Macau Business Daily, December 4, 2012 by Business Daily

Year I Number 175 Tuesday December 4, 2012 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã MOP $ 6.00

Public homes target missed T

www.macaubusinessdaily.com

Guangdong to approve ICBC Hengqin branch Four local banks are planning to open offices over the border in Hengqin. Industrial and Commercial Bank of China (Macau) Ltd is leading the way, said Shen Xiaoqi, the bank’s chief executive officer yesterday. Despite government cooling measures on the city’s housing market, local mortgage business “still has room to grow”, he added. Page 3

he government’s pledge to provide 19,000 public homes by the end of this year will not be met, admitted Lau Si Io, Secretary for Transport and Public Works, at the Legislative Assembly yesterday. The target will be missed by nearly 3,000 units for ‘reasons beyond government’s control’ said Mr Lau. But he was vague on the reasons why. “Among the projects, three cases are due to force majeure reasons while in one project the contractor is being held accountable for not following contract provisions,” the secretary stated. Nonetheless he was clear on the missing projects. They are: one for subsidised housing in Ilha Verde; and three for social rental-only housing in Toi San, Fai Chi Kei and Mong Ha, together providing more than 2,800 flats according to Housing Bureau data. The Legislative Assembly said at the same session it has doubts on the effectiveness of the Land Law revision. Legislator Ho Ion Sang suggested public land would be sold “far from the market price” despite changes in land premiums. More on page 2

I SSN 2226-8294

HANG SENG INDEX 22150

Local restaurant group raises HK share capital

22070

21990

Restaurant operator Future Bright, controlled by Chan Chak Mo, has raised HK$86.25 million (US$11.1 million) via a share placement in Hong Kong. “Approximately HK$34 million” will be used for the development of the group’s food processing centre in the Zhuhai-Macau Cross-Border Industrial Park. A further HK$30 million is to be invested in seven new restaurants. Page 6

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HSI - Movers Name

2012 rev on track for 13 pct y-o-y growth Wastewater soap opera lives on Two-and-a-half years after a tender for the Macau wastewater plant was first launched, the contract twice adjudicated to CESL Asia has yet to be signed. One of the bidders originally excluded – wrongfully, the courts say – from the tender has filed yet another appeal. And a similar tender for the Coloane plant is coming soon. Page 7

ovember’s gaming revenue, published yesterday, came in at 24.88 billion patacas (US$3.12 billion). That’s a 7.9 percent rise year-on-year. Gross gaming revenues for the whole of 2012 could expand yearon-year by nearly 13 percent – the middle of the estimated range given to Business Daily in October by Macau’s gaming regulator Manuel Joaquim das Neves. Full-year gross gaming revenue was expected “to grow between 10 percent and 15 percent,” Mr Neves – head of the Gaming Inspection and Coordination Bureau (DICJ) – told us at the time. That’s despite a high base after 42 percent growth in 2011 and 58 percent expansion in 2010 and a tightening of credit on the mainland prior to the last month’s scheduled change in the country’s political leadership.

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%Day

CHINA RES POWER

1.15

WANT WANT CHINA

1.06

HONG KG CHINA GS

0.48

WHARF HLDG

0.42

SWIRE PACIFIC-A

0.32

CHINA OVERSEAS

-2.61

CHINA RES LAND

-2.66

CHINA COAL ENE-H

-2.94

LI & FUNG LTD

-2.98

TENCENT HOLDINGS

-3.08

Source: Bloomberg

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business daily December 4, 2012

macau

Pledge for 19,000 public homes in 2012 falls short Target missed by nearly 3,000 units for ‘reasons beyond government’s control’: Lau

opinion

‘Macau sã assi’ – That’s Macau for you

Tony Lai

tony.lai@macaubusinessdaily.com

Paulo Rego*

paulorego.pontofinal@gmail.com

he administration has admitted four projects that are part of the 19,000 public houses scheme would not be completed by year-end. But it claimed all but one were due to reasons beyond its control.

Doubts on new land law T

he Legislative Assembly has doubts on the effectiveness of the Land Law revision, which is on the way to the assembly. Legislator Ho Ion Sang said despite a new calculation mechanism for land premiums payable by developers – including factors such as inflation and the money paid in previous public tenders – the cost of government land for private investors will remain “far from the market price”. “The new revision still keeps some grey areas like the exemption of public tender for land grants when those grants ‘match government policies’, but there is no standard about how it [the exemption] is granted and details on later supervision,” he said. The law revision includes tougher fines for squatting and for failing to develop plots and new rules for public tenders, as well as new calculations for land premiums, the Executive Council announced last week. But legislator Au Kam San expressed dissatisfaction with the reforms. “What is the point of revising the law when the government still keeps these loopholes, [creating] the possibility of granting land at extremely cheap prices without public supervision?” he stated.

These four projects include one for subsidised housing in Ilha Verde and three for social rental-only housing in Toi San, Fai Chi Kei and Mong Ha, together providing more than 2,800 flats according to Housing Bureau data. “Among the projects, three cases are due to force majeure reasons while in one project the contractor is being held accountable for not following contract provisions,” Secretary for Transport and Public Works. Lau Si Io, told the Legislative Assembly yesterday during the discussion of his Policy Address for 2013. Mr Lau refused to identify the contractor but pledged the administration would penalise the company in accordance with the contract. The delay in other developments was related to what her characterised as unexpected land features and changes to construction methods in response to worries from nearby residents, he added. The three pan-democrat New Macau Association legislators criticised the administration for not keeping the promise made in 2007 of completing 19,000 public homes by this year. The secretary did not answer questions about his responsibility, only saying, “We understand there is a difference between the reality and residents’ expectations on the public housing projects but we hope they can understand the reasons behind it.” Between 1,000 and 2,000 households in the waiting lists for subsidised housing would receive a home this year, he added. However, the secretary did not address legislators’ queries on why only applications for one-room subsidised flats would be open again next year.

Interpretation gap Assembly members are also concerned about the slowness in approving private housing projects. Legislator Chan Meng Kam urged the

government to publicise the details of the private sector schemes undergoing government review “so that we can be clear on whether it is the developers’ problem or another case of government ineffectiveness,” he said. “The industry thinks we approve projects slowly but the problem is not about our inefficiency,” Mr Lau said. “It is related to both parties’ different interpretations of existing laws and regulations.” “We hope that we can improve the situation through the drafting of the five related laws in the future,” he added. The five laws include the land law and the urban planning law, which the Executive Council had finished discussing, he said. He added the urban planning law would be submitted to the assembly in due course after minor adjustments. Communication with developers would be improved in order to speed procedures, he added. Mr Lau also did not rule out further measures to rein in the surge in private housing prices but admitted difficulties in increasing home supply. The government can only boost supply through public housing and quickening the approval of private projects, he stressed. Four new developments comprising 4,000 public homes would be ready by 2015 while another 1,000 houses were also in the planning stage, he added.

We hope that we can improve the situation through the drafting of the five related laws in the future

ell-organised crime is the kind that does what it pleases, as long as it is cautious and discreet. What it cannot do is be boastful or obvious, thus challenging the unspoken law that rules the realm of public order. The authorities say triads are doing well, but promise that they are under control. In other words, they can’t operate visibly. The recent interview given to Radio Macau by the head of the Unitary Police Service clearly reveals this tacit understanding. It is part of Macau’s identity and part of a particular narrative about the city’s longstanding relationship with the casino underworld. Speaking about the release of Wan Kuok Koi alias Broken Tooth Koi, CommissionerGeneral José Proença Branco said “the leader about to be released” had to “reflect deeply if he wants to live a calm life or a life of agitation”. Should he choose the latter, then the security forces will keep him company. However, if he chooses to lead a triad or a triad faction – with its private army, managing gaming rooms in a professional manner, efficiently attracting punters, making loans and, especially, discreetly collecting difficult debts – and still behaves properly, then everything will be just fine. Mr Branco believes that Mr Wan will be “discreet”. I believe it as well. I would even bet that he will not even try lighting up in a no-smoking area. After 14 years in prison, surely he knows that it is pointless to take such a risk. Anyone new to Macau would be shocked by such a state of affairs, but people in the know just shrug their shoulders and carry on as if nothing has happened. Macau is like that. There is a kind of sincerity in public officials that describe life as it is. Honestly, I prefer this attitude to hypocrisy. On the other hand, I am surprised by the sudden innocence of some members of the Legislative Assembly who apparently have just now realised that there is prostitution in Macau and that massage parlours give the city a bad reputation. The gall of some people! Carlos Morais José, the director of Portuguese-language newspaper Hoje Macau, speaking on the public broadcaster TDM’s “Contraponto” television programme, was right on the money when he said that what we must demand of the authorities is that they find out how many women have been forced into prostitution and are therefore sex slaves and victims of human trafficking, and how many are prostitutes of their own free will. We all know that human trafficking is for real and constitutes a serious problem that must be dealt with. It is also important to ensure that the Health Bureau provides healthcare to these women, especially to protect them from sexually transmitted diseases. This is a fundamental public health issue. Unlike other shady activities, prostitution is conspicuous and, since prostitutes are required by the tourism industry and accepted by the city, the question is not how to hide them, it is how to protect them.

* Director of the Portuguese-language newspaper Ponto Final

December 4, 2012 business daily | 3

MACAU

ICBC eyes Hengqin branch next year Four Macau banks intend to open branches on Hengqin, with ICBC leading the way Stephanie Lai

sw.lai@macaubusinessdaily.com

Approval from Guangdong authorities looms, says Shen Xiaoqi

ndustrial and Commercial Bank of China (Macau) Ltd (ICBC Macau) will establish a branch on Hengqin island as soon as next year if administrative procedures in mainland China go well, bank chief executive Shen Xiaoqi has said. “The Monetary Authority of Macau has already approved our application and the application has been delivered to the Guangdong Banking Regulatory Commission,” Mr Shen told reporters yesterday. “It’s hard to tell exactly when we may see this branch built,” he said. “But, according to feedback, both the Hengqin administrative committee and Guangdong government would pretty much like our application to proceed, so I think we can expect approval from them soon.” The latest supplement to the Closer Economic Partnership Agreement between Macau and the mainland lowers the minimum assets Macau banks must have to gain a foothold on Hengqin to US$4 billion (32 billion patacas) from US$6 billion.

The Chinese-language Macao Commercial Post quoted the deputy director of the Administrative Committee of Hengqin New Area’s fiscal and finance bureau, Zhao Guopei, as saying in October that another three Macau banks were in contact with the Hengqin authorities about establishing branches on the island: Tai Fung Bank Ltd, Banco Nacional Ultramarino SA and Luso International Banking Ltd. Mr Shen of ICBC Macau said: “We will mainly provide the financial services required by Macau companies working on Hengqin.” He added: “We will also fully exercise our competitive advantages on Hengqin to provide financial services required by infrastructure construction there.” The Hengqin administrative committee said last week that details of how Hong Kong and Macau financial institutions could lend yuan to mainland companies would be released this year. By the end of October 71 financial institutions had a presence on Hengqin, including six mainland banks.

Cheaper homes immune to new curbs, says bank’s chief executive Sales of mid-market homes are largely unaffected by the government’s latest measures to cool the property market Stephanie Lai

sw.lai@macaubusinessdaily.com

he government’s tightening of mortgage lending restrictions in October has reduced sales of homes but has had little effect on mid-market housing, according to the chief executive of Industrial and Commercial Bank (Macau) Ltd (ICBC Macau), Shen Xiaoqi. “Property market cooling measures have more of an impact on luxury homes or foreign investment,” Mr Shen told reporters yesterday. “But the restricted mortgage lending is not really affecting much the homes priced between 3 million [US$375,800] and 5 million patacas, the most common options for residents,” he said. The government reduced in October the maximum percentages of the value of upmarket homes that homebuyers can borrow. It reduced the maximum percentage of the value of homes worth over 8 million patacas that resident homebuyers can borrow to 70 percent from 50 percent.

The mortgage lending business looks promising as property investment in Macau still has room to grow Shen Xiaoqi, ICBC Macau chief executive The government tightened mortgage lending restrictions in October (Photo: Manuel Cardoso)

But it kept the maximum percentage of the value of homes worth between 3.3 million patacas and 6 million patacas that resident homebuyers can borrow at 70 percent. “In the long term, the mortgage lending business looks promising as

property investment in Macau still has room to grow,” Mr Shen said. “Our mortgage business for homes has already doubled when compared with the same period last year,” he said. New mortgage lending to

residents amounted to 11.6 billion patacas in the third quarter of this year, the most in any quarter since the government introduced in June last year the special stamp duty on the resale of housing, official data show.

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business daily December 4, 2012

macau Jamaica tax deal in effect The tax information exchange agreement inked with Jamaica on October 5 has come into effect, after being published in the Official Gazette yesterday. The deal will cover all types of taxes issued on both sides, including any new taxes imposed in the future or taxes introduced to replace existing ones. In October, the Secretary for Economy and Finance, Francis Tam Pak Yuen, said the agreement would improve probing of cross-border tax evasion. The territory has so far concluded tax deals with 16 different countries or regions.

Rental hikes push jewellery retailer to e-commerce Online sales could offer luxury retailers alternative to sky-high rents Vítor Quintã

vitorquinta@macaubusinessdaily.com

Chow Tai Fook’s online jewellery sales tripled in the first half

how Tai Fook Jewellery Group Ltd, the world’s biggest jewellery retailer by market value, said on Thursday it is targeting e-commerce as a pillar of future growth after online sales tripled in the first half. But with rental pressure in both Macau and Hong Kong increasing,

said Terence Lok, analyst at Oriental Patron Financial Group, other luxury retailers could soon follow suit. Chow Tai Fook fell short of estimates with a 33 percent fall in six-month profit, hurt by higher operating costs – including a 48.4 percent hike in rental costs. But Kent Wong Siu Kee, Chow Tai

Fook managing director, said there were positive signs that indicated luxury spending would pick up gradually. The company said e-commerce channels would continue to extend its customer reach, especially to younger consumers and this business year’s online sales could climb as much as threefold.

China’s e-commerce industry saw growth of 45 percent yearon-year in the second quarter to reach 278.8 billion yuan (357.1 billion patacas). “We see huge development potential in e-commerce and we also see the practice is also changing with more people willing to shop online even for luxury goods,” Mr Wong said. “E-commerce will enable the group to enjoy the blend of online and in-store sales channels in the future,” Chow Tai Fook wrote. But the company founded by Cheng Yu Tung, 87, the Hong Kong jewellery and property tycoon, is not the only one facing increased rental pressure. Rival Luk Fook Holdings (International) Ltd, which also has shops in Macau, posted a smallerthan-estimated 22 percent drop in first-half net profit to HK$558.2 million (US$72 million). Sales in Hong Kong and Macau should grow 10 percent year-onyear during the second half, UBS said in a report. But, Oriental Patron wrote, “we believe this would be offset by the rental pressure,” as Luk Fook will need to renew the lease for five of its stores. Watch retailer Oriental Watch Holdings Ltd also saw its profit drop sharply in the six months ended September 30, partially due to rising rental expenses, the company said. “Escalating rental rates continued to be a major concern for Hong Kong and Macau retailers,” the company told the Hong Kong Stock Exchange yesterday. In comparison to the same period of last year, the group’s rental expense increased by about 23.1 percent. With Reuters

CWC sells island assets, Macau comes next

ahrain Telecommunications Co (Batelco) has agreed to buy Cable & Wireless Communications’ assets in Monaco and some islands in a deal worth up to US$1 billion (8 billion patacas), the state-owned company said in a statement on its website. In a separate statement, CWC said the Batelco deal would cut its debt to US$937 million and focus on a smaller geographical area.

The operator is also in talks to sell a majority stake in Macau’s only fixed-line network and leading wireless network CTM, Companhia de Telecomunicações de Macau SARL, to partner Citic Telecom International Holdings Ltd. CWC is nearing the end of disposals meant to concentrate its holdings around Latin America and the Caribbean, chief financial officer Tim Pennington said in an interview.

Once the second phase of the Monaco transaction is completed and Macau is sold, CWC will have flexibility to make more acquisitions in the region, he said. “Essentially, we will be that regional business,” Mr Pennington said. “It’s extremely good for us. It’s part of the next step of our evolution.” The executive said that the company is still negotiating with Citic

Telecom about its Macau business, and he believes others would be interested in the asset. “We think that Macau is an extremely attractive business,” Mr Pennington said. “It’s got a great profile. It’s got great operating metrics. We think lots of people are interested.” He declined to say when the talks with Citic Telecom might conclude. Reuters/Bloomberg

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December 4, 2012 business daily | 5

MACAU

Gaming growth for 2012 in line with regulator’s estimates Tracking for 13 pct y-o-y expansion after 24.88 billion patacas in November Michael Grimes

michael.grimes@macaubusinessdaily.com

Market Share Per Operator (2011-2012) 28000

Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

SJM

27% 26% 27% 28% 27% 25% 29% 26% 26% 26% 27% 27% 28%

26000

Sands China 16% 17% 19% 18% 17% 18% 17% 18% 22% 19% 18% 21% 21%

24000

Galaxy

20% 19% 19% 17% 20% 21% 20% 23% 19% 21% 18% 19% 16%

Wynn

13% 14% 13% 13% 12% 13% 11% 12% 11% 12% 13% 10% 12%

22000

MPEL

13% 14% 13% 14% 14% 14% 12% 13% 13% 13% 14% 14% 14%

20000

MGM

11% 10% 10% 10% 10% 10% 11% 9% 9% 10% 10% 9% 10%

Total

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

16000

* Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total

ross gaming revenues for the whole of 2012 could expand year-on-year by nearly 13 percent – the middle of the estimated range given to Business Daily in October by Macau’s gaming regulator Manuel Joaquim das Neves. Full-year gross gaming revenue was expected “to grow between 10 percent and 15 percent,” Mr Neves – head of the Gaming Inspection and Coordination Bureau (DICJ) – told us at the time. November’s revenue, published by DICJ yesterday, came in at 24.88 billion patacas (US$3.12 billion). That’s a 7.9 percent rise year-on-year. On an accumulated basis for the eleven months to the end of November it shows a 13 percent expansion. It’s possible December

KEY POINTS GGR tracking for 13 pct y-o-y expansion in 2012 Nov revenue in line with analyst forecasts of 24.9 bln patacas Mass market gamblers continue to bolster growth Local industry facing tighter regulation and scrutiny

could show significantly lower yearon-year growth than November, because of seasonal variations in demand. But averaged out over the whole year the likelihood is for a 13 percent improvement compared to 2011, says Grant Govertsen of Union Gaming Macau. “We continue to expect December GGR to be in the low dou b le d i g i ts , wi th g r o wth o f approximately 10 percent year-onyear,” Mr Govertsen said in a note. “This would imply [December] GGR of 26 billion (US$3.3 billion). It would also imply full-year GGR of 302 billion patacas, and growth of nearly 13 percent for the year,” the document added.

High baseline That annual figure is in line with some of the more bearish estimates of analysts near the start of the year. But it’s still positive given the background – a high base after 42 percent growth in 2011 and 58 percent expansion in 2010 – along with a slowdown in China’s economy this year plus a tightening of credit lines on the mainland leading up to the last month’s scheduled change in the country’s political leadership. Kenneth Fong of J.P. Morgan in Hong Kong said in another note published shortly before the November figures were published: “The industry revenue growth rate for November and December is important as investors are likely to use it to form their baseline growth expectation for 2013. Currently, the street is looking for a headline

18000

gaming revenue of eight to 12 percent growth for 2013.” Credit-based VIP gambling – which in recent years has accounted for up to 70 percent of annual GGR – has been hardest hit by China’s tightening of credit markets, while much of the recent year-on-year growth has been in the higher margin (although lower volume) mass market. Union Gaming expects mass market gaming to continue to outpace VIP next year. “As we think about 2013, we expect a resumption in VIP growth – somewhere in the mid to high single digits, which would be very favourable for sentiment in the context of a largely flat 2012,” says Union Gaming. “Further, and on the heels of important infrastructure works, we think mass market will continue post 25 percent-plus growth.”

Market share The market shares of the operators in November were as follows: SJM Holdings Ltd 28 percent (down one percent from October); Sands China Ltd 21

percent (unchanged); Galaxy Entertainment Group Ltd 16 percent (down three percent); Melco Crown Entertainment Ltd 14 percent (unchanged); Wynn Resorts Macau Ltd 12 percent (up two percent) and MGM China Holdings Ltd at 10 percent (up one percent). Standard & Poor’s, a credit rating agency, yesterday gave Melco Crown Gaming (Macau) Ltd – the Macau casino operating unit of Melco Crown Entertainment Ltd – a BB ‘Stable’ rating. The agency said the score “reflects the significant construction and execution risks associated with the parent group’s proposed development of the Studio City project, which is an integrated gaming complex in Macau, and a new casino investment in the Philippines.” Separately a survey published on Monday of managers in China’s private sector factories showed the mainland’s manufacturing sector quickened for the first time in 13 months in November. It’s being seen by some as evidence China’s economy is reviving after seven quarters of slowing growth.

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business daily December 4, 2012

macau

Future Bright gets expansion capital The restaurant operator will open seven new food and drink outlets and develop a food processing centre Vítor Quintã

vitorquinta@macaubusinessdaily.com

HK$ 86.25 mln

Proceeds from share placement

Chan Chak Mo now owns less than 50 percent of Future Bright

acau restaurant operator Future Bright Holdings Ltd has said it has raised HK$86.25 million (US$11.1 million) through a share placement. The company told the Hong Kong Stock Exchange on Friday that it would use about HK$34 million

of the proceeds to develop its food processing centre in the ZhuhaiMacau Cross-Border Industrial Park. It will invest HK$30 million in new restaurants. Future Bright said “more than six independent placees [sic], all of which are independent third parties”

Corporate

Cotai Water Jet exceeds Galaxy sponsor wins 28 mln passengers marathon group trophy Cotai Water Jet – a Hong Kong-to-Macau ferry service on behalf of local casino operator Sands China Ltd – says it has carried 28 million passengers since 2007. The timetable started on November 30 that year with a three-vessel fleet providing 20 daily sailings. The company has since expanded to its current fleet of 14 catamarans capable of cruising at 42 knots. It moves passengers on average 83 times per day. Last Friday marked the fleet’s fifth anniversary. “With predictions estimating 30 million visitors to Macau in 2013, Cotai Water Jet will continue to play a key role in Macau’s development,” said John Seale, chief operating officer. The business is managed and run by Chu Kong High Speed Ferry Co. Ltd of Hong Kong. Cotai Water Jet runs services from Macau Outer Harbour Ferry Terminal; Taipa Temporary Ferry Terminal; Hong Kong-Macau Ferry Terminal in Sheung Wan, Hong Kong; Kowloon’s China Ferry Terminal and Hong Kong International Airport’s SkyPier.

Runners from the title sponsors of the Macau Marathon won the group trophy for the eighth year running. Local casino operator Galaxy Entertainment Group Ltd has been the main backer of the international sporting event for the past nine years. A total of 500 GEG runners took part out of a competitive field that this year reached 6,000 entrants. GEG employee Shanti Devi Adhikari from Waldo Casino brought another medal to the Galaxy team by winning the ‘Category B Female Mini Marathon’ title. Among the GEG runners were Philip Cheng, a director, Michael Mecca, the group’s president and chief operating officer, Gabriel Hunterton, deputy chief operating officer of Galaxy Macau, and Charles So Chak Lam, deputy chief operating officer of StarWorld Macau. Vong Iao Lek, president of Macau Sport Development Board, Ma Iao Hang, president of the Association of Athletics of Macau, and Francis Lui Yiu Tung, Galaxy’s vice chairman, officiated at the start of the day’s racing.

had bought 75 million shares, or 11.9 percent of the company’s share capital. The shares were placed out at HK$1.20 (US$0.15) apiece, a discount of 11.1 percent to Friday’s closing price of HK$1.35 per share for Future Bright stock.

The sale reduced the stake held by Chan Chak Mo, Future Bright’s managing director and a Legislative Assembly member, who used to own more than 50 percent of the company. Future Bright said Mr Chan now owned about 44.9 percent. The company intends to open seven more food and drink outlets this year, including two Chinese restaurants, a staff canteen at Macau International Airport and a Pacific Coffee Co shop at the Macau University of Science and Technology. Future Bright has also won a three-year contract to operate three restaurants and a coffee shop on the new University of Macau campus on Hengqin Island from next July. Mr Chan said last month that the number of Future Bright restaurants in Macau and in mainland China would reach 47 next year.

Local earnings help Tsui Wah to 36 pct revenue growth

ong Kong tea restaurant chain Tsui Wah Holdings Ltd recorded a 35.7 percent increase in revenue to HK$486.97 million (US$62.8 million) for the six months ended September 30. The result was buoyed in part by a strong improvement in earnings from its first Macau restaurant. That venue opened at Cotai casino resort Galaxy Macau in May 2011. It recorded a 91.1 percent year-on-year expansion in revenue in the half year to this September, to HK$5.04 million. The result was boosted slightly by the fact the Macau restaurant opened part way through the equivalent half-year in 2011. The Macau operation is described as one of the group’s “jointly controlled entities”. But the interim results filed with the Hong Kong Stock Exchange don’t specify how the economic benefit of the Macau site ultimately is split

between the partners. But the company said its share of profits – net of start up and other costs – from all jointly controlled entities amounted to HK$2.1 million for the six-month period. Tsui Wah has 26 branches in Hong Kong, Macau and mainland China. It launched an initial public offering of 333 million shares in Hong Kong last month with the aim of raising HK$760 million (US$98 million) for a three-year expansion plan. The IPO prospectus indicated that Tsui Wah has no plans to expand further in Macau over the next three financial years. But it did say the company is seeking to open 24 new branches in the mainland and 13 in Hong Kong. The group was founded in 1967 and is best known for its milk tea and egg tarts. M.G.

December 4, 2012 business daily | 7

MACAU

Losing sewage bidder turns to courts, again A company excluded from the bidding for a sewage treatment contract will appeal to the courts against a government decision to stick with the contractor it originally chose Vítor Quintã

vitorquinta@macaubusinessdaily.com

government commission that reevaluated the bids and had received them, “after some debate over the stamp duty we had to pay”, early last month. “We did a review of the evaluation and we formally lodged an appeal last month, by joining it with the previous case,” Mr Kilker said. Va Tech Wabag is still waiting for the Court of Second Instance to rule on its case to have the original decision to award the contract to the CESL Asia consortium overturned. On November 9 Va Tech Wabag asked the court to change the object of the legal challenge to include the new adjudication, the lawyer representing the company, Ana Soares, explained.

We did a review of the evaluation and we formally made an appeal last month Sean Kilker, Va Tech Wabag GmbH managing director

A consortium led by CESL Asia operates the Areia Preta sewage treatment plant (Photo: Manuel Cardoso)

a Tech Wabag GmbH, an Austro-Indian venture which the courts say was wrongfully excluded from the bidding to run the sewage treatment plant on the peninsula, is now asking the courts to overturn a government decision that the contract should remain in the hands of the winning bidder.

Va Tech Wabag managing director Sean Kilker told Business Daily that the company was taking its case against the decision to the Court of Second Instance. In September the government re-evaluated the bids for the fiveyear contract worth 604.9 million patacas (US$75.64 million), and

Plant on peninsula in contract limbo

ore than two months after the government re-awarded the contract to run the sewage treatment plant on the peninsula to a consortium led by Macau firm CESL Asia Investments & Services Ltd, the contract has yet to be signed. Yesterday’s Official Gazette says Chief Executive Fernando Chui Sai On has authorised the signing of another contract with the consortium, which includes Portugal’s Indaqua – Indústria e Gestão de Águas SA and China’s Tsinghua Tongfang Co Ltd. This other contract, worth 11.3 million patacas (US$1.4 million), is for the supply of three air blowers, which feed air into the sewage tanks where bacteria break up waste, for the Areia Preta plant. Business Daily asked the

again awarded it to a consortium led by CESL Asia Investments & Services Ltd. The consortium comprises CESL Asia, Portugal’s Indaqua - Indústria e Gestão de Águas SA and mainland China’s Tsinghua Tongfang Co Ltd. Mr Kilker said Va Tech Wabag had asked for the minutes of the

Coloane plant next challenge

Environmental Protection Bureau if the air blower contract was part of an agreement for the consortium to operate, maintain and modernise the Areia Preta plant, but had received no reply by the time we went to press. Business Daily knows that the five-year contract to run the plant, worth 604.9 million patacas, has not yet been signed but that the government is keen to wrap up the deal this month. The consortium has operated the plant since October 2011, even though the contract is still unsigned. However, modernisation of the plant is on hold as the public tendering process for the contract is being disputed in the courts. The consortium has yet to be paid for running the plant. V.Q.

he government, still embroiled in the legal battle over the sewage treatment plant on the peninsula, will face a new challenge when it calls for tenders to run a similar plant on Coloane. The contract for the operation and maintenance of the Coloane sewage treatment plant, worth 45.7 million patacas (US$5.7 million), is held by WABAG Serviços de Tratamento de Águas (Macau) Ltda, a subsidiary of Austro-Indian company Va Tech Wabag GmbH. The contract will expire at the end of next November, the managing director of the plant operator, Sean Kilker, told Business Daily. The Infrastructure Development Office conducted the public tendering process that led to Mr Kilker’s company getting the contract. But a spokesperson for the Infrastructure Development Office

The firm is now waiting for the judge in charge of the case to decide whether or not to allow this change, she told Business Daily. Another defeated bidder, a consortium led by Belgium-based Waterleau Group NV and including Beijing Origin Water Technology Co Ltd, chose not to appeal directly against the adjudication. The government has informed the court of the September decision and “we have responded to that change,” Camilo Ribeirinha, the lawyer representing Waterleau, told Business Daily. “It’s a similar move [to the one taken by Va Tech Wabag] but there are some differences in our positions,” he stressed without giving any further details. “If the courts decide to revoke it [the original adjudication], then everything, right from the start, will go back to scratch, including this new adjudication,” the lawyer recalled.

told Business Daily that next time the Environmental Protection Bureau, the owner of the plant, will conduct the tendering process. Business Daily asked the bureau when it would call for tenders for the new contract, but had received no reply by the time we went to press. “They should have done it already,” said Mr Kilker. He thinks the bureau may call for tenders next month. The government has also put the Environmental Protection Bureau in charge of the disputed public tendering process for the contract to run the sewage treatment plant on the peninsula. Two would-be bidders that were originally excluded from the process – wrongfully, the courts say – have criticised the transfer of responsibility. “I don’t think this move was made according to Macau law,” Mr Kilker said in September. Hélder Santos, the managing director of Consulasia – Consultores de Engenharia e Gestão, Lda, said the transfer was ”unprecedented”. V.Q.

8 |

business daily December 4, 2012

GREATER CHINA

Manufacturing in rebound shows growth reviving Beijing seen keeping annual target next year

anufacturing activity in China has continued to rebound in November as two sets of figures have shown the industry is now expanding. HSBC said yesterday its Purchasing Managers’ Index hit a 13-month high, while on Saturday the government’s version of the same index touched a 7-month high, adding to evidence that the economy is reviving after seven quarters of slowing growth. The final reading for the HSBC Purchasing Managers’ Survey (PMI) rose to 50.5 in November from 49.5 in October, in line with a preliminary survey published late last month. It was the first time since October 2011 that the survey crossed above 50 points, the line that demarcates accelerating from slowing growth. The final HSBC reading follows a similar survey by the National Bureau of Statistics (NBS) released last weekend, which showed the pace of growth in the manufacturing sector quickening. The official PMI rose to a seven-month high of 50.6 for November, from 50.2 in October. “This confirms that the Chinese economy continues to recover gradually,” HSBC’s chief China economist Hongbin Qu wrote. An official PMI survey of China’s non-manufacturing sectors also ticked up, to 55.6 in November from 55.5 in October, led by expanded activity in construction services. But growth in air and rail transport and food and beverages both slowed.

While a recovery in growth appears possible, there are troubling signs that China is still relying too much on state-led investment rather than the more dynamic private sector. Growth accelerated for large firms for the third month in a row, but medium and smaller companies saw a retrenchment, with the decline more pronounced for the smaller firms, the NBS said in a note accompanying its official manufacturing PMI survey. “The improving numbers are mostly because of government

From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it’s not a very healthy recovery yet Dong Xian’an, Peking First Advisory

investment,” said Dong Xian’an, economist with Peking First Advisory, referring to the official PMI. “From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it’s not a very healthy recovery yet.” In another sign that demand remains lacklustre, an HSBC subindex for output prices fell despite a rise in a different sub-index for input prices, indicating that firms are unable to pass rising costs on to buyers. “Whilst we feel that the economy has been stabilised through the shortterm, we feel that the manner in which activity has been revived will retard China’s economic reform agenda and make the transition onto a sustainable footing all the more tricky,” wrote Xianfang Ren and Alistair Thornton of IHS Global Insight.

Uneven growth Smaller and private firms are still pleading for greater access to credit and investment incentives, which have gone disproportionately to the state sector, particularly since the financial crisis of 2008-2009. Government intervention to mask debt problems where they do appear runs the risk of a socialisation of losses, the IHS Global Insight analysts warned. “Production can continue [hence contributing to GDP], and employment can remain tight. Our fear, therefore, is that whilst activity

Home prices rise for 6th month Cost per square metre increased to US$1,412 in November – survey

hina’s new home prices rose the most in four months as smaller developers marketed more projects amid interest from buyers concerned that prices will start rising again. Prices climbed for a sixth month, increasing 0.26 percent to 8,791 yuan (US$1,412) per square metre in November from October, SouFun Holdings Ltd, the country’s biggest real estate website owner, said in an e-mailed statement yesterday, based on its survey of 100 cities. “Buyers’ sentiment improved as they saw home sales rise in first-tier cities, which is a leading indicator,” said Johnson Hu, a Hong Kongbased property analyst at CIMB-GK Securities Research. “First-home buyers, who have been waiting and watching the market, are begging to take action in case home prices take off nationwide.” China is unlikely to relax property curbs nor issue new measures after the Communist Party unveiled the new generation of leaders in November. The government’s property curbs have had a “relatively good” effect and the government will “steadfastly” enforce property controls, Housing Minister Jiang Weixin said at a press conference in Beijing last month. The eastern city of Heze had the

biggest gain in November, increasing 1.97 percent, SouFun said. Home prices in Beijing rose 0.7 percent from October, and increased 0.1 percent in Shanghai. Moody’s Investors Service last week revised China’s property sector to “stable” from “negative,” on expectation sales and access to funding will continue to improve in 2013.

More sales Property sales are expected to increase over the next 12 months, while

In recent years the manufacturing sector has been o

the Chinese government is unlikely to impose further tightening, Franco Leung, an assistant vice president of Moody’s, said in the report. Home sales in Shanghai almost doubled last month from October to 981,500 square metres, property consultant Shanghai UWin Real Estate Information Services Co. said in an e-mailed statement yesterday. China will speed up property tax reform over the next five years, Shanghai Securities News reported last week citing Finance Minister Xie Xuren. The Chinese Academy of

is resuming, economic efficiency is declining. This has negative longerterm consequences.” Overall, China’s economic health has improved since September, with an array of indicators from factory output to retail sales and investment showing Beijing’s pro-growth policies are starting to gain traction. Output, new orders and new export orders all improved, the official PMI showed, but a sub-index tracking employment deteriorated. Private firms generally account for more new jobs than does the state sector. China’s annual economic growth

Social Sciences proposed imposing a property tax nationwide on homes where the per-person space for each individual exceeds 40 square metres, the official Xinhua News Agency reported last week. The government has raised downpayment and mortgage requirements in its more than two-year effort to curb the property market. It also imposed a property tax for the first time in Shanghai and Chongqing, increased construction of low-cost social housing and enacted home-purchase restrictions in about 40 cities. Developers are “relatively optimistic” about sales in the first half of next year as no new property curbs are expected, according to CIMB’s Mr Hu. Home prices fell 0.46 percent last month from a year earlier, according to yesterday’s SouFun statement. Bloomberg

KEY POINTS Home sales rise in first-tier cities Buyers’ sentiment seen improving Beijing unlikely to relax property curbs Prices in Beijing rose 0.7 percent from October

Sales expected to increase over the next 12 months

December 4, 2012 business daily | 9

GREATER CHINA

Wanda in talks for U.S. buys C

hina’s privately-owned Dalian Wanda Group, the world’s largest movie theatre owner, is in talks with “well-known” hotel chains for acquisition opportunities in the United States, its chairman said yesterday. Wanda, which also has interests in real estate, tourism and department stores, bought U.S.based movie theatre chain AMC Entertainment for US$2.6 billion in September in one of China’s biggest overseas entertainment investments. The company will invest US$10 billion in the United States over the next decade and is in talks with famous hotel brands for acquisitions in the Washington D.C. area, New York and Los Angeles, Wang Jianlin, Wanda’s chairman, told Reuters in an interview.

“We are in discussions with hotel management companies in the United States and are seeking opportunities for mergers and acquisitions; and we are in negotiations with the city governments of Washington D.C., New York City and other American cities for the construction of hotels, department stores and commercial properties,” Mr Wang said. After completing the AMC buy, a studio executive said Wanda was nearing an agreement with Fox film studio to co-produce films in China. Mr Wang said he will be working with 3-4 of the top-6 movie studios in the United States on deals to co-finance and co-produce movies. Though a cinema mogul, Mr Wang says he does not watch movies often. Reuters

one of the main drivers of growth

dipped to 7.4 percent in the third quarter, slowing for seven quarters in a row and leaving the economy on course for its weakest showing since 1999. Given the recent signs of recovery, many analysts expect the economy to snap out of its longest downward cycle since the global financial crisis, and start to trend upwards in the fourth quarter. The end of a destocking cycle and a greater pace of investment are expected to keep driving up domestic demand. Economists also warn of downside risks from still cloudy external markets. The European debt crisis and listless U.S. economy continue

to crimp demand from China’s two largest trade partners. China may maintain its annual economic growth target at 7.5 percent next year in a sign the new leadership headed by Xi Jinping won’t tolerate a bigger slowdown from the lowest goal since 2004. Nine of 16 analysts surveyed between November 22 and 30 by Bloomberg News forecast the government will set a goal unchanged from 2012, while six expect a decline to 7 percent and one sees an increase to 8 percent. Reuters

Cut in bankcard fees may add credit risk, Moody’s says

Wang Jianlin, Wanda’s chairman

Pre-tax profit at Chinese commercial banks to drop

Beijing to boost gas output in South China Sea

Large-scale shale gas development expected for 2016-2020

hina’s plan to cut merchant fees for bankcard transactions may increase credit risk at the country’s banks if they increase lending to offset the reduction, Moody’s Investors Service said. The cuts, which start on February 25, will reduce pre-tax profit at the Chinese commercial banks Moody’s covers by 1 percent to 1.5 percent, Katie Chen, a Beijing-based associate analyst at Moody’s Investors Service Hong Kong Ltd, wrote in a report yesterday. “Banks may try to accelerate volume growth to make up for the loss in fee income,” she wrote. Lenders may also promote the use of cards for overdrafts or instalment payments as a way to increase profit from fees, according to Ms Chen. Outgoing Premier Wen Jiabao in April called for China to break the “monopoly” of a few big lenders that make easy profits because it’s hard to borrow money elsewhere. Mr Wen is trying to deepen access to credit among small businesses as part of efforts to rebalance the world’s second-largest economy toward domestic consumption and away from dependence on exports.

Minsheng bank – more focused on small business clients

“This cut in merchant fees is part of an on-going campaign to support China’s real economy,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd, wrote in a report yesterday. “We see this change as an effort to support small businesses and to help make China’s payments business less cash intensive.” The reduction in pre-tax income may be as little as 0.4 percent at the nine mainland banks whose shares are traded in Hong Kong, according to Mr Antos. China Minsheng Banking Corp. may be “the big winner” as its “core small and micro business clients” adopt electronic payments, he wrote. Bloomberg

hina aims to produce 15 billion cubic metres (bcm) of natural gas a year from the South China Sea by 2015, the energy administration said yesterday, raising the possibility of disputes with neighbours over over-lapping claims in the sea. The National Energy Administration, said in its 20112015 five-year plan that the South China Sea would “form the main part” of the country’s offshore gas exploration plans. Beijing is in dispute with several of its neighbours over claims to parts of the oil and gas-rich sea, including the Philippines, Taiwan, Vietnam, Brunei and Malaysia. China lays claim to almost the whole of the sea. The energy administration did not specify in its plan, published on its website, which particular parts of the sea it intended to exploit for gas. The administration said China’s

total offshore output was expected to reach 20 bcm by 2015, with 15 bcm from the South China sea. Total national production is expected to be 176 bcm by 2015, including 138.5 bcm of conventional natural gas. Output last year reached 102 bcm. With consumption expected to reach 230 bcm by the end of 2015, China’s would depend on overseas supplies for about 35 percent of its needs, up from 15 percent in 2010, the administration said. “This will bring new challenges to the country’s energy security, and it must do its utmost to boost effective domestic supplies while at the same time optimising the natural gas consumption mix,” it said. The office also said the 20112015 period would be used to “lay the foundations” for the large-scale development of the shale gas sector over the following five-year period. Reuters

10 |

business daily December 4, 2012

ASIA Australia set for Forbidden City theme park A China theme park in Australia featuring a full-size replica of gates to the Forbidden City and a nine-storey temple could rival the Sydney Opera House as a tourist drawcard, officials said yesterday. The planned Aus$500 million (US$520 million) attraction moved a step closer after Wyong Shire Council in New South Wales signed a deal on Sunday to sell 15.7 hectares of land to the company behind the proposal. Construction of the seven-sectioned theme park 80 kilometres north of Sydney is set to begin in 2015 and be finished by 2020.

S.Korea inflation dips in November Backs view for more rate cuts

outh Korean inflation slowed in November further below the central bank’s target while manufacturing output shrank again, underscoring weak momentum and adding to the case for at least once more central bank rate cut to spur growth. The consumer price index rose 1.6 percent in November from a year earlier, Statistics Korea data showed, down from a 2.1 percent gain in October and compared with a median 1.9 percent gain forecast in a Reuters survey. The data, combined with recent pessimistic business and consumer sentiment readings, underscored how private consumption and corporate investment remain depressed by the uncertain economic outlook and lacklustre exports. “It’s better for the Bank of Korea to ease now, while the economy hasn’t actually rebounded yet and other central banks are easing, between the end of this year and the first quarter,” said IBK Securities economist Na Jung-hyeok. Though exports rose in annual terms for the second consecutive month in November, the rate of

shipments growth still remained far below what was seen in 2011. The South Korean won has also appreciated by more than 6 percent against the dollar so far this year, which will pose additional challenges for exporters in coming months. Separate private sector data released yesterday showed South Korean manufacturers’ activity contracted for the sixth consecutive month in November, underscoring the fragile state of Asia’s fourthlargest economy. The central bank cut the policy interest rate by 25 basis points each in July and October and many analysts expect it to lower the rate again early next year as Asia’s fourth-largest economy needs further support and price pressures remain weak. “Lower interest rates would ease debt servicing burdens on the middle class and address the recent attacks on the won, which stems from how South Korea’s stimulus efforts have been considerably weaker than other countries,” said IBK’s Mr Na. November was the ninth consecutive month that the annual inflation was below the Bank of Korea’s 3 percent target, after having

fallen below the 4 percent upper limit in January this year. From a month earlier, the consumer price index fell 0.4 percent in November after a 0.1 percent decline in October, compared with a median 0.1 percent fall in the Reuters survey.

Seoul tightens monitoring of foreign investment The South Korean government unveiled measures yesterday allowing it access to more details on the activities of foreign investors in a bid to reduce volatility in financial markets. Until now, Seoul banks must report a daily change of money volume in financial investment accounts held by foreigners. But under a new rule to take effect in April, they will have to offer a detailed breakdown of the money flow by types of investment such as stocks and bonds, the Bank of Korea and the finance ministry said in a joint statement. The

Inflation for the January-November period averaged 2.2 percent, far lower than 4.0 percent seen for the same period in 2011 and compared with the central bank’s forecast of 2.3 percent for the whole of this year. Reuters

change will allow Seoul financial authorities to better track capital flows of foreign investors and to respond to sudden volatility in markets – particularly stock markets – more quickly and effectively, it said. “Since the global financial crisis, capital flows in foreigners’ stock trading have become far more volatile than before … the change will help us monitor the money flows of foreign investors more closely,” it said. The move came less than a week after the authorities announced a plan to lower the ceiling on foreign exchange forward positions by foreign and local banks in a bid to ease volatility in the currency market. The Korean won has gained about 9 percent against the dollar since May – a worrying trend for the country’s export-driven economy which is already struggling with the impact of the downturn in its US and European markets.

Indonesia’s trade deficit to pressure rupiah Inflation mild, central bank expected to hold

Rupiah – the worst performing emerging market Asian currency

ndonesian exports fell more than expected in October and imports surged, creating a record US$1.54 billion trade deficit in Southeast Asia’s largest economy that is likely to pressure the rupiah and keep the central bank’s rate policy on hold. A much higher-than-forecast 10.82 percent jump in imports in October was driven by capital goods and oil, reflecting the record levels of foreign direct investment that the country has attracted as well as rising domestic demand for fuel. Exports dropped 7.61 percent in a seventh consecutive monthly decline, showing that weak global demand will continue to dampen the economy into the fourth quarter. The trade balance, a worry for investors, had been expected to improve. “Renewed pressure on the current account could pose downside pressure on the currency and other asset markets,” said Radhika Rao, economist at Forecast in Singapore. The rupiah, though, held its ground after the data at 9,600 to the U.S. dollar, having lost 5.5 percent this year to make it the worst performing emerging

market Asian currency. Jakarta stocks traded 0.1 percent lower.

Import surge The fall in October exports was smaller than a 9.35 percent drop the previous month, pointing to a slight improvement in shipments to Asian countries, but larger than a decline of 4.79 percent forecast in a Reuters poll. The consensus forecast for imports was a slight growth of 0.62 percent and a trade surplus of US$650 million. The country registered trade deficits for four straight months, from

US$ 1.54 bln Indonesia’s trade deficit in October

December 4, 2012 business daily | 11

ASIA Singapore Air mulls Virgin sale Singapore Airlines said yesterday it was in talks with interested parties to sell its 49 percent stake in British carrier Virgin Atlantic, with sources revealing that Delta Air Lines Inc. was among the potential suitors. Delta wants to gain access to Virgin’s landing rights at London’s Heathrow airport, according to two people familiar with the matter. Delta has been looking to acquire a Virgin stake for more than two years but previous talks broke down over price and other issues, and there is no guarantee that its recent discussions would result in a pact, the people said.

Foreign-controlled banks must go public, BSP says Philippine central bank gives lenders 3 years to comply with listing rules

he Philippines will give foreign banks in the country three years to list at least 10 percent of their companies on the local bourse, after the central bank clarified when banks must do so from regulations that were not enforced earlier. The listing requirement was contained in a 1994 law liberalising the entry and scope of operations of foreign banks in the Philippines, but it was not implemented because it did not clearly specify when the banks were supposed to comply. The central bank in a November 28 circular posted on its website defined “reasonable period of time” as three years. Under the law, foreign banks can operate in the country by acquiring up to 60 percent of an existing bank, investing in up to 60 percent of a new banking subsidiary, or by establishing branches with full banking authority. Only foreign banks that entered the Philippines via the first two modes are required to make their companies public. Less than five banks operating in the country now fall under those categories, including Maybank Philippines and Chinatrust, said

April through July. The import surge came as Indonesia’s economy is increasingly being driven by investment to feed buoyant consumer demand, as rising wages lead a new middle class to buy more cosmetics, smartphones and cars. Imports of capital goods – a leading indicator for foreign direct investment – jumped 18.2 percent in October, though imports of consumer goods fell 2.3 percent from the previous month. Greater investment in manufacturing and rising wealth are also boosting the country’s need for fuel, gas and power, at a time when local production is sagging. Imports of crude oil surged 37.9 percent from September and gas imports rose 10 percent. But the widening trade deficit caused by surging imports may put off portfolio investors. “The worsening trade balance completely overshadows the improving inflation picture. We had expected a stronger export outcome in line with regional trends and in view of improving export PMIs. We now expect Indonesia rupiah pressure to persist,” said Aninda Mitra, head of Southeast Asia economics at ANZ bank in Singapore. The uncertain trade outlook and mild inflation means Bank Indonesia will likely leave its benchmark rate unchanged at a record low 5.75 percent at its meeting on December 11 and into 2013, economists say. Reuters

Maybank Philippines required to list on the bourse

Judith Sungsai, director for Central Point of Contact Department at the Bangko Sentral ng Pilipinas. Maybank Philippines said it was not ready to comment as it was seeking guidance from its parent company,

Maybank, Eric Montelibano, the bank’s corporate affairs head, said. Chinatrust, a subsidiary of Taiwan’s largest bank Chinatrust Commercial Bank, could not immediately comment.

Early this year, Chinatrust opted to voluntarily delist rather than comply with the Philippine Stock Exchange’s minimum public float requirement of at least 10 percent. Reuters

Fitch warns on Indian economy Loosen fiscal policy ahead of elections could put pressure on ratings

ndia’s sovereign rating could be cut if the government loosens fiscal policy in the run-up to elections due by 2014 or sees a prolonged slowdown in economic growth, ratings agency Fitch said yesterday. Both Fitch and Standard & Poor’s earlier this year cut their ratings outlooks for Asia’s third-largest economy to negative, putting the country in danger of being the first of the BRICS grouping of fast-growing economies to be downgraded to junk status. Fitch said weak GDP data on Friday confirmed the slowdown in the economy, and recent reform proposals by the government, while potentially supportive of growth, would need time to work and face political risks in their implementation. “Policy slippage and/or mounting evidence of a structural decline in the trend growth rate, such as protracted relatively weak economic data, could cause the ratings to be downgraded,” its report said. The Indian economy extended its

long slump in the September quarter, growing only 5.3 percent, below the 5.5 percent expansion seen in the three months to June, keeping it on track for its worst year in a decade. The ratings agency expects economic recovery to be shallow with real GDP falling to 6 percent in the current fiscal year from 6.5 percent in the previous year before recovering to 7 percent in the year that ends March 2014. The agency, however, pointed out that the upbeat HSBC PMI reading earlier yesterday suggests that growth may have troughed. India’s manufacturing sector beat the expectations of economists to grow at its fastest pace in five months in November, boosted by strong export orders and a surge in output, a business survey showed yesterday. “However, tight fiscal and monetary policy settings decrease the authorities’ scope to support growth amid stubbornly high inflation and a commitment to consolidating public

finances,” the report said. Fitch said several of the proposals announced by the government require legislative approval and policy reversals cannot be ruled out. “The approach of general elections in 2014 means there is little time to fully enact reform. These risks are reflected in the Negative Outlook,” Fitch added. Reuters

12 |

business daily December 4, 2012

MARKETS Hang SENG INDEX NAME

NAME

PRICE

DAY %

VOLUME

11.84

-1.986755

17935925

9.79

4190322

NAME

PRICE

DAY %

VOLUME

29.75

-1.3267

33212155

CHINA UNICOM HON

ALUMINUM CORP-H

3.23

-2.121212

17569119

CITIC PACIFIC

BANK OF CHINA-H

3.21

-1.834862

257043672

BANK OF COMMUN-H

5.55

-2.288732

34948226

BANK EAST ASIA

29.8

-0.3344482

2292405

BELLE INTERNATIO

16.2

-0.4914005

11602312

ESPRIT HLDGS

23.75

-0.210084

12096483

HANG LUNG PROPER

28.1

-1.056338

9147548

TINGYI HLDG CO

13.4

-1.615272

4073896

HANG SENG BK

117.9

-0.4222973

1295978

WANT WANT CHINA

116.7

-1.352494

4714687

HENDERSON LAND D

54.45

-1.358696

2592847

WHARF HLDG

CHINA COAL ENE-H

7.59

-2.941176

29579960

HENGAN INTL

69.6

-0.5714286

2581450

CHINA CONST BA-H

5.86

-1.346801

230402681

HONG KG CHINA GS

21.1

0.4761905

3119523

CHINA LIFE INS-H

22.5

-1.531729

16246617

CHINA MERCHANT

23.5

3068809

AIA GROUP LTD

BOC HONG KONG HO CATHAY PAC AIR CHEUNG KONG

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD

67.2

-0.3263127

2100168

16.38

-1.206273

32883377

10.8

-1.279707

3465295

11.86

-1.495017

10564205

HONG KONG EXCHNG

122.7

-0.8885299

5628043

HSBC HLDGS PLC

78.25

-0.6349206

17195592

CHINA MOBILE

87.25

-1.523702

13076688

HUTCHISON WHAMPO

78.4

-1.631117

5907892

CHINA OVERSEAS

22.35

-2.614379

22974945

IND & COMM BK-H

5.15

-1.529637

175733704

CHINA PETROLEU-H

8.1

-1.459854

44774731

LI & FUNG LTD

12.38

-2.978056

16859686

CHINA RES ENTERP

27.65

1860767

MTR CORP

30.85

-0.3231018

2175568

CHINA RES LAND

20.15

-2.657005

13737108

NEW WORLD DEV

12.28

16842291

CHINA RES POWER

17.58

1.150748

8933257

PETROCHINA CO-H

10.24

-1.348748

51539335

CHINA SHENHUA-H

-2.362205

16821867

PING AN INSURA-H

57.85

-1.364024

8297744

PRICE

DAY %

VOLUME

24.75

-2.559055

9058683

8.1

-1.459854

POWER ASSETS HOL SANDS CHINA LTD SINO LAND CO SUN HUNG KAI PRO SWIRE PACIFIC-A TENCENT HOLDINGS

MOVERS

PRICE

DAY %

68.35

0.2199413

VOLUME 1720146

32.8

-0.7564297

12487290

13.8

-1.428571

5685841

112.5

-0.7936508

7408891

95.3

0.3157895

1275370

245.4

-3.080569

5373337

22.4

-1.103753

2022542

11.44

1.060071

9825207

59.9

0.4191115

8045989

4 22150

INDEX 21767.85 HIGH

22147.96

LOW

21767.85

52W (H) 22162.47 (L) 17821.51953

21760

29-November

3-December

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.34

-1.764706

89673504

PRICE

DAY %

VOLUME

YANZHOU COAL-H

11.7

-1.349073

AIR CHINA LTD-H

5.24

0.9633911

8962259

19218371

44774731

ZIJIN MINING-H

3.09

-0.9615385

ALUMINUM CORP-H

3.23

-2.121212

17569119

CHINA RAIL CN-H

8.48

23965977

-1.851852

19753302

ZOOMLION HEAVY-H

9.72

-2.507523

ANHUI CONCH-H

25.6

-0.7751938

8619967

CHINA RAIL GR-H

11433889

4.48

-0.6651885

19193087

ZTE CORP-H

11.44

-2.222222

BANK OF CHINA-H

3.21

-1.834862

257043672

3590863

CHINA SHENHUA-H

-2.362205

16821867

CHINA PACIFIC-H CHINA PETROLEU-H

5.55

-2.288732

34948226

CHINA TELECOM-H

4.12

-2.369668

68176891

19.16

-3.62173

5052902

DONGFENG MOTOR-H

10.7

-1.834862

24684798

CHINA CITIC BK-H

3.96

-1

35501592

GUANGZHOU AUTO-H

6.07

-3.803487

8373229

CHINA COAL ENE-H

7.59

-2.941176

29579960

HUANENG POWER-H

6.82

3.805175

41482177

CHINA COM CONS-H

7.06

18943734

IND & COMM BK-H

5.15

-1.529637

175733704

CHINA CONST BA-H

5.86

-1.346801

230402681

JIANGXI COPPER-H

19.64

-1.306533

7793735

CHINA COSCO HO-H

3.58

0.8450704

11588740

PETROCHINA CO-H

10.24

-1.348748

51539335

CHINA LIFE INS-H

22.5

-1.531729

16246617

PICC PROPERTY &

9.89

-0.8024072

13528403

CHINA LONGYUAN-H

5.06

-1.171875

6984678

PING AN INSURA-H

57.85

-1.364024

8297744

CHINA MERCH BK-H

14.68

-1.078167

14210009

SHANDONG WEIG-H

7.65

-4.494382

9278764

BANK OF COMMUN-H BYD CO LTD-H

NAME

MOVERS

1 10680

INDEX 10458.91 HIGH

10673.35

LOW

10437.16

CHINA MINSHENG-H

7.51

-1.184211

30186447

SINOPHARM-H

23.95

-0.4158004

5336664

52W (H) 11916.1

CHINA NATL BDG-H

9.99

-1.284585

48378475

TSINGTAO BREW-H

43.2

-0.9174312

3699172

(L) 8987.76

CHINA OILFIELD-H

15.1

-2.45478

3821851

WEICHAI POWER-H

-0.5145798

3492801

10400

29-November

3-December

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.61

0.3846154

44719671

DAQIN RAILWAY -A

6.34

0.6349206

25400180

SHANDONG DONG-A

37.02

-1.28

2106648

AIR CHINA LTD-A

4.65

-0.2145923

6099614

DATANG INTL PO-A

3.77

-4.79798

7754020

SHANDONG GOLD-MI

35.55

-3.553988

8814195

ALUMINUM CORP-A

4.58

-0.2178649

6706629

EVERBRIG SEC -A

10.01

-1.862745

7755155

SHANG PHARM -A

9.88

-2.371542

7093609

ANGANG STEEL-A

3.39

7090300

GD POWER DEVEL-A

2.29

-1.293103

46605656

SHANG PUDONG-A

7.35

-1.474531

53769233

ANHUI CONCH-A

16.51

0.1820388

20962547

GEMDALE CORP-A

5.41

2.268431

138206870

SHANGHAI ELECT-A

3.58

-2.185792

2074997

BANK OF BEIJIN-A

7.09

-1.527778

35980716

GF SECURITIES-A

10.9

-1.978417

15651665

SHANXI LU'AN -A

15.38

-4.174455

7170547

BANK OF CHINA-A

2.74

-0.7246377

29262045

GREE ELECTRIC

23.26

-0.8947593

13365986

SHANXI XINGHUA-A

32.67

-10

6180798

BANK OF COMMUN-A

4.21

-0.4728132

32801451

GUANGHUI ENERG-A

14.63

-1.9437

12562044

SHANXI XISHAN-A

10.53

-6.4

11260208

BAOSHAN IRON & S

4.63

-0.856531

16967109

HAITONG SECURI-A

7.9

-0.1264223

41504793

SHENZEN OVERSE-A

5.8

1.398601

53582835

26.78

-2.084095

2138470

SICHUAN KELUN-A

51.4

3.275065

657313

2.31

-1.282051

17517890

SUNING APPLIAN-A

5.84

-0.6802721

23233004

NAME

BYD CO LTD -A CHINA CITIC BK-A

NAME

15.46

0.1944264

3497775

HANGZHOU HIKVI-A

3.6

-0.8264463

8121371

HEBEI IRON-A

NAME

CHINA CNR CORP-A

4.24

0.2364066

52842520

HENAN SHUAN-A

54.14

-1.041857

1425026

TASLY PHARMAC-A

49.65

-0.441147

1335609

CHINA COAL ENE-A

6.74

-0.8823529

5928759

HONG YUAN SEC-A

14.16

-2.814001

9174046

TSINGTAO BREW-A

29.63

-0.9361418

1210294

CHINA CONST BA-A

4.17

20895448

HUATAI SECURIT-A

7.38

-2.766798

15550083

WEICHAI POWER-A

22.25

0.8155868

16270019

CHINA COSCO HO-A

4.24

0.952381

13216410

HUAXIA BANK CO

8.08

-4.151839

74841539

WUHAN IRON & S-A

2.69

1.509434

48414337

CHINA CSSC HOL-A

18.68

-2.505219

2332144

IND & COMM BK-A

3.86

-0.5154639

26701846

WULIANGYE YIBIN

24.31

-9.862811

63576490

CHINA EAST AIR-A

2.96

-0.6711409

11079661

INDUSTRIAL BAN-A

12.47

-1.50079

53977022

YANGQUAN COAL -A

11.22

-8.482871

14707375

CHINA EVERBRIG-A

2.56

-0.7751938

36609021

INNER MONG BAO-A

29.84

-3.492885

29739726

YANTAI WANHUA-A

12.9

-0.6928406

6704333

CHINA LIFE INS-A

17.8

0.8498584

14072515

INNER MONG YIL-A

19.43

-2.263581

5267879

YANZHOU COAL-A

15.43

-4.753086

2526816

CHINA MERCH BK-A

9.91

-1.097804

35031520

INNER MONGOLIA-A

4.55

-5.60166

46045473

YUNNAN BAIYAO-A

62.66

-0.8387403

1418574

CHINA MERCHANT-A

24.2

1.467505

14834720

JIANGSU HENGRU-A

27.46

-1.43575

2792401

ZHONGJIN GOLD

14.71

-1.605351

10089369

CHINA MERCHANT-A

8.19

-1.206273

6286994

CHINA MINSHENG-A CHINA NATIONAL-A

6.19

-1.589825

JIANGSU YANGHE-A

91.79

-8.026052

3206496

ZIJIN MINING-A

3.56

-1.111111

21951610

85134341

JIANGXI COPPER-A

20.02

-0.4475385

4165019

ZOOMLION HEAVY-A

7.86

-1.132075

27397112

JINDUICHENG -A

9.95

-2.35525

2716890

ZTE CORP-A

7.64

-1.419355

6631484

ZTE CORP-A

7.75

-0.8951407

7062265

7.13

0.7062147

47967917

CHINA OILFIELD-A

14.92

-0.665779

1794702

KANGMEI PHARMA-A

14.43

-2.368065

10561745

CHINA PACIFIC-A

17.29

2.916667

25066652

KWEICHOW MOUTA-A

200.19

-7.323735

7937236

6.11

1.495017

23948836

LUZHOU LAOJIAO-A

30.98

-7.494775

11627728

2.04

1.492537

50557024

2.45

10370324

CHINA PETROLEU-A CHINA RAILWAY-A

5.46

1.298701

41642107

METALLURGICAL-A

CHINA RAILWAY-A

2.85

-0.3496503

60031612

NINGBO PORT CO-A

CHINA SHENHUA-A

21.42

-1.426599

6189210

PANGANG GROUP -A

3.07

-2.848101

25916377

8.47

7762842

CHINA SHIPBUIL-A

3.93

-2.48139

12412555

PETROCHINA CO-A

CHINA SOUTHERN-A

3.33

-0.5970149

15125158

PING AN BANK-A

12.56

-1.875

14072783

36.63

0.4111842

MOVERS

235

10 2150

INDEX 2108.85

CHINA STATE -A

3.2

2.564103

216061526

PING AN INSURA-A

21681916

HIGH

2149.73

CHINA UNITED-A

3.24

2.208202

75027892

POLY REAL ESTA-A

11.75

2.441151

62164826

LOW

2108.74

CHINA VANKE CO-A

8.8

0.5714286

88740723

QINGDAO HAIER-A

11.14

-0.1792115

10681050

CHINA YANGTZE-A

6.36

8710803

QINGHAI SALT-A

22.43

-2.052402

2012708

CITIC SECURITI-A

-0.0999001

55722846

SAIC MOTOR-A

14.32

1.77683

35770799

CSR CORP LTD -A

4.84

1.25523

46155083

SANY HEAVY INDUS

7.62

-6.503067

28922357

PRICE DAY %

Volume

PRICE DAY %

Volume

PRICE DAY %

Volume

76.3 -0.2614379

5247830

TAIWAN MOBILE CO

104 -0.4784689

7772892

7964522

TPK HOLDING CO L

463 -0.2155172 97.9

52W (H) 2717.825 (L) 2108.149

2100

29-November

3-December

FTSE TAIWAN 50 INDEX NAME

NAME

ACER INC

25.4

0.3952569

14077663

FORMOSA PLASTIC

ADVANCED SEMICON

24.4

0.2053388

18979872

FOXCONN TECHNOLO

100.5 -0.9852217

ASIA CEMENT CORP

37.5

0.4016064

4264800

FUBON FINANCIAL

33.05

0.1515152

19668375

TSMC

ASUSTEK COMPUTER

318.5

-0.624025

3549038

HON HAI PRECISIO

94.7

1.609442

50497443

UNI-PRESIDENT

5.263158

230824362

HOTAI MOTOR CO

214 -0.4651163

630436

CATCHER TECH

147.5

-1.006711

12148592

HTC CORP

CATHAY FINANCIAL

30.75 -0.6462036

17418212

HUA NAN FINANCIA

CHANG HWA BANK

15.85

0.6349206

9060316

CHENG SHIN RUBBE

74.8

0.9446694

6475303

CHIMEI INNOLUX C

13.9

6.923077

212973942

335

1.361573

10867338

CHINA DEVELOPMEN

7.15

0.8462623

58098462

MEGA FINANCIAL H

22.75

15965139

CHINA STEEL CORP

26.25

-1.315789

18692054

NAN YA PLASTICS

51.6

0.3891051

4970709

CHINATRUST FINAN

16.95

0.5934718

28433821

PRESIDENT CHAIN

151

1.342282

1027441

93.9

6347811

QUANTA COMPUTER

71.7

-1.780822

7322583

AU OPTRONICS COR

CHUNGHWA TELECOM COMPAL ELECTRON

8255537 34100297

WISTRON CORP

31.65 -0.7836991

0.1879699

15458182

0.3039514

7037589

YUANTA FINANCIAL

LARGAN PRECISION

778

-2.015113

1706524

YULON MOTOR CO

LITE-ON TECHNOLO

39.6 -0.2518892

5567098

20.5

4.3257

64230689

SILICONWARE PREC

31.35

-0.317965

4923413

106.5

2.403846

3938060

SINOPAC FINANCIA

12.15 -0.4098361

21115902

FAR EASTERN NEW

34.55

19914829

SYNNEX TECH INTL

FAR EASTONE TELE

71.5

-1.785714

8583069

TAIWAN CEMENT

FIRST FINANCIAL

51.4 -0.9633911 11.15 -0.8888889

16.5

DELTA ELECT INC

55.5

0.1805054

6942194

-0.131406

6588536

17.75

13613305

16.05

0.3125

11053632

FORMOSA CHEM & F

68.1

-1.017442

5167237

TAIWAN FERTILIZE

74.6

-1.322751

2640686

FORMOSA PETROCHE

89.4

1.245753

2480410

TAIWAN GLASS IND

27.2

-0.729927

2353536

TAIWAN COOPERATI

5129426 41756536

UNITED MICROELEC

266.5

MEDIATEK INC

-0.810537

MOVERS

0.6802721

20133612

0.952381

3771240

4 5375

INDEX 5360.12 HIGH

5372.45

LOW

5262.82

8055372

14.8

52W (H) 5621.53 (L) 4643.05

5260

29-November

3-December

December 4, 2012 business daily | 13

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

MeLCo CroWn enTerTaInMenT

MgM CHIna HoLDIngS 39.6

30.00

14.6

29.65

14.5 39.4

29.30

14.4

28.95

Max 29.85

average 29.145

Min 28.7

Last 28.85

28.60

SanDS CHIna LTD

average 33.185

Max 33.65

14.3 Max 39.4

average 39.4

METALS

Min 32.65

Last 32.8

Max 14.58

average 14.382

Min 14.3

Last 14.34

Wynn MaCaU LTD 22.4

33.5

18.3

22.2

33.2

18.2

22.0

32.9

18.1

21.8

32.6

18.0 Max 18.34

average 18.264

Min 18.18

Last 18.3

21.6 Max 22.4

average 22.075

Last 21.8

Min 21.7

CURRENCY EXCHANGE RATES

WTI CRUDE FUTURE Jan13

88.83

-0.08997863

-9.162491052

109.6699982

79.68000031

BRENT CRUDE FUTR Jan13

111.16

-0.062932662

7.400966184

120.7699966

90.15999603

GASOLINE RBOB FUT Jan13

DAY %

YTD %

(H) 52W

273.33

0.109878035

10.50780302

293.3099985

218.4999943

952.5

-0.052465897

6.276150628

1036.25

799.25

NATURAL GAS FUTR Jan13

3.608

1.319853974

-7.082152975

4.394999981

3.062000036

HEATING OIL FUTR Jan13

306.16

0.029405038

6.549732025

334.2199802

255.5699825

Gold Spot $/Oz

1719.1

0.2402

9.853

1796.08

1522.75

Silver Spot $/Oz Platinum Spot $/Oz Palladium Spot $/Oz

33.61

0.5911

20.7473

37.4775

26.1513

1601.38

-0.0387

14.8354

1736

1339.25

682.4

-0.1609

4.4223

725.19

553.75

LME ALUMINUM 3MO ($)

2094

1.453488372

3.663366337

2361.5

1827.25

LME COPPER 3MO ($)

7995

1.208937275

5.197368421

8765

7131

LME ZINC

2046

0.862706433

10.89430894

2220

1745

3MO ($)

LME NICKEL 3MO ($)

17650

3.823529412

-5.665419562

22150

15236

15.35

0.523903078

-0.032562683

16.60000038

14.60000038

761

1.095981402

26.78050812

846.25

511

WHEAT FUTURE(CBT) Mar13

871.25

0.897510133

18.69891008

948.25

652

SOYBEAN FUTURE Jan13

1456.5

1.233709818

20.07419621

1781.5

1126.75

COFFEE 'C' FUTURE Mar13

149.6

-0.664010624

-37.12964909

249

147.0999908

SUGAR #11 (WORLD) Mar13

19.46

0.620475698

-16.69520548

25.12999916

COTTON NO.2 FUTR Mar13

73.82

-0.12176972

-16.59699469

98.5

AGRICULTURE ROUGH RICE (CBOT) Jan13 Mar13

PRICE

(L) 52W

GAS OIL FUT (ICE) Jan13

MAJORS

ASIA PACIFIC

CROSSES

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

DAY %

1.0416 1.6051 0.9248 1.3037 82.17 7.9825 7.75 6.2287 54.605 30.65 1.2203 29.096 40.9 9614 85.587 1.20565 0.81219 8.1175 10.4065 107.12 1.03

-0.1151 0.2373 0.3568 0.3927 0.3773 0.0025 0.0039 -0.0337 -0.6227 0.1958 -0.0082 -0.1443 -0.2567 0.0416 0.4919 -0.0274 -0.1367 -0.1688 -0.271 -0.0093 0

YTD %

(H) 52W

2.0276 3.2684 1.4381 0.5864 -6.4014 0.2142 0.2245 1.0644 -2.8203 2.9364 6.2526 4.0659 7.1883 -5.6688 -8.3599 0.924 2.6102 0.2057 -0.5237 -6.9642 0.0097

(L) 52W

1.0857 1.6309 0.9972 1.3487 84.18 8.0198 7.7864 6.3964 57.3275 32 1.3138 30.396 44.35 9664 88.637 1.24438 0.86134 8.5568 10.7914 111.44 1.0308

0.9582 1.5235 0.8931 1.2043 76.03 7.9823 7.7498 6.2105 48.6088 30.2 1.2152 28.914 40.795 8875 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029

MACAU RELATED STOCKS (H) 52W

(L) 52W

3.15

-2.777778

43.18182

3.32

2.16

6404277

CROWN LTD

10.31

0.5853659

27.44128

10.34

7.92

1359529

18.65999985

AMAX HOLDINGS LT

0.065

-1.515152

-25.28735

0.119

0.055

3407500

66.84999847

BOC HONG KONG HO

23.75

-0.210084

29.07609

17.46

12096483

CENTURY LEGEND

0.27

-1.818182

17.3913

0.335

0.204

172000

CHEUK NANG HLDGS

4.21

50.35715

4.36

2.5

NAME

56000

22.35

-2.614379

72.38191

23.3

12.066

22974945

ARISTOCRAT LEISU

CHINA OVERSEAS

World Stock MarketS - Indices

PRICE

DAY % YTD %

VOLUME CRNCY

CHINESE ESTATES

11.5

0.7005254

-8

13.26

8.3

2000

CHOW TAI FOOK JE

11.22

-0.8833922

-19.39655

15.16

8.4

11525715

EMPEROR ENTERTAI

1.79

2.873563

61.26126

1.82

0.99

2885000

FUTURE BRIGHT

1.31

-2.238806

211.9048

1.43

0.38

2628000

GALAXY ENTERTAIN

28.85

-2.368866

102.5983

29.85

13.28

25629471 1295978

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

13025.58

0.02887461

6.6136

13661.87

11735.19

NASDAQ COMPOSITE INDEX

3010.241

-0.05929562

15.54963

3196.932

2518.01

HANG SENG BK

117.9

-0.4222973

27.94357

120

91.15

FTSE 100 INDEX

5881.5

0.2502207

5.549259

5989.07

5229.76

HOPEWELL HLDGS

30.25

-0.9819967

54.31975

31.091

19.049

860151

DAX INDEX

7434.06

0.3856593

26.03626

7478.53

5637.53

HSBC HLDGS PLC

78.25

-0.6349206

32.62712

79.55

57.05

17195592

NIKKEI 225

9458.18

0.1288375

11.8603

10255.15

8238.96

HUTCHISON TELE H

3.44

-0.2898551

15.05017

3.88

2.83

4402215

HANG SENG INDEX

21767.85

-1.191717

18.08283

22162.47

17821.51953

LUK FOOK HLDGS I

23.25

-14.20664

34.3

14.7

4455500

MELCO INTL DEVEL

8.26

-0.6016847

43.15425

8.35

5.12

2903021

CSI 300 INDEX

2108.85

-1.439994

-10.0988

2717.825

2108.149

MGM CHINA HOLDIN

14.34

-1.103448

49.49719

14.76

9.432

4421431

TAIWAN TAIEX INDEX

7599.91

0.2604163

7.463576

8170.72

6609.11

MIDLAND HOLDINGS

3.5

-2.506964

-11.48309

5.217

3.249

2600000

NEPTUNE GROUP

0.156

40.54054

0.222

0.084

1380000

NEW WORLD DEV

12.28

96.16613

13.2

6.13

16842291

SANDS CHINA LTD

32.8

-0.7564297

49.43052

33.95

20.35

12487290

SHUN HO RESOURCE

1.25

1.37

0.97

SHUN TAK HOLDING

3.64

42.23593

3.77

2.418

22397795

KOSPI INDEX S&P/ASX 200 INDEX

1940.02

0.3683584

6.259381

2057.28

1750.6

4531.508

0.5652862

11.70813

4581.8

3985

4302.444

0.6151107

12.57072

4381.746094

3635.283

FTSE Bursa Malaysia KLCI

1607.35

-0.2160377

5.005455

1679.37

1448.54

NZX ALL INDEX

876.203

-0.1301654

20.06065

878.077

712.548

SJM HOLDINGS LTD

18.3

0.1094092

46.33519

18.36

11.973

2528591

SMARTONE TELECOM

14.3

-0.9695291

6.398813

17.5

12.96

2352659

WYNN MACAU LTD

21.8

-1.580135

11.79487

25.5

14.62

4604125

ASIA ENTERTAINME

3.36

-0.591716

-42.85714

7.24

2.4

162553

BALLY TECHNOLOGI

45.14

-1.634343

14.10515

51.16

35.79

756391 36932

JAKARTA COMPOSITE INDEX

14.2

18.4

PRICE

NAME

39.2

33.8

NAME

CORN FUTURE

Last 39.4

SJM HoLDIngS LTD

Commodities ENERGY

Min 39.4

PHILIPPINES ALL SHARE IX

3661.12

0.5962489

20.23225

3661.12

2952.17

HSBC Dragon 300 Index Singapor

603.91

0.76

21.68

STOCK EXCH OF THAI INDEX

1331.93

0.5959034

29.90385

1333.64

1006.16

HO CHI MINH STOCK INDEX

379.27

0.3837806

7.885081

492.44

332.28

BOC HONG KONG HO

3.09

-1.277955

28.90106

3.3

2.24

Laos Composite Index

1196.44

33.01758

1249.34

876.33

GALAXY ENTERTAIN

3.79

-2.067183

102.6738

3.87

1.75

2550

INTL GAME TECH

13.87

-0.5021521

-19.36047

18.1

10.92

6976341

JONES LANG LASAL

82.01

0.7989184

33.87202

87.52

56.51

331218

LAS VEGAS SANDS

46.65

-0.5966333

9.173884

62.09

34.72

6153146

MELCO CROWN-ADR

15.26

0.1969796

58.62786

16.02

8.32

1809382

MGM CHINA HOLDIN

1.82

52.72387

1.96

1.1917

1200

MGM RESORTS INTE

10.15

1.398601

-2.684567

14.9401

8.83

9003314

SHFL ENTERTAINME

13.76

-0.3620565

17.40614

18.77

10.61

294471

SJM HOLDINGS LTD

2.33

-1.271186

44.939

2.36

1.5484

1000

WYNN RESORTS LTD

112.4

0.3302687

8.492636

129.6589

84.4902

958736

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

AUD HKD

USD

14 |

business daily December 4, 2012

Opinion Next big writedown disaster may not be a mystery Jonathan Weil

Bloomberg View columnist

uring the technologystock bubble of the 1990s, it would have been a compliment to say a company had the potential to become the next HewlettPackard Co. That same line would have a very different meaning now. Today, if someone called a company the next HewlettPackard, this would probably mean it is a prime candidate to book huge losses because of disastrous acquisitions. What might such a company look like? Consider Xerox Corp. At the start of 2007, Xerox had a stock-market value of US$16 billion. Since then, the Norwalk, Connecticut-based printer and copier pioneer has paid about US$9.1 billion to acquire 41 other companies. It has destroyed more value than it created. At US$6.79 a share, Xerox’s market value is US$8.6 billion – equivalent to 71 percent of its common shareholder equity, or book value. The most glaring sign that large writedowns may be needed at Xerox is a line on its books called goodwill, which is the intangible asset that a company records when it pays a premium in a takeover. Xerox’s balance sheet would have investors believe

that its goodwill alone, at US$9 billion, is more valuable than what the market says the whole company is worth. Xerox’s goodwill obviously isn’t worth that in reality. Goodwill exists only on paper and can’t be sold by itself. It’s a plug number, defined under the accounting rules as the difference between the purchase price for an acquisition and the fair value of the acquired company’s net assets.

‘Reference points’ Asked about the possible need for large writedowns, a Xerox spokeswoman, Karen Arena, noted that the company will conduct its annual goodwill-impairment test this quarter. “Share price is just one of several reference points we use to validate our assumptions,” she said. “We also look to our operational results, including cash flows, revenue growth and profit margins.” Most of the goodwill on Xerox’s balance sheet arose from the company’s US$6.5 billion acquisition in 2010 of Affiliated Computer Services Inc., a provider of information-

technology services. Xerox allocated US$5.1 billion of the purchase price in that deal to goodwill. Xerox’s latest balance sheet also showed US$2.9 billion of other intangible assets, the bulk of which are customer relationships acquired from Affiliated Computer. Suspiciously high goodwill was the same indicator I pointed to in an October 4 blog post suggesting that more large writedowns were needed at Hewlett-Packard. The Palo Alto, Californiabased maker of computers and printers traded for a

Those kinds of numbers … are strong indicators that big writedowns may be needed

significant discount to book value at the time, and its goodwill exceeded its market value by US$7.5 billion. Hewlett-Packard last week disclosed an US$8.8 billion writedown of goodwill and other intangible assets from its 2011 purchase of the U.K. software maker Autonomy Corp. It said more than US$5 billion of the charge was related to financial-reporting improprieties by Autonomy. The disclosure sent HewlettPackard’s shares down 12 percent in a day. Regardless of whether the allegation proves correct, Hewlett-Packard paid way too much for Autonomy, which had a reputation for aggressive accounting long before it was bought. (Just ask the analysts at the financial-research firm CFRA in New York, who wrote 14 reports from 2001 to 2010 raising doubts about Autonomy’s accounting and disclosure practices.) Hewlett-Packard had allocated US$6.9 billion of its US$11 billion purchase price for Autonomy to goodwill. The writedowns disclosed last week were only the latest of their kind. Three months earlier, Hewlett-Packard

recorded a US$9.2 billion writedown largely related to its buyout of Electronic Data Systems Corp. in 2008.

Dubious leaders A search for other companies with strangely high goodwill values turned up several notable examples. Credit Agricole SA, the French bank that trades for about a third of its book value, shows goodwill of 16.9 billion euros (US$21.9 billion). By comparison, its stock-market value is 14.6 billion euros. Telecom Italia SpA, which trades for about 60 percent of its book value, has goodwill of 36.8 billion euros and a market capitalisation of only 13.2 billion euros. Fiat SpA, the Italian automaker, trades for less than half of book and shows goodwill of 10.4 billion euros – more than twice its market value. Nasdaq OMX Group Inc. trades for 78 percent of book and shows US$5.3 billion of goodwill; its market cap is US$4 billion. Those kinds of numbers – where the balance sheets are clearly out of whack with market sentiments – don’t necessarily mean the companies will be required to slash asset values. But they are strong indicators that big writedowns may be needed. The test under the rules ultimately comes down to management’s cash-flow projections, and whether they are strong enough to justify the goodwill on the books. That’s why goodwill writedowns can be an important signal about the future. Xerox had an infamous accounting scandal more than a decade ago that resulted in a US$10 million fine by the Securities and Exchange Commission. The penalty was a record at the time for an accounting-fraud case. Six former executives, including former Chief Executive Officer Paul Allaire, paid US$22 million in SEC settlements in 2003. The last thing Xerox and its CEO, Ursula Burns, should be giving investors is a reason to wonder whether they can trust the company’s numbers. The market has already decided it has one. Bloomberg View

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December 4, 2012 business daily | 15

OPINION Europe’s dysfunctional wires growth compact Business

Leading reports from Asia’s best business newspapers Benedicta Marzinotto

Research Fellow at Bruegel and lecturer in Political Economy at the University of Udine

Bangkok Post The average salary increase in Thailand for 2013 is projected at 6 percent, slightly higher than the 5.7 percent pay rise in 2012, putting the country in the middle spectrum in the Asia-Pacific region, where predictions range from 2.3 to 12 percent – a slight increase from 2012. Companies across the Asia-Pacific region expect salary budgets in 2013 to grow slightly faster than 2012 in response to better macroeconomic outlook and improved business sentiments, showed a survey by Towers Watson, a global professional services company.

Economic Times Morgan Stanley has raised India’s FY13 GDP growth forecast to 5.4 percent from 5.1 percent, citing better-thanexpected GDP growth for the September quarter and also the stabilisation in non-agriculture growth indicators. The country’s economy grew 5.3 percent from a year earlier in the JulySeptember period, provisional GDP data showed on Friday. The economy extended its long slump keeping it on track for its worst year in a decade and underscoring the urgency of politically difficult reforms to spur a revival.

Korea Herald South Korea’s trade surplus widened in November from the previous month as exports posted positive growth on the back of steady global demand, the government said. The country’s trade surplus came to US$4.48 billion in November, compared with the surplus of US$3.7 billion the previous month, according to the Ministry of Knowledge Economy. The country’s exports grew 3.9 percent from the same month last year to US$47.79 billion with imports gaining 0.7 percent on-year to US$43.32 billion.

Yomiuri Shimbun Trade ministers from European Union member states have agreed to start full-fledged negotiations with Japan on concluding an economic partnership agreement for free trade. The ministers concluded that the EU needs to promote further trade with the world’s third-largest economy to secure economic growth at a time when the region has been hit hard by the financial crisis and is facing the risk of recession. The EU and Japan are expected to declare the start of full EPA talks at their regular summit in Japan in early 2013. The negotiations will likely start in the spring.

ecently, a 10 billion euro (US$13 billion) shortfall in this year’s European Union budget came to light. As a result, the EU cannot reimburse member states for recent unexpected expenditures, including emergency outlays, such as aid to Italian earthquake victims, and spending aimed at boosting economic growth and employment, such as the accelerated absorption of unused Structural and Cohesion Funds. Member states have refused the European Commission’s request for extra contributions to cover the shortfall, causing talks over next year’s budget to collapse. Meanwhile, negotiations over the 2014-2020 Multiannual Financial Framework (MFF), the centralplanning instrument for the use of EU funds, have broken down, owing to disagreement over key issues, including the size of the budget and the composition of expenditure. The decision has been postponed until early next year. The situation has highlighted the ambiguity surrounding the EU budget’s role in European integration. While all EU leaders have advocated using the budget to stimulate economic growth, little action is being taken. This raises doubts about the so-called “growth compact” launched by the European Council in June, particularly about the political commitment to mobilize 120 billion euro quickly by reallocating unused Structural and Cohesion Funds and increasing the European Investment Bank’s lending capacity. Indeed, although European governments have agreed to encourage faster absorption of EU funds in crisis countries, they have refused to pay into the EU budget to enable the funds’ disbursement. This contradiction signals that national interests continue to prevail in EU budget negotiations, which are often exploited for domestic political gain in member states. Unless a mechanism is introduced that facilitates the rapid disbursement of EU funds, thus insulating the budget from destructive

politicisation, these funds cannot be used to stimulate growth in times of crisis.

Grants, not loans Not all member states contribute equally to the EU budget; some are net contributors, while others are net beneficiaries. At the end of EU-financed investment projects – payments for which are agreed and executed in the annual budget framework – the money is transferred to the beneficiary. Cash to net beneficiaries is paid in by net contributors. One country’s inflow of EU money is thus another country’s outflow – and these are grants, not loans. As a result, agreement every seven years on overall expenditures is inadequate to preclude conflict on annual budgets. Nonetheless, steps can be taken to prevent political deadlock in budget negotiations, while increasing the budget’s flexibility so that it can be used to stimulate growth. For example, some leveraging of the budget could be allowed, although this would spark controversy, given that EU treaties require that

Although European governments have agreed to encourage faster absorption of EU funds in crisis countries, they have refused to pay into the EU budget to enable the funds’ disbursement

the budget remains balanced at all times. But the EU budget has already enabled an indirect form of leveraging: the European Commission’s use of implicit budget guarantees to raise capital on financial markets. These funds are used to provide financial assistance to non-euro zone EU countries through the Medium-Term Financial Assistance Facility, to euro zone countries through the now-expired European Financial Stabilisation Mechanism, and to partner third countries. Between the MTFA, the EFSM, and payments to third countries, the total exposure this year is 70.5 billion euro. Some borrowing over the seven-year MFF period may be possible, while upholding the medium-term objective of a balanced budget.

Risk-sharing mechanism Such leveraging of the EU budget would complement the recently established European Stabilisation Mechanism (the successor to the EFSM) and the MTFA. Countries receiving assistance should be given the option of applying for an anticipated disbursement of EU funds. Following a request by a member state, the Commission would be entitled to borrow on capital markets under the implicit EU budget guarantee, with the maximum

amount determined by the size of the country’s unused (pre-allocated) Structural and Cohesion Funds. The capital would be repaid in annual instalments as the funds become available through the EU budget, while the national co-financing rate would apply to interest payments. This framework would reduce incentives for using annual EU budget negotiations to advance political agendas. Net contributors would be locked into a relationship with the markets – a convincing creditor. At the same time, imposing conditionality on this kind of disbursement would enhance legitimacy, as opposed to the current framework, in which beneficiaries seek entitlements. Indeed, all EU countries – not just euro zone members – would benefit from such a framework. Such an initiative could co-exist with European Council President Herman Van Rompuy’s proposal to create a risk-sharing mechanism only for euro zone countries. The revamped growth compact would more effectively allocate European resources and increase the flexibility of permanent transfers from rich to poor countries – provided that the money is used for productive investment. Van Rompuy’s budget would also help to stabilise the euro zone in the event that asymmetric shocks require temporary transfers from unaffected to crisis-stricken countries. In fact, the two instruments may well be complementary in euro zone countries. Crises are typically associated with a drop not only in actual growth, but also in a country’s growth potential, owing to deferred investment. A risk-sharing facility could limit the decline in actual growth after a crisis, while prompt EU-financed investment would prevent a country from shifting to a lower growth path. © Project Syndicate

16 |

business daily December 4, 2012

CLOSING Chinese shares near 4-year lows

ADM raises offer for Australia’s GrainCorp

Shares on mainland China fell to their lowest since early 2009 yesterday, dragging Hong Kong into a loss, as investors shrugged off upbeat Chinese factory data and booked profits on some recent outperformers. Stocks of alcohol makers, which were battered in November on a contamination scare, lost ground again. The Hang Seng Index closed down 1.2 percent at 21,767.9 after hitting an intra-day 2012 high at 22,16.5. The CSI300 Index of the top Shanghai and Shenzhen listings shed 1.4 percent, while the Shanghai Composite Index lost 1 percent. Both closed at their lowest since February and January in 2009.

Archer-Daniels-Midland Co., the world’s largest corn processor, raised its bid for Sydney-based GrainCorp Ltd to about A$2.8 billion (US$2.9 billion) after the Australian company rejected an earlier offer.ADM proposes paying A$12.15 a share in cash, compared with A$11.75 previously, and allowing GrainCorp investors to keep the A$0.35-a-share dividend announced on November 15, ADM said yesterday in a statement. The latest per-share bid is 27 percent higher than GrainCorp’s share price on October 18, the last close before the initial bid was announced. Buying GrainCorp would give ADM control of seven of the eight ports that ship grain in bulk from the nation’s East Coast.

Greece launches bond buyback offer In bid to reduce debt and unfreeze long-delayed aid

reece offered 10 billion euros (US$13 billion) to buy back bonds issued earlier this year as the bailed-out nation attempts to cut a debt load that may threaten future international aid. Greek bonds rallied after the socalled modified Dutch auction was announced yesterday by the Athensbased Public Debt Management Agency. PDMA offered an average maximum purchase price for the bonds maturing from 2023 to 2042 of 34.1 percent, based on information in the statement. The offer runs until 5pm London time on Friday. Success of the buyback is crucial to releasing aid that’s been frozen since June. The offer was part of a package of measures approved by euro-area finance ministers last week to cut the nation’s debt to 124 percent of gross domestic product in 2020 from a projected 190 percent in 2014. The deal may enable Greece to retire about 30 billion euros of debt, Citigroup strategist Valentin Marinov wrote in a comment. The average price “is higher than previously published or announced,” said Spyros Politis, chief executive of Athens-based TT-ELTA AEDAK, which oversees about 300 million euros of assets and owns Greek government debt. “At

the moment it looks as if it will be successful, or if they miss the target, they will miss it by a small margin. Anything that reduces the overall debt burden is good.” The bid to ease Greece’s debt burden underscores a move away from austerity-first measures European leaders have embraced since the financial crisis began in 2009. German Chancellor Angela Merkel on Sunday opened the possibility that Germany may ultimately accept a write-off of Greek debt, previously a taboo in the biggest contributor to euro bailouts.

Blocked funds Investors who join the buyback will receive payment in six-month bills from the European Financial Stability Facility, the Greek debt agency said. The International Monetary Fund set the 2020 debt-cut target as a condition for continuing to fund a third of Greece’s bailout programme. IMF Managing Director Christine Lagarde said after the euro-area finance ministers’ meeting that the fund will examine the results of the buyback before deciding whether to approve disbursement of additional aid. The buyback accounts for 11 percentage points, or more than half

Athens offered 10 billion euros to buy back bonds

of the 20 percentage points of the planned drop. While Greece has gotten pledges for 240 billion euros of aid, the funds have been blocked since June as the government tries to get its bailout programme back on track after it was disrupted by two elections and a deepening recession. The buyback will target 62 billion euros of new bonds issued after the debt swap, according to a November

27 draft of a report by the so-called troika comprising the European Commission, the European Central Bank and the IMF. Greek banks hold about 15 billion euros of the new bonds, while the country’s pension funds hold 8 billion euros. Finance ministers plan to make a formal decision on Greece’s 34.4 billion-euro disbursement by December 13. Bloomberg

Euro zone manufacturing downturn eases PMI shows little sign of an imminent turnaround

he contraction in activity at the euro zone’s embattled manufacturers eased to an eightmonth low in November, although a meaningful recovery still looks a long way off, a survey showed yesterday. Markit’s Eurozone manufacturing Purchasing Managers Index (PMI) rose to 46.2 in November from October’s 45.4, though it stayed below the 50 mark dividing growth from contraction for the 16th straight month. Still, the PMI pointed to little sign of an imminent turnaround and merely showed factory activity, new orders and output declining at a slower rate. Manufacturing accounts for around a quarter of the euro zone’s private economy and is dwarfed by a services sector that fared badly in November, the data showed.

Manufacturing output in the 17-nation euro area shrank for a 16th month

“The ongoing steep pace of manufacturing decline suggests that the region’s recession will have deepened in

the final quarter of the year, extending into a third successive quarter,” said Chris Williamson, chief economist from

survey compiler Markit. “With official data lagging the PMI, the rate of GDP decline is likely to have gathered pace markedly on the surprisingly modest 0.1 percent decline seen in the third quarter.” On the plus side, the manufacturing PMI seems to have bottomed out in July, suggesting things are looking a little bit brighter, Mr Williamson added. The new export orders index was revised up to 46.4 from the preliminary reading of 45.9 two weeks ago, and it now reads more than a full point higher than the October reading. “Production and employment look set to fall at reduced rates in coming months as export demand slowly revives in markets such as the U.S. and Asia,” said Mr Williamson. Reuters