

9.99

386

CHINA PETROLEU-H

8.15

0.1228501

35151008

9.67

6.22

291

CHINA RES ENTERP

27.2

-1.090909

1980075

35.5

24

1109

CHINA RES LAND

14.7

4.255319

12211400

15.6

7.28

836

CHINA RES POWER

13.7

-0.4360465

3221854

16.2

10.82

1088

CHINA SHENHUA-H

33.65

0.4477612

6635706

40.2

27.1

762

CHINA UNICOM HON

13.02

0.1538462

8366041

17.68

12.6

267

CITIC PACIFIC

12.64

0.3174603

2083314

23.85

10.26

2

CLP HLDGS LTD

65.9

-0.5283019

1056622

75.2

62.1

883

CNOOC LTD

16.14

1.12782

46161317

20.1

11.2

1199

COSCO PAC LTD

11.08

0.9107468

2793882

17.16

7.52

330

ESPRIT HLDGS

16.16

0.8739076

2184701

33.95

7.55

101

HANG LUNG PROPER

28.75

0.3490401

3243312

35.3

20.85

11

HANG SENG BK

104.6

0.4803074

423677

125

84.4

12

HENDERSON LAND D

44.55

-0.5580357

1499001

54.25

33.2

1044

HENGAN INTL

79.9

-0.4361371

1356089

83.45

56.8

3

HONG KG CHINA GS

19.94

-0.2002002

5652132

20.65

16.68

388

HONG KONG EXCHNG

125.4

-0.1671841

2837106

182.5

99.15

5

HSBC HLDGS PLC

69.05

0.6559767

9918370

85.35

56

1588159

64.8

52

13.36

-0.5952381

6831742

14.16

8.482

SUN HUNG KAI PRO

94.6

-0.1055966

4722498

124.4

85.45

SWIRE PACIFIC-A

88.5

0.1131222

808291

102.539

69.321

TENCENT HOLDINGS

227.6

-4.690117

6399506

241

139.8

TINGYI HLDG CO

19.86

-1.439206

6007300

26

17.84

WANT WANT CHINA

9.51

1.277955

24786197

9.58

6.03

WHARF HLDG

45.4

0.8888889

3624211

59

33.15

INDEX 20646.29 52W (H) 24260.76 (L) 16170.35 MOVERS 22 24 2

IN FOCUS Aristocrat share price: Year-to-date performance 3.40 3.12 2.84 2.56 2.28 2.00

Shanghai Shenzhen CSI 300 NAME

3-Jan-2012

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.74

0

47160130

AIR CHINA LTD-A

6.25

0

7971215

ALUMINUM CORP-A

7.01

0.1428571

15259167

ANGANG STEEL-A

4.39

0.4576659

9565940

NAME

24-Apr-2012

PRICE

DAY %

VOLUME

PRICE

DAY %

CHINA SOUTHERN-A

4.82

0.4166667

35640719

NAME NINGBO PORT CO-A

2.67

0.754717

VOLUME 28316801

CHINA STATE -A

3.38

2.114804

150629793

PANGANG GROUP -A

8.1

3.448276

84489235

CHINA UNITED-A

4.37

0.4597701

65825053

PETROCHINA CO-A

9.92

0.6085193

15911121

CHINA VANKE CO-A

8.88

2.896871

86608903

PING AN INSURA-A

40.8

0.02451581

22478933 42212434

ANHUI CONCH-A

17.75

0.5665722

25397290

CHINA YANGTZE-A

6.53

0.1533742

19035342

POLY REAL ESTA-A

12.31

2.497918

BANK OF BEIJIN-A

10.41

0.3857281

47936276

CITIC SECURITI-A

13.16

-0.6792453

97215769

QINGHAI SALT-A

33.48

1.948843

4722165

BANK OF CHINA-A

3.05

-0.6514658

18008801

CSR CORP LTD -A

5.04

2.439024

69409301

SAIC MOTOR-A

15.36

1.185771

19207980

BANK OF COMMUN-A BANK OF NINGBO-A

4.86

-0.2053388

57537176

DAQIN RAILWAY -A

7.46

-0.2673797

65225823

SANY HEAVY INDUS

14.35

-0.1391788

21304874

10.77

0.5602241

70162842

DATANG INTL PO-A

5.12

-0.1949318

3669019

SHANDONG GOLD-MI

34.87

5.923451

19839405 66489024

BAOSHAN IRON & S

4.99

0.8080808

28031368

DONGFANG ELECT-A

22.3

2.67035

11932140

SHANG PUDONG-A

9.35

-0.3198294

BBMG CORPORATI-A

8.63

1.768868

38338400

EVERBRIG SEC -A

13.58

-1.736614

24153685

SHANGHAI ELECT-A

5.7

2.333932

7787402

BYD CO LTD -A

27.4

-1.9678

4510254

GD MIDEA HOLDING

13.22

2.163833

26825991

SHANXI LU'AN -A

27.5

0.9174312

13604820

CHINA CITIC BK-A

4.54

-0.2197802

30300205

CHINA CNR CORP-A

4.57

1.781737

120401986

GD POWER DEVEL-A GF SECURITIES-A

2.56

-0.3891051

59743490

SHANXI XISHAN-A

17.48

3.431953

43944918

30.78

-0.7416962

11570646

SHENZ DVLP BK-A

16.86

0.5966587

20892365 46980552

CHINA COAL ENE-A

9.33

1.633987

17385625

GREE ELECTRIC

21.53

1.79669

11052138

CHINA CONST BA-A

4.81

0.8385744

42833356

GUIZHOU PANJIA-A

31.92

0.06269592

7679486

CHINA COSCO HO-A

5.46

0.5524862

14733926

HAITONG SECURI-A

9.9

-0.3021148

98777369

CHINA CSSC HOL-A

35.68

-0.9988901

13572041

HANGZHOU HIKVI-A

45.46

0.8877053

1703897

CHINA EAST AIR-A

3.95

0

15577721

HEBEI IRON-A

3.02

1.003344

20467295

7.54

1.891892

SINOVEL WIND-A

SHENZEN OVERSE-A

15.97

0.6935687

2455355

SUNING APPLIAN-A

10.51

-0.09505703

42530668

TSINGTAO BREW-A

34.04

0.05878895

1511940

WEICHAI POWER-A

33.54

1.084991

7445198 15275173

CHINA EVERBRIG-A

3

-0.3322259

60803190

HENAN SHUAN-A

65.03

0.154012

2486874

WULIANGYE YIBIN

34.47

0.2909514

CHINA INTL MAR-A

14.98

4.027778

19437797

HUATAI SECURIT-A

10.35

-1.61597

44556048

XCMG CONSTRUCT-A

15.11

1.137885

9190810

CHINA LIFE INS-A

18.52

0.2164502

20023533

HUAXIA BANK CO

11.24

-0.7943513

36503565

XINJIANG GUANG-A

24.7

1.520756

6294710 28607832

CHINA MERCH BK-A

12.27

-0.2439024

51512921

IND & COMM BK-A

4.42

0.2267574

42632884

YANGQUAN COAL -A

19.95

1.06383

CHINA MERCHANT-A

13.18

-1.051051

18216391

INDUSTRIAL BAN-A

14.26

0.9915014

69661175

YANTAI CHANGYU-A

92.52

0.325309

1118614

CHINA MERCHANT-A

22.69

3.939533

14089134

INNER MONG BAO-A

70.36

3.91375

38831702

YANZHOU COAL-A

23.24

0.6496319

6419297

CHINA MINSHENG-A

6.59

0.1519757

86213466

INNER MONG YIL-A

22.18

-0.04506534

7960657

CHINA NATIONAL-A

6.56

-1.353383

20204299

INNER MONGOLIA-A

6.16

4.054054

116712358

JIANGSU YANGHE-A

YUNNAN BAIYAO-A

50.19

1.37346

4498370

ZHONGJIN GOLD

23.21

2.336861

27452861 132146157

CHINA OILFIELD-A

17.12

0.6466784

6437902

157.53

0.1398512

584870

CHINA PACIFIC-A

21.92

0.2744739

22166969

JIANGXI COPPER-A

25.59

1.749503

12010066

ZOOMLION HEAVY-A

CHINA PETROLEU-A

7.28

-0.1371742

41721836

JINDUICHENG -A

14.25

1.207386

17186030

ZTE CORP-A

15710433

CHINA RAILWAY-A

2.76

2.985075

90062017

JIZHONG ENERGY-A

CHINA RAILWAY-A

4.5

2.272727

52159178

KWEICHOW MOUTA-A

CHINA SHENHUA-A

26.6

0.6432085

14433505

CHINA SHIPBUIL-A

6.11

-0.6504065

CHINA SHIPPING-A

3.12

0.6451613

20.02

2.09077

212.92

0.6618759

1552942

LUZHOU LAOJIAO-A

42.55

0.2119642

3909378

37821721

METALLURGICAL-A

2.69

1.893939

39464156

24075198

NARI TECHNOLOG-A

19.6

0

6882085

NAME

Hang SENG CHINA ENTErPRISE INDEX NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.57

1.709402

125998869

AIR CHINA LTD-H

5.12

0

0

ALUMINUM CORP-H

3.76

-0.265252

25.75

ANHUI CONCH-H

4.4

3.044496

9.98

0.5035247

32815343

17.61

-0.113443

11921168

INDEX 2625.99 52W (H) 3325.45 (L) 2254.567 MOVERS 220 64 16

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

CHINA LONGYUAN-H

6.06

1

2567000

PETROCHINA CO-H

11.14

-0.7130125

37943316

CHINA MERCH BK-H

16.24

0.9950249

8073774

PICC PROPERTY &

9.58

0.1044932

4919200

CHINA MINSHENG-H

7.51

-0.5298013

33574693

PING AN INSURA-H

62.2

-0.1605136

5016147

CHINA NATL BDG-H

NAME

10.42

1.165049

20541000

8.45

0.3562945

1176000

CHINA OILFIELD-H

11.9

1.362862

3302875

SINOPHARM-H

19.96

0.4024145

2652963

7470850

CHINA PACIFIC-H

25.65

0

3639400

TSINGTAO BREW-H

45.55

0.4410143

590000

0.5859375

5821299

CHINA PETROLEU-H

8.15

0.1228501

35151008

WEICHAI POWER-H

36.4

0.9708738

3572098

YANZHOU COAL-H

16.22

0.2472188

7481178

2.91

-1.689189

33857400

11.12

1.645338

14644777

19.6

1.977107

5328240

BANK OF CHINA-H

3.21

-0.310559

210004469

CHINA RAIL CN-H

5.79

1.93662

8532000

BANK OF COMMUN-H

5.78

-0.3448276

17268277

CHINA RAIL GR-H

2.97

0.6779661

15490919

BYD CO LTD-H

21.1

0.7159905

1674000

CHINA SHENHUA-H

33.65

0.4477612

6635706

CHINA CITIC BK-H

4.75

-0.210084

19390132

CHINA TELECOM-H

4.11

0

29200254

CHINA COAL ENE-H

8.54

-0.5820722

13390103

DONGFENG MOTOR-H

15

0.9421265

16392615

CHINA COM CONS-H

7.8

0.5154639

12638219

GUANGZHOU AUTO-H

8.28

1.595092

4247284

CHINA CONST BA-H

5.92

-0.5042017

211290092

HUANENG POWER-H

4.47

1.360544

21075604

CHINA COSCO HO-H

4.58

-0.6507592

13806500

IND & COMM BK-H

5.13

0

225724386

CHINA LIFE INS-H

20.5

-1.204819

19752518

JIANGXI COPPER-H

18.18

-0.547046

10898776

NAME

PRICE DAY %

FTSE TAIWAN 50 INDEX NAME

ZIJIN MINING-A

PRICE DAY %

Volume

Volume

SHANDONG WEIG-H

ZIJIN MINING-H ZOOMLION HEAVY-H ZTE CORP-H

INDEX 10812.79 52W (H) 13721.26 (L) 8058.58 MOVERS 23 13 4

NAME

PRICE DAY %

Volume

FAR EASTERN NEW

33

0

3163351

SINOPAC FINANCIA

9.99

1.62767

7951040

FAR EASTONE TELE

64.7

-1.820941

3629056

SYNNEX TECH INTL

68.5

0

4591517

17.55

1.73913

16177480

TAIWAN CEMENT

34.5

-1.146132

8463645

84

0.4784689

3268688

TAIWAN COOPERATI

17.6

0

4310442

989534

TAIWAN FERTILIZE

70.6 -0.1414427

3651042

FIRST FINANCIAL FORMOSA CHEM & F

ACER INC

33.9

2.108434

23016332

FORMOSA PETROCHE

87.7 -0.5668934

ADVANCED SEMICON

28.9

1.760563

14001422

FORMOSA PLASTIC

83.4

1.831502

7125806

TAIWAN GLASS IND

29.85

1.186441

1618178

36.45

1.25

3555841

FOXCONN TECHNOLO

103.5

2.475248

12521580

TAIWAN MOBILE CO

92

-1.075269

4215738

ASUSTEK COMPUTER

287

3.985507

6154272

FUBON FINANCIAL

31.15

1.963993

13810092

TPK HOLDING CO L

385

1.315789

2858542

AU OPTRONICS COR

14

4.089219

33805670

HON HAI PRECISIO

106

2.415459

46055080

TSMC

84.2 -0.4728132

31122004

UNI-PRESIDENT

42.1

-0.118624

2669757

UNITED MICROELEC

14.9

1.016949

37478674

ASIA CEMENT CORP

CATCHER TECH

196

0

14617206

HOTAI MOTOR CO

185

1.648352

1624861

CATHAY FINANCIAL

31.15

1.465798

10156414

HTC CORP

470.5

-1.671891

11136656

CHANG HWA BANK

16.1

0.625

6095540

HUA NAN FINANCIA

16.45

1.230769

6175838

WISTRON CORP

43.6

2.227433

9026458

CHENG SHIN RUBBE

70.6

0

6550251

LARGAN PRECISION

537

-1.104972

1593699

YUANTA FINANCIAL

13.9 -0.3584229

28460672

YULON MOTOR CO

CHIMEI INNOLUX C

13.1

4.8

16085516

LITE-ON TECHNOLO

35.8

2.873563

4043752

CHINA DEVELOPMEN

7.53

0.2663116

66320470

MEDIATEK INC

263

1.937984

7627922

CHINA STEEL CORP

28.85

0

7784213

MEGA FINANCIAL H

22.15 -0.6726457

30767623

CHINATRUST FINAN

17.85

0

27070543

NAN YA PLASTICS

60.1

-0.661157

90.5

0.8918618

9322639

PRESIDENT CHAIN

159

0.3154574

998211

33.75 -0.5891016

5639714

QUANTA COMPUTER

75.7 -0.7863696

7183526

6327446

SILICONWARE PREC

34.7

CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC

92

1.098901

4.518072

46

0.6564551

1718390

12593720

INDEX 5258.87 52W (H) 6265.48 (L) 4643.05 MOVERS 29 14 7

10286741

April 26, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXy ENTERTAINMENT

Max 23.00

Average 22.90

MELCO CROWN ENTERTAINMENT

Min 22.50

23.0

43

14.5

22.9

42

14.4

22.8

41

14.3

22.7

40

14.2

22.6

39

14.1

22.5

Last 22.90

SANDS CHINA LTD

Max 31.85

Max 40.00

Average 40.00

Min 40.00

Last 40.00

Average 31.62

Max 14.46

Min 31.00

Min 14.20

Last 14.46

14.0

WyNN MACAU LTD 17.00

23.8

31.8

16.97

23.7

31.6

16.94

23.6

31.4

16.91

23.5

31.2

16.88

23.4

31.0

Last 31.80

Average 14.33

32.0

23.3

16.85 Max 17.00

Average 16.91

Min 16.86

Last 16.90

Max 23.70

Average 23.55

Min 23.35

Last 23.55

CURRENCY EXCHANGE RATES

Japanese Yen and European currencies:

PRICE

Year-to-date exchange rate against the Euro, the Swiss Franc and the British Pound

MAJORS

1.3

JPYCHF

1.2 1.1

ASIA PACIFIC

1.0

JPYEUR

0.9

JPYGBP

0.8

2-Jan-2012

25-Apr-2012

0.7

MACAU RELATED STOCKS PRICE

38

SJM HOLDINGS LTD

IN FOCUS

NAME

MGM CHINA HOLDINGS

DAY % YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

ARISTOCRAT LEISU

3.14

0

42.72727

3.25

1.88

1503631

CROWN LTD

8.96

0.5611672

10.75402

9.2

7.45

1382096

AMAX HOLDINGS LT

0.087

0

0

0.143

0.06

3549000

BOC HONG KONG HO

23.25

0.6493506

26.3587

24.7

14.24

14811538

CENTURY LEGEND

0.26

0

13.04348

0.41

0.204

0

CHEUK NANG HLDGS

3.18

0.3154574

13.57143

4.79

2.3

17000 20714350

CHINA OVERSEAS

16.18

2.405063

24.65332

17.86

9.99

CHINESE ESTATES

10.7

-0.5576208

-14.4

14.8

10.2

113000

CHOW TAI FOOK JE

11.6

0.1727116

-16.66667

15.16

11.52

2260400

EMPEROR ENTERTAI

1.39

0

25.22522

2.09

0.97

305000

FUTURE BRIGHT

0.92

-4.166667

119.0476

1.04

0.3

6912000

CROSSES

AUD HKD

DAY %

YTD %

(H) 52W

(L) 52W

AUD

1.0342

0.5738

1.3028

1.1081

0.9388

GBP

1.6089

-0.3777

3.5128

1.6747

1.5235

CHF

0.9089

0.4731

3.2127

0.9596

0.7071

EUR

1.3221

0.4406

2.006

1.494

1.2624

JPY

81.18

0.0739

-5.2599

84.18

75.35

MOP

7.9917

0.0225

0.0989

8.0449

7.9823

HKD

7.7588

0.0232

0.1108

7.8113

7.7529

CNY

6.3043

0.0571

-0.1475

6.5175

6.2846

INR

52.575

0.233

0.932

54.305

43.855

THB

30.93

0.1293

2.0045

31.96

29.63

SGD

1.2451

0.2008

4.1362

1.3199

1.1992

TWD

29.484

0.0611

2.6964

30.716

28.48

PHP

42.665

0.157

2.754

44.35

41.879

IDR

9199

0

-1.4132

9367

8458

AUDJPY

83.962

-0.499

-6.5863

89.601

72.057

EURCHF

1.20169

0.03

1.2566

1.29654

1.00749

EURGBP

0.82175

-0.8202

1.4165

0.90835

0.81444

EURCNY

8.33

-0.2245

-2.3505

9.6769

7.9674

EURMOP

10.5652

-0.4098

-2.0179

11.9509

10.1031

EURJPY

107.33

-0.3634

-7.1462

121.84

97.04

1.03

0

0.0097

1.0311

1.0288

HKDMOP

World Stock MarketS - Indices

22.9

2.690583

60.81461

24.35

8.69

18056972

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

104.6

0.4803074

13.51058

125

84.4

423677

DOW JONES INDUS. AVG

US

13001.56

0.5754546

6.416994

13297.11

10404.49

HOPEWELL HLDGS

20.5

-1.442308

3.222555

24.903

18.56

392019

NASDAQ COMPOSITE INDEX

US

2961.6

-0.2979347

13.68252

3134.17

2298.89

HSBC HLDGS PLC

69.05

0.6559767

17.0339

85.35

56

9918370

HUTCHISON TELE H

3.46

1.169591

15.71906

3.6

2.13

2247005

4791.01

LUK FOOK HLDGS I

20.45

-1.682692

-24.53875

46.15

19.2

2293201

GALAXY ENTERTAIN HANG SENG BK

NAME

FTSE 100 INDEX

GB

5732.51

0.4031884

2.875484

6103.73

DAX INDEX

GE

6683.06

1.405831

13.30389

7600.410156

4965.8

JN

9561.01

0.981935

13.07646

10255.15

8135.79

8.04

1.005025

39.34142

10.76

4.3

4897002

NIKKEI 225

MGM CHINA HOLDIN

14.46

2.553191

50.74821

17.183

7.6

3554400

HANG SENG INDEX

HK

20646.29

-0.1492952

11.99876

24260.76953

16170.35

MIDLAND HOLDINGS

3.98

0.2518892

-1.485148

5.976

2.95

550002

CSI 300 INDEX

CH

2625.99

0.8109438

11.9471

3292.48

2254.567

NEPTUNE GROUP

0.111

0.9090909

0

0.157

0.08

60000

NEW WORLD DEV

9.06

-0.5488474

44.72843

12.675

6.13

7107980

TAIWAN TAIEX INDEX

TA

7563.18

0.8579994

6.94421

9099.75

6609.11

SANDS CHINA LTD

31.8

2.912621

44.87471

33.05

14.9

14368712

MELCO INTL DEVEL

KOSPI INDEX

SK

1961.98

-0.07334141

7.462179

2231.47

1644.11

S&P/ASX 200 INDEX

AU

4360.447

0.1841499

7.491229

4930.6

3765.9

SHUN HO RESOURCE

1.2

0

20

1.32

0.82

0

SHUN TAK HOLDING

3.19

0.3144654

24.65182

4.686

2.241

2566434

JAKARTA COMPOSITE INDEX

ID

4163.643

-0.1608977

8.939085

4232.923

3217.951

SJM HOLDINGS LTD

16.9

0.4756243

33.28075

21

10.22

7022412

SMARTONE TELECOM

16.08

0

19.64286

18.5

9.8

687620

FTSE Bursa Malaysia KLCI

MA

1579.35

-0.1851758

3.176262

1609.33

1310.53

WYNN MACAU LTD

23.55

1.072961

20.76923

27.48

14.807

4618813

NZX ALL INDEX

NZ

785.446

0.2492683

7.624784

814.431

700.441 2695.06

ASIA ENTERTAINME

5.78

-1.70068

-1.700682

10.8692

4.72

50247

BALLY TECHNOLOGI

46.84

0.7528501

18.40242

47.6

24.74

421001

BOC HONG KONG HO

3.01

0

25.56381

3.16

1.81

13050

GALAXY ENTERTAIN

2.9

-1.694915

55.08021

3.09

1.08

21250

15.9

-1.791229

-7.558144

19.15

13.38

4645131

JONES LANG LASAL

79.67

0.9375396

30.05224

107.77

46.01

161471

LAS VEGAS SANDS

56.4

-0.8438819

31.99158

62.09

36.08

7460408

MACAU CAPITAL IN

0.11

0

9.999998

0.11

0.11

500

MELCO CROWN-ADR

15.09

0.6671114

56.86071

16.15

7.05

5990992

INTL GAME TECH

MGM CHINA HOLDIN

1.78

0

49.36731

2.21314

1.00254

1500

MGM RESORTS INTE

13.06

-0.4573171

25.21572

16.05

7.4

9294648

SHUFFLE MASTER

16.57

-1.894612

41.38225

18.77

7.35

514995

2.2

5.263158

34.96933

2.64

1.28

770

124.71

-0.4311377

12.86995

165.4931

101.02

1122884

SJM HOLDINGS LTD WYNN RESORTS LTD

USD

PHILIPPINES ALL SHARE IX

PH

3472.24

0.9152074

14.02937

3483

HSBC Dragon 300 Index Singapor

SI

576.61

0.69

16.17

na

na

STOCK EXCH OF THAI INDEX

TH

1201.57

0.1425166

17.18976

1214.31

843.69

HO CHI MINH STOCK INDEX

VN

472.87

1.550521

34.51003

488.02

332.28

Laos Composite Index

LO

1032.22

1.404826

14.75996

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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14 |

business daily April 26, 2012

Opinion

Mind the neighbours Anne-Marie Slaughter

Former director of policy planning in the US State Department and Professor of Politics and International Affairs, Princeton University

Turks saying that they need Western support, the US saying that it needs regional support, and both saying that they need UN support.

Looking beyond the Middle East, Africa provides the best evidence for a geopolitics based as much on regional powers and institutions as on traditional great powers. While Annan has been trying his diplomatic best to resolve Syria’s crisis, upheavals in Senegal, Mali, Malawi, and GuineaBissau have been swiftly addressed by other regional powers. In particular, the African Union (AU) has acted repeatedly in the name of enforcing the African Charter on Democracy, Elections, and Governance.

Higher purposes

T

he conventional wisdom last week on whether Syria would comply with former United Nations Secretary-General Kofi Annan’s ceasefire plan was that it was up to Russia. We were reverting to Cold War politics, in which the West was unwilling to use force and Russia was willing to keep arming and supporting its client. Thus, Russia held the trump card: the choice of how much pressure it was willing to put on Syrian President Bashar alAssad to comply with the plan.

If this view were correct, Iran would surely be holding an equally powerful hand. Annan, after all, traveled to Tehran as well. Traditional balance-ofpower geopolitics, it seems, is alive and well.

But this is, at best, a partial view that obscures as much as it reveals.

In particular, it misses the crucial and growing importance of regional politics and institutions.

A longer-term resolution of the Syrian crisis depends as much on Turkey and the Arab League as it does on the United States, Europe, and Russia.

Consider what else happened last week: Turkey’s government made clear that it would turn to new measures if Annan’s plan does not produce results.

Turkish officials have been issuing similar proclamations for months, but now Syrian troops have fired into Turkey, chasing Free Syrian Army rebels who fled across the border, while the number of Syrian civilian

refugees has increased sharply. Last week, Prime Minister Recep Tayyip Erdoğan raised the stakes dramatically with talk of having “many options,” and by adding: “Also, NATO has responsibilities to do with Turkey’s borders, according to Article 5.”

Options on the cards Article 5 of the NATO treaty stipulates that an attack on one NATO member is to be considered an attack on all, and that all will come to the member’s aid. Of course, other NATO members could disagree that Syria has in fact attacked Turkey, but if Turkey were to invoke Article 5, a refusal to offer assistance could have unpleasant consequences for the alliance as a whole. And Assad knows full well that it will be impossible to avoid further border incidents unless he is prepared to allow the Free Syrian Army to use Turkey as a safe zone.

The significance of Article 5 is that if a credible case can be made that Turkey and its allies are acting in selfdefense, they do not need to seek the UN Security Council’s approval. That makes Erdoğan’s suggestion a gamechanger, forcing Assad to reckon with the prospect of a de facto militarilyenforced safe zone for the civilian opposition.

The deeper point here is that regional organizations, including NATO, provide the first level of legality and legitimacy required for a successful use of force. The US would not have

supported intervention in Libya if the Arab League had not supported a nofly zone and been willing to go to the UN on that basis.

Indeed, assuming that Assad does not start bulldozing entire cities, I cannot imagine any circumstances under which the US would support even limited military intervention in Syria without public approval by the Arab League and Turkey. That is why we have seen a game of “after you” with respect to Syria, with the

Those who interpret all moves on the international stage in terms of states’ eternal jockeying for power and prestige will never lack for evidence. But countries’ desire to stop mass murder in their neighbourhood, or to enforce regional norms, has its own force

In Senegal, simmering violence accompanied recent elections in which President Abdoulaye Wade was allowed to stand for an unprecedented third term. The first round forced Wade into a run-off with Macky Sall, at which point the AU promptly sent an Elections Observer Mission, drawn from 18 African countries, to assess whether the elections were legal and the results “reflected the will of the Senegalese people.” We cannot be sure what impact the mission had on Wade’s ultimate decision to concede defeat to Sall, but knowing that the region was watching must have focused his mind.

The situation in Mali is more complicated, for it involves an ongoing secessionist movement, as well as a coup on March 21. But, after the coup the AU and the Economic Community of West African States (ECOWAS), backed by the UN, immediately suspended Mali’s membership in the AU, imposed economic and diplomatic sanctions on the country, and placed travel restrictions on coup leaders. Just over two weeks later, ECOWAS announced that it had reached an agreement with the coup leaders to return the government to civilian rule in exchange for lifting the sanctions.

Likewise, AU President Jean Ping condemned a coup in Guinea-Bissau in early April immediately and in the strongest terms.

Those who interpret all moves on the international stage in terms of states’ eternal jockeying for power and prestige will never lack for evidence.

The way in which the Saudi-Iranian rivalry is playing out in Syria is a prominent example. But countries’ desire to stop mass murder in their neighbourhood, or to enforce regional norms, has its own force. Increasingly, when a regional institution will not act, powers from outside the region find it difficult to intervene.

And, when a region does unite on a course of action, intervention by outside powers becomes either less necessary or more effective. © Project Syndicate

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April 26, 2012 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Argentina before the law Ana Palacio

Former Spanish foreign minister, served as Vice President of the World Bank

Taipei Times

The Taiwan Institute of Economic Research cut its GDP growth forecast from 3.96 percent to 3.48 percent on Tuesday, citing weaker-than-expected growth in the first quarter. The institute has also raised its annual inflation estimate to 1.98 percent, up 0.52 percentage points from January’s forecast. This revised forecast was made after the government raised petrol and diesel prices this month. Electricity charges will rise next month. The institute forecast output would grow 2.11 percent this year.

Asahi Shimbun

Three electric utilities have warned of power shortages this summer with all of Japan’s nuclear reactors going offline. Kansai Electric Power Co. predicted supply capacity would fall 16.3 percent short of peak demand, the report said. From May 6, Japan will have no nuclear power for the first time in 42 years. The No. 3 reactor at Hokkaido’s Tomari plant, the only reactor still in operation, will shut down for regular inspections.

The supply capacities of Kansai Electric, Kyushu Electric Power Co. and Hokkaido Electric Power Co. are expected to fall by 16.3 percent, 3.7 percent and 3.1 percent, respectively, in August.

Jakarta Globe

Indonesia’s wealthy are growing richer at a faster rate than their lessaffluent countrymen. The Deposit Insurance Agency said the nominal value of bank accounts with more than 5 billion rupiah (4.3 million patacas) in savings and deposits grew 61 percent to 1,215 trillion rupiah in March year-on-year. In contrast, the report said the nominal value of bank accounts with less than 100 rupiah million rose by 16 percent.

Only 58,450 bank accounts contained more than 5 trillion rupiah in March, just 0.6 percent of the total 101.09 million bank accounts.

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A

rgentine President Cristina Fernández de Kirchner’s decision to renationalize the energy company YPF has raised a virtual tsunami of political diatribes, threats from unexpected places and players, heated commentary from journalists worldwide, and public outrage in Argentina, Spain, and many other countries.

But Fernández is not likely to care about the complaints; renationalization is playing very well with her Peronist supporters at home.

So now Argentina will face international law. In addition to Repsol, the Spanish energy company that held a majority stake in YPF, Spain and the European Union (which, under the Lisbon Treaty, has acquired authority regarding investment matters in third countries) will fight the seizure with every legal tool that they can muster.

Argentina stands to lose economically by its actions as well. Given Fernández’s contempt for her country’s largest foreign investor, the renationalized YPF will find it difficult to find a new partner in international markets.

Indeed, given Fernández’s arbitrary action, the Chinese firms that were negotiating with Repsol for a stake in YPF are likely to have second thoughts.

In the end, a solution must be found that is acceptable to all. So allowing tempers to cool and rhetoric to soften is now a high priority, and there is no better way to do than by switching on the legal machinery. Repsol’s announcement that it will seek

international arbitration before the International Center for Settlement of Investment Disputes (ICSID) is a useful first step.

But Repsol’s willingness to go to arbitration raises several questions for members of the general public, most of whom are unfamiliar with the workings of international law (which are sometimes incomprehensible even to experts).

What does it mean to resort to the ICSID? How effective are its decisions when rendered against states?

The ICSID was established in 1965 as a part of the World Bank by the Convention on Differences Relative to Investments between States and Nationals of Other States, in response to the proliferation of requests for the Bank president’s ad hoc mediation in investment controversies.

Its greatest virtue is that it offers two means of resolving controversies, conciliation and arbitration, in a process that places states and investors on an equal footing.

Arbitration mechanisms Historically, ICSID arbitration has enjoyed a high degree of acceptance by all parties to disputes. Undoubtedly, in addition to formal means of implementation, the impressive shadow of the World Bank, with its powerful influence over developing countries’ access to international markets, plays a key role. But, today, with more players able to set themselves up as an alternative to the World Bank, this influence has begun to dissipate, at least in some cases.

party in only three cases, and Peru in fewer than 10.

Capricious decisions

cause immeasurably harm to the states that adopt them. It is no coincidence that the world’s most prosperous countries are those with the strongest institutions, the most predictable business climate, and a reputation for upholding the rule of law

Over the past 15 years, since the first case was registered against a Latin American state (Costa Rica) in 1996, the number of investment arbitrations submitted to the ICSID from the region, mainly by foreign investors, has soared. Indeed, Latin America now accounts for nearly half of the ICSID’s caseload.

Argentina is, by far, the leading cause of the regional surge in investment disputes, accounting for roughly 25% of all ICSID cases, 50% of those originating in Latin America, and twice as many as any other country. Indeed, since 1996, Chile has been a

Strengthening the rule of law Of course, it would be best if the dispute between Repsol and Argentina could be resolved by negotiation. But if precedent means anything – and it generally does – there is not much hope that the parties will resolve this case by direct agreement. So, once again, Argentina will stand out among that small group of countries that are reluctant to comply with legal custom, if not with legal findings.

Argentine leaders’ addiction to demagogic and populist behavior is one reason for the country’s exceptionalism in this regard. So, once again, that behavior must be censured, not only by other leaders, but also in legal proceedings. Only rigorous adherence to law can discourage the populist temptation to seek shortcuts to solving problems.

Investments and loans are two sides of the same coin; they flow only to where they are offered the security of a legal framework that prevents political leaders from exercising power arbitrarily. Because autarky is not an option – not even for North Korea – capricious decisions such as the renationalization of YPF cause immeasurably greater harm to the states that adopt them. It is no coincidence that the world’s most prosperous countries are those with the strongest institutions, the most predictable business climate, and a reputation for upholding the rule of law. © Project Syndicate

16 |

business daily April 26, 2012

CLOSING Companies line up for Shanghai IPOs Greece completes private debt swap Chinese coal miner Huaibei Mining Co and tube maker Golden Dragon Precise Copper Tube Group Inc are planning to raise more than US$1.5 billion in total through listings on the Shanghai stock exchange, as the market shows signs of stabilising. Huaibei Mining Co. plans to raise 6.1 billion yuan (US$967.1 million) in an initial public offering, it said in a prospectus, potentially making it the biggest deal in mainland China so far this year.

Separately, Golden Dragon Precise Copper Tube Group Inc said it aims to raise 3.5 billion yuan in a Shanghai IPO.

Greece has completed a huge exchange of government debt held by private creditors worth nearly 199 billion euros (US$262 billion), the finance ministry said. “Following the final settlement, the Republic will have restructured approximately 199 billion euros (96.9 percent) of the total face amount of bonds eligible to participate,” the ministry said yesterday after the end of the third and final phase of the exchange. The swap initiated in February cuts some 106.5 billion euros of Greece’s near- and midterm debt of over 350 billion euros, with investors losing most of their investment in Greek government bonds as a result of the swap.

“The only answer is to persevere.”

The ECB had played its part in buying governments time.

“Our LTROs have been quite timely and successful. If the only thing we had achieved is to buy time, which by the way is not the only thing we achieved, we would have been successful. I think buying time is not a minor achievement,” Draghi said.

President Hu Jintao

Shaky economy

Draghi throws crisis ball back to governments European Central Bank chief calls for a ‘growth compact’ as the sovereign debt crisis weighs on the euro-area economy Robin Emmott

E

uropean Central Bank President Mario Draghi gave no indication yesterday that the ECB was poised to provide more support for banks or governments but also said the time was not right to consider rolling back its crisisfighting measures.

There are growing expectations in financial markets that the ECB will have to ride to the rescue again with Spain under intense pressure, the Dutch government having collapsed over budget plans and latest data showing the euro zone is being

driven back into recession.

The word from the currency bloc’s central bankers is very different having created more than a trillion euros of low-cast, three-year money via so-called LTROs to avert a credit crunch, governments and banks have been given space to cut debt and clean up balance sheets.

Draghi rammed home that message in an address to the European Parliament’s economic committee.

“Now, the ball is entirely, squarely in the court of governments and banks,” he said.

UK economy in double-dip recession The economy has returned to recession, after shrinking by 0.2 percent in the first three months

B

ritain’s economy has fallen into its second recession since the financial crisis after a shock contraction at the start of 2012, heaping pressure on Prime Minister David Cameron’s government as it reels from a series of political missteps.

Britain’s Conservative-Liberal Democrat coalition has seen its support crumble after weeks of criticism over unpopular tax measures in last month’s budget, and is under further pressure from revelations about its close links with media tycoon Rupert Murdoch.

With local elections taking place on May 3, there could hardly be worse timing for yesterday’s news from the Office for National Statistics that

Britain’s gross domestic product fell 0.2 percent in the first quarter of 2012 on top of a 0.3 percent decline at the end of 2011.

Most economists had expected Britain’s economy to eke out modest growth in early 2012, but these forecasts were upset by the biggest fall in construction output in three years, coupled with a slump in financial services and oil and gas extraction.

Cameron said the figures were “very, very disappointing”.

He told parliament: “I don’t seek to excuse them. I don’t see to try to explain them away. There is no complacency at all in this government in dealing with what is a very tough situation that frankly has just got tougher.”

However, he added that any “exit strategy” from the ECB’s emergency measures, something Bundesbank chief Jens Weidmann and others have said should be discussed, was premature given weak economic conditions.

Draghi said banks must strengthen their finances further, including by retaining earning and bonus payments, while governments must stick with fiscal austerity drives which in some cases are driving countries deep into recession.

“We are just in the middle of the river that we are crossing,” he said.

The government desperately needs growth to achieve its overriding goal of eliminating Britain’s large budget deficit over the next five years. But this will be a challenge as many of Britain’s European trading partners are already in recession.

The figures pose a conundrum for the Bank of England, which had appeared poised to end its second round of quantitative easing asset buying, having said that it was more persuaded by survey evidence

The euro zone’s business slump deepened at a far faster pace than expected in April, data showed on Monday, suggesting the economy will stay in recession at least until the second half of the year.

Draghi conceded recent data had been mixed though he expected overseas demand and the ECB’s still very low interest rates to support growth.

“At the same time, downside risks relate in particular to a renewed intensification of tensions in euro area sovereign debt markets and their potential spillover to the real economy,” he said.

Despite the political stand-off in the Netherlands, the immediate pressure is off. Spanish and Italian 10-year government bond yields fell on Wednesday and are both comfortably below the 6 percent mark which starts to flash danger signals.

ECB Executive Board Member Jose Manuel Gonzalez-Paramo said Spain would not find it hard to meet its financing needs for the rest of the year despite rising borrowing costs.

Draghi said the bond-buying scheme was “neither eternal nor infinite” while Bundesbank board member Andreas Dombret said banks should not rely on the ECB providing unlimited liquidity as an alternative to adjusting their business practices as the policy will be removed before it creates risks to financial stability.

Reuters

that the underlying economy was strengthening.

“This could be something of a game changer for monetary policy,” said Investec economist Philip Shaw.

“With the weakness in the economy pervasive ... there is a genuine debate to be had over whether it is wise to suspend QE.” Gilt prices rallied and sterling fell more than half a cent against the dollar after the data.

A sharp fall in construction output was behind the surprise contraction

Reuters