Macau Business Daily, January 3, 2013 by Business Daily

Year I Number 191 Thursday January 3, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã MOP $ 6.00 www.macaubusinessdaily.com

Records tumble as 2012 gaming rev hits MOP304 bln M

acau generated 304 billion patacas (US$38 billion) in gaming revenue in 2012 – a year-on-year expansion of 13.5 percent. The final two days of December alone grossed nearly two billion patacas (US$238 million) in gross gaming revenue, industry sources have told Business Daily. It helped contribute to a 19.6 percent year-on-year rise in Macau’s

gross gaming revenue for December. The year’s tally of 304 billion patacas was also a record compared to the 268 billion patacas generated in 2011, according to data from Macau’s Gaming Inspection and Coordination Bureau released yesterday. Revenue on December 30 was 900 million patacas and on December 31 more than one billion. Two factors seem to have

added to the December bounce – renewed confidence that exports-focused China is benefitting from some stabilisation in the global economy, and relief that China’s leadership transition does not – as first feared – involve a crackdown on the VIP gambling credit system and its use of the ‘underground’ banking system. More on page 3

Timeline for introduction of new tobacco packaging sucks, say wholesalers

I SSN 2226-8294

HANG SENG INDEX 23320

23226

obacco wholesalers complain they haven’t been given enough time to phase out traditional product packaging in favour of graphic images depicting smoking-related diseases. The new packaging was announced in principle in January 2012, with a year for the new rules to be implemented. But it wasn’t until May that government guidelines for the new packaging were shared with the tobacco distributors. They say that didn’t give them enough time to run down their stocks of old packs and that they could now lose millions of patacas on old products they can’t legally sell.

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CITIC PACIFIC

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Land law full of holes: legislators

CESL Asia gets hands on sewage plant

Legislators complain there are so many loopholes in the new Land Law that it won’t be fair or transparent. The latest draft gives more explicit circumstances in which land grants could be exempted from a public tendering process – non-profit developments of education, culture, health and public utilities. Projects that match the government policies would also be exempted. The government plans to take the long-awaited revision to the assembly today.

A consortium led by CESL Asia Investments & Services Ltd has finally signed a 604.9-million-pataca (US$75.8 million) contract with the government to operate and modernise the wastewater treatment plant on the Macau peninsula – after running the facility on behalf of the government since 2011. A dispatch from Chief Executive Fernando Chui Sai On, dated December 18 but only published in yesterday’s Official Gazette, announced the contract.

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Page 5

11.42

HONG KONG EXCHNG

7.58

CHINA LIFE INS-H

6.72

LI & FUNG LTD

6.29

ALUMINUM CORP-H

6.20

POWER ASSETS HOL

1.06

CLP HLDGS LTD

0.85

HANG SENG BK

0.67

HANG LUNG PROPER

0.49

TINGYI HLDG CO

0.23

Source: Bloomberg

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business daily January 3, 2013

macau

Changing tobacco warnings may cost smaller retailers Tobacco sales could fall by up to 10 percent this year as government intensifies anti-smoking efforts, say vendors Tony Lai

tony.lai@macaubusinessdaily.com

obacco importers will likely need to write off millions of patacas worth of stock that lacks the graphic health warnings which became mandatory on Tuesday. Retailers say they their businesses will take a second hit from tighter smoking controls in the city’s casinos that came into effect on New Year’s Day. Companhia de Tabaco Wai Tai Ldta administrator Patrick Ho Wing Cheung says his company has more than 300 boxes of cigarettes without the new, more graphic anti-smoking messages. Each box contains about 500 cigarette packets. “We only started collecting back the old batches from retailers [on January 1] so I think this number may keep rising,” Mr Ho told Business Daily. He said it would take up to two months to collect the city’s stock of cigarettes with the older branding. Wai Tai is the city’s sole distributor of the Marlboro brand and the biggest tobacco importer. “As each box with 500 packs of cigarettes is worth about 13,000 patacas (US$1,625), we may at least lose over 3 million patacas,” Mr Ho said. The tobacco control law, introduced last January, states that all tobacco

products must be labelled with health warnings with an image and text. Previously, only a written health warning was required. The industry was to be given a 12-month grace period to adjust to the new rules but traders have complained that the government only released the guidelines last May. Another importer, Macau Shanghai Cigarette Factory Ltd, says its sales will be hit hard. The company’s administrator, Shen Xuegen, estimates it will need to recall more than 1,000 unsold boxes with the older health warnings. The city’s retailers and importers handed a petition with 132 signatures to the Health Bureau last October asking for another four more months to sell older stock. The request was turned down by the government on November 15.

Business downturn The tobacco industry is considering ways to minimise its losses as a result of the health warning regulations. A spokesman for distributor Heng Cheong Hong said his firm would try to return its remaining 60 boxes of stock to its Hong Kong agents. “Even if this doesn’t work,

Graphic health warnings are mandatory on cigarette packets under new rules hoped to reduce tobaccorelated diseases (Photo: Manuel Cardoso)

we’ll try to get back the taxes levied on the cigarettes by the government,” he told Business Daily. According to Wai Tai, the firm may recoup 5,000 patacas in taxes levied on each box but he added that it was still waiting for the government’s reply on the issue. Pessimism among tobacco companies has been worsened by the expected impact of a new partial indoor smoking ban in casinos. All casinos must reserve at least 50 percent of their gaming floors for nonsmoking areas, starting this month.

The spokesman said the combination of these factors will see “the business of the entire sector this year drop by 10 percent”. “This year’s sales will certainly be affected but I think it will not be as bad as last year, when an indoor smoking ban on other places was first introduced and an increase made in the tobacco tax,” said Mr Shen. Wai Tai’s Mr Ho shares a similar opinion. “Our business has plunged by half since last year due to the higher levies on cigarettes,” said Mr Ho. A smoking ban was introduced for all public

indoor spaces excluding venues such as casinos and bars in January last year. The tax on each cigarette was also raised from 0.20 patacas to 0.50 patacas in 2012. The Heng Cheong Hong spokesman said lower retail prices in Zhuhai would also hurt the industry. “For a pack of mediumquality cigarettes, you need to pay about 18 patacas here but only 5.50 yuan [7 patacas] in Zhuhai. What will you choose?” the spokesman said. “Facing these changes we’re pretty helpless and can only try to cut down the costs.”

January 3, 2013 business daily | 3

MACAU

2012 revenue beats market estimates with MOP304 bln New monthly record for December helps casino numbers post 13.5 pct y-o-y expansion last year Michael Grimes

Improving economics, political signals, boost casino market

michael.grimes@macaubusinessdaily.com

acau generated 304 billion patacas (US$38 billion) in gaming revenue in 2012 – a year-on-year expansion of 13.5 percent. The final two days of December alone grossed 1.9 billion patacas (US$238 million) in gross gaming revenue industry sources have told Business Daily. It helped contribute to a 19.6 percent year-on-year rise in Macau’s gross gaming revenue for December. The year’s tally of 304 billion patacas was also a record compared to the 268 billion patacas generated in 2011, according to data from Macau’s Gaming Inspection and Coordination Bureau released yesterday. December is not traditionally

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the strongest month for Macau gambling, as Chinese players have in previous years tended to conserve their cash ahead of the Lunar New Year celebrations that fall in either January or February. But two factors seem to have added to the December bounce – renewed confidence that exports-focused China is benefitting from some stabilisation in the global economy, and relief that China’s leadership transition does not – as first feared – involve a crackdown on VIP gambling credit and the ‘underground’ banking system.

VIP comeback “There’s been an improvement in the VIP business in December,” Kenneth Fong, of J.P. Morgan in Hong Kong told Business Daily. “That might be linked to politics but also to an improvement in the macroeconomic picture out of China.” Grant Govertsen of Union Gaming Research Macau in a note to investors: “As we think about 2013, we expect 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. “Further, and on the heels of important infrastructure works, we think mass market will continue to post 25 percent plus growth,” he added.

Mr Govertsen told Business Daily the mass market in particular appeared to have performed strongly in December. “The mass [market] is just surging. The casino foot traffic in the past few weeks appears to have been greater even than in Golden Week.” An industry source told Business Daily that the start of December was very strong, and there was also a surge in the final two days. Daily revenue on December 30 was 900 million patacas and on December 31 above one billion patacas, compared to a daily average for the rest of the month of around 800 million patacas.

KEY POINTS MOP304 bln (US38.9 bln) gaming rev for 2012 Y-o-y growth for 2012 is 13.5% New monthly record in December MOP28.2 bln

n January 1 China’s official Purchasing Managers’ Index – a key measure of the mainland’s manufacturing activity – showed a third month of expansion, adding to evidence that the recovery in the world’s second-biggest economy will extend into the new year. In the past there has been a strong positive correlation between China’s economic growth and the growth particularly of the VIP gambling segment in Macau. China’s PMI was 50.6 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing. The final December reading of another purchasing managers’ index released on December 31 by HSBC Holdings Plc and Markit Economics was 51.5, the highest in 19 months, after a 50.9 preliminary reading and a final 50.5 in November. The HSBC index focuses more on smaller businesses. Political messages from China’s leadership also appear to have calmed investors’ and gamblers’ fears that the Beijing wished to crack down on high roller gambling in Macau. Those concerns follow reported arrests of several junket executives just before Christmas in a move that happened to coincide with the transition in China’s political leadership. But on December 20 Li Gang, who has just assumed the role of deputy director of the Central Government’s Liaison Office in Macau, told local reporters Beijing’s renewed efforts against corruption are “not related” to Macau’s gaming policy. He was speaking on the sidelines of celebrations marking the 13th anniversary of Macau’s handover from Portuguese administration. He was echoing remarks made a few days earlier by his new boss, the incumbent Macau liaison office head Bai Zhijian. He had also told local media that China’s graft busting measures and the administration of the casino industry “are not the same thing” and that the anti-corruption drive would not harm the sector. The VIP gaming market accounted for almost 70 percent of revenues in the first three quarters of 2012, official data show. Visitor arrivals in Macau rose 0.5 percent to 25.6 million in the first 11 months of 2012, with 60 percent coming from mainland China, the city’s Statistics and Census Service said.

Dec y-o-y growth 19.6% Numbers beat analysts’ estimates

Market Share Per Operator (2011-2012)

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

SJM

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

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

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

Wynn

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

MPEL

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

MGM

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

Total

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

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

M.G./Bloomberg News

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business daily January 3, 2013

macau Senna Fernandes to lead tourism crisis office

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Helena de Senna Fernandes, the city’s new tourism boss, will replace João Manuel Costa Antunes as the coordinator of the Tourism Crisis Management Office, according to yesterday’s Official Gazette. Ms Senna Fernandes was already expected to lead the office since she took over the Macau Government Tourist Office on December 20, replacing Mr Costa Antunes. The crisis management office was established in 2007 and it is responsible for offering assistance to Macau residents travelling abroad, as well as to tourists in the city.

HOSPITALITY Stagnating figures The number of visitors in November dropped by 1.8 percent from a year before. This tends to confirm a marked slowdown in arrivals in the preceding months. The slowdown is apparent even though the numbers of visitors from the city’s main source of tourists, mainland China, are growing. This suggests that the rest of the world is passing us by, and that the growth in the numbers of mainland visitors is insufficient to sustain previous rates of growth in tourist numbers overall. Note that about 92 percent of all visitors come from just five sources.

Legislators raise doubt over land bill changes A draft bill that aims to make government land concessions more transparent is up for discussion in the Legislative Assembly today Tony Lai

tony.lai@macaubusinessdaily.com 10

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The mainland apart, among the five main sources of tourists only South Korea is sending more of its people our way. Our main sources of tourists after the mainland – Hong Kong and Taiwan – sent us fewer visitors last year than the year before, so cancelling out much of the growth in the numbers of visitors from the mainland. Japan had been growing in importance as a source of tourists. But it seems that recent political tension between Beijing and Tokyo has dented the enthusiasm of Japanese for Macau. The number of Japanese tourists in November was 38.5 percent lower than a year before. A similar drop in December and 4 percent increase registered in the year to November will be brought down to almost nothing. J.I.D.

38.5 %

Drop in Japanese tourists in November from a year before

egislators say proposed amendments to the Land Law need further improvements to close loopholes in a draft of the law, which has been years in the making. Legislative Assembly member Au Kam San said he was “very disappointed” with the long-awaited revision that the government plans to take to the Legislative Assembly today. This version “bears not many differences from the original version”, Mr Au told Business Daily. “The key for this revision is to avoid the abuses of land grants without public tenders … but I don’t see how this draft can help.” The Executive Council, the government’s top advisory body, concluded its debate on the draft law on November 30. The bill has not been revised in 30 years. The latest draft gives more explicit circumstances in which land grants can be made exempt from a public tender process, including non-profit developments related to education, culture, health and public utilities. Projects deemed as following government policies can also be made exempt. “The law should not leave room for people to take advantage of such situations, [including projects that] meet government policies,” said Mr Au. “What I have always suggested is that public tendering be made mandatory for land plots slated for commercial use.” Currently, land grants that meet the “public interest” for the city’s social development are exempt from the tender process. “For those concessions, an elaborate supervising mechanism should be established, for instance, the Legislative Assembly could have

debates on such projects,” Mr Au said. A public hearing will be required for any land concession that does not undergo a public tendering process, according to the draft bill.

More transparent Legislative Assembly member Ho Ion Sang said he was concerned that the draft law does not include more public participation. He said the land committee that approves concessions should include members of the public, in order to increase the transparency of the decision making process. The draft law says the committee should be comprised of government officials. Both assembly members said bigger fines for squatting would prove a stronger deterrent for companies or individuals illegally occupying land. “The most important thing is the government must implement the law or else people will continue to do this [illegally occupy land],” Mr Au said. The draft bill raises the fines

for squatting to a maximum of 3 million patacas (US$375,000) from 50,000 patacas. The two legislators also repeated past criticism over the way land premiums are calculated. The draft bill states that the new calculation formula will take into account inflation and the adjudication price in public tenders. “The land premium is still too low compared to the market price and the money developers earn from what they build,” said Mr Ho. “The new draft also does not create a regular [evaluation] period for the government to review such formulae.” Mr Au thinks the current calculation system is “too complicated”. The premium could be simply calculated based on the average price from previous land auctions. Today’s Legislative Assembly session will include a presentation of the bill while the first reading will be scheduled for another date. Legislators will also discuss a new draft law on asset declarations for public officials.

The land law, including the way land concessions are awarded, has remained unchanged for 30 years

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January 3, 2013 business daily | 5

MACAU

After long delay, CESL Asia signs wastewater contract CESL Asia has officially taken control of the Macau peninsula sewage plant after managing its operation since the end of 2011 Tiago Azevedo

tiago.azevedo@macaubusinessdaily.com

consortium led by CESL Asia Investments & Services Ltd has finally signed a 604.9-millionpataca (US$75.8 million) contract with the government to operate and modernise the wastewater treatment plant on the Macau peninsula. A dispatch from Chief Executive Fernando Chui Sai On, dated December 18 but only published in yesterday’s Official Gazette, announced the contract. Business Daily has learnt that the contract was signed last month, a few days after the chief executive had authorised the deal. Last month, the Environmental Protection Bureau said legal wrangling over who would operate the plant was affecting the performance of the 17-year-old facility. “Part of the equipment is currently in a state of wear and deterioration due to having passed its usual normal length of usage,” the bureau said at the time. The CESL Asia consortium that took over the plant in October

CESL Asia has been running the wastewater treatment plant on the Macau peninsula since October 2011 (Photo: Manuel Cardoso)

2011 includes Portugal’s Indaqua - Indústria e Gestão de Águas SA and mainland-based Tsinghua Tongfang Co Ltd. The five-year deal has been in limbo, as the consortiums and

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government are involved in “ongoing judicial procedures,” the bureau said last month. The court ruled last year that two bids from the 2010 tender process were excluded wrongfully.

Legal action continues and one of the companies involved in a losing bid says signing the contract with CESL Asia does not affect their case against the government. “I don’t think the two [matters] are related,” said Sean Kilker, managing director of Va Tech Wabag GmbH, an Austrian-Indian venture the courts say was wrongfully excluded from the tender process. “They [CESL Asia] took over the plant in October 2011 and this contract signing was a formality. Even if there are appeals [from other bidders] the contract should have been signed right away.” The plant is to be modernised as part of the new contract. The operator has six months from the day the contract was signed to overhaul the plant. A more complete renovation remains on hold but the Environmental Protection Bureau pledged to “start, as soon as possible, the full development of the modernisation works” just last month.

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business daily January 3, 2013

macau Biggest reclaimed area to cost MOP1.9 bln

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The government has granted the land reclamation project contract for the new reclaimed urban zone opposite Areia Preta district, valued at 1.87 billion patacas (US$238 million). A consortium composed of Companhia de Construção e Engenharia Omas Ltda and Companhia de Engenharia Porto da China Ltda won the public tender against other seven bidders, according to yesterday’s Official Gazette. This is the biggest of the five new reclamation projects, with an area of 138 acres east of Areia Preta and Ponte da Amizade. The construction period could stretch until 2015.

Paying off The publication of the figures for gross national income completes the set of national accounts statistics typically released each year. The figures show that inflows, meaning the income generated by investments by Macau residents elsewhere, are in recovery after three years of decline. However, it is not enough to counter a significant rise in the negative net flow. Outflows – income paid to non-residents for work or investment in Macau – rose much faster, starting from an already higher base and confirming a recovery that started in the previous year.

New reclamation zones linked by underwater roads Two tunnels to be built beneath coastal estuary says Infrastructure Development Office Stephanie Lai

sw.lai@macaubusinessdaily.com

The leading component in this rise was the income flow generated by foreign direct investment. It rose by 65 percent in 2011, having risen by 44 percent in 2010. This means that this type of income has more than doubled in just two years and is the real driver of income generation for non-residents. It is also by far the biggest component of outflows, representing alone almost seven times the volume of all other forms of income put together. All the latter rose considerably in 2011, unlike in 2010, when they either increased only slightly or declined. Income from portfolio investment was the fastest-rising component, almost tripling in one year from 238 million patacas (US$29.8 million) to 685 million patacas. Income from other sources of investment rose by a comparatively paltry 40 percent. Work income also recovered. Outflows in this category had been declining markedly since 2008. They were less than half in 2010 what they were in 2008. But they rose by about 34 percent in 2011 to just over 1 billion patacas. J.I.D.

65 %

Rise in FDI income outflows in 2011

Underwater tunnels will connect the new reclaimed zones (Photo: Manuel Cardoso)

he government is to build two underwater tunnels to feed road traffic to land reclamation zones currently being built in the Pearl River estuary. It ruled out building bridges similar to the three that already link Macau peninsula to Taipa. That’s because bridges are vulnerable to closure due to typhoons and other adverse weather conditions. The two tunnels will connect respectively reclamation zones A and B and zones A and E, said the Infrastructure Development Office. The Office refers to the tunnel connecting zone A and B as the ‘fourth channel’ of road links crossing the estuary. The other three ‘channels’ are the three existing bridges. The government said the tunnels would use the so-called ‘shield’ method of construction – whereby

a cylindrical structure is driven into the bed of the waterway – rather than the more expensive ‘pipe’ method whereby hydraulic jacks are used to thrust specially-made pipes through the ground behind a shield machine. The shield method would be used due to cost concerns, the Infrastructure Development Office said in a statement. The pipe method was also discounted on grounds of impact on marine life, and the need to close waterways to marine transport and disrupt traffic on the Friendship Bridge. Such disruptions would be “unacceptable”, the Office added. The tunnel construction method was decided in a meeting between the Office and Guangdong officials on December 27. Under the terms of the Basic Law drawn up prior to Macau’s handover from Portuguese

administration in 1999, Macau has no territorial waters of its own. Reclamation zone A is east of the Macau peninsula next to the artificial island where the Hong KongZhuhai-Macau bridge will land. Zone B is immediately south of Macau peninsula. Zone E is the lot that will be near Macau International Airport and the Pac On ferry terminal adjacent to Taipa. The tunnel connecting Zone A and E will have six lanes for traffic travelling at a maximum speed of 80 kilometres per hour (50 mph). The other tunnel will have four lanes for vehicles and the same speed limit. Though stressing that the shield tunnel method is cheaper than the pipe method, the Infrastructure Development Office has not yet revealed the projected cost of the two tunnels.

January 3, 2013 business daily | 7

MACAU Guangzhou rail link boosts tourism The new Guangzhou-Zhuhai Intercity Railway Station is expected to contribute to a general surge in mainland tourists arriving via the Gongbei border gate this New Year. The terminus, only five minutes on foot from the crossing point – opened to regular services on New Year’s Eve. Around 35 trains per day carrying a maximum 654 passengers are using the station. Recent estimates suggest they are 90 percent full, so up to 21,000 train passengers are likely to be arriving per day. Macau authorities estimate there will be over 800,000 total crossings during the January 1 to 3 period.

Macau Legend seeks HK$6.24 billion IPO: report

David Chow Kam Fai

acau Legend Development Co. Ltd, controlled by businessman David Chow Kam Fai, is planning an initial public offering in Hong Kong as early as the second quarter of 2013, Hong Kong newspaper Apple Daily said quoting unidentified sources. It suggested the share flotation would seek to raise approximately HK$6.24 billion (US$800 million). In August Business Daily reported Mr Chow’s intention to spend HK$5 billion (US$645 million) on redevelopment of Fisherman’s Wharf, which has failed to draw crowds since its December 2005 opening. In September a person with knowledge of the matter told Business Daily the revamp of Fisherman’s Wharf would include a second casino to complement the Casino Babylon

venue that operates there under a Sociedade de Jogos de Macau SA gaming licence. A notice about Fisherman’s Wharf’s redevelopment in the Official Gazette in September mentioned only a “dinosaur museum” a four-star hotel and a five-star hotel. There is currently supposed to be a government moratorium on so-called ‘satellite casinos’ – those using a licence of one of the six existing concessionaires but where the property is managed by an outside party. No one from Macau Legend or from CLSA AsiaPacific Markets – a broker said to be working on the IPO deal – was available for comment yesterday. Macau Legend is an umbrella for several of Mr Chow’s Macau ventures – Macau Fisherman’s Wharf, the Landmark Macau hotel and the Pharaoh’s Palace Casino – and is understood to be 58.3 percent owned by the former Macau legislator and his mother, Lam Fong Ngo, with Stanley Ho Hung Sun’s third consort Ina Chan Un Chan holding 17 percent and SJM Holdings Ltd, the Hong Kong-listed parent of SJM, with four percent. M.G./S.L.

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business daily January 3, 2013

GREATER CHINA

Hong Kong shares start year at 19-month high China plays showing particular strength as mainland economy shows revival signs Clement Tan

ong Kong shares climbed to a 19-month high on Wednesday with the market poised for more gains after a bill was passed in the United States to avert harsh tax hikes on most Americans, helping ward off fears of a recession in the world’s largest economy. Growth-sensitive counters led gains as midday turnover hit the highest since December 5. More gains could be in store after the U.S. House of Representatives passed the bill shortly before trading stopped for the lunch in Hong Kong. The Hang Seng Index went into the midday break up 1.9 percent at 23,089.9, its highest since June 2011 and decisively breaking above chart resistance at around 22,800 that has stymied gains for much of the previous two weeks. The China Enterprises Index of the top Chinese listings jumped 2.9 percent to 11,765 points, its highest since February 2012. Chart resistance is seen at around 11,916, its February 20 peak. Both indices had posted their best annual gains since 2009,

rising 22.9 and 15.1 percent, respectively, in 2012.

U.S. risk “In the short term, U.S. risk premium will come down once a deal is struck and might trigger some

KEY POINTS HSI +1.9%, H-shares +2.9%, China shut for holiday HSI breaks above 22,800 resistance in strong turnover China financial sector reform plays among top gainers Sands China up ahead of positive Macau gambling revenue

reversal of flows back to the U.S., but the effects of that will probably be offset by flows from Japan as the yen continues to weaken,” said Hong Hao, chief equity strategist at Bank of Communications International Securities. “There’s also an element of catch up today as people begin to return from their holidays and realise they have missed out on the December rally in the China market,” Mr Hong added. An 18 percent gain in December, its best monthly showing since July 2009, helped propel the CSI300 of the top Shanghai and Shenzhen listings to its first annual gain in three years. Mainland markets were shut yesterday and will resume trade on Friday. Aluminum Corporation of China jumped 4.2 percent to return to levels not seen since May 2012. It had finished 2012 up 5 percent, failing to retain much of its gains from early last year and underperforming the Hang Seng Index. Metallurgical Corp of China Ltd jumped 4.6 percent after the company said it will transfer its 51.06

China Steel, Posco, buy stake in ArcelorMittal unit Deal gives access to 40 pct of Canada’s annual iron ore output Yu-Huay Sun and Michelle Yun

percent equity interest in loss-making Huludao Nonferrous Group to its controlling shareholder.

China plays Chinese non-bank financial counters extended strength, with China Life Insurance the top percentage gainer among Hang Seng Index components, soaring 5.3 percent yesterday to its highest since August 2011. New China Life Insurance surged 11 percent to its highest since June

to date, it’s very difficult to improve bottom line earnings if you do not have a low enough iron ore input cost.” Posco and China Steel “will enter into long-term iron ore off-take agreements proportionate to their joint venture interests,” Kaohsiung, Taiwan-based China Steel said yesterday in a statement on its website. The other members in the bidding group are “financial investors,” the statement said without elaborating.

Resource goal

much it will invest, according to Kim Ji Young, a spokeswoman. Buying the stake will give the Asian steelmakers access to mines that produce about 40 percent of Canada’s iron ore output, according to ArcelorMittal’s website. ArcelorMittal, the world’s largest steelmaker, is considering selling about 30 percent

40%

ArcelorMittal’s Mont Wright mine in Québec, Canada

hina Steel Corp. and Posco led a group that agreed to pay US$1.1 billion for a 15 percent stake in ArcelorMittal Mines Canada Inc. to secure supplies of iron ore, the main steelmaking raw material. China Steel, Taiwan’s biggest

steelmaker, will take 3.68 percent of the unit that has two iron ore mines for US$270 million, Steve Lee, China Steel executive vice president, said today by telephone. Posco, South Korea’s largest steelmaker will also take a stake without saying how

Amount of Canada’s yearly iron output accessed by the deal of its Canadian iron ore unit as it seeks to reduce its debt amid slumping steelindustry earnings, a person familiar with the matter said on October 20. “Upstream integration is going to be a key trend,” said Vanessa Lau, a senior analyst at Sanford C. Bernstein & Co. in Hong Kong. “If you look at the steel companies and their performance

Obtaining the stake will take China Steel toward its goal of getting 30 percent of its iron ore and coal needs from mines it has investments in by 2015. The deal is expected to complete in two instalments in the first and second quarters, the company said in yesterday’s statement. ArcelorMittal Mines Canada operates two open pit mines, and produces about 15 million metric tons of iron ore concentrate a year and more than nine million tons of iron oxide pellets, according to its website. ArcelorMittal had its debt rating cut to BB+ from BBB- last month by Fitch Ratings, which cited a “more challenging than previously expected outlook for western European steel markets in 2013.” The downgrade follows a move by Standard & Poor’s to lower the company’s rating to junk on August 2 and a cut by Moody’s Investors Service on November 8. Posco was a member of a group with Noble Group Ltd. and Korean investors that terminated a A$1.2 billion (US$1.25 billion) offer for Sydney based Arrium Ltd. in October after the target’s board refused to engage with the group. Arrium is an Australian steelmaker and iron ore producer. Bloomberg News

January 3, 2013 business daily | 9

GREATER CHINA

Mainland’s cyclical uptick boosts copper, Brent Crude

14 after rising 14.6 percent in 2012. The mainland’s securities regulator had said over the weekend that it plans to allow eligible securities houses and insurers’ asset management units to develop and manage mutual funds in a bid to reinvigorate an industry struggling to produce returns for investors. This follows an announcement last week allowing brokerages to sell subordinated debt and the Chinese central bank pledging to quicken the pace of reforming the financial sector that sent shares of Chinese brokerages

soaring last Friday. Financial sector reforms in China are expected to stay a dominant theme in 2013, analysts say, as would Chinese urbanisation-related counters such as property developers, which were also stronger yesterday. Sands China rose 1.8 percent ahead of data at midday that showed gambling revenue in Macau rose a higher than expected 19.6 percent in December from a year earlier, boosted by strong visitation numbers and spending by rich Chinese gamblers. Reuters

pbeat China data indicating steady improvement in the world’s top copper consumer and the U.S. Congress deal on the ‘fiscal cliff’ helped push London copper prices up more than two percent yesterday. It was the biggest daily rise since mid-November. Those factors also helped push Brent crude oil above US$112 per barrel to hit a one-month high yesterday. Oil also gained support from robust Chinese data pointing to a recovery at the world’s second largest economy and second biggest oil consumer. “That is adding to the demand picture of oil,” said Michael McCarthy, a markets strategist at CMC Global Markets in Sydney. Meanwhile three-month copper on the London Metal Exchange climbed to a near three-week high of US$8,130 a tonne, but pared gains later. By 0746 GMT, it was trading at US$8,111.75, up 2.3 percent – its biggest daily rise since November 19. “Less tail risk in the U.S., China coming up with a cyclical bound, combined with a weaker dollar. Voila! There you have the higher prices,” said Dominic Schnider, an analyst at UBS Wealth Management in Singapore. Copper is expected to rise towards US$9,000 in the first half of the year

before weakening in the second half due to solid supply growth and less incremental demand, he added. “If metals prices rally, it is probably not for a structural reason but a cyclical bound,” Mr Schnider said. “We would like to sell into metal rallies.” China’s official manufacturing purchasing managers’ index held steady in December at 50.6, matching November’s seven-month high and adding to evidence that the world’s second-largest economy was headed towards steady growth revival. Reuters

Taiwan dollar at seven-week high Andrea Wong

aiwan’s dollar rose to a seven-week high after the U.S. House of Representatives passed legislation averting some of US$600 billion (4.8 billion patacas) in automatic tax increases and spending cuts, boosting demand for riskier assets. The MSCI Asia Pacific Index of shares rallied 1.1 percent. President Barack Obama said he would sign the bill passed by Congress that makes the George W. Bush-era income tax cuts permanent for most workers while letting them expire for top earners. “Passing the bill will avoid the drastic impact a fiscal cliff would have on the global economy,” said Frances Cheung, a Hong Kongbased strategist at Credit Agricole CIB, but added the outlook for the region was still uncertain. “The [Taiwan] central bank will probably try to maintain the relative competitiveness of the Taiwan dollar,” she stated. The Taiwan dollar gained 0.2 percent to NT$29.09 against its U.S. counterpart, according to data from Taipei Forex Inc. It touched NT$28.998 earlier, the strongest level since November 13. T he cur r ency strengthe n ed

four percent in 2012 as overseas investors boosted their holdings of the island’s stocks by US$4.9 billion, according to exchange data. The Taiwan dollar will drop to NT$29.2 by the end of March, Ms Cheung predicts. The monetary authority has bought the greenback to counter gains in the island’s currency on most days in the past nine months, according to traders who asked not to be identified. The central bank’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves, Governor Perng Fai-Nan said on December 19. One-month implied volatility in the Taiwan dollar, a gauge of expected moves in exchange rates used to price options, fell 11 basis points to 3.15 percent. The yield on the 1.125 percent bonds due September 2022 fell one basis point, or 0.01 percentage point, to 1.158 percent, according to Gretai Securities Market. The overnight interbank lending rate fell two basis points to 0.389 percent, a weighted average compiled by the Taiwan Interbank Money Center shows. Bloomberg News

Macau at your breakfast table. With Business Daily. Find us in the following newsstands Pacapio at San Ma Lo Opposite HKSB (Nam Van) Beside Luso Bank Building Wen Hang Bank at San Ma Lo In front of Portuguese Bookshop In front CTM at San Ma Lo In front Daiso shop at San Ma Lo Next to S. Lourenço Market Next to Human Resources Dpt Next BNU at Av. Sidonio Pais San Miu, Av. Horta e Costa Next to Metro Park Hotel

10 |

business daily January 3, 2013

ASIA Trade growth to stay until Feb: Maersk Maersk Line, the world’s biggest container shipping company, said demand for trade on the Asia-Europe route is expected to grow until Lunar New Year in February as Chinese manufacturers produce and export more. Imports into China have also helped increase demand as raw materials are shipped to Asia’s largest economy for final assembly while local consumers increase spending, Tim Smith, head of north Asia operations for Maersk Line, told Bloomberg yesterday. “In December, we saw nice uptick in volume running up to the year-end, and we expect that to continue into Chinese New Year,” he said.

Asia’s factories show signs of revival But exports point to further sluggish growth for the region Kim Coghill

anufacturing activity in Asia expanded in December as China’s economy showed signs of revival but export demand was uneven, pointing to further sluggish growth for the region, business surveys suggest. Private and official manufacturing surveys added to evidence that China’s economy picked up late in the year, while activity in India expanded at its strongest pace in six months in December, boosted by strong factory output and a spike in new orders. Similar reports yesterday also showed activity increased in South Korea and Taiwan for the first time since May. But while domestic orders showed some improvement, export orders were decidedly mixed, pointing to continued weakness in global demand with Europe mired in recession and fears of tighter fiscal policy clouding recovery prospects in the United States.

South Korean exports unexpectedly fell in December, according to data on Tuesday, highlighting that any recovery for export-reliant Asian economies is likely to be patchy and slow. “Asia is gradually improving, but the region, including China, remains largely exposed to exports and without signs of improvement in the U.S. and Europe it will be hard for activity to take off,” said Frederic Neumann, co-head of Asian economics at HSBC Holdings Plc.

More cliffs ahead A last-minute deal in Washington to avoid steep tax hikes and spending cuts from January 1 may not remove an expected drag on the world’s largest economy, Mr Neumann added, noting that more heated political battles over U.S. fiscal policy were likely in coming months.

“We have a triple ‘fiscal cliff’ coming up in March,” he said, referring to talks over the U.S. debt ceiling and other upcoming budget battles. “We will probably only get clarity on the outlook for the year by the second quarter,” he stated, adding the Chinese New Year holidays early in the year also tended to distort trade and production patterns. The U.S. economy will remain sluggish in 2013, underscoring the very fragile world economic outlook, while chances of a recovery in the euro zone have faded further, Reuters polls show. For Asia, much hinges on the pace and quality of the recovery in China as a new generation of leaders prepares to take charge. The official China manufacturing purchasing managers’ index (PMI) released on Tuesday held steady in December at 50.6, matching

November’s seven-month high, though growth in new orders was unchanged and the pace of output softened marginally. A similar survey by HSBC released a day earlier, which focuses more

Singapore avoids recession with Q4 growth GDP expanded by an annualised 1.8 percent from the previous quarter

ingapore’s economy grew more vigorously than foreseen in the last three months of 2012, avoiding an expected recession, as gross domestic product (GDP) data for previous quarters was revised downwards. Singapore’s GDP expanded by an annualised 1.8 percent in the fourth quarter from the third quarter after seasonal adjustments, advanced estimates from the Ministry of Trade and Industry showed yesterday, reversing a larger than earlier reported 6.3 percent contraction in the JulySeptember period. From a year ago, Singapore grew by 1.1 percent in the fourth quarter, bringing growth for 2012 to 1.2 percent, down from 4.9 percent in 2011. The government had in November predicted fullyear economic growth of around 1.5 percent. The government had previously said GDP contracted by 5.9 percent in the third quarter at a seasonally adjusted and annualised rate. Second quarter GDP was also revised downwards to show growth of 0.2 percent versus the earlier-reported 0.5 percent expansion. Most economists had forecast that Singapore’s economy would

contract in the fourth quarter, sinking into recession like Japan, but their estimates were based on earlier numbers. Singapore narrowly avoided a recession in the third quarter, when second quarter growth was revised to slow a slight expansion instead of a contraction, surprising forecasters. The city-state, whose trade is around three times GDP, has been badly hit by the weakness in Western economies that has crimped demand for many of its exports. The Southeast Asian city-state’s electronic manufacturers have also failed to tap surging demand for smartphones, unlike rivals in South Korea and Taiwan. According to the advance GDP numbers, Singapore’s manufacturing sector shrank 10.8 percent sequentially in the fourth quarter on an annualised and seasonally adjusted basis, worsening from the 9.9 percent contraction in the third quarter. “In the near term, it’s hard to see any improvement in manufacturing. On the positive side, we’ve seen a rebound in momentum. Hopefully, services can continue to provide a lift going forward,” said Selena Ling, head of treasury research at OverseaChinese Banking Corp.

Prime Minister Lee Hsien Loong said in his New Year address that Singapore’s economy is expected to grow by 1 to 3 percent in 2013, reiterating the government’s earlier forecast.

Home prices up Singapore home prices climbed to a record in the fourth quarter after developers sold more homes, a government report showed. The island state’s private residential property price index rose 1.8 percent to 211.90 points in the three months ended December 31, according to preliminary estimates released by the Urban Redevelopment Authority yesterday. The index advanced 0.6

1.2 %

Singapore’s GDP growth for 2012

percent in the previous quarter, which was also at a record. Prices rose 2.8 percent in the year compared to a 5.9 percent gain in 2011, data from the Authority showed. Prices of non-landed private residential properties increased 0.8 percent in prime districts in the quarter, the data showed. In suburban areas, prices climbed 3.4 percent. “Private property prices saw a rebound with the price increase in the fourth quarter contributing to more than 50 percent for the entire year,” Mohamed Ismail, chief executive of PropNex Realty, said in an emailed statement. “It is expected that the trend will continue and prices will further increase resulting in an overall 4 percent to 5 percent growth in the private property price index in 2013.” Singapore is seeking to sell land to add as many as 14,000 new homes in the first half of this year as the government moves to prevent excessive gains in home prices. The government will sell 12 private residential sites in the first half that could yield 6,900 apartments, and may sell a further 19 sites where developers could build 7,100 units, the Ministry of National Development said in a statement on December 14. Reuters/Bloomberg News

January 3, 2013 business daily | 11

ASIA Indonesia’s inflation slowed in Dec Indonesia’s inflation slowed for a second month in December, supporting the central bank’s decision to hold off interest-rate increases as exports slump. Consumer prices climbed 4.3 percent from a year earlier last month, after a previously reported 4.32 percent gain in November, the statistics bureau said in Jakarta yesterday. Bank Indonesia has kept borrowing costs unchanged for 10 straight meetings as exports tumbled and the rupiah weakened. Price pressure in Southeast Asia’s largest economy may rise as a planned increase in electricity tariffs and minimum wages take effect, with a possible reduction in fuel subsides also weighing.

Asia is gradually improving, but the region … remains largely exposed to exports and without signs of improvement in the U.S. and Europe it will be hard for activity to take off Frederic Neumann, HSBC Holdings Plc

Exports show continued weakness in global demand

on smaller and mid-sized firms, suggested activity was at its strongest since May 2011. Together the surveys support a growing consensus that economic activity in China picked up during

October to December – after GDP growth had slowed for seven consecutive quarters to 7.4 percent in the third quarter – partially offsetting persistent weakness in Europe and Japan. “Both surveys are back above

50 [indicating expansion], which is reassuring but not pointing to a return to the kind of heady growth that China has seen before,” Mr Neumann said. “We really need Chinese consumers to step up.” Most analysts and academics agree China needs to transform its growth model to allow consumption, not exports and investment, to drive activity. But there is no clear agreement on how or when China can pursue such changes. Soon-to-be-retired President Hu

Jintao promised in a new year address that reform of China’s economic growth model would be a crucial theme this year, without giving further details.

Mixed signals In India, Asia’s third-largest economy, the HSBC Markit Manufacturing PMI, which gauges the business activity of the country’s factories but not its utilities, jumped to 54.7 in December from 53.7 in November, its biggest monthly rise since January 2012. India’s central bank is widely expected to cut interest rates as early as this month if inflation continues to cool, shifting its focus towards boosting the economy. A similar survey on South Korea’s manufacturing sector edged up to 50.08 in December from 48.16 in November. It was the first time since May that the index stood above the 50-point mark that separates growth from contraction. Sub-indexes for overall output and new orders were marginally above 50, driven by new product launches that met domestic demand. But the new export orders sub-index fell to 48.86 in December, marking the seventh month of contraction as overseas consumer sentiment wilted. Activity in Southeast Asia’s largest economy, Indonesia, also expanded but at a slower rate, as growth of new export orders eased from a month earlier. Reuters

Hyundai-Kia forecast smaller growth in car sales Carmakers expect sales to rise 4.1 percent, the slowest since 2006

yundai Motor Co. and smaller affiliate Kia Motors Corp., South Korea’s two largest automakers, forecast their slowest sales growth in seven years as a slowing global economy and strengthening won saps demand. The two companies plan combined sales to rise 4.1 percent to 7.41 million vehicles in 2013, Chung Mong Koo, chairman of both Hyundai and Kia, told employees during a new year address in Seoul yesterday. That’s the lowest growth since 2006, when deliveries shrank

KEY POINTS Hyundai, Kia target 7.41 mln global vehicle sales in 2013 Sales growth would be slowest since 2006 Hyundai’s new plants in China, Brazil to drive growth this year

1.2 percent. Mr Chung, 74, told employees to be more proactive to changes in the markets to meet the business targets. Both companies are also coping with a domestic currency that’s appreciated more than any other major Asian currency in the past six months, undermining their ability to compete against Toyota Motor Corp. and General Motors Co. globally. “2013 will be a very difficult year as the ongoing European crisis and the slowing global economy affect international and domestic markets,” Mr Chung said. Hyundai, whose shares advanced 2.6 percent last year, fell as much as 1.6 percent in Seoul trading yesterday as the benchmark Kospi index rose. Kia, which declined 15 percent in 2012, dropped as much as 0.9 percent. Hyundai and Kia’s 2013 growth forecast is half the 8 percent increase posted last year. The automakers sold an estimated 7.12 million vehicles in 2012, exceeding their goal of 7 million units, Mr Chung said.

Conservative forecaster Lee Sang Hyun, an analyst at NH Investment & Securities Co.

Chung Mong Koo, chairman of Hyundai Motor Co. and Kia Motors Corp

in Seoul, said Hyundai and Kia typically provide conservative targets for sales and will probably keep increasing market share in Europe and outperform in China. Mr Lee has buy ratings on both stocks. By company, Hyundai forecast its sales will climb to 4.66 million vehicles – or 60,000 units more than the average analyst estimate.

Kia predicted deliveries will increase 1.1 percent to 2.75 million units, or about 3 percent shy of the average estimate. The combined forecast exceeds Hyundai’s own projections for industry growth of 3.6 percent. Demand in China, the world’s largest auto market, will help Kia and Hyundai exceed their target of delivering 1.25 million vehicles in the country in 2012, they said in October, while sales rose in Europe on demand for models including the i10 minicar and Cee’d hatchback. China is Hyundai’s biggest market, accounting for 18 percent of sales in the first nine months of 2012, followed by the U.S. at 17 percent. The U.S. is Kia’s largest market, contributing 21 percent of sales in the period, while Korea is the second biggest, responsible for 17 percent. Hyundai’s profit will probably increase 7 percent to 9.65 trillion won (US$9.1 billion) in 2013, according to the average analyst estimate compiled by Bloomberg. Kia’s net income will probably climb 6.9 percent to 4.45 trillion won, based on the average estimate. Bloomberg News

12 |

business daily January 3, 2013

MARKETS Hang SENG INDEX PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

31.1

2.809917

57462514

CHINA UNICOM HON

12.72

2.415459

25239006

POWER ASSETS HOL

ALUMINUM CORP-H

3.77

6.197183

64660565

CITIC PACIFIC

12.88

11.41869

37292549

BANK OF CHINA-H

3.58

3.468208

483991429

CLP HLDGS LTD

65.4

0.848111

5887682

BANK OF COMMUN-H

6.08

4.109589

70981646

CNOOC LTD

17.3

3.098927

NAME

PRICE

DAY %

VOLUME

66.9

1.057402

5943259

SANDS CHINA LTD

35.75

5.301915

15222420

SINO LAND CO

14.26

2.295552

7150302

49343943

SUN HUNG KAI PRO

118.8

2.237522

4328272 1795546

BANK EAST ASIA

30.25

2.023609

2548003

COSCO PAC LTD

11.34

2.717391

10475322

SWIRE PACIFIC-A

BELLE INTERNATIO

17.36

3.210464

14977738

ESPRIT HLDGS

11.12

3.538175

14142458

TENCENT HOLDINGS

BOC HONG KONG HO

24.55

1.86722

24786214

HANG LUNG PROPER

30.95

0.487013

8729091

TINGYI HLDG CO

CATHAY PAC AIR

14.54

2.250352

3332855

HANG SENG BK

119.5

0.673968

2030688

WANT WANT CHINA

CHEUNG KONG

121.8

2.352941

4538080

HENDERSON LAND D

56.3

2.925046

3215074

WHARF HLDG

CHINA COAL ENE-H

8.81

4.631829

53647265

HENGAN INTL

72.3

3.359543

5599660

CHINA CONST BA-H

6.43

3.376206

328984520

6.719368

88020966

25.45

2.414487

3563992

91.4

1.274238

12373324

3.896104

20222204

9.06

3.189066

61552313

CHINA LIFE INS-H CHINA MERCHANT CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H

HONG KG CHINA GS

21.4

1.182033

5352665

141.9

7.581501

18478545

83.2

2.337023

20964487

HUTCHISON WHAMPO

1.359703

7286688

IND & COMM BK-H

5.7

3.636364

298500452

LI & FUNG LTD

14.54

6.28655

26969577

HONG KONG EXCHNG HSBC HLDGS PLC

CHINA RES ENTERP

28.3

1.252236

3724380

MTR CORP

31.05

1.803279

2461605

CHINA RES LAND

22.4

6.161137

11923697

NEW WORLD DEV

12.42

3.327787

21297185

CHINA RES POWER

20.45

3.38726

6527809

PETROCHINA CO-H

11.18

1.821494

92600971

CHINA SHENHUA-H

35.3

3.976436

19303928

PING AN INSURA-H

68.25

5.161787

27243267

MOVERS

97.4

1.61711

257.4

3.373494

5338180

21.6

0.2320186

8328469

10.8

1.123596

19814046

61.85

2.062706

4236334

0 23320

INDEX 23311.98 HIGH

23311.98

LOW

22584.44

52W (H) 23317.39063 (L) 18056.4

22580

28-December

2-January

Hang SENG CHINA ENTErPRISE INDEX PRICE

DAY %

VOLUME

CHINA PACIFIC-H

30.7

7.155323

25842914

YANZHOU COAL-H

11079264

CHINA PETROLEU-H

9.06

3.189066

61552313

ZIJIN MINING-H

6.197183

64660565

CHINA RAIL CN-H

8.95

1.589103

13887654

29.5

4.609929

11550668

CHINA RAIL GR-H

4.66

2.869757

35984064

BANK OF CHINA-H

3.58

3.468208

483991429

CHINA SHENHUA-H

35.3

3.976436

19303928

BANK OF COMMUN-H

6.08

4.109589

70981646

CHINA TELECOM-H

4.39

1.856148

65633210

BYD CO LTD-H

23.4

0.6451613

3769362

DONGFENG MOTOR-H

12.34

3.177258

23386853

CHINA CITIC BK-H

4.78

3.913043

61667039

GUANGZHOU AUTO-H

6.96

1.310044

8118884

CHINA COAL ENE-H

8.81

4.631829

53647265

HUANENG POWER-H

7.39

3.06834

14952536

CHINA COM CONS-H

7.82

4.545455

31192978

IND & COMM BK-H

5.7

3.636364

298500452

CHINA CONST BA-H

6.43

3.376206

328984520

JIANGXI COPPER-H

21.45

5.147059

16782615

CHINA COSCO HO-H

4.07

7.105263

49936525

PETROCHINA CO-H

11.18

1.821494

92600971

6.719368

88020966

PICC PROPERTY &

11.52

6.077348

44371607

CHINA LONGYUAN-H

5.55

3.544776

15668237

PING AN INSURA-H

68.25

5.161787

27243267

CHINA MERCH BK-H

17.7

3.508772

28640468

SHANDONG WEIG-H

7.8

1.167315

12955508

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.94

2.872063

148432766

AIR CHINA LTD-H

6.6

0.7633588

ALUMINUM CORP-H

3.77

ANHUI CONCH-H

CHINA LIFE INS-H

NAME

PRICE

DAY %

VOLUME

13.78

7.4883

74749654

3.13

2.622951

70586001

ZOOMLION HEAVY-H

11.98

4.903678

26915241

ZTE CORP-H

13.94

6.738132

17202252

MOVERS

0 11890

INDEX 11897.66 HIGH

11897.66

LOW

11333.78

CHINA MINSHENG-H

9.78

9.151786

77520223

SINOPHARM-H

24.6

1.443299

3597912

52W (H) 11916.1

CHINA NATL BDG-H

11.74

3.527337

39699432

TSINGTAO BREW-H

47.55

3.934426

1431483

(L) 8987.76

16.5

3.254068

9336272

WEICHAI POWER-H

37.7

9.593023

6128552

CHINA OILFIELD-H

11330

28-December

2-January

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.8

1.449275

178108658

AIR CHINA LTD-A

2.564103

17654080

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

6.87

0.2919708

32441364

QINGHAI SALT-A

26.8

-0.07457122

6711171

CITIC SECURITI-A

13.36

1.519757

157945838

SAIC MOTOR-A

17.64

3.157895

27755914

CHINA YANGTZE-A

NAME

VOLUME

ALUMINUM CORP-A

5.13

26293045

CSR CORP LTD -A

4.96

54622369

SANY HEAVY INDUS

10.59

0.1892148

50009738

ANGANG STEEL-A

3.88

2.37467

36969956

DAQIN RAILWAY -A

6.76

-0.5882353

43763163

SHANDONG GOLD-MI

38.16

1.086093

14760573

ANHUI CONCH-A

18.45

0.5449591

29461632

DATANG INTL PO-A

4.03

-0.2475248

34944261

SHANG PHARM -A

11.11

0.5429864

10761629

BANK OF BEIJIN-A

9.3

3.218646

79815040

EVERBRIG SEC -A

14.1

3.600294

37229611

SHANG PUDONG-A

9.92

3.441084

198451648

BANK OF CHINA-A

2.92

1.038062

43590225

GD POWER DEVEL-A

2.63

2.734375

80236471

SHANGHAI ELECT-A

4.07

0.9925558

7542940

BANK OF COMMUN-A

4.94

2.277433

172774562

GEMDALE CORP-A

7.02

4.154303

79520047

SHANXI LU'AN -A

21.89

0.5050505

14376248

10.66

3.094778

21925442

GF SECURITIES-A

15.42

1.581028

72782897

SHANXI XINGHUA-A

41.66

3.118812

8094069

25.5

0.3937008

27673254

SHANXI XISHAN-A

13.91

0.2883922

19100331

BANK OF NINGBO-A BAOSHAN IRON & S

4.89

0.617284

35888821

GREE ELECTRIC

8.1

3.053435

32325688

GUANGHUI ENERG-A

16.39

1.048089

25654730

SHENZEN OVERSE-A

7.5

3.878116

69563235

20.35

5.331263

9150069

HAITONG SECURI-A

10.25

1.99005

104236670

SUNING APPLIAN-A

6.65

-0.7462687

86603568

CHINA CITIC BK-A

4.29

2.386635

40536670

HANGZHOU HIKVI-A

31.11

-0.9235669

6333330

TSINGTAO BREW-A

33.06

1.070009

3707660

CHINA CNR CORP-A

4.51

0.2222222

52529868

HENAN SHUAN-A

57.9

0.6956522

5058433

WEICHAI POWER-A

25.31

0.7964954

9021769

CHINA COAL ENE-A

7.82

0.7731959

18016612

HONG YUAN SEC-A

18.85

24808808

WULIANGYE YIBIN

28.23

37780927

CHINA CONST BA-A

4.6

1.545254

53032365

HUATAI SECURIT-A

9.8

2.403344

31894063

YANGQUAN COAL -A

14.53

2.612994

23979982

CHINA COSCO HO-A

4.41

1.146789

48793346

HUAXIA BANK CO

10.35

2.171767

53961371

YANTAI CHANGYU-A

-1.052632

2792141

CHINA CSSC HOL-A

23.24

7.892293

25864639

IND & COMM BK-A

4.15

1.219512

110538906

YANTAI WANHUA-A

15.61

1.760104

16795647

CHINA EAST AIR-A

3.51

0.862069

27737555

INDUSTRIAL BAN-A

16.69

2.079511

87142724

YANZHOU COAL-A

18.23

1.277778

7011667

CHINA EVERBRIG-A

3.05

2.348993

161137942

INNER MONG BAO-A

37.45

0.1336898

43504504

YUNNAN BAIYAO-A

1.872659

4796239

CHINA INTL MAR-A

11.53

0.69869

13316736

INNER MONG YIL-A

21.98

4.318937

19262336

ZHONGJIN GOLD

16.63

0.7878788

28284458

21.4

5.835806

39125401

INNER MONGOLIA-A

5.4

0.7462687

55419449

ZIJIN MINING-A

3.83

0.7894737

80494853

153712026

JIANGSU HENGRU-A

30.1

0.4002668

10516851

ZOOMLION HEAVY-A

9.21

-0.861141

99337517

93.37

-0.4265757

4781906

ZTE CORP-A

9.75

4.055496

33828434

ZTE CORP-A

8.38

2.444988

17657199

BBMG CORPORATI-A BYD CO LTD -A

CHINA LIFE INS-A CHINA MERCH BK-A

13.75

6.095679

CHINA MERCHANT-A

29.89

3.068966

20991209

JIANGSU YANGHE-A

CHINA MERCHANT-A

10.55

1.735776

32693732

JIANGXI COPPER-A

23.86

3.334777

24874936

CHINA MINSHENG-A

7.86

2.077922

216576436

JINDUICHENG -A

11.71

2.719298

19895849

CHINA NATIONAL-A

8.24

0.9803922

35709597

JIZHONG ENERGY-A

13.83

1.318681

29489730

13.14

-0.5299016

53872784

209.02

-1.544984

5191483

CHINA OILFIELD-A

16.4

0.9230769

10583225

KANGMEI PHARMA-A

CHINA PACIFIC-A

22.5

5.782793

39346419

KWEICHOW MOUTA-A

CHINA PETROLEU-A

6.92

1.764706

51955356

LUZHOU LAOJIAO-A

35.4

1.461737

17602895

2.26

142174707

CHINA RAILWAY-A

5.87

0.1706485

36139448

METALLURGICAL-A

CHINA RAILWAY-A

3.04

0.330033

62945391

NINGBO PORT CO-A

2.57

0.390625

32070265

4.12

1.477833

MOVERS 246

18 2530

INDEX 2522.952

CHINA SHENHUA-A

25.35

1.971038

24294581

PANGANG GROUP -A

64722356

HIGH

2522.95

CHINA SHIPBUIL-A

4.77

3.470716

69660187

PETROCHINA CO-A

9.04

0.780379

38199598

LOW

2444.16

CHINA SOUTHERN-A

3.91

1.033592

34361646

PING AN BANK-A

16.02

2.692308

37868419

CHINA STATE -A

3.9

1.298701

140478990

PING AN INSURA-A

45.29

3.378224

32981463

CHINA UNITED-A

3.5

0.8645533

126831129

POLY REAL ESTA-A

13.6

3.343465

73129483

10.12

166448824

QINGDAO HAIER-A

13.4

2.997694

15462944

NAME

PRICE DAY %

Volume

PRICE DAY %

Volume

ACER INC

25.1 -0.3968254

20556404

FORMOSA PLASTIC

CHINA VANKE CO-A

52W (H) 2717.825 (L) 2102.135

2440

27-December

31-December

FTSE TAIWAN 50 INDEX NAME

TAIWAN MOBILE CO

105

-1.869159

FOXCONN TECHNOLO

90.9

6996263

TPK HOLDING CO L

521

1.559454

4720024

35.1

18868978

TSMC

99.6

2.680412

40647121

88.7 -0.2249719

34036039

UNI-PRESIDENT

53.9

1.125704

9438851

UNITED MICROELEC

11.8

0.8547009

44320016

WISTRON CORP

30.1

8965052

0.3344482

15955731

55.6

1.090909

5677105

3.769841

44292601

ASIA CEMENT CORP

37.45

0.2677376

2856071

FUBON FINANCIAL

ASUSTEK COMPUTER

328.5

0.6125574

1418968

HON HAI PRECISIO

AU OPTRONICS COR

13.7

5.384615

143210959

HOTAI MOTOR CO

146.5

1.736111

11924478

HTC CORP

CATHAY FINANCIAL

31.7

0.6349206

20445219

HUA NAN FINANCIA

CHANG HWA BANK

16.1

0.9404389

11921229

CHENG SHIN RUBBE

75.9

0.66313

3636687

CHIMEI INNOLUX C

16.65

233.5

0.2145923

401658

303

0.8319468

18633381

16.95

0.8928571

6384300

YUANTA FINANCIAL

LARGAN PRECISION

832

6.940874

2896765

YULON MOTOR CO

LITE-ON TECHNOLO

39.8

3.242542

5038111

6.730769

130005424

MEDIATEK INC

325

0.4636785

7946566

CHINA DEVELOPMEN

7.58 -0.2631579

47641502

MEGA FINANCIAL H

22.9

1.327434

16092098

CHINA STEEL CORP

27.6

0.9140768

25838163

NAN YA PLASTICS

56.6

1.071429

5575253

CHINATRUST FINAN

17.3

0.8746356

35774643

PRESIDENT CHAIN

155.5

1319172

94 -0.5291005

6179439

QUANTA COMPUTER

67.7 -0.8784773

6480532

8495087

SILICONWARE PREC

31.1

0.3225806

4830774

COMPAL ELECTRON DELTA ELECT INC FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL

Volume

5239202

26.15

CHUNGHWA TELECOM

PRICE DAY %

0.5089059

ADVANCED SEMICON

CATCHER TECH

NAME

19.7

0.7672634

107.5

0.9389671

5197812

SINOPAC FINANCIA

12.5

0.4016064

11183585

33.3

0.6042296

10222443

SYNNEX TECH INTL

53.9

0.7476636

5179338

74 -0.1349528

7366703

TAIWAN CEMENT

0.2570694

6374614

16.45

17.95

1.412429

10190297

0.6116208

8659625

FORMOSA CHEM & F

75.4

0.5333333

5185118

TAIWAN FERTILIZE

75.5 -0.3957784

2232312

FORMOSA PETROCHE

2.325581

2462464

TAIWAN GLASS IND

30.8

1695116

TAIWAN COOPERATI

2.666667

MOVERS

6219368

4 5460

INDEX 5452.2 HIGH

5459.46

LOW

5335.18

52W (H) 5621.53 5330

(L) 4719.96 27-December

2-January

January 3, 2013 business daily | 13

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

MELCo CroWN ENTErTAINMENT

MGM CHINA HoLDINGS 43.2

31.5

14.4

43.0 31.0

14.2

42.8 42.6

30.5

14.0

42.40 Max 31.35

Average 30.918

Min 30.55

Last 31.3

30.0

SANDS CHINA LTD

Max 43

Average 42.85

Min 42.4

42.2

Last 42.7

SJM HoLDINGS LTD

Max 14.36

Average 14.193

Min 13.96

Last 14.34

WyNN MACAU LTD 18.4

35.8 35.3

21.2 21.1

18.3

34.8

21.0 18.2

34.3

Average 34.902

Max 35.75

Min 33.95

Last 35.75

33.8

Average 18.284

NAME

PRICE

WTI CRUDE FUTURE Feb13

92.55

0.795033762

109.4300003

80.05999756

BRENT CRUDE FUTR Feb13

111.62

0.45900459

119.2999954

90.38999939

GASOLINE RBOB FUT Feb13

278.41

0.811094616

292.9699898

220.3500032

GAS OIL FUT (ICE) Feb13

939.25

1.321467098

1031.5

800.25

3.33

-1.18694362

-0.626678603

4.090000153

3.049999952

HEATING OIL FUTR Feb13

303.98

0.263869648

0.263868601

333.4599972

255.6599855

Gold Spot $/Oz

1681.8

0.4413

1.0418

1796.08

1527.21

Silver Spot $/Oz

30.685

1.2539

1.9097

37.4775

26.1513

Platinum Spot $/Oz

1558.8

1.3524

2.7047

1736

1379.05

Palladium Spot $/Oz

708.1

0.5681

1.2063

725.19

553.75

DAY %

YTD %

(H) 52W

LME ALUMINUM 3MO ($)

2073

0.484730974

2361.5

1827.25

7931

0.557880056

8765

7219.5

LME ZINC

2080

1.339829476

2220

1745

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Mar13 Mar13

17060

-0.813953488

22150

15236

15.175

-0.589584016

16.84000015

14.90999985

698.25

0.612391931

846.25

511

WHEAT FUTURE(CBT) Mar13

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

(L) 52W

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

(L) 52W 2.16

393621

CROWN LTD

10.82

1.405811

1.40581

10.82

7.95

1365629

18.30999947

AMAX HOLDINGS LT

0.072

2.857143

2.857142

0.119

0.055

17355000

66.84999847

BOC HONG KONG HO

24.55

1.86722

1.867218

18.18

24786214

CENTURY LEGEND

ARISTOCRAT LEISU

COFFEE 'C' FUTURE Mar13

143.8

-2.076949268

249

141.25

SUGAR #11 (WORLD) Mar13

19.51

0.463439753

25.12999916

COTTON NO.2 FUTR Mar13

75.14

0.642914546

98.5

World Stock MarketS - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

13104.14

1.283263

13661.87

12035.08984

NASDAQ COMPOSITE INDEX

3019.514

1.999822

3196.932

2604.6

FTSE 100 INDEX

5990.94

1.579061

1.579059

5997.04

5229.76

DAX INDEX

7758.32

1.917006

1.917002

7771.71

5817.71

NIKKEI 225

10395.18

0.6994104

10433.63

8238.96

HANG SENG INDEX

23311.98

2.891214

2.891216

23317.39063

18056.4

CSI 300 INDEX

2522.952

1.729925

2717.825

2102.135

TAIWAN TAIEX INDEX

7779.22

1.035392

1.035395

8170.72

6857.35

2057.28

(H) 52W

1.0857 1.6381 0.9972 1.3487 87.33 8.0039 7.7713 6.3964 57.3275 32 1.3006 30.314 44.35 9815 91.521 1.2199 0.8506 8.4894 10.7712 115.99 1.0314

3.32

1194.5

1.705011

YTD %

(H) 52W

652

1728.25

1.705015

1.137 0.9644 0.4168 0.5307 -1.1481 -0.0138 -0.0116 -0.0401 1.0845 0.6583 0.0655 0.0793 0.3745 1.4503 -2.2681 -0.1067 0.4298 -0.7261 -0.5384 -1.671 -0.0097

0.9523779

948.25

2031.1

DAY %

0.8068 0.6471 0.4607 0.4545 -0.4133 -0.0125 -0.0116 0.0722 0.5147 0.8887 0.1147 0.1792 0.3745 1.471 -1.2177 -0.0538 0.0616 -0.5316 -0.3155 -0.9004 0

0.952381

-0.599435825

1758.99

PRICE

DAY % YTD %

VOLUME CRNCY

0.265

0.335

0.204

CHEUK NANG HLDGS

5.6

-6.510851

-6.510848

6.25

2.75

805217

CHINA OVERSEAS

3.896104

3.896102

24.3

12.066

20222204

CHINESE ESTATES

-0.6116208

-0.6116202

13.26

8.3

28298

CHOW TAI FOOK JE

4.501608

4.501611

15.16

8.4

7927281

EMPEROR ENTERTAI

1.91

1.058201

1.058202

1.92

0.99

1660000

FUTURE BRIGHT

1.23

0.8196721

0.8196698

1.43

0.41

1196000

GALAXY ENTERTAIN

31.3

3.130148

3.130147

31.35

13.28

13860029

119.5

0.673968

0.6739706

120

2030688

HOPEWELL HLDGS

33.8

1.654135

34.2

19.049

903900

HSBC HLDGS PLC

83.2

2.337023

2.33702

83.3

58.55

20964487

HANG SENG BK

HUTCHISON TELE H

3.54

-0.5617978

-0.5617962

3.88

2.88

5468000

LUK FOOK HLDGS I

25.3

3.688525

3.688526

33.2

14.7

3671500

MELCO INTL DEVEL

9.25

2.663707

2.663704

9.3

5.12

5328788

MGM CHINA HOLDIN

14.34

2.282454

2.28245

14.76

9.554

3856444

MIDLAND HOLDINGS

3.84

3.783784

3.783782

5.217

3.249

3376000

NEPTUNE GROUP

0.15

-1.315789

-1.315786

0.222

0.084

5200000

NEW WORLD DEV

12.42

3.327787

3.327783

13.2

6.3

21297185

SANDS CHINA LTD

15222420

4705.94

1.225868

1.225863

4710.3

3985

4346.475

0.6900662

0.6900682

4381.746094

3635.283

FTSE Bursa Malaysia KLCI

1674.72

-0.8425353

-0.8425342

1688.95

1502.09

NZX ALL INDEX

882.053

-0.2783446

886.132

718.491

SJM HOLDINGS LTD

18.28

PHILIPPINES ALL SHARE IX

3726.79

0.7518289

0.7518305

3756.31

3009.45

SMARTONE TELECOM

14.14

WYNN MACAU LTD

21.55

ASIA ENTERTAINME BALLY TECHNOLOGI

JAKARTA COMPOSITE INDEX

Last 20.9

Min 20.9

3.18

-0.096308186

1.0496 1.6332 0.9116 1.326 87.1 7.9843 7.7515 6.2331 54.405 30.38 1.2206 29.01 40.852 9653 91.4 1.20877 0.81193 8.2776 10.5874 115.5 1.03

NAME

778

S&P/ASX 200 INDEX

Average 20.952

MACAU RELATED STOCKS

1409.5

KOSPI INDEX

20.8 Max 21.15

PRICE

SOYBEAN FUTURE Mar13

NAME

Last 18.28

(L) 52W

LME COPPER 3MO ($)

CORN FUTURE

Min 18.2

CURRENCY EXCHANGE RATES

NATURAL GAS FUTR Feb13

METALS

20.9

18.1 Max 18.32

Commodities ENERGY

13.8

35.75

5.301915

5.301912

35.85

20.65

SHUN HO RESOURCE

1.48

5.714286

5.714288

1.48

33500

SHUN TAK HOLDING

4.22

0.7159905

0.7159891

4.33

2.506

7999765

1.555556

18.36

11.973

3158080

0.4261364

0.4261369

17.5

12.96

2399152

2.863962

2.863958

25.5

14.62

8508029

3.06

7.368421

7.24

2.4

383224

44.71

1.891522

51.16

38.96

736452 9700

HSBC Dragon 300 Index Singapor

621.09

STOCK EXCH OF THAI INDEX

1408.45

1.186841

1.186834

1411.58

1022.04

HO CHI MINH STOCK INDEX

418.35

1.11667

1.116669

492.44

332.28

BOC HONG KONG HO

3.07

3.3

2.32

Laos Composite Index

1222.9

0.6692625

0.6692629

1249.34

876.33

GALAXY ENTERTAIN

3.97

0.9535919

4.05

1.79

6232

INTL GAME TECH

14.17

3.809524

18.1

10.92

3117441

JONES LANG LASAL

83.94

1.96793

87.52

61.39

234584

LAS VEGAS SANDS

46.16

3.220036

58.3216

32.6127

6822901

MELCO CROWN-ADR

16.84

3.567036

16.98

9.13

3257440

MGM CHINA HOLDIN

1.85

1.96

1.2863

1000

MGM RESORTS INTE

11.64

1.83727

14.9401

8.83

8554930

SHFL ENTERTAINME

14.5

3.719599

18.77

11.64

330161

SJM HOLDINGS LTD

2.31

0.8733624

2.37

1.5484

6525

112.49

2.57135

129.6589

84.4902

1139968

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

WYNN RESORTS LTD

AUD HKD

USD

14 |

business daily January 3, 2013

Opinion Shinzo Abe’s monetary-policy delusions

Stephen S. Roach

Faculty member at Yale University and former chairman of Morgan Stanley Asia

The last thing that the Japanese economy needs at this point is backsliding on structural reforms

he politicisation of central banking continues unabated. The resurrection of Shinzo Abe and Japan’s Liberal Democratic Party – pillars of the political system that has left the Japanese economy mired in two lost decades and counting – is just the latest case in point. Japan’s recent election hinged critically on Abe’s views of the Bank of Japan’s monetary policy stance. He argued that a timid BOJ should learn from its more aggressive counterparts, the U.S. Federal Reserve and the European Central Bank. Just as the Fed and the ECB have apparently saved the day through their unconventional and aggressive quantitative easing (QE), goes the argument, Abe believes it is now time for the BOJ to do the same. It certainly looks as if he will get his way. With BOJ Governor Masaaki Shirakawa’s term ending in April, Abe will be able to select a successor – and two deputy governors as well – to do his bidding. But will it work? While experimental monetary policy is now widely accepted as standard operating procedure

in today’s post-crisis era, its efficacy is dubious. Nearly four years after the world hit bottom in the aftermath of the global financial crisis, QE’s impact has been strikingly asymmetric. While massive liquidity injections were effective in unfreezing credit markets and arrested the worst of the crisis – witness the role of the Fed’s first round of QE in 2009-2010 – subsequent efforts have not sparked anything close to a normal cyclical recovery. The reason is not hard to fathom. Hobbled by severe damage to private and publicsector balance sheets, and with policy interest rates at or near zero, post-bubble economies have been mired in a classic “liquidity trap”. They are more focused on paying down massive debt overhangs built up before the crisis than on assuming new debt and boosting aggregate demand.

Balance-sheet repair The sad case of the American consumer is a classic example of how this plays out. In the years leading up to the crisis, two bubbles – property

and credit – fuelled a record-high personal-consumption binge. When the bubbles burst, households understandably became fixated on balancesheet repair – namely, paying down debt and rebuilding personal savings, rather than resuming excessive spending habits. Indeed, notwithstanding an unprecedented post-crisis tripling of Fed assets to roughly US$3 trillion – probably on their way to US$4 trillion over this year – U.S. consumers have pulled back as never before. In the 19 quarters since the start of 2008, annualised growth of inflation-adjusted consumer spending has averaged just 0.7 percent – almost three percentage points below the 3.6 percent trend increases recorded in the 11 years ending in 2006. Nor does the ECB have reason to be gratified with its strain of quantitative easing. Despite a doubling of its balance sheet, to a little more than 3 trillion euros (US$4 trillion), Europe has slipped back into recession for the second time in four years. Not only is QE’s ability to jumpstart crisis-torn, balance-

sheet-constrained economies limited; it also runs the important risk of blurring the distinction between monetary and fiscal policy. Central banks that buy sovereign debt issued by fiscal authorities offset market-imposed discipline on borrowing costs, effectively subsidising public-sector profligacy.

Artificial life-support Unfortunately, it appears that Japan has forgotten many of its own lessons – especially the BOJ’s disappointing experience with zero interest rates and QE in the early 2000’s. But it has also lost sight of the 1990’s – the first of its so-called lost decades – when the authorities did all they could to prolong the life of insolvent banks and many nonfinancial corporations. Zombie-like companies were kept on artificial lifesupport in the false hope that time alone would revive them. It was not until late in the decade, when the banking sector was reorganised and corporate restructuring was encouraged, that Japan made

progress on the long, arduous road of balance-sheet repair and structural transformation. U.S. authorities have succumbed to the same Japanese-like temptations. From quantitative easing to record-high federal budget deficits to unprecedented bailouts, they have done everything in their power to mask the pain of balancesheet repair and structural adjustment. As a result, America has created its own generation of zombies – in this case, zombie consumers. Like Japan, America’s postbubble healing has been limited – even in the face of the Fed’s outsize liquidity injections. Household debt stood at 112 percent of income in the third quarter of 2012 – down from record highs in 2006, but still nearly 40 percentage points above the 75 percent norm of the last three decades of the twentieth century. Similarly, the personalsaving rate, at just 3.5 percent in the four months ending in November 2012, was less than half the 7.9 percent average of 1970-99. The same is true of Europe. The ECB’s über-aggressive actions have achieved little in the way of bringing about long-awaited structural transformation in the region. Crisis-torn peripheral European economies still suffer from unsustainable debt loads and serious productivity and competitiveness problems. And a fragmented European banking system remains one of the weakest links in the regional daisy chain. Is this the “cure” that Abe really wants for Japan? The last thing that the Japanese economy needs at this point is backsliding on structural reforms. Yet, by forcing the BOJ to follow in the misdirected footsteps of the Fed and the ECB, that is precisely the risk that Abe and Japan are facing. Massive liquidity injections carried out by the world’s major central banks – the Fed, the ECB, and the BOJ – are neither achieving traction in their respective real economies, nor facilitating balance-sheet repair and structural change. That leaves a huge sum of excess liquidity sloshing around in global asset markets. Where it goes, the next crisis is inevitably doomed to follow. © Project Syndicate

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January 3, 2013 business daily | 15

OPINION China stands out in 2012’s wires leadership transitions Business

Leading reports from Asia’s best business newspapers

Straits Times Prices of private homes in Singapore rose 1.8 percent in the fourth quarter of last year, compared with 0.6 percent in the previous quarter, show flash estimates released on Tuesday. For the year, the price rises have slowed. Overall prices were up 2.8 percent, compared with the 5.9 percent recorded for 2011. Among the three different regions, the suburban areas showed the sharpest increase. The outside central region’s prices edged up sharply by 3.4 percent compared with 1 percent in the third quarter.

Economic Times Major car makers in India either posted a drop or a marginal increase in December sales despite offering year-end discounts as customers, hemmed in by high interest rates and spiralling inflation, put off their purchases. While Hyundai Motors, Toyota Kirloskar Motors and General Motors reported a drop in sales, Mahindra & Mahindra (M&M), Ford India and Honda Motor Co managed to register a modest rise. “The market continued to remain difficult in 2012. The market still needs a boost to come out of this current rut,” Hyundai’s vicepresident, Rakesh Srivastava, was quoted as saying.

The Star The near term earnings prospects for Malaysian banks remain strong, but Alliance Research is maintaining its Neutral recommendation on the sector. The research firm said on Tuesday the factors were that the ongoing external uncertainties could yield negative earnings surprises for banks with significant regional footings. Alliance Research said the second concern was that loan loss provision could creep up should the external headwinds persist. Thirdly, the high foreign shareholdings make the sector vulnerable to foreign selling should domestic equity risk premium heighten.

Asahi Shimbun An increasing number of companies in Japan pitching their products are moving beyond splashing their ads and logos across billboards and magazine pages and they are now advertising on the thighs of young women. Not only do the women effectively function as walking corporate ads on city streets, they also provide plenty of fodder for talk on online social networking services. The ads are placed on what has been dubbed the “absolute territory,” the bare leg exposed between a woman’s miniskirt and knee-high socks. The women are able to receive up to 10,000 yen (US$121) in “ad commissions”.

Noah Feldman

Law professor at Harvard University and a Bloomberg View columnist

he year 2012 will go into the history books as one of contrasting transitions. China’s five-year cycle for Communist Party congresses and leadership turnover overlapped with the U.S.’s four-year electoral calendar. And if that once-in20-years coincidence wasn’t enough, Egypt’s rocky shift from dictatorship to democracy continues to remind us of what transition looks like in the absence of a predictable institutional framework. The confluence of Chinese and American transitions marks an extraordinary historic development. The last time this happened, we might not have been able to predict the impeachment of Bill Clinton or the Supreme Court deciding the 2000 presidential election in Bush v. Gore. But any reasonable observer would have expected that presidential elections would continue in their ordinary course, and that the crises associated with impeachment and an uncertain electoral outcome would be resolved in a regular fashion, not by palace coups or purges. By contrast, in 1992 it would have been essentially impossible to predict that China would soon embark on a regularised process for replacing the leadership of the Communist Party based on generational turnover. Five-year plans were nothing new – the Chinese had inherited them from the Soviets – but top leadership change didn’t follow that regular clock. Neither the oscillations of power that accompanied the Cultural Revolution nor the Tiananmen upheavals (both before and after the events of June 4, 1989) followed a predictable calendar.

Planned retirement Although the generation of Deng Xiaoping officially “retired” in 1992, no one thought this meant its members would actually relinquish political authority. In short, China was still ruled as a quasi-dictatorship. As a result, it was plagued by dictatorship-style uncertainty about who would come to power next, when, and how. Over the past two decades, the situation has changed fundamentally. Gradually, after Deng’s death, it has become normal for China’s leaders to stand aside when their decade in office is done. As a result, observers in China and outside can now speculate with some confidence about who will come to power and when. Everyone knew that Xi Jinping and Li Keqiang would form the centre of the new administration more

than two years before they assumed office. At the same time, the selection of officials throughout the Communist Party apparatus increasingly takes account of performance, not only loyalty to party discipline. Although recent studies suggest – unsurprisingly – that the meritocracy is far from perfect, it is broadly understood that the party members who specialise in the selection process try to advance cadres’ careers based on a mix of their talents, accomplishments, networks and commitment to the party. Indeed, it is reasonable to infer that China’s most senior leadership engaged in a remarkable experiment. Through the system of internal selection and generational turnover, the party is trying to solve the problem of transitions without relying either on democratic elections or pure hereditary power. There are many sons and daughters of senior party members whose family connections have aided their rise, but to be a princeling isn’t enough: You also have to be good. The upshot of these changes is that while China is still authoritarian, it is no longer a dictatorship. Dictators don’t cede power voluntarily, as the

Hard-won stability is an asset that the [Chinese] leadership has inherited and will not want to squander. Rapid change of any kind will therefore be anathema

Arab Spring reminds us. And if a new dictator doesn’t emerge, the system can be thrown into near-chaos – a process still playing out in Egypt. Some observers in 2012 thought that the Communist Party apparatus was so focused on the transition – on figuring out who was in and who was out – that its leaders neglected pressing economic concerns. That might be true. Yet it isn’t so different from the situation in the U.S., where the direction of the economy and the precarious fiscal situation took a back seat for most of the long presidential campaign. Stable transitions tend to be elaborate, and elaborate transitions take time, effort and money. At least the Chinese didn’t waste upward of US$2 billion on campaign advertising.

Conservatism rules The new reality of transitional stability in China tells us something crucial about how the new leadership will govern. Hard-won stability is an asset that the leadership has inherited and will not want to squander. Rapid change of any kind will therefore be anathema. Conservatism, not rapid reform, will be the order of the day. Deng’s generation faced a major legitimacy challenge as the Soviet Union collapsed and traditional communist ideology was shown to be bankrupt. A serious crisis demanded bold measures, and the changes

were far-reaching and rapid. Now, the party’s leaders have much more to lose – including the tremendous asset of predictable transitions. Of course, even conservative leaders have to keep their base satisfied. Xi has closer ties to the People’s Liberation Army than did his predecessors, and so is likely to be more hawkish. This closeness is reflected in his immediate assumption of the reins of the military – unlike the last president, who waited two years. Xi probably won’t rapidly militarise the conflict with Japan around the Senkaku/ Diaoyu Islands – that would be insufficiently conservative – but with the army in his camp, he also isn’t going to back down. Yet here, too, China’s stability coming out of transition is historically noteworthy. Xi needs the military, but he doesn’t fear it in the way that Egypt’s Mohamed Mursi must fear the army that both produced and deposed his predecessor. When it comes to civilian control of the military, China is now more like the U.S. than like a developingworld dictatorship. China isn’t on the royal road to democracy or to capitalism without major state direction. But in 2012 it reaped the benefits of its historic move away from dictatorship – and in historical and comparative terms, that’s impressive enough. Bloomberg View

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business daily January 3, 2013

CLOSING Joseph Lau’s trial gets new judge

Portuguese budget sent to court

Mário Silvestre, a judged in Macau’s Court of First Instance, is taking over as the lead judge in the upcoming trial of Chinese Estates Holdings Ltd boss Joseph Lau Luen Hun and BMA Investment chairman Steven Lo Kit Sing. Mr Silvestre will replace Alice Costa as the presiding judged, Portuguese-language Radio Macau reported yesterday. The Public Prosecutions Office has accused Mr Lau, Mr Lo and six others of being part of the web of corruption woven by Ao Man Long when he was secretary for transport and public works. The trial was due to start in September but was postponed owing to the illness of Ms Costa.

The Portuguese president has said that he will send this year’s controversial budget to the Constitutional Court. Aníbal Cavaco Silva said the budget didn’t treat citizens fairly, and hit some of them worse than others. The rightof-centre government has argued that the unprecedented tax increases the budget contains were necessary to meet the terms of the country’s euro zone bailout. For most Portuguese workers the tax rises that came into effect on January 1 are equivalent to more than a month’s wages. President Cavaco Silva made the surprise announcement in his New Year’s speech, the day after signing the budget into law.

Euro zone factory slump deepens Adds to signs that a recession in the currency bloc may extend into this year Jonathan Cable and Kim Coghill

Germany saw its manufacturing sector shrink for the 10th straight month

uro zone factories sank deeper into recession in December as new orders tumbled, business surveys showed yesterday. Purchasing managers’ surveys in the 17-nation euro zone showed economic decline spread further into the core members, suggesting the overall economy may have slipped deeper into recession at

the end of 2012. Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) edged down to 46.1 in December from November’s 46.2, below a flash reading of 46.3. It has been below the 50 mark that divides growth from contraction since August 2011. “It’s pretty grim really,” said Jonathan Loynes at Capital

Economics. “These surveys are pointing to a pretty deep recession. If the German industrial sector is contracting quite sharply it is pretty hard to see where growth across the euro zone as a whole is going to come from.” Germany, Europe’s largest economy, saw its crucial manufacturing sector shrink for the 10th straight month and at a faster pace, while French data showed a decline in all but one of the past 17 months. The slump in Spain deepened, while Italy’s index, although improved, remained below 50 for the 17th month. Ireland was the only member of the currency union to show manufacturing growth in December. The euro-area economy has shrunk for two successive quarters and economists foresee a further decline in gross domestic product in the final three months of last year. The European Central Bank forecasts contractions of 0.5 percent and 0.3 percent in 2012 and 2013. “The euro zone manufacturing sector remained entrenched in a steep

downturn at the end of the year,” Chris Williamson, chief economist at Markit, said in the report. “The region’s recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter.” “Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little as producers should benefit from signs of stronger demand in key export markets such as the U.S. and China,” Mr Williamson added. Separate data on Wednesday showed French car sales dropped 15 percent in December, the worst annual performance in 15 years, while Spanish new car registrations were down 23 percent. But British factory activity jumped unexpectedly to grow at its fastest pace since September 2011, raising the chance that its economy eked out some growth at the end of 2012. “The sector seems to be showing some signs of improvement - probably as the euro zone [debt] crisis is easing a little bit and Chinese growth is bottoming out,” said Rob Wood at Berenberg Bank. Reuters

Thai billionaire extends offer for F&N US$7.2 bln offer stretched until January 10

hai billionaire Charoen Sirivadhanabhakdi extended a deadline for a US$7.3 billion bid for control of Fraser & Neave Ltd, prolonging a takeover battle. Mr Charoen’s TCC Assets Ltd will move the closing date on its S$8.88 per share offer for the property and beverages conglomerate back until January 10, according to a stock exchange statement yesterday. A group led by Overseas Union Enterprise Ltd on November 15 topped his bid with a S$9.08 per share offer that is due to close today. Mr Charoen agreed to buy a stake in F&N in July, setting off a fight for the conglomerate with assets spanning from soft drinks to property. OUE, a Singapore-based property company, has enlisted Kirin Holdings Co., Japan’s largest drinks maker, in its bid. OUE would get the company’s

property business and Kirin would take the food and beverage unit. Kirin has agreed to tender its 14.8 percent stake in F&N, OUE has said. The Japanese brewer, Asia’s biggest beverage maker, will offer S$2.7 billion for F&N’s food and beverage business, if OUE wins enough support to complete the takeover. F&N has said it had committed to pay the OUE consortium a break-up fee of as much as S$50 million if a competing offer is successful. F&N’s board has said an independent adviser has found both offers “not compelling, though fair”. Mr Charoen has a net worth of US$8.5 billion, according to data compiled and calculated through the Bloomberg Billionaires Index. OUE executive chairman Stephen Riady is a son of Mochtar Riady, who controls Indonesia’s Lippo Group, with

F&N shares have been trading above the offer prices with the market expecting a higher offer

businesses ranging from real estate and financial services to food across Asia. OUE, which gets about 65 percent of its revenue from hotel operations, is planning at least one investment a

year in Singapore to boost property holdings that include office towers, luxury apartments and malls, Stephen Riady said in an interview in August. Bloomberg News