Macau Business Daily, April 4, 2012 by Business Daily

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Home prices stubbornly high Measures to curb speculation have slowed sales but many would-be buyers are still priced out of the market as prices of residential units continue to rise

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Casino stocks up on Cotai hopes

Gov’t readmits bidder in wastewater tender Page 6

Ching Ming visitors flood in

he Sino-Belgian consortium that was wrongfully excluded from a tender to operate the Macau peninsula wastewater treatment plant was readmitted by the Infrastructure Development Office. But, ten days after local companies were notified, Waterleau Group has yet to be officially informed of the decision, and the lawyer did not rule out going back to court to have the decision enforced. Waterleau is wary of the government’s intention, after a controversial earlier opening of a bid from Austro-Indian company Va Tech Wabag Ltd., which the courts say was also wrongfully excluded.The two bidders who won earlier

No condo sales for Four Seasons Macao

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court battles to overturn their exclusion from the tender are accusing the government of ignoring verdicts from the Court of Final Appeals, while trying not to have to put the contract out to tender again or strike a compensation deal. The Infrastructure Development Office remains mum but the consortium that is currently running the plant downplayed the decision. CESL Asia is confident that it will be allowed to continue operating the plant, even though the adjudication contract has yet to be signed. In the meantime the modernisation of the plant remains on hold as legal disputes continue. More on page 3

China more than doubles foreign investor quota

hina more than doubled the amount overseas investors can pump into its capital markets to US$80 billion (MOP640 billion) as Premier Wen Jiabao signalled that further measures to support the world’s second-largest economy will be taken soon. The Securities Regulatory Commission announced a US$50 billion increase in quotas for qualified foreign institutional investors from a cap of US$30 billion now, according to a statement on its website yesterday. Off-shore investors will also be allowed to pump an extra RMB50 billion (MOP60.6 billion) into the country, Bloomberg reported. Premier Wen is seeking to attract more international investment as the economy cools, prompting the benchmark Shanghai Composite Index to slump 24 percent in the past year. Gross domestic product probably expanded 8.4 percent in the first quarter from a year earlier, according to the median estimate of analysts surveyed by Bloomberg, down from 8.9 percent in the fourth quarter. “We should come out with a fine-tuning of policies as soon as possible, in response to changes in the situation,” Wen said in a meeting with local government officials in Fuzhou yesterday. A Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics showed manufacturing contracting and export orders falling, while China had its largest trade deficit since at least 1989 in February. Exports fell for the first time in two years in January.

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Malaysia eyes local trade hub Brought to you by

HANG SENG INDEX 20800 20760 20720 20680 20640 20600

April 3

HSI - Movers Name

%Day

China Overseqas Land

5.32

China Resources Land

5.11

Want Want China

4.66

Hankg Lung Properties

4.00

Hengan International

3.75

Tingyi Cayman Islands

-1.34

Cathay Pacific

-1.14

China Resources Power

-0.71

CLP Hold

-0.37

MTR Corp

-0.36

Source: Bloomberg

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business daily April 4, 2012

MACAU the agency has had fewer clients. The Kam Chun Agency spokesman says she has had just two transactions this month. “The residential market in Macau is expected to remain subdued in the immediate future, with weaker investor sentiment and tighter bank credit availability,” says Mr Wong of Jones Lang Lasalle.

Old vacancies

Macau residents are still facing difficult choices on whether to pay a high first instalment and take on a heavy mortgage to buy a home

Despite bid to cool market home prices stay too high Measures to curb speculation have slowed sales but many would-be buyers are still priced out of the market by Kelsey Wilhelm

Tony Lai

kelsey.wilhelm@macaubusinessdaily.com tony.lai@macaubusinessdaily.com

he Special Stamp Duty law, passed by Macau’s Legislative Assembly eight months ago to cool the real estate market, has delivered ambiguous results. Although transactions have slowed, the prices of residential units continue to rise, according to data from the Macau Statistics and Census Service. The legislation, along with eight other regulations, was passed unanimously on a proposal from Chief Executive Fernando Chui Sai On. It was intended to cool down the overheated real estate market, lessen shortterm and speculative investments and, importantly, make it easier for Macau citizens to buy houses. The real estate market is “cooling down”, says Jeff Wong, head of residential at Jones Lang Lasalle, but this “emergency measure” exhibits the kind of government intervention that cannot go on forever, particularly as Macau emerges as an international city. The effect of the legislation showed in the third quarter of last year with a 73.4-percent quarter-on-quarter drop in sales. Just 606 residential units were sold in October, the lowest figure since May 2009. But prices in the mass and medium residential market have increased by 10.6 percent year-on-year, with high-end residential prices rising 15.2 percent. According to official data, the average price per square metre stood at MOP41,201 (US$5,151) in February, with the average transaction area at around 76 square metres. In the Macau peninsula that

average figure drops slightly to MOP39,430, although it rises to MOP46,533 in Coloane. Sales data for Coloane has been influenced by the sale of “duplex” style, high-end apartments at new projects such as One Oasis. This luxury-oriented housing project boasted sales of 700 units on the first day of its launch, including pre-sales. “It’s a big commitment for people to buy property here, especially (since) the amount or rate is quite substantial,” says Mr Wong.

General decline The actual number of transactions has fallen substantially. The year-

Key points Special stamp duty: government intervention that cannot go on forever, realtor says Average resident unable to afford city’s new highend projects Share of monthly household income for housing instalments could top 50 percent

on-year values have almost halved, with 15,837 units sold last year, compared with 31,246 transactions the year before. The special duty has undoubtedly had an effect. The penalties on successive short-term transactions, such as a 20-per-cent tax on property sold within one year of its purchase, closed the doors to some but has failed to open them to Macau buyers. With a median monthly income of MOP10,000, the average wage earner is unable to afford more than a corner of a room in one of the city’s new high-end projects. The limits on duty for properties up to MOP3 million are one move to enable residents the chance to buy a home. Most new housing projects, such as La Baie du Noble and The Bayview in the Areia Preta region, tend to primarily offer bigger T3style apartments in the range of MOP3 to 6 million. Even they may be out of reach for many would-be buyers. A spokesman from Shun Wing Real Estate Agency said residents cannot afford the first instalment of about MOP1 million required on a MOP3million flat. In fact, limits on mortgage loans from the banks, which conduct their own real estate valuations, are often on the low side and increase the amount required for a down payment. Add the new public housing projects to the equation, and most face difficult choices in deciding whether to buy. A spokesman for the Yee Wo property agency says that although this year’s prices remain on par with last year’s,

Jones Lang Lasalle estimated that 6,100 residential units would come onto the market in the next two years. Of these, 4,700 units have already been pre-sold, leaving just 1,400 units available for sale. More than 90 percent of last year’s 1,188 units were snapped up in presale arrangements as well. But other regulations, focused on upgrading buildings, are being enforced, pushing pre-sales in current projects back nearly two years, says Mr Wong. As of January, the actual number of building units started was at its lowest point for the past 12 months. It dropped to just seven buildings, the same as last December, and the lowest since last February. This pales in comparison to the explosion of growth seen in the same period of 2009, in which 1,361 buildings were started. March, five years ago, boasted 2,192 commencements. The number of completed buildings in January stands at 35, less than half the previous month and less than a tenth of the nearly 500 finished the same time last year. This seems the end of a cycle. The current pricing category of many of the recent buildings falls into the “luxury” category. ”People claim their project is luxury because they want to sell [at a] high price,” says Mr Wong. Asking prices start at HK$7,000 to 8,000 per square foot. “Middle-class medium standard” housing such as Nova City, says Mr Wong, begins at “around HK$3,800 to 4,000”. According to the statistics bureau, 12,457 residential units were vacant at the end of December. Though a record low, vacant units in the Macau peninsula saw a steady rise between June of 2008 and December 2010. Simultaneously, the number of vacant units in Taipa has fallen steadily, resting at the lowest recorded since 2004.

Bubble, no bubble Rose Lai, associate dean of research and development at the University of Macau’s Business Faculty, says there is a lack of force within the market to make the duty law and eight accompanying regulations effective. While “fine-tuning” can be beneficial, she says, it does not help residents invest because the market is “too hot already”. Ms Lai says the drop in actual transactions but lack of pricing change reflects the value of the apartments, which have improved in quality. But the expectations of both buyers and sellers may be running too high. She says that a bubble resistant to bursting could exist within the current housing market. “People say it [the bubble] is big because people cannot afford or, many people say, it’s very expensive, but this again comes to ... affordability,” she says. In a typical situation, she adds, 30 percent of the monthly household income goes for instalments. Amounts greater than 50 percent, which are the case in Hong Kong, may be required in the current conditions, she says. “Macau seems to be going in that direction.”

business daily April 4, 2012 | 3

Photo: Manuel Cardoso

MACAU

Waterleau suspects that its readmiss ion to the bidding to run the peninsu la’s wastewater plant is just for the sake of appearances.

Gov’t readmits bidder in wastewater tender A bidder readmitted into the Macau wastewater plant tender has yet to be notified. Court action remains an option by Vítor Quintã

vitorquinta@macaubusinessdaily.com

he Infrastructure Development Office has admitted a bid from a Sino-Belgian consortium to operate the Macau peninsula wastewater treatment plant, having at first excluded it – wrongfully, the courts say. But the consortium, led by Waterleau Group NV and including Beijing Origin Water Technology Co. Ltd., has yet to be notified of the decision to readmit it to the bid, the consortium’s lawyer, Camilo Ribeirinha, told Business Daily. In the meantime, the contract has been given to another bidder. A letter of notification that Business Daily has seen indicates that Chief Executive Fernando Chui Sai On accepted a recommendation from the Infrastructure Development Office on March 8 to readmit the consortium. Macau bidders were told of the readmission of the Sino-Belgian consortium on March 26. The delay in informing the consortium is “very strange”, Mr Ribeirinha said. “It will delay everything that comes next”.

In the meantime, the five-year contract, worth MOP604.9 million (US$75.64 million), has been 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 is operating the plant, even though the contract has yet to be signed. However, the modernisation of the plant remains on hold as legal disputes continue. CESL Asia has yet to receive one pataca for its work. Mr Ribeirinha said Waterleau would wait until it receives official notification before deciding on its next step. He said the company was worried that its readmission is “just for the sake of appearances”. Last November the government opened another bid, by Austro-Indian company Va Tech Wabag Ltd., which the courts say was also wrongfully excluded.

Va Tech Wabag said the government’s action in opening its bid was wrong, and alleged that the contract had already been awarded. The Infrastructure Development Office spokesperson declined to comment on whether Va Tech Wabag’s bid had been admitted or rejected. The Court of Final Ap-

peal has ruled that the Waterleau bid and the Va Tech Wabag bid were both wrongfully excluded. Wabag Water Services (Macau) Ltd. managing director Sean Kilker, feels both bids “were treated differently and no reason was given”. He said the government had decided “not to have another farce of a meeting in order to prevent further embarrassment”. The difference in treatment may be linked to Wabag’s bid being the most expensive among the seven original bids and Waterleau’s being the cheapest. The government could put the contract out to tender again or strike a compensation deal with Water-

leau and Va Tech Wabag. Waterleau has said it spent more than MOP1 million preparing its bid. But Mr Kilker believes the government is trying to find a third way. “They are not really carrying out the court decision,” he said. Mr Ribeirinha said: “What they should do is to carry out the court decision and evaluate all the proposals before making a definite adjudication.” He did not rule out going back to court to have the decision enforced. CESL Asia is confident that it will be allowed to continue operating the Areia Preta plant, chief executive António Trindade said. “Even if you look at the past, it’s quite obvious that we put forward the best proposal when it comes to the technical solutions for wastewater treatment,” he said.

The March 26 notification says the decision to readmit Waterleau to the bidding was based on a recommendation by the Infrastructure Development Office which was accepted by the Chief Executive.Photo: Manuel Cardoso

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business daily April 4, 2012

macau

InBrief Casino stocks rise as Cotai ignites guessing game Melco to open Cambodia slots Entertainment Gaming Asia Inc. a subsidiary of the Lawrence Ho Yau Lung’s Melco Group, announced on Sunday its intention to open a 1,115 square metre slot hall in Poipot, Cambodia. The project is an expansion of an existing casino and includes 300 slot machines as well as entertainment and refreshment. The company will share the daily net win and operating costs with the casino owner with a 40 percent and 60 percent division, respectively.

Shares of all the Macau-based gaming operators rose in the first three months of this year By José I. Duarte jid@macaubusinessdaily.com

Stricter rules for Indonesian staff The Indonesia Government will introduce stricter measures for workers moving to Macau, according to the Jakarta Globe. The National Agency for the Placement and Protection of Indonesian Migrant Workers will require all migrant workers to submit online registration forms and receive training before determining placement costs abroad. The aim is to “improve the quality of the placement process,” said Arifin Purba, of the agency. Macau currently has 4,338 Indonesian non-resident workers, including 3,464 maids.

CTM waits for nod to lower line rentals Telecommunications operator CTM is waiting for government approval before it announces by how much it will lower fixed-line rentals. The company’s chief executive, Vandy Poon Fuk Hei, was quoted by the English-language newspaper Macau Post Daily as saying that CTM is considering lowering the rates for its leased lines. Mr Poon refused to give details on the company’s performance this year, according to the report. Although CTM held its general assembly on March 26, Mr Poon said the sole operator of fixed-line telecommunications would release financial details to the media at a “later time”.

asino stocks are widely considered a good bet. The evolution of share prices this year seems to confirm the perception. All shares of the Macau-based gaming operators listed on the Hong Kong Stock Market rose in the last quarter. Top performers Melco Crown Entertainment Ltd. and Galaxy Entertainment Group Ltd. saw their shares appreciate by more than 40 percent. Even shares in Wynn Macau Ltd., which registered the smallest growth of the operators, touched a respectable 14.7-percent growth rate.

The relatively lethargic performance of Wynn Macau cannot be separated from the threat of protracted legal battles. Japanese billionaire Kazuo Okada and Wynn Resorts chairman Steve Wynn are embroiled in court. More recently, as noted in Business Daily this week, an American pension fund went to court over Wynn’s pledge to donate to the University of Macau. The future for share prices, and market speculation more generally, is focused on developments on the Cotai Strip. Sands Cotai Central opens on April 11. In addition, MGM China

Gaming results: Market Share Per Operator 40 35

New labour boss steps in tomorrow

The new head of the Labour Affairs Bureau is set to assume office tomorrow. Wong Chi Hong (left), former head of the Human Resources Office will replace Shuen Ka Hung, who was reappointed as director of the Macau Productivity and Technology Transfer Centre. During the same ceremony Lou Soi Peng will take over the Human Resources Office. Ms Lou is currently one of the two vice-directors of the office.

27 HK

880 HK 6883 HK 1928 HK 2282 HK 1128 HK

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Holdings Ltd., SJM Holdings Ltd. and Wynn have pending applications for land on the strip. Last month, there were official comments that two of the applications might be approved this year. These comments are bound to drive speculation. Most analysts, though, are positive about the outlook for the segment. Morgan Stanley Research has revised this year’s growth estimate from 15 percent to 20 percent, driven mostly by the mass market. That portion of the market alone should grow by no less than 27 percent, according to Morgan Stanley’s analysts. These expectations seem conservative when compared with research published last month by Nomura or Credit Suisse. They say total revenue growth will hover between 25 and 30 percent. These expectations will keep pushing up stock prices. In its weekly valuation summary, Deutsche Bank recommends a “buy” for the three American operators, saying each has strong prospects for growth. Though the sector inspires optimism among investors and analysts, it is not immune to the market’s ebb and flow. At the end of the second quarter last year, almost all the stock prices were running higher than today, only to fall sharply in October. Despite a recovery since, the prices have not matched those levels.

business daily April 4, 2012 | 5

macau

No condo sales for Four Seasons Macao Government confirms no single unit deals on Cotai apartments but no date yet on alternatives By Alexandra Lages

fter more than a year of silence on the topic, Macau’s Land, Public Works and Transport Bureau has confirmed to Business Daily that Venetian Macao SA - a unit of Sands China cannot sell its Four Seasons apartments on Cotai as individual units. That method is also known as a condominium, ‘strata title’ or ‘horizontal property’ system. Land title rules in Macau are varied, complex and politicised. That’s had an effect on the contracts the Macau government has drawn up with gaming operators and what the operators can do with any real estate they build. In Las Vegas land title rules are less complex, allowing casino companies more easily to leverage their investments by leasing or selling holiday apartments. “In accordance with the provisions of the [Macau] gaming concession contract, the company is not allowed to sell in the form of horizontal property the apartments of the entertainment complex,” the Land, Public Works and Transport Bureau spokesman told Business Daily. “Any apartment hotel or hotel is a single building unit, so their rooms or suites cannot be submitted or subjected to the horizontal property system,” the bureau added. It didn’t say when Sands China would be allowed to start earning income from the apartment portion of the Four Seasons. The hotel and casino part has been open since August 2008. Sands’ parent Las Vegas Sands said in its 2011 annual

report it plans to ‘monetise’ the residential part by having it managed as serviced apartments and branded apartments by Four Seasons, which already has a management contract for the hotel portion. “Four Seasons Apartments will consist of approximately 1.0 million square feet of Four Seasons-serviced and -branded luxury apart-hotel units and common areas. We have completed the structural work of the tower and expect to monetise the units within the Four Seasons Apartments subject to market conditions and obtaining the relevant government approvals,” says LVS’s annual report. Building transmission Sands China told Business Daily in response to the Lands, Public Works and Transport Bureau statement: “We would like to confirm that we did not request, at any time, permission for the sale of the Four

‘We did not request, at any time, permission for the sale of the Four Seasons Hotel Macau.’ Sands China

Seasons Hotel Macau. “Venetian Cotai SA requested an authorisation from the Macau SAR government for the transmission of rights to the Apart-Hotel building. Any transmission will be of the Apart-Hotel building and not of any independent units within it,” added the spokesman. “There will not be a horizontal property regime at the building of the Apart-Hotel, and consequently, no independent units will exist.” Sands China added that the conveyance of the ApartHotel building will be made to a subsidiary of Venetian Cotai SA, with no other third parties involved. That may rule out a New York City-style co-operative – an option previously discussed by LVS management. In such cases a property remains a single unit, but a company or association is formed that issues shares entitling each member to use a portion of it. No real estate exceptions LVS confirmed in its annual report for 2011 that it has so far spent US$1.07 billion on the Four Seasons construction and will spend a further US$115 million on fitting out the apartments and on pre-opening costs. Rival Macau casino operator Melco Crown Entertainment considered building apartments at City of Dreams across the Cotai Strip from Four Seasons Macao - but dropped the idea. Last July Lawrence Ho Yau Lung, Co-Chairman of MPEL, told the media: “With regards to what we

call ‘Phase Three’ of development at City of Dreams - which was the old apartment hotel, in our last quarterly conference call about a month ago, I did address this topic and said ‘Look, I don’t think the Macau government should or will approve any sale of apartment hotels in Macau’. And we fully support that theory.” Macau gaming concessionaires have no automatic right to lease or sell real estate developed in the grounds of their casino resorts. Macau’s standard contract for gaming licensees states: “Casinos shall not be housed within any real estate… whereby the full ownership of

Photo: Manuel Cardoso

the real estate is not assigned to the Concessionaire”. But it adds special exceptions – what it refers to as “non-typical authorisation” are possible. “[Non-typical] authorisation may, in particular, impose the condition, in order to allow the casinos to revert to Macau Special Administrative Region, that the concessionaire shall purchase the properties in which the casinos are situated by one hundred and eighty days [prior to the expiry of the casino concession].” In Las Vegas Sands’ case that is June 26 2022. With Associate Editor

Buyers snap up 300 La Scala flats in 4 days

he first 300 flats to go on sale in the La Scala project in Taipa were sold within four days, the developer has said. The average price of the flat sold in the first pre-sale phase was MOP7,200 (US$900) per square foot and the flats range in size from 1,200 square feet to 3,000 square feet. The general manager of the sales division of developer Chinese Estates Holdings Ltd, Chung Chi Lam, told the Chinese-language Macau Daily News that most buyers intended to live in the flats. La Scala is a HK$20-billion (MOP 20.6 billion) residential project near the airport. Chinese Estates originally intended to put 100 flats on the market, with price tags starting at HK$13 million, but tripled the number to meet demand. About half of the buyers are wealthy Macau residents, one-third are from Hong Kong and the rest are mainland investors. Mr Chung said one mainland buyer spent more than MOP52 million on two connected flats, each with an area greater than 3,000 square feet. The apartment will be used as investment property. The pair of apartments were sold at an average price of MOP8,200 per square foot, an amount that was about 10 percent to 15 percent lower than forecast, says the regional director of Centaline Macau, Sek Po Tak. He said the pre-sale phase had attracted many buyers who usually specialise in the second-hand property market. La Scala will have 899 flats in nine towers when its construction is complete in 2014. C.L.

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business daily April 4, 2012

MACAU

Ching Ming

visitors flood in, residents fly out

As tourists descend on the city for the Ching Ming holiday, residents head for the mainland, Thailand or Taiwan

he Ching Ming festival, celebrated today, is expected to increase the number of passengers arriving in Macau each day by three percent to five percent, the Public Security Police say. Simultaneously, Macau residents are leaving on package tours or making last-minute arrangements with travel agencies to get out of the city. The mainland is both the main origin and main destination of travellers during the Ching Ming period. The mainland was the source of nearly 1.3 million visitors for Ching Ming last year, more than half of the total. More than 400,000 entered in organised tour groups.

The mainland was the destination for 15,289 people leaving Macau in tour groups and almost 17,500 residents that left as individual travellers. Thailand was the next most popular destination for people that left Macau in groups. Another 10,000 people travelled as individuals to Taiwan. Tourists arriving in Macau for Ching Ming this year will find that a hotel room costs, on average, MOP1,000 (US$125) a night more than usual, the Chinese-language Macau Daily News reported. Five-star hotels typically charge MOP2,000 to MOP3,000 a night for a “grand” room, a charge that excludes a 15-percent tax.

A suite at the Grand Lisboa usually costs MOP3,500 a night on weekdays. A deluxe suite at the Regency Hotel costs a minimum of MOP2,180 a night. The Statistics and Census Bureau says the city’s hotels were 84.5 percent full, on average, in April last year. At five-star hotels the occupancy rate was 87.79 percent last April, and a room cost, on average, of

MOP1,592 a night. A room cost MOP784 in a fourstar hotel and MOP901 in a threestar hotel. Most tourists in Macau come from the mainland, but in April last year about 700,000 of the more than 2.2 million visitors to the city came from Hong Kong, about 110,000 from Taiwan, and 27,122 from Malaysia. K.W./C.L.

MOP 1,000 Hotel rooms average price during the Ching Ming holiday

Weather Beijing Changchun 5/-7 o C

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MACAU

City’s newest graduates chase more than money

The University of Macau launches an initiative to help graduates track down jobs with prospective employers by Terina Cao tting@macaubusinessdaily.com

anagers may have a different view but Macau’s newest university graduates are not merely focused on salary when looking for their first jobs. They also aim for a position that puts them on the fast track to promotions. To help graduates access the latest information on the job market, the University of Macau Alumni Association has joined an online site to organise the first Annual Macau Campus Joint Recruitment Event. The three-month event seeks to create a platform that will connect employers and job hunters. “Many organisations in Macau are seeking an effective way to spread their needs and organisational culture, which can attract more

outstanding graduating students,” MSS Recruitment Managing Director Jiji Tu said at the event’s opening on Monday. Fourth-year finance student Chan Ieng In said she preferred to hunt down work by asking her friends. The online recruitment fair took more time to come up with job offers. Ms Chan has already had some success. She registered at an online site and has an offer from a bank. “I will not take this offer because it’s a bank teller’s position, which, I think, is high-school student work”, she said. “Everyone says it’s easy to find a job in Macau,” she added. “Actually, it’s not easy to find a good job, with good career development, a job that you like or suits you.”

Minimum pay Many students set MOP10,000 (US$1,250) as the lowest acceptable salary. But salary was not everything for most of the graduates Business Daily spoke to. “Salary is not the most important consideration,” sociology graduate Dawning Lee said. “A good career path and promoting opportunity are my priorities. It’s okay for me to get MOP8,000 per month at the beginning if I can earn more and more in the future.” A recent survey by job agency macauHR found that 65 percent of this year’s university graduates expected starting monthly salaries between MOP11,000 and MOP15,000. Most employers were prepared to offer between MOP8,000 and

MOP11,000 for an entry-level job. Ms Tu said recent graduates should pay more attention to a “good career path” and personal interests than “a good salary”. “Diligent and hard-working are the characteristics many companies look for when recruiting new graduates,” she said. “These traits can be seen from parttime jobs the students might have done before and extra-curricular activities they took part in.” Work engagement is at the top of the eight elements to success listed by Ip Kai Ming, the director of the Macau Association of Banks. According to “Macau Corporate Hiring Listing for Recent Graduates 2012”, a booklet released at the recruitment event, initiative is also high on the list.

Malaysia sees in Macau a springboard for trade Trade between the two partners has increased and new opportunities point to future growth By Cláudia Aranda claudiaaranda@macaubusinessdaily.com

Malaysia wants to boost economic and commercial relations with Macau and is eyeing the territory as a launching pad into increased trade with the mainland and the Portuguese-speaking countries of Angola, Cape Verde, Guinea-Bissau, Mozambique and Portugal. Edison Choong Wan Sern, trade consul of the Consulate General of Malaysia in Hong Kong, told Business Daily “there are new business opportunities” mostly related to joint ventures. He said education and healthcare services, tourism and cultural exports might also be developed. Growth was a likely by-product of increased interaction and joint trade programmes between Malaysia and Macau. Data from Macau’s Statistics and Census Service show that trade relations between the two sides have deepened. Imports from Malaysia have increased by 27.7 percent since 2010, to MOP691.6 million (US$86.5 million) last year, while exports to it grew from MOP 22.4 million to MOP40.6 million. Food products made up the bulk of imports from Malaysia in 2010 and last year tobacco was Macau’s main export, worth about MOP16 million. Next in exports were MOP14.2-million worth of live gaming equipment and MOP1 million of card shuffling and dealing appliances. Mr Choong said 18 companies from Malaysia presented products at the 2012 Macau International Environmental Co-operation Forum last weekend, where sales were reported to have reached US$10 million.

Imports from Malaysia have increased by 27.7 percent to MOP691.6 million last year

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business daily April 4, 2012

GREATER CHINA

Hong Kong billionaires claim innocence Billionaire brothers make first appearance since arrests By Alison Leung

Sun Hung Kai Properties Ltd. executives, Raymond Kwok (left) and Thomas Kwok have been released on bail

he billionaire brothers and co-chairmen of Hong Kong developer Sun Hung Kai Properties Ltd denied any wrongdoing and insisted it was business as usual yesterday, in their first public appearance since their arrest

on suspicion of corruption. Raymond and Thomas Kwok were arrested last week by Hong Kong’s Independent Commission Against Corruption (ICAC) in the agency’s biggest investigation since it was set up in 1974 to root out graft in the

government and police. “I can tell you definitely that I personally do not do anything wrong and I believe that Thomas Kwok has done nothing wrong,” Raymond Kwok told reporters as the pair faced the media at the company’s headquarters in Hong Kong’s busy Wan Chai district. The brothers, worth US$18.3 billion according to Forbes magazine, said the investigation would not affect business decisions at Asia’s

largest developer, and that sales and development plans would go ahead as scheduled. The company owns some of the former British colony’s largest properties, including its tallest building, the International Commerce Centre that houses Morgan Stanley and the Ritz Carlton. The arrests last Thursday of the two brothers, along with Rafael Hui, a former No. 2 official in the Hong Kong government, came days after the election of Beijing-loyalist Leung Chun-ying as the city’s next leader, pledged to address soaring property prices. The Hong Kong public has been increasingly aggrieved at the perceived cosy ties between government and big business, and some observers have interpreted the arrests as a first move in an attempt to rein in the power of the monied elite. The brothers and Hui were released on bail and have not been charged with any offence. But last week’s event dented investor confidence and nearly US$5 billion in Sun Hung Kai’s market value was wiped out when trading in the company’s shares resumed on Friday. Yesterday the stock rose about 2 percent to around HK$96.25, still well below HK$111.10 when the company halted trading in its shares last Thursday. The benchmark Hong Kong share index closed up 1.3 percent. Sun Hung Kai is a family-run conglomerate, founded by the Kwoks’ father, and owns phone, refuse and bus businesses in Hong Kong. In the past few weeks, Sun Hung Kai has also disclosed that Thomas Chan Kui-yuen, in charge of project planning and land acquisitions, had been arrested for suspected bribery. Reuters

Longreach exploring Taiwan bank exit By Denny Thomas

rivate equity firm Longreach Group has hired Morgan Stanley to explore the sale of its majority stake in Taiwanese lender EnTie Commercial Bank Ltd, a source familiar with the matter told Reuters. Longreach bought nearly 51 percent of EnTie in 2007 for T$18.8 billion (US$637 million) amid a rush of private equity deals in Taiwan’s banking industry. The value of the stake has dropped to about US$440 million based on Monday’s closing price. Longreach has not decided on an exit strategy and there is no process underway to find a buyer, the source added. But the hiring of an investment bank underscores the private equity firm’s desire to cash in on its investment. The source declined to be identified as the decision was not public. Longreach officials were not available for immediate comment. EnTie and Morgan Stanley declined to comment. The Hong Kong-based firm has previously said it is raising a new fund, targeting US$750 million. It received commitments for about US$125 million last year. The sale could attract interest from Japanese and Chinese banks keen to expand their Asian footprint, separate sources said. Still, domestic Taiwanese banks may have an edge over foreign investors, they added.

Most private equity investments in Taiwan’s financial sector were aimed at rebuilding the island’s financial sector, which was hit hard by a consumer lending crisis beginning in 2005. Buyout firms such as TPG, Longreach and Carlyle Group hoped low valuations, China’s growth prospects and a local consolidation wave would boost investment prospects, but the anticipated benefits have largely failed to materialise. Taiwanese banks’ return on assets in 2011 was 0.53 percent - the lowest among banks in Asia excluding Japan, according to Fitch Ratings in Taiwan. They also have with little in the way of overseas operations to fuel growth. Some other private equity firms are also planning to exit their bank investments in Taiwan. Carlyle Group, which owns about 40 percent of Ta Chong Commercial Bank, is also mulling sale of its stake in the mid-sized lender. TPG in December cut its stake in Taishin Financial to 6.55 percent from 14.82 percent, including selling a 3.45 percent part to Cathay Financial, Taiwan’s largest financial holding firm, for US$155 million. The planned sale come even as buyout funds have faced political and regulatory hurdles from their exits in Taiwan. Reuters

9 |

business daily April 4, 2012

GREATER CHINA

Beijing may allow more InBrief overseas investment Mainland authorities may ease rules to spur overseas investment to help reduce imbalances from net capital inflows By Kevin Yao

China sees 8.4 pct growth in Q1 China’s economy may have grown 8.4 percent in the first quarter from the year-earlier period, said Zhang Xiaoqiang, a vice head of the National Development and Reform Commission, citing initial figures from a “related research agency”. “It will take great effort to achieve the annual target for economic growth by adopting a prudent monetary policy and proactive fiscal policy this year,” Zhang said in a speech at the Boao Forum. The Q1 figure Zhang cited was broadly in line with estimates of private economists. The National Bureau of Statistics is due to release the first-quarter economic growth data on April 13.

Google starts building data centre in Taiwan

Central bank head Zhou Xiaochuan (centre) says China will encourage capital outflows

hina may loosen overseas investment rules for private investors, the country’s central bank chief said yesterday, less than a week after the government gave the go-ahead for pilot financial reforms in a coastal city. China’s State Council last week said it would study allowing direct investments overseas by residents in the eastern Chinese city of Wenzhou as part of a “general financial reform zone” experiment. That was seen as a significant step toward liberalising capital account transactions. Speaking at the 2012 Boao Forum for Asia on China’s southern Hainan island, central bank head Zhou Xiaochuan said China encouraged capital outflows, which would help reduce imbalances caused by net capital inflows. “There may be further deregulation to allow Chinese enterprises and residents more convenience in (making) overseas investment,” Zhou said, without saying whether any reforms would be limited to Wenzhou or expanded to other areas. Zhou also warned that the global economy could slip back into recession, and reiterated that China would use a combination of monetary tools to tackle inflation and steer towards a soft landing. “We are still in the global financial crisis period, there are new elements that may bring the global economy back to recession,” he said. China’s central bank is seen as on track to ease policy as the world’s second-largest economy encounters stiff global headwinds, but it has stuck to a gradual approach due to concern over inflation and property risks. Annual economic growth is widely

expected to slow to just over 8 percent in the first quarter of 2012 - the fifth consecutive quarter of lower pace expansion - while annual inflation cooled to a 20-month low of 3.2 percent in February. Allowing private investors to lend via legal entities will help the government tame the country’s underground lending market, where annualised interest rates can reach 100 percent.

The idea of a financial reform zone emerged in late 2011 after media reports about Wenzhou entrepreneurs who had gone into hiding or committed suicide after they were unable to repay high interest under-the-counter loans. The People’s Bank of China estimated that market at 2.4 trillion yuan as the end of March 2010, or 5.6 percent of China’s total lending. Reuters

US Internet giant Google yesterday started building one of its three planned data centres in Asia to meet fast growing online demand from the region, the company said. “More new Internet users are coming online everyday here in Asia than anywhere else in the world,” Daniel Alegre of Google said during a ceremony to begin work on the US$300 million, 15 hectare (37 acre) site in Changhua county, western Taiwan. Construction of the two other data centres for the region - in Singapore and Hong Kong - started in December and will cost US$700 million in total.

Kunlun seeks about US$1.4bn in share sale Kunlun Energy Co., a Chinese gas supplier controlled by PetroChina Co., is seeking about US$1.4 billion in a stock offering to accelerate its liquefied-natural gas expansion. A total of 800 million primary shares are being offered at HK$13 to HK$13.50 each, a discount of as much as 8.3 percent to its closing price on Monday, according to a term sheet for the sale obtained by Bloomberg News. At the high end of the range, the sale would fetch HK$10.8 billion (US$1.4 billion). The share sale comes as Kunlun seeks to become the country’s biggest onshore gas supplier and producer within the next two years.

10 |

business daily April 4, 2012

ASIA Seoul shares rise to 8-month closing high Seoul shares rallied to a eight-month closing high yesterday, tracking broad gains in global equities after strong manufacturing data from the United States provided a solid indication of recovery in global demand. Automakers soared, with Hyundai Motor Co jumping 6.25 percent while Kia Motors Corp climbed 3.43 percent, hitting multi-month highs on robust offshore sales and a rosy firstquarter earnings outlook. The Korea Composite Stock Price Index (KOSPI) climbed 0.99 percent to close at 2,049.28 points.

Malaysia seeks to avoid subprime crisis Housing loan applications jumped 46 percent in February from a year earlier Manirajan Ramasamy and Barry Porter

alaysia is taking “strict measures” to avoid a U.S.style subprime mortgage lending crisis after reporting an average 6.6 percent jump in home prices in the fourth quarter of last year, an official said. “The government is worried about property prices causing a bubble and we don’t want banks to overlend to the property sector,” Donald Lim, deputy finance minister, told reporters in Kuala Lumpur today. “We are seeing a lot of foreigners from Middle East and China keen to buy properties in Malaysia.” Housing loan applications jumped 46 percent in February from a year earlier to 14.96 billion ringgit

(US$4.9 billion), according to data on the central bank’s website. The government doesn’t want to raise the risk of non-performing loans at a time when a faltering global recovery threatens Malaysia’s economy. Bank Negara Malaysia, the central bank, tightened mortgage lending rules in November 2010, limiting the loan-to-value ratio for people taking third mortgages to buy homes. Hong Kong and Singapore have also taken steps to rein in the housing markets to tame inflation. “With the tightening in Hong Kong and Singapore, there is certainly a spill-over to the Malaysia property market, particularly Kuala Lumpur,” Irvin Seah, a

Singapore-based economist at DBS Group Holdings Ltd., said in a phone interview. “Bank Negara has always been worried about financial imbalances.” Malaysia has no plans to require banks to hold more capital to support housing loans to reduce risk, Governor Zeti Akhtar Aziz told reporters on March 9, when the central bank left borrowing costs unchanged at 3 percent. Bank Negara tightened credit card lending rules in March 2011, capping limits for lower-income earners as a pre-emptive move to ensure household debts remain

“resilient,” Deputy Governor Nor Shamsiah Mohd Yunus said at the time. The Malaysian banking industry’s gross impaired-loans ratio may rise to 3 percent in 2012 from 2.7 percent last year, Wong Yin Ching, Rating Agency Malaysia Bhd.’s head of financial institution ratings, said in a report on March 20. The level of household debt is of concern, though not an imminent danger, with banks holding a “comfortable” loans-to-deposits ratio of 76 percent at the end of January, he said. Bloomberg

business daily April 4, 2012 | 11

ASIA

InBrief

Asian stocks on expected recovery Signs of recovery in the U.S. and China, coupled with the possibility of additional monetary easing, are increasing business confidence and pushing up Asian stocks higher. The trend has been bucked in Japan, where stocks reacted negatively to the Yen appreciation, which has increased pressure on the country’s exporters.

Japan’s monetary base slides in March

Indonesia sells US$1bn of debt

First drop in three years sparks call for central bank to do more to end deflation

Indonesia’s government

Masahiro Hidaka and Toru Fujioka

apan’s liquidity supply dropped in March for the first time in more than three years, fuelling politicians’ complaints that the central bank should be doing more to end deflation. The monetary base fell 0.2 percent from a year earlier after climbing 11.3 percent in the previous month, a Bank of Japan report showed yesterday. The average amount outstanding was 112.46 trillion yen (US$1.37 trillion). Governor Masaaki Shirakawa and his officials have pledged “powerful easing” until 1 percent inflation is in sight. “This raises the question of how serious the BOJ is about monetary easing,” said Yasuhide Yajima, chief economist at NLI Research Institute Ltd. in Tokyo. “This may give a reason for politicians to put more pressure on the BOJ.” The monetary base is the currency supplied by the BOJ and its total current-account balance as well as banknotes and coins in circulation. It surged 16.9 percent in March 2011 and peaked the following month after the BOJ poured a record amount of cash into the financial system to stabilise the economy after a record earthquake and tsunami.

Japan’s monetary base fell 0.2 percent from a year earlier, according to a Bank of Japan report Monetary tightening “A shrinking monetary base is equivalent to monetary tightening,” Yuji Shimanaka, chief economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, said before the report was released. “They may fail to win trust for accommodative monetary policy operations and that could bring back a situation where we have deflation with a strong yen in the worst case scenario.” In Japan, Deputy Governor Hirohide Yamaguchi said yesterday the central bank isn’t targeting monetary base levels when a lawmaker asked why the amount shrank by more than 6 trillion yen from January to February. Even with the recent declines, the supply of currency remains near the levels that existed when the BOJ conducted quantitative easing from

Japanese pension fund to raise cash

apan’s public pension fund, the world’s largest, plans to raise about US$108 billion from the sale of assets, including Japanese government bonds, to generate cash for pension payouts this year. The Government Pension Investment Fund (GPIF) has become a net seller of assets to raise cash for pension payouts in recent years after inflows from loans being paid back by public entities stopped. The public pension fund, which is under pressure to raise returns to cope with a rapidly ageing population, is closely watched by markets as its $1.33 trillion portfolio is near-

Japan’s public pension fund is under pressure to raise returns to cope with a rapidly ageing population

March 2001 to March 2006. “This is very important,” Yoichi Kaneko, a lawmaker in the ruling Democratic Party of Japan, told Yamaguchi in a parliamentary hearing. This means that while promising a strong easing stance, “the BOJ has sapped money from the market,” he said.

Lawmaker Scrutiny

sold 9 trillion rupiah (US$1 billion) of bonds and bills in an auction yesterday, exceeding the indicative target of 6 trillion rupiah, the Finance Ministry’s debt management office said in a statement on its website. The government received total incoming bids of 19.49 trillion rupiah, it said. Rahmat Waluyanto, director general at the Finance Ministry’s debt management office said earlier total incoming bids were 19.9 trillion rupiah.

S. Korea’s Kyobo considers bid for ING South Korea’s third-largest life

BOJ policy makers have come under lawmaker scrutiny in recent weeks. Kiyohiko Nishimura, the bank’s other deputy, was asked by lawmakers about the idea of adopting a Federal Reserve-style “operation twist,” swapping short-term bonds for longer-dated securities. Sentiment among Japan’s largest manufacturers failed to improve in March as executives predicted the yen will rebound against the dollar, hurting exporters’ sales and profits, the BOJ’s quarterly Tankan index showed yesterday. “Business conditions aren’t good enough to convince companies to be optimistic,” Yajima said. “There’s room for the BOJ to do more to ensure a recovery.”

insurer, Kyobo Life Insurance, said yesterday it was considering a bid for the Asian assets of Dutch giant ING Groep NV. Kyobo Life Insurance is the latest South Korean company to show interest in the operations, which some analysts say could cost around US$6 billion if bought whole. “We have decided to participate (in the bidding) and will name advisors soon,” Kyobo spokesman Park ChiSoo told Dow Jones Newswires. The news comes after KB Financial Group said it is interested only in ING’s assets in South Korea as it seeks to diversify its business portfolio. ING has yet to declare if it will sell its Korean operations separately.

Bloomberg

ly as big as the economy of Spain. The GPIF invests reserves of national and corporate pension plans, allocating about two-thirds of its assets to Japanese government bonds (JGBs), where the yield on benchmark 10-year bonds languishes around 1 percent. Its holding of foreign shares helped the fund generate a positive investment return in the October-December quarter of 0.58 percent, for an investment gain of 619 billion yen. However, its rate of return in the nine months to December was minus 2.5 percent, losing 2.87 trillion yen (US$35 billion). The fund currently invests in four asset classes - domestic bonds, domestic stocks, foreign stocks and foreign bonds - and plans to invest in emerging market equities. Reuters

Temasek Holdings invests in gas Temasek, the investing arm of Singapore, in association with a private equity firm, RRJ Capital, bought almost half of the shares Kunlun Energy, a subsidiary of PetroChina Co. The company is expected to become a major investor in China’s natural gas sector. Foreign companies have often expressed strong interest in becoming involved in the potentially lucrative exploitation of China’s resources. According to sources quoted by Reuters, 140 investors bought shares in the offering of 800 million new shares.

12 |

business daily April 4, 2012

MARKETS Hang seng index - Last 6 months

Hang SENG INDEX

22000

Price

Day %

VOLUME

(H) 52 W

(L) 52 W

28.45

1.246

39433552

29.9

19.84

ALUMINUM CORP OF CHINA LTD-H

3.74

1.081

13196000

7.8

3.2

BANK OF CHINA LTD-H

3.13

1.623

348028583

4.5

2.2

3328

BANK OF COMMUNICATIONS CO-H

5.87

0.514

51585214

7.845

4.15

BANK OF EAST ASIA

29.2

-1.518

2564084

34.45

21.85

1880

BELLE INTERNATIONAL HOLDINGS

13.94

-0.429

8855820

17.54

11.38

2388

BOC HONG KONG HOLDINGS LTD

21.45

-0.694

14586947

25.6

14.24

293

CATHAY PACIFIC AIRWAYS

14.38

-2.575

17829313

20.15

11.8

CHEUNG KONG HOLDINGS LTD

100.3

-2.998

13813594

131.8

79.1

1898

CHINA COAL ENERGY CO-H

8.71

-0.229

27535221

11.66

6.59

939

CHINA CONSTRUCTION BANK-H

0.503

218484625

7.58

4.41

2628

CHINA LIFE INSURANCE CO-H

20.15

0.249

18836916

30.6

17.04

144

CHINA MERCHANTS HLDGS INTL

0.971

3975363

37.6

941

CHINA MOBILE LTD

85.45

1.545

23677116

87.5

68.05

688

CHINA OVERSEAS LAND & INVEST

14.76

0.682

35346021

17.86

386

CHINA PETROLEUM & CHEMICAL-H

8.46

68260317

291

CHINA RESOURCES ENTERPRISE

27.1

-0.184

9473298

1109

CHINA RESOURCES LAND LTD

13.42

0.299

17270900

15.92

836

CHINA RESOURCES POWER HOLDIN

14.38

2.276

4481125

16.2

1088

CHINA SHENHUA ENERGY CO-H

32.75

0.153

20483423

40.2

762

CHINA UNICOM HONG KONG LTD

13.16

1.075

21989036

267

CITIC PACIFIC LTD

13.08

-0.153

CLP HOLDINGS LTD

-0.298

883

CNOOC LTD

15.96

0.251

1199

COSCO PACIFIC LTD

11.72

330

ESPRIT HOLDINGS LTD

15.6

101

HANG LUNG PROPERTIES LTD

28.45

HANG SENG BANK LTD

HENDERSON LAND DEVELOPMENT

1044

HENGAN INTL GROUP CO LTD

78.5

2.951

HONG KONG & CHINA GAS

19.9

-0.748

CODE

Name

1299

AIA GROUP LTD

2600 3988

20800 19600 18400 17200 16000 (L) 52 W

VOLUME

(H) 52 W

-1.136

4310865

186.5

-1.083

16808315

85.35

-1.834

16225337

94.7

53.6

5.01

1.623

326805173

6.75

3.46

17.82

-2.835

35615169

20.9

10.82

3996912

29.2

22.45

58252527

13.226

6.13

CODE

Name

388

HONG KONG EXCHANGES & CLEAR

HSBC HOLDINGS PLC

9.99

HUTCHISON WHAMPOA LTD

9.67

6.22

1398

IND & COMM BK OF CHINA-H

35.5

494

LI & FUNG LTD

7.28

MTR CORP

27.8

1.091

10.82

NEW WORLD DEVELOPMENT

9.33

-2.406

27.1

857

PETROCHINA CO LTD-H

10.98

2.235

94596143

12.5

8.59

17.68

12.54

2318

PING AN INSURANCE GROUP CO-H

58.7

0.514

8094321

87.9

37.35

3632208

24.6

10.26

POWER ASSETS HOLDINGS LTD

3407696

75.2

SINO LAND CO

75314692

21.3

11.2

SUN HUNG KAI PROPERTIES

9668609

17.16

7.52

SWIRE PACIFIC LTD-A

-0.763

9442206

36.75

7.55

700

TENCENT HOLDINGS LTD

216.6

0.53

14075298

36.25

20.85

322

TINGYI (CAYMAN ISLN) HLDG CO

22.45

103.2

-1.244

1886351

127

84.4

151

WANT WANT CHINA HOLDINGS LTD

42.85

-2.503

17343181

56.95

33.2

WHARF HOLDINGS LTD

3375201

78.5

56.05

12441917

20.65

16.68

Price 20555.58

(L) 16170.35

Price

Day %

130.5 68.5 77.6

99.15

2344201

64.8

51.1

12.4

-3.577

29072157

14.16

8.482

96.5

-13.141

120526573

129

85.45

87.05

-1.971

2140338

103.896

69.321

0.278

4397562

230.8

139.8

3.695

16998786

17.84

8.68

2.118

24295428

9.07

5.99

42.2

-2.877

10494104

33.15

(H) 24468.641

Shanghai Shenzhen CSI 300 Name

Price

Day %

VOLUME

AGRICULTURAL BANK OF CHINA-A

2.68

1.132

96216187

AIR CHINA LTD-A

5.88

0.685

7988064

ALUMINUM CORP OF CHINA LTD-A

6.57

0.922

12333571

ANGANG STEEL CO LTD-A

4.28

0.234

6686214

Name

Price

Day %

VOLUME

CHINA UNITED NETWORK-A

4.23

0.714

101526501

CHINA VANKE CO LTD -A

8.28

1.099

43236556

CHINA YANGTZE POWER CO LTD-A CITIC SECURITIES CO-A

6.52

0.617

9355050

11.59

2.657

73157155

Name

Price

Day %

NINGBO PORT CO LTD-A

2.46

-0.405

7486111

PANGANG GROUP STEEL VANADI-A

6.71

-1.468

48139788

PETROCHINA CO LTD-A

VOLUME

9.69

-0.206

12614723

PING AN INSURANCE GROUP CO-A

36.58

0.938

19483204 49255781

15.78

1.675

26566333

CSR CORP LTD -A

4.44

0.452

16105991

POLY REAL ESTATE GROUP CO -A

11.29

4.537

BANK OF BEIJING CO LTD -A

9.82

1.656

13513149

DAQIN RAILWAY CO LTD -A

7.45

1.915

52067190

QINGHAI SALT LAKE INDUSTRY-A

31.9

-2.267

8929999

BANK OF CHINA LTD-A

2.98

2.055

35279766

DATANG INTL POWER GEN CO-A

5.03

-1.373

4112584

SAIC MOTOR CORPORATION LTD-A

14.83

4.216

37503806 19369027

ANHUI CONCH CEMENT CO LTD-A

BANK OF COMMUNICATIONS CO-A

4.71

1.29

38629220

DONGFANG ELECTRIC CORP LTD-A

21.65

-0.046

8164043

SANY HEAVY INDUSTRY CO LTD-A

12.27

-0.406

BAOSHAN IRON & STEEL CO-A

4.77

0.421

17499506

EVERBRIGHT SECURITIE CO -A

11.97

1.269

8338634

SHANDONG GOLD MINING CO LT-A

32.79

-1.413

6686273

7.9

-0.126

5970109

GD MIDEA HOLDING CO LTD -A

13.12

0.923

12929451

SHANGHAI ELECTRIC GRP CO L-A

5.31

2290365

SHANGHAI PHARMACEUTICALS-A

11.14

-0.801

15680507

8.93

0.676

50587012

BBMG CORPORATION-A BYD CO LTD -A

28.3

4.044

10245919

CHINA CITIC BANK CORP LTD-A

4.26

0.948

9879058

2.58

1.976

58032525

GF SECURITIES CO LTD-A

GD POWER DEVELOPMENT CO -A

27.18

3.543

9599713

CHINA CNR CORP LTD-A

4.11

19654426

GREE ELECTRIC APPLIANCES I-A

20.33

2.109

13519941

CHINA COAL ENERGY CO-A

9.09

2.712

12740071

GUIZHOU PANJIANG REFINED-A

26.5

0.189

3389816

CHINA CONSTRUCTION BANK-A

4.83

1.684

46510422

HAITONG SECURITIES CO LTD-A

9.01

2.27

47256406

CHINA COSCO HOLDINGS-A

4.95

1.227

11913620

HANGZHOU HIKVISION DIGITAL-A

42.6

0.972

488977

32.25

3.068

8363704

HEBEI IRON & STEEL CO LTD-A

2.88

-0.69

15552534

3.58

1.13

11902572

HENAN SHUANGHUI INVESTMENT-A

68.9

1337109

CHINA CSSC HOLDINGS LTD-A CHINA EASTERN AIRLINES CO-A CHINA EVERBRIGHT BANK CO-A

2.85

1.064

25585157

CHINA INTL MARINE CONTAIN-A

13.61

0.074

6425109

HUATAI SECURITIES CO LTD-A HUAXIA BANK CO LTD-A

SHANGHAI PUDONG DEVEL BANK-A SHANXI LU’AN ENVIRONMENTAL-A

24.49

0.492

6903970

SHANXI XISHAN COAL & ELEC-A

14.68

-0.542

11469479

SHENZHEN DEVELOPMENT BANK-A

15.71

0.899

10631246

SHENZHEN OVERSEAS CHINESE-A

7.01

17025638

SINOVEL WIND GROUP CO LTD-A

15.08

0.199

1149434

9.75

-1.015

40978758

SUNING APPLIANCE CO LTD-A

8.78

1.738

12252712

TSINGTAO BREWERY CO LTD-A

32.57

-1.512

808443

10.73

1.514

14440840

WEICHAI POWER CO LTD-A

30.16

0.033

4763164 18187821

CHINA LIFE INSURANCE CO-A

16.35

1.742

6031784

IND & COMM BK OF CHINA-A

4.33

1.168

38033990

WULIANGYE YIBIN CO LTD-A

32.84

-2.898

CHINA MERCHANTS BANK-A

11.9

0.677

39187875

INDUSTRIAL BANK CO LTD -A

13.32

1.524

28867304

XINJIANG GUANGHUI INDUSTRY-A

23.56

-1.008

5860299

CHINA MERCHANTS PROPERTY -A

20.5

2.912

12936011

INNER MONGOLIA BAOTOU STEE-A

66.76

-1.228

33554678

YANGQUAN COAL INDUSTRY GRP-A

17.23

-1.317

11874245

CHINA MERCHANTS SECURITIES-A

11.35

-0.7

6933629

INNER MONGOLIA YILI INDUS-A

22.04

0.182

6518775

YANTAI CHANGYU PIONEER-A

94.22

-0.758

241521

6.27

2.451

132762711

5.95

-4.187

134498148

YANZHOU COAL MINING CO-A

22.21

0.09

4074427

49.22

1.234

2173582

20.5

-2.288

10582113

CHINA MINSHENG BANKING-A CHINA OILFIELD SERVICES-A

16.67

1.03

7721298

CHINA PACIFIC INSURANCE GR-A

19.29

1.956

17002961

INNER MONGOLIAN BAOTOU STE-A JIANGSU HENGRUI MEDICINE C-A JIANGSU YANGHE BREWERY -A

26.23

0.115

1429733

YUNNAN BAIYAO GROUP CO LTD-A

147.15

-3.508

1936829

ZHONGJIN GOLD CORP-A

CHINA PETROLEUM & CHEMICAL-A

7.19

0.842

17889436

JIANGXI COPPER CO LTD-A

23.91

0.252

6798177

CHINA RAILWAY CONSTRUCTION-A

3.96

0.508

17267670

JINDUICHENG MOLYBDENUM CO -A

12.74

-2.075

12572067

CHINA RAILWAY GROUP LTD-A

2.45

1.24

22200326

JIZHONG ENERGY RESOURCES-A

CHINA SHENHUA ENERGY CO-A

25.61

1.386

13316435

KWEICHOW MOUTAI CO LTD-A

CHINA SHIPBUILDING INDUSTR-A

5.61

1.081

20523869

CHINA SHIPPING CONTAINER-A

2.83

0.712

8528160

LUZHOU LAOJIAO CO LTD-A METALLURGICAL CORP OF CHIN-A

17.17

-0.98

7185637

196.96

-2.083

3795990

39.09

-2.251

5102636

2.55

19469249

ZIJIN MINING GROUP CO LTD-A

4.11

0.244

36403642

ZOOMLION HEAVY INDUSTRY S-A

8.66

0.932

19252893

16.43

2.177

12694968

ZTE CORP-A

Price 10640.16 (L) 2254.57

(H) 3380.53

CHINA SOUTHERN AIRLINES CO-A

4.51

0.895

21241875

NARI TECHNOLOGY DEVELOPMEN-A

31.57

0.445

3060635

CHINA STATE CONSTRUCTION -A

3.05

0.993

44244472

NEW HOPE LIUHE CO LTD-A

16.69

0.907

2365546

Price

Day %

VOLUME

Price

Day %

VOLUME

7.03

0.000

24562390

PICC PROPERTY & CASUALTY -H

9.53

3.139

17340259

CHINA NATIONAL BUILDING MA-H

10.14

3.575

73819590

PING AN INSURANCE GROUP CO-H

58.9

0.341

4390024

160

130

Hang SENG CHINA ENTREPRISE INDEX Name

Price

Day %

VOLUME

AGRICULTURAL BANK OF CHINA-H

3.34

0.300

69413959

Name

AIR CHINA LTD-H

5.25

-2.416

9715177

ALUMINUM CORP OF CHINA LTD-H

3.67

-1.872

23518105

CHINA OILFIELD SERVICES-H

11.26

1.077

5288000

SHANDONG WEIGAO GP MEDICAL-H

8.54

-3.720

5996000

ANHUI CONCH CEMENT CO LTD-H

24.9

1.220

13776118

CHINA PACIFIC INSURANCE GR-H

24.15

0.416

9303270

SINOPHARM GROUP CO-H

21.5

-0.922

3204800

BANK OF CHINA LTD-H

3.14

0.319

159547021

8.42

-0.473

48751131

TSINGTAO BREWERY CO LTD-H

42.55

1.430

943500

WEICHAI POWER CO LTD-H

36.35

0.276

3484417

YANZHOU COAL MINING CO-H

CHINA MINSHENG BANKING-H

CHINA PETROLEUM & CHEMICAL-H

BANK OF COMMUNICATIONS CO-H

5.88

0.170

25039701

CHINA RAILWAY CONSTRUCTION-H

5.23

8.282

20233000

BYD CO LTD-H

21.2

-2.304

3607265

CHINA RAILWAY GROUP LTD-H

2.69

8.032

44696946

4.6

-1.499

37608000

CHINA SHENHUA ENERGY CO-H

32.65

-0.305

11589281

CHINA COAL ENERGY CO-H

8.83

1.378

18804373

CHINA TELECOM CORP LTD-H

4.23

-1.628

40593989

CHINA COMMUNICATIONS CONST-H

7.53

-3.338

19518577

DONGFENG MOTOR GRP CO LTD-H

14.24

1.569

10294702

CHINA CONSTRUCTION BANK-H

6.01

0.167

111381717

4.9

-0.204

20620218

CHINA CITIC BANK CORP LTD-H

CHINA COSCO HOLDINGS-H CHINA LIFE INSURANCE CO-H

20.4

1.241

19073890

CHINA LONGYUAN POWER GROUP-H

6.46

-0.462

2812062

15.78

-0.630

11210656

CHINA MERCHANTS BANK-H

GUANGZHOU AUTOMOBILE GROUP-H HUANENG POWER INTL INC-H IND & COMM BK OF CHINA-H

7.9

2.597

6281253

4.33

2.607

14306000

5.01

0.000

211813877

JIANGXI COPPER CO LTD-H

18.14

1.568

10914344

PETROCHINA CO LTD-H

10.96

-0.182

49992738

NAME

PRICE DAY %

Name

16.76

-0.475

13669621

ZIJIN MINING GROUP CO LTD-H

3.1

0.649

21188500

ZOOMLION HEAVY INDUSTRY - H

10.3

-0.387

11129160

20.65

-1.196

5941732

ZTE CORP-H

Price 2454.90 29

(L) 8058.58

(H) 13770.730

FTSE TAIWAN 50 INDEX NAME

PRICE DAY %

Volume

Acer Inc

0.902

2703.059

39.15

Advanced Semiconductor Engineering Inc

1.700

6712.086

29.7

Asia Cement Corp

0.721

2351.863

Volume

First Financial Holding Co Ltd

0.870

5749.076

17.75

Formosa Chemicals & Fibre Corp

3.137

4267.854

86.2

35.95

Formosa Petrochemical Corp

1.488

1897.217

NAME

PRICE DAY %

Volume

SinoPac Financial Holdings Co Ltd

0.662

7288.503

Synnex Technology International Corp

0.966

1544.603

10.65 73.3

Taiwan Cement Corp

1.088

3692.176

34.55 18.5

Asustek Computer Inc

1.788

752.760

278.5

Formosa Plastics Corp

4.536

6120.840

86.9

Taiwan Cooperative Financial Holding

0.781

4947.619

AU Optronics Corp

1.020

8760.837

13.65

Foxconn Technology Co Ltd

1.220

1172.720

122

Taiwan Fertilizer Co Ltd

0.479

735

76.4

Catcher Technology Co Ltd

1.287

723.796

208.5

Fubon Financial Holding Co Ltd

1.905

6718.311

33.25

Taiwan Glass Industry Corp

0.484

1706.742

33.25

Cathay Financial Holding Co Ltd

2.242

7824.354

33.6

Chang Hwa Commercial Bank

0.565

3931.746

16.85

Cheng Shin Rubber Industry Co Ltd

1.121

1854.356

70.9

Chimei Innolux Corp

0.791

6741.975

13.75

China Development Financial Holding Corp

0.863

11250.646

China Steel Corp

2.901

11284.657

30.15

Chinatrust Financial Holding Co Ltd

1.778

11238.437

18.55

Chunghwa Telecom Co Ltd

2.947

3801.149

Compal Electronics Inc

1.252

4420.952

Delta Electronics Inc

1.758

Far Eastern New Century Corp

1.070

Far EasTone Telecommunications Co Ltd

0.824

10.377

10627.373

114.5

Taiwan Mobile Co Ltd

1.285

1676.208

89.9

Hotai Motor Co Ltd

Hon Hai Precision Industry Co Ltd

0.831

409.634

238

TPK Holding Co Ltd

0.719

176.453

477.5

HTC Corp

4.389

862.052

597

TSMC

18.646

25753.417

84.9

Hua Nan Financial Holdings Co Ltd

0.888

6160.736

16.9

Uni-President Enterprises Corp

1.583

4544.369

40.85

Largan Precision Co Ltd

0.498

100.605

580

United Microelectronics Corp

1.600

12987.771

14.45

Lite-On Technology Corp

0.699

2296.218

35.7

Wistron Corp

0.779

2052.140

44.5

MediaTek Inc

2.765

1147.610

282.5

Yuanta Financial Holding Co Ltd

1.311

10016.140

15.35

90.9

Mega Financial Holding Co Ltd

1.519

8544.629

20.85

Yulon Motor Co Ltd

0.563

1170.255

56.4

33.2

Nan Ya Plastics Corp

4.466

7852.299

66.7

2383.486

86.5

President Chain Store Corp

1.090

779.717

164

3672.913

34.15

Quanta Computer Inc

1.895

2874.431

77.3

1596.665

60.5

Siliconware Precision Industries Co

0.951

3116.361

35.8

Price 5503.52 34

(L) 4643.05 2

(H) 6265.48

business daily April 4, 2012 | 13

MARKETS GaLaXy entertainMent

MeLCo Crown entertainMent

Last max Average min

22.0

21.45 21.80 21.42 21.10

Last max Average min

21.8 21.6

30.35 30.75 30.31 29.85

21.0

34.5

14.15

wynn MaCaU Ltd Last max Average min

16.02 15.94

23.15

22.7 23.10 22.77 22.65

23.02 22.89

29.8

15.78

22.63

29.5

15.70

22.50

CURRENCY EXCHANGE RATES MAJORS

ASIA PACIFIC

0.80 0.75

MACAU RELATED STOCKS (H) 52 W (L) 52 W

Volume CRNCY

ARISTOCRAT LEISU

3.02

1.342

37.273

3.3

1.88

1554186

CROWN LTD

8.69

1.164

7.417

9.2

7.45

1591335

AMAX HOLDINGS LT

0.086

-1.149

0.147

0.06

3683000

BOC HONG KONG HO

21.45

-0.694

16.576

25.6

14.24

14586947

CENTURY LEGEND

0.243

1.25

5.652

0.475

0.204

196000

3.33

18.929

4.79

2.3

47000

CHINA OVERSEAS

14.76

0.682

13.713

17.86

9.99

35346021

CHINA STAR LTD

0.215

-2.273

0.407

0.128

63015

CHINESE ESTATES

10.72

-1.471

-14.24

14.88

10.2

299400

CHOW TAI FOOK JE

12.3

-2.844

-11.638

15.16

12.22

9132346

EMPEROR ENTERTAI

1.43

1.418

28.829

2.09

0.97

847680

0.66

57.143

0.76

0.3

1104000

GALAXY ENTERTAIN

21.45

-0.464

50.632

22.45

8.69

12440324

HANG SENG BK

103.2

-1.244

11.991

127

84.4

1886351

HOPEWELL HLDGS

21.3

-1.160

7.251

24.903

18.56

1816726

HSBC HLDGS PLC

68.5

-1.083

16.102

85.35

16808315

HUTCHISON TELE H

3.29

-1.201

10.033

3.6

2.13

3844436

23.6

-12.915

46.15

19.2

2488942

MELCO CROWN ENTE

-2.778

42.857

37.35

22.4

34200

MGM CHINA HOLDIN

14.18

-1.391

47.829

17.183

7.6

3092892

4.08

-1.923

0.990

6.123

2.95

1540087

0.108

-1.818

-2.703

0.158

0.08

110000

NEW WORLD DEV

9.33

-2.406

49.042

13.226

6.13

58252527

SANDS CHINA LTD

30.35

0.165

38.269

32.55

14.9

14179154

SHUN HO RESOURCE

1.2

1.32

0.82

SHUN TAK HOLDING

3.14

-0.633

22.698

4.686

2.241

2811021

SJM HOLDINGS LTD

15.8

-1.619

24.606

10.22

12040773

15.94

-3.860

18.601

18.5

9.8

9156199

WYNN MACAU LTD

22.7

-2.575

16.410

27.48

14.807

9363623

ASIA ENTERTAINME

6.52

3.002

10.884

10.869

4.72

64643

BALLY TECHNOLOGI

46.75

-0.107

18.175

47.468

24.74

323087

BOC HONG KONG HO

2.82

4.059

17.638

3.22

1.81

760

GALAXY ENTERTAIN

2.73

0.368

45.989

2.87

1.08

25500

16.79

-0.651

-2.384

19.15

13.38

2783712

JONES LANG LASAL

83.31

0.446

35.994

107.84

46.01

187524

LAS VEGAS SANDS

57.57

0.489

34.730

59.85

36.08

8093062

MACAU CAPITAL IN

0.11

10.000

0.11

500

MELCO CROWN-ADR

13.64

2.711

41.788

16.15

7.05

8343097

MGM CHINA HOLDIN

1.85

1.648

55.241

2.213

1.003

169

MGM RESORTS INTE

13.62

-1.661

30.585

16.05

7.4

16245859

SHUFFLE MASTER

17.6

2.385

50.171

18.380

7.35

557559

SJM HOLDINGS LTD

2.02

23.926

2.64

1.28

11500

124.88

-0.040

13.024

165.493

101.02

1289926

WYNN RESORTS LTD

Last max Average min

22.76

0.85

INTL GAME TECH

16.10

15.86

0.90

SMARTONE TELECOM

15.80 16.06 15.89 15.76

30.1

0.95

NEPTUNE GROUP

14.33

14.21

1.00

DAY % YTD %

14.39

34.7

Macau Pataca / renminbi exchange rate - Last 5 years

MIDLAND HOLDINGS

35.1

sJM HoLdinGs Ltd

Last max Average min

LUK FOOK HLDGS I

35.3

14.45

14.18 14.40 14.24 14.16

21.2

30.4

FUTURE BRIGHT

Last max Average min

14.27

30.7

CHEUK NANG HLDGS

35.5

34.9

31.0

PRICE

35.00 35.25 34.89 34.60

21.4

sands CHina Ltd

Name

MGM CHina HoLdinGs

AUD

CROSSES

HKD

PRICE

DAY %

YTD %

(H) 52 W

(L) 52 W

JPY

82.87

-0.857

-7.192

85.53

75.35

GBP

1.601

0.825

2.992

1.675

1.524

CHF

0.903

0.598

3.945

0.960

0.707

EUR

1.334

0.497

2.947

1.494

1.262

AUD

1.035

-0.010

1.342

1.108

0.939

IDR

9146

0.405

-0.842

9367

8458

INR

50.876

1.020

4.302

54.305

43.855

PHP

42.91

0.163

2.167

44.35

41.879

THB

30.83

0.162

2.335

31.96

29.63

TWD

29.505

0.186

2.623

30.716

28.48

SGD

1.258

0.072

3.093

1.320

1.199

CNY

6.299

0.125

-0.056

6.549

6.289

HKD

7.766

-0.017

0.017

7.811

7.753

MOP

7.999

-0.01

0.013

8.045

7.982

EURJPY

110.56

-1.339

-9.859

123.33

97.04

EURCHF

1.204

0.101

1.055

1.324

1.007

EURGBP

0.833

0.429

0.084

0.908

0.822

EURCNY

8.400

0.120

-3.163

9.677

7.967

EURMOP

10.662

-0.399

-2.909

11.951

10.103

AUDJPY

85.726

-0.840

-8.509

90.031

72.057

World Stock MarketS - Indices Name

country

PRICE

DAY %

DOW JONES INDUS. AVG

13212.04

0.504

8.140

NASDAQ COMPOSITE INDEX

3091.57

-0.122

FTSE 100 INDEX

5768.45

0.460

DAX INDEX

6946.83

13289.08

10404.49

18.671

3134.17

2298.89

3.520

6103.73

4791.01

1.043

17.776

7600.410

4965.8

NIKKEI 225

10083.56

-0.309

19.257

10255.15

8135.79

HANG SENG INDEX

20555.58

-0.261

11.507

24468.641

16170.35

CSI 300 INDEX

2454.9

0.482

4.653

3380.527

2254.567

TAIWAN TAIEX INDEX

7933

0.766

12.174

9099.75

6609.11

KOSPI INDEX

2014.04

-0.018

10.314

2231.47

1644.11

S&P/ASX 200 INDEX

4335.242

-0.061

6.870

4976.4

3765.9

JAKARTA COMPOSITE INDEX

USD

YTD % (H) 52 W (L) 52 W

4121.551

0.399

7.838

4195.724

3217.951

FTSE Bursa Malaysia KLCI

1596.33

0.687

4.286

1597.08

1310.53

NZX ALL INDEX

782.22

0.350

7.182

814.431

700.441

PHILIPPINES ALL SHARE IX

3458.73

0.328

13.586

3464.85

2695.06

FTSE STRAITS TIMES INDEX

3010.46

0.547

13.759

3227.28

2521.95

STOCK EXCH OF THAI INDEX

1196.77

-0.593

16.722

1214.31

843.69

HO CHI MINH STOCK INDEX

441.03

0.318

25.453

488.02

332.28

Laos Composite Index

1033.18

2.525

14.867

1348.88

876.33

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business daily April 4, 2012

Opinion

Captured Europe

Simon Johnson

Professor at MIT Sloan

Daron Acemoglu

Professor of Economics at MIT

urope’s policy elite – the people who call the shots at the national and eurozone level – are in serious  trouble. They have mismanaged their way into a deep crisis, betraying all of the lofty promises of unity and prosperity issued when the euro was created. The currency union may survive, but, for millions of people, the euro has already failed in its mission of sustaining growth and ensuring stability. How did this happen? The Greek, Portuguese, Irish, and Italian economies are reeling under fiscal austerity – with budget cuts and higher taxes as far as the eye can see. This policy mix will slow their growth, and that of the rest of Europe. But that is only part of the problem. The bigger issue is the “debt overhang” that has forced European governments to pursue this course. There are strong parallels to what happened in the United States in the past few years: many families felt crushed by their debts, so household consumption fell and has yet to recover. The adjustment will be even more painful in Europe, because a sovereign-debt crisis has a depressing effect on everyone – consumers, investors, and the public sector alike. There is a simple way to deal with a debt overhang: reduce payments by restructuring the debt. Many firms are able to renegotiate financing terms with their creditors – typically extending the maturity of their liabilities, which enables them to borrow more to finance new, better projects. If such negotiation cannot be achieved voluntarily, US firms can use Chapter 11 of the bankruptcy code, under which a court supervises and approves the reorganization of liabilities. So you would think the same would be true for US households and embattled European governments. But the restructuring of debt has been too little and has come too late. Why?

In both cases, the main argument for not removing the debt overhang came from bankers, who claimed that it would create havoc in financial markets for two reasons. First, banks were the primary creditors, and the large losses that they would face in any restructuring was bound to trigger a domino effect, with waves of pessimism driving up interest rates and ruining other borrowers’ prospects. Second, banks would also suffer because they had sold insurance against default – in the form of credit-default swaps. When these swaps were activated, the banks would incur potentially further crippling losses. In the case of Greece, international bankers argued long and hard that debt restructuring would generate contagion far and wide within the eurozone – and perhaps more broadly. And yet, in the end, Greece had little choice but to restructure its debt, cutting the value of private claims by about 75% relative to their face value (although even this is probably

not enough to make the country’s debt burden sustainable). This was deemed a “credit event,” so credit-default swaps were exercised: anyone who insured against default had to pay out. Did all hell break loose? No. Banks have not failed, and there is no sign of tumbling dominoes. But that is not because banks prepared themselves by raising more capital. On the contrary, compared to their likely future losses, European banks have raised relatively little capital recently – and much of this has been

‘The lesson for Europe – and for the US – is clear: it is time to stop listening to what banks say, and start focusing on what they do’

creative accounting, rather than truly loss-absorbing shareholder equity. Perhaps the risk that a Greek debt restructuring would cause a financial meltdown was always minimal, and quiescent markets were to be expected. But, in that case, why all the fuss? The answer should be clear by now: interest-group politics and policy elites’ worldview. Even if the risk to the financial system was minimal, the impact on banks and bondholders was substantial. They stood to lose billions, and many financial-sector employees stood to lose their jobs. Not surprisingly, leading bankers lobbied against debt restructuring, both behind closed doors and publicly. For example, the Institute for International Finance, a preeminent Washington, DC-based lobbying group for large banks, consistently argues: bail us out, or else face the consequences. But, just as important as their storyline is their political power, which has risen greatly in recent years – to the point that all major

Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief José I. Duarte Creative Director José Manuel Cardoso Designer Janne Louhikari Newsdesk Cláudia Aranda, Kristy Chan, Kelsey Wilhelm, Cherry Lee, Terina Cao, Tony Lai, Vitor Quintã Photography Carmo Correia, John Si, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

policymakers in the US and Europe cater to banks’ fortunes even when there are no wider implications for the economy. Even now, many of the losses that bankers should have faced are being shouldered by the public sector, including through various forms of direct support and the extraordinary and risky actions of the European Central Bank. The extent of subsidies in this sector is stunning and, under current policies, will only increase over time – thereby primarily supporting the lifestyles of the top 1% of people in very rich countries. The Greek default has turned out to be the proverbial dog that didn’t bark. The lesson for Europe – and for the US – is clear: it is time to stop listening to what banks say, and start focusing on what they do. We must re-evaluate the distorted political economy of the financial sector, before the excessive power of the few imposes even larger costs on everyone else. © Project Syndicate

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business daily April 4, 2012 | 15

OPINION

Whither Europe?

Business

wires Leading reports from Asia’s best business newspapers

Shanghai has been hailed as the most open area in the country by the mainland’s top economic planner, the National Development and Reform Commission. The report says Beijing placed second and Guangdong province is third. Analysts say thinking light could turn Acer’s fortunes around. Taiwan-based Acer Inc. aims to reclaim its spot among the world’s top three personal computer makers by aggressively marketing thin, light laptops.

Deutsche Bank AG is in the final stages of negotiating a deal to sell its asset management business to United States institutional asset manager Guggenheim Partners LLC. Deutsche Bank is expected to sell the unit for between 1.5 billion euro (US$2 billion) and 1.6 billion euro, with some senior executives likely to stay on in their roles after the deal. A S$244-million (US$194 million) initial public offering by Indonesian palm oil firm Bumitama Agri Ltd. in Singapore has attracted strong demand from funds and wealthy investors. The offering is the latest in a string of IPOs in Singapore this year. Kyobo Life Insurance Co. Ltd. is considering a bid for the Asian assets of Dutch giant ING Groep NV. The bid by South Korea’s third-biggest life insurer could cost up to US$6 billion. The news comes after KB Financial Group Inc. said it was interested only in ING’s South Korean assets.

The Japanese government will reduce the number of new employees to 3,780 next year, a 56-percent decrease from the 2009-level set before the ruling Democratic Party of Japan came into power. Two people are dead after strong winds hit Japan yesterday. The wild weather disrupted bullet train services and public transport. Officials have issued weather warnings for Tokyo and the country’s north. The monetary base fell 0.2 percent to 112.46 trillion yen (US$1.37 trillion) last month compared to the same period last year. The Bank of Japan says this is the first decline since August 2008.

Michael Boskin Professor of Economics at Stanford University

ith the likelihood of a contagious sovereigndebt implosion and European bank failures greatly reduced by the Greek debt deal and the European Central Bank’s lending program, it is time to look ahead. Where do the European Union, the eurozone, and the EU’s highly indebted countries go from here? Will Europe be able to roll back its welfare states’ biggest excesses without economic distress and social unrest toppling governments and, in the peripheral countries, undermining already-tenuous agreements with creditors? Some good news globally will have an impact on how these questions are resolved. The United States’ economy is gradually reviving, albeit slowly by the standards of recovery from a deep recession. China, Brazil, and India have not decoupled from their customers in Europe and North America, and so are slowing, though a relatively soft landing is likely if Europe’s recession is as short and mild as predicted. The EU’s economic output and population are larger than that of the US, so the fate of the 27 EU countries is everyone’s business, from New York to New Delhi, São Paulo to Shanghai. Formed originally as a free-trade area, the eurozone comprises 17 of the countries. Knitting together 17 disparate economies, cultures, and institutions was a monumental undertaking, fraught with risk. The Lisbon Treaty emphasizes unanimity in decision-making. With some members inside of the eurozone, and others remaining outside of it, and with disparate economic interests and monetary and fiscal traditions even within the eurozone, agreement is difficult. That sets the stage for three broad scenarios, each with implications for the European and global economy, the financial and banking system, and relations between the member states and EU institutions. In the first scenario, a more united and homogeneous Europe emerges from the crisis, enforcing greater restrictions on member states’ budgets to reduce apparent risk. Accompanied by a strong, broad eurozone, risk of a future currency crisis remains. In the second scenario, a two- or three-tiered Europe includes a

two-tiered euro, with the weaker countries using a separate “euroB” currency that can float against the stronger economies’ “euroA.” This arrangement would hold out the promise to fiscally stressed economies that, if they get their act together, they could rejoin euro-A – and do so more readily than they could from their own currency. In the final scenario, what emerges is a more decentralized Europe, with less top-down agreement in areas beyond trade and a smaller, more homogeneous eurozone composed of the EU’s core economies. Such a construct would be far more popular with citizens who are unhappy with the accretion of EU power in Brussels and the loss of traditional sovereignty. Some current euro members – Greece (and perhaps others) – would revert to national currencies.

‘Yet no one should write off Europe. It still has great strengths, and, with sensible reforms, the EU can survive and eventually return to greater prosperity and stability’

None of these options is easy; each entails serious difficulties and great risks. Episodic muddling through may be the best that can be hoped for. For example, how would Greece (or any country) exit the euro in order to cushion the extreme downward wage adjustment required to regain competitiveness, and to avoid the severe social unrest that could result from reining in debt too rapidly? As soon as word got out that Greece was seriously considering such a move – well before it could even generate a new drachma currency – euro bank deposits would flee Greece. As a result, Greece would be forced to impose capital controls. Some contracts denominated in euros would be subject to Greek law, some to European law, and others – for example, derivatives contracts – to British or US law. Legal chaos

would result. Yet sticking to the euro and forcing all of the adjustments in wages risks greater unrest; indeed, it might merely postpone the inevitable. Governments and the bond market will test the seriousness of the newly agreed fiscal guidelines (if they are ratified). While talk is tough now, the history of such agreements does not inspire optimism. Before the financial crisis, even Germany violated the EU Stability and Growth Pact’s (SGP) deficit limits. In the US, the 1980’s deficit limits set by the Gramm-Rudman-Hollings law were not met, and, like the SGP, were revised and extended. Agreements with, and access to, the International Monetary Fund and Europe’s new bailout fund provide (soft) constraints. Regardless of how these governance and fiscal issues are resolved, or muddled through, Europe’s banks remain a thorny issue. With the time afforded by the ECB’s three-year cheap loans, they have some breathing room to rebuild their capital and clean up their balance sheets. But, while doing so, they are not likely to be expanding privatesector lending to support economic growth. European banks are far more thinly capitalized, and account for a much larger share of credit extended, than banks in the US, where much more lending originates in capital markets. Most large US banks – Citi is an exception – passed US Federal Reserve stress tests recently, with enough capital to withstand a hypothetical deep recession (13% unemployment, a 21% further fall in home prices, and a 50% stockmarket decline). Europe’s stress tests have been much weaker. Some sort of Brady bond to reduce and extend excessive sovereign debt will be necessary. We can expect further European turmoil – from banks, sovereign debt, and social unrest in response to even modest welfare-state rollbacks – and clashing visions, within and among countries, concerning the desirability of deeper European integration. Europe has come a long way from the days when its leaders prophesied that the euro would quickly rival the dollar as a global reserve currency. Yet no one should write off Europe. It still has great strengths, and, with sensible reforms, the EU can survive and eventually return to greater prosperity and stability. But Europe remains closer to the beginning of that process of renewal than to the end. © Project Syndicate

16 |

business daily April 4, 2012

CLOSING Apple shares to soar to US$1,001: analyst Apple shares are set to rocket to US$1,001 (MOP8,006) within the next 12 months as it branches into new markets and expands its footprint in China, predicted Topeka Capital Markets analyst Brian White. He emphasised the company’s “ever expanding portfolio of innovative products, a growing integrated digital grid, [and] unmatched aesthetics,” Mr White wrote in a Monday note. Shares of Apple were trading up about 1.5 percent to US$628.20 in early trade yesterday.

Bonds up as stock futures slip

InBrief

With investors waiting for data from the latest U.S. Singapore factory Federal Reserve policy meeting, safer bonds rose output up again

Singapore’s manufacturing sector

by Ellen Freilich

expanded for a second consecutive month in March, signalling the worst may be over as new export orders and production edged higher, the citystate’s latest Purchasing Manager’s Index showed. The PMI stood at 50.2 points in March, slightly below February’s 50.4 but still above the key 50-point level that shows an increase in activity, the Singapore Institute of Purchasing & Materials Management said. A separate PMI for Singapore’s important electronics sector rose to 51.5 in March from 51.0 in February due to further expansion in new orders from overseas and domestic markets, the institute said.

nited States government debt prices rose for the second straight day yesterday as weaker stock index futures encouraged a bid for safe-haven debt before the afternoon release of minutes from last month’s Federal Reserve policy meeting. The gains at the start of the second quarter followed a first-quarter retreat in which investors had shown willingness to choose riskier assets over safe-havens such as Treasuries. United States stock futures fell yesterday after the S&P 500 climbed to a four-year high in the previous session. The Fed was due to release minutes from its March meeting yesterday. Traders were looking for further insight into how actively the central bank is mulling more

steps to boost growth. The Fed cut rates to near zero in December 2008 and has bought US$2.3 trillion in bonds to boost growth. Evidence of stronger hiring had led some analysts to say the Fed would have to raise interest rates before late 2014. But Fed Chairman Ben Bernanke said last week the modest pace of United States growth was unlikely to cut unemployment quickly, and that further stimulative action would remain an option. Barclays said the Treasury yield curve could steepen if the market makes price concessions for next week’s auctions of 10-year and 30year Treasuries. “We maintain our 10s-30s curve steepener recommendation until closer to the bond auction,” Ajay

Rajadhyaksha, head of U.S. fixed income and securitized products strategy at Barclays, wrote. Treasury supports have held at the October rate highs for five-year note yields near 1.20 percent, for 10year note yields near 2.40 percent, and 30-year bond yields near 3.50 percent, said William O’Donnell, managing director and head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut. O’Donnell suggested lightening up on long positions as the market approaches resistance at 2.10 percent in 10-year yields and 3.22 percent in 30-year yields. “Treasury benchmark yields are near the midpoint of rate ranges that have held up for months now,” he wrote in a research note. Reuters

Australia leaves rates steady at 4.25 pct Australia’s central bank kept interest rates steady at 4.25 percent yesterday, saying growth was close to trend and inflation near target even as it hinted a rate cut may be in the offing next month. Reserve Bank of Australia governor Glenn Stevens said the board decided at its monthly monetary policy meeting that the current setting was correct, after easing rates in late 2011. “Since then, its judgement has been that, with growth expected

to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate,” Stevens said. But he added that the board’s view was also that, “were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy”. Stevens said while the bank judged the pace of output growth to be lower than earlier estimated, it deemed it wise to wait for key data on prices to reassess its outlook for

inflation before taking steps to ease rates. In underlying terms, inflation was around 2.5 percent in 2011 and it was expected that inflation would be within the bank’s target range of two-three percent over the coming one to two years, he added. Analysts took the statement as an indication of a possible cut at the RBA meeting in May, which will be the first after the release of consumer price index data for the March quarter, on April 24.

AFP

Wheat drops as crop prospects improve Wheat futures fell for a second straight day on speculation that global supplies will be ample as prospects improve for United States and Europe crops. But soybeans dropped and corn rose. About 58 percent of the United States winter wheat crop was in good condition as of April 1, up from 37 percent a year earlier, the Department of Agriculture said. Meanwhile winterkill in southwest Europe may not be as bad as expected.

February U.S. factory orders rise Treasuries remained higher after a government report showed United States factory orders increased in February. Factory orders rose 1.3 percent in February, after a one percent decline in January, compared to median estimate of 1.5 percent by economists in a Bloomberg News survey before the report yesterday. A report April 6 is forecast to show the United States added 201,000 jobs in March.