Macau Business Daily, January 4, 2013 by Business Daily

Parking costs move into top gear P

arking space rents are likely to rise by 30 percent this year, say property agents. Some of the increase is thought to be landlords passing on the cost of the government’s recently imposed 20 percent stamp duty on property sales. Ironically that measure was supposed to curb speculation and

inflation in the real estate sector. CarparKing Co. Ltd – a local firm specialising in car park sales and rentals – says the Areia Preta and Horta e Costa districts attract the highest prices. A parking spot there this year is likely to cost between 2,000 patacas (US$250) and 2,500 patacas a month on average. CarparKing’s general manager Chan Lik Ki

www.macaubusinessdaily.com Year I Number 192 Friday January 4, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã MOP 6.00

said prices were lower in NAPE district and Taipa, ranging between 1,000 patacas and 1,500 patacas a month. “The owners [of parking spaces] were quick to adjust to the new curbs. They either increased the price by 20 percent to 30 percent, or stopped selling temporarily,” said Mr Chan. More on page 3

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Factory bosses upbeat after months of decline

Locals rush to cash in lucky zodiac banknotes

A survey released for the third quarter 2012 by the Economic Services Bureau shows 32.2 percent of the city’s manufacturers felt optimistic about their future business, doubling from 16.5 percent in the previous quarter. It was the strongest positive showing in 12 months worth of surveys. Not since the second quarter 2011 have local factory owners been so upbeat.

Residents rushing online to register for ‘lucky’ Year of the Snake ten-pataca (US$1.25) banknotes caused a temporary crash to the website of local bank Banco Nacional Ultramarino SA. Last year some Year of the Dragon notes with auspicious serial numbers including 8s and 3s were being re-sold by the owners for hundreds and even thousands of patacas each, said the Chinese Paper Money Society of Macau.

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January 3

HSI - Movers Name

%Day

ESPRIT HLDGS

4.32

BELLE INTERNATIO

4.03

CHINA RES LAND

4.02

CITIC PACIFIC

3.88

COSCO PAC LTD

3.70

WHARF HLDG

-1.70

HENDERSON LAND D

-1.78

POWER ASSETS HOL

-2.02

CHINA RES POWER

-3.28

TINGYI HLDG CO

-3.47

Source: Bloomberg

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Officials must register interests under new law Page 4

Mainland warms to Taiwan casinos plan

Beyond Senado: shifting tourists uptown Page 6

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business daily January 4, 2013

macau

Manufacturers’ optimism reaches 12-month high As value of exports keeps increasing year-on-year Tony Lai

tony.lai@macaubusinessdaily.com

Close to one-third of the city’s manufacturers are optimistic about their future business

acau’s remaining manufacturers are expressing more confidence in the city’s export prospects for the coming six months. The territory, which as recently as a decade ago was a hub for footwear and textile production, has started to make a modest comeback in making things

rather than simply exporting ‘invisibles’ such as gambling services. That also chimes with the city and central government’s desire to see economic diversification beyond casinos. A survey released for the third quarter 2012 by the Economic Services Bureau yesterday shows 32.2 percent of the city’s manufacturers

felt optimistic about their future business, doubling from 16.5 percent in the previous quarter. It was the strongest positive showing in 12 months worth of surveys. Not since the second quarter 2011 have local factory owners been so upbeat. At that time 37 percent were feeling positive.

Those manufacturers expressing pessimism in Q3 2012 decreased to 33.5 percent of the sample from 43.9 percent in the second quarter. But among the interviewed subjects who expressed optimism in the third quarter, only 0.6 percent of them expected a significant growth in exports. The bureau didn’t reveal the exact number of manufacturers interviewed. But manufacturers’ apparent optimism was accompanied with a significant recovery in the city’s exports – albeit from a low base. The value of exports in November grew by 6.1 percent year-on-year to over 690 million patacas (US$86.3 million); official data released last month show. This also marks 10 consecutive months of year-on-year surges, the longest improving streak since 2006. Nonetheless textile exports continued to drop – by 16 percent in November 2012 to 83.2 million patacas compared to November a year earlier. Non-textile exports rose by 10.1 percent to 607.5 million patacas. Seven years ago in November 2005, textile exports were worth 22 times that amount –13.6 billion patacas – according to data from the city’s Statistics and Census Service. The latest figures published yesterday also show the main challenges for factory owners responding to the survey in the third quarter were surges in raw material prices (a problem for 64.3 percent of those polled) and labour shortages (a concern for 50 percent). Insufficient orders, competition from outside and rising salaries for staff were also common headaches from the manufacturers, according to the data.

January 4, 2013 business daily | 3

MACAU Melco Crown’s Manila share buy completed by Feb A block share purchase by Macau casino operator Melco Crown Entertainment Ltd in a Manila-listed firm will be completed by February 21, says a Philippine Stock Exchange filing. MCE earlier paid 1.26 billion pesos (245.6 million patacas) for a 93.1 percent stake in Philippines-listed Manchester International Holdings Unlimited Corp. It’s buying the remaining 6.94 percent currently in public hands for 3.1491 pesos per Class A share and 3.5498 pesos per Class B share. MCE will use MIH as a vehicle for its planned US$650 million (5.19 billion patacas) investment in the Belle Grande Manila Bay casino resort.

Rents for parking spaces set to rise An increase in public car parking charges will probably make renting private parking spaces more expensive, estate agents say Tony Lai

tony.lai@macaubusinessdaily.com

ents for private parking spaces may rise again this year if public car parking charges increase, as seems probable, estate agents say. Some estate agents have told Business Daily that rents might rise by up to 30 percent. According to CarparKing Co. Ltd, the districts of Areia Preta and Horta e Costa have the highest rents for private parking spaces. The rent for a parking slot there can reach between 2,000 patacas (US$250) and 2,500 patacas per month, on average. CarparKing’s general manager, Chan Lik Ki, said rents were lower in the NAPE district and on Taipa, where they ranged between 1,000 patacas and 1,500 patacas. CarparKing specialises in letting or selling parking spaces. “Northern districts like Areia Preta and Fai Chi Kei have the highest rents and prices as these areas are usually densely populated, with a high number of vehicles but a lack of supply of parking spaces,” Mr Chan said. He said rents for parking spaces, particularly in the north, had doubled in the past two years from

around 1,000 patacas. He expects rents to climb by up to another 30 percent if the government increases public car parking charges. “If the government decides to raise the charges for some public car parks, this will definitely spur the private market to follow their lead,” Mr Chan said. The Transport Bureau said on December 28 that it would consult the public in the first quarter of this year about changes in road traffic control measures, including increases

MOP 2,500

Monthly rent for a parking space in the northern district last May

Expect to pay more to rent a parking space for your car this year (Photo: Manuel Cardoso)

in public car parking charges. The bureau said charges might increase by different amounts in different districts. Midland Realty (Macau) Ltd’s chief executive, Ronald Cheung Yat Fai, shares Mr Chan’s view. “The increase in public parking charges will push up rents in the private the market, where the rate of return remains relatively low at the moment,” said Mr Cheung. “There is still room for a rise.” He said, for instance, that a parking space worth 1 million patacas could be let for only around 1,000 patacas per month, meaning the annual rate of return was less than 2 percent. But he does not expect sales of parking spaces to be much affected by any increases in public car parking charges. Official data show that in November last year the city had over 216,000 motor vehicles, including over 94,000 light vehicles and more than 115,000 motorcycles, but that it had public parking for only 11,552 vehicles. CarparKing estimates that the city has about 50,000 private parking spaces.

Parking space prices immune to new levy Private parking spaces are still regarded as an easy and relatively cheap investment

he expansion of the special stamp duty to cover sales of private parking spaces on October 30 has reduced the number sold but not the prices paid for them, estate agents say. The general manager of CarparKing Co. Ltd, Chan Lik Ki, told Business Daily that the expansion of the special stamp duty, meant to cool the property market, had tightened the supply of parking spaces but that demand remained strong. CarparKing specialises in letting or selling parking spaces. “The owners were quick to adjust to the new curbs. They either increased their prices by 20 percent to 30 percent or stopped selling temporarily,” said Mr Chan. The special stamp duty is a levy of 20 percent on the sale of property of certain kinds if it is sold within one year of purchase, or 10 percent if it is sold within two years. Mr Chan said a parking space in the Areia Preta area could cost over 2 million patacas (US$250,000), about two-thirds of the cost of some small flats. He said the number of parking spaces sold had dropped by about 30 percent, but that rents for parking spaces had surged as more people rented them. Midland Realty (Macau) Ltd’s chief executive, Ronald Cheung Yat Fai, expects the number of parking spaces sold and the prices paid for them to rise this year as hot money flows into the city. Mr Cheung pointed out that the special stamp duty now covers sales of almost all kinds of property. “The investment limit on car parks is low compared to other properties,” he told Business Daily. T.L.

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business daily January 4, 2013

macau Macau, Shenzhen officials to meet next week

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Chief Executive Fernando Chui Sai On will head a delegation in a twoday visit to Shenzhen starting on January 7. The chief executive will meet with officials there to improve ties on issues including medical services and education. Both sides are also expected to sign agreements and memorandums to help Macau set up a drug control centre as well as an inspection centre for frozen poultry. Last year the two cities signed deals to boost ties on tourism, trade, cultural matters and creative industries.

HOSPITALITY Unreliable saviours That most visitors to Macau come from only a few sources is well known. Our dependence on visitors from mainland China seems to be growing, as our next-biggest sources of visitors, Hong Kong and Taiwan, appear to be sending fewer. The next-biggest sources after Taiwan, in descending order, are Japan, South Korea, Malaysia, the Philippines, Thailand, Singapore and Indonesia. The hope is that we can get our visitors from a greater variety of sources mainly by attracting people from other Asian countries. Malaysia, the Philippines, Thailand, Singapore and Indonesia all send about the same number of visitors. In the first 11 months of last year each sent about 80,000. Together, they were the source of only about 4.2 percent of all our visitors. Bearing this in mind, what do the recent rates of growth in arrivals from our main Southeast Asian sources of visitors suggest?

Officials must declare financial interests under new law Assets will all have to be disclosed, though location and value of any real estate owned can remain confidential Stephanie Lai

sw.lai@macaubusinessdaily.com

The picture is mixed because of the variety of ways that arrivals from each country are growing, and the variety of rates that they are growing at. It is also difficult to get a clear picture because a number of these countries are sources of labour for Macau. In many cases visits by people from Southeast Asia have a closer correlation with the dynamics of the job market here than the city’s tourist attractions. There is no question that it would be desirable to get our visitors from a greater variety of sources, but much would have to change for Southeast Asian countries, separately or together, to make a noticeable difference to the mixture of visitors we get.

he Asset Declaration Law, also dubbed the ‘Sunshine Act’, was finally passed in yesterday’s Legislative Assembly plenary session after undergoing nearly two years of legal amendment and discussion. Under the new law, information on assets owned by the chief executive of the day and other senior officials will be available for the public to read on the Court of Final Appeal’s website. Failure to disclose assets accurately wou ld b e p u n i s h a b l e b y fi n es equivalent to between three months and one year’s salary for the official in question. Failure to disclose assets at all would be punishable by up to three years in prison. Ownership of real estate, as well as any stakes or other interests in companies held or registered locally or overseas should be disclosed, the law says. “Another major feature with the

new act is that the official should also disclose the positions they hold in not-for-profit bodies,” said legislator Kwan Tsui Hang, who chairs the assembly’s first standing committee and led the legislation discussions. Aside from the chief executive, the Executive Council members, Legislative Assembly members, judicial members, directors and deputy directors of government bureaus, and managers and supervisors of government-owned companies or utilities will have to declare their assets. However, the location and value of any real estate owned does not need to be disclosed to the public. Ownership by officials of shares in listed companies or investment funds, and of debt securities, loans, savings, works of art, jewellery, motor vehicles, boats and aircraft will remain confidential. Legislator Pereira Coutinho is highly critical of these exemptions.

“All these – the owned securities, art collections or boats – ought to be disclosed and in principle, the disclosure of these assets should override privacy,” said Mr Coutinho. Vasco Fong Man Chong, the Commissioner Against Corruption, disagreed with Mr Coutinho’s stance and stressed that even the United Nations Convention against Corruption requires asset disclosure ought to be balanced with privacy protection. “The ‘Sunshine Act’ is not a one-sizefor-all solution to solve all the problems, it is just one of the essential tools to curb corruption, as in the international community,” said Mr Fong. “Actually we would advise the government to form a bill [law] against bribing foreign civil servants, and related trade crimes – there’s now a vacuum [on that] in Macau,” Mr Fong continued. The Asset Declaration Law will come into force 90 days after it is published in the Official Gazette.

J.I.D.

33.1 %

Fall in Singaporean visitors in first 11 months of 2012 from a year before

Yesterday’s meeting of the Legislative Assembly

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January 4, 2013 business daily | 5

MACAU

Year of the Snake note rush starts The passion for banknotes marking the lunar year is still strong, but this time round efforts are being made to hold speculators in check Stephanie Lai

sw.lai@macaubusinessdaily.com

Hundreds of residents rushed to get dragon bank notes last year (Photo: Carmo Correia)

he sheer volume of online applications by Macau residents for special banknotes marking the forthcoming lunar Year of the Snake crashed Banco Nacional Ultramarino SA’s (BNU’s) system on its first day in operation on Wednesday. “This is the first time that we had this kind of crash. There were too many people rushing to register and it dragged the system down,” a BNU spokeswoman told Business Daily. The spokeswoman said that the service had been restored later that day and had been running well since.

The Macau Branch of Bank of China Ltd, the other bank authorised to issue notes marking the lunar year, had no problems with its online application system. The rush to reserve Year of the Snake notes online was similar to the rush to get Year of the Dragon notes last year, BNU and Bank of China said. By 6pm on Wednesday some 214,000 people had reserved Year of the Snake notes, Bank of China said. From 2012 to 2023, BNU and Bank of China are each authorised to issue a maximum of 20 million special notes with a face value of 10 patacas

(US$1.25) to mark each lunar year. The limit was imposed at the end of last January in an effort to curb the kind of crazed speculation that took hold after the Year of the Dragon notes were put in circulation in that month. BNU and Bank of China at first intended to issue only 10 million Year of the Dragon notes each, but people formed long queues to get them.

Counter-measures “The dragon notes evaporated within three days of being released and there was much speculation,” said

Chan Io Kuong, chairman of Chinese Paper Money Society of Macau, which does research on antique bank notes and sells them. “For the dragon notes with good numbers, such as the ones with a serial number ending with 88888, the price would reach several thousand patacas,” Mr Chan told Business Daily. “Even for the notes ending with a single eight or three, a pair of dragon notes can be worth 300 patacas in the market,” he said, meaning one note each from BNU and Bank of China. This year, the online reservation system is meant to end the speculation. The Monetary Authority of Macau no longer allows applicants to choose the serial numbers of the notes they reserve. Each resident is now permitted to reserve a maximum of 30 Year of the Snake notes at each of the issuing banks. People that apply online before January 31 will get the notes sometime between March 1 and August 30. “The authority has now successfully set a cool-off period in between the registration time and getting the notes, which will help curb the speculation craze,” said Mr Chan. “But to completely wipe out speculation over the lunar year notes is impossible, especially because the demand for these notes from mainland China is strong,” he said. Mr Chan believes the market for notes marking the lunar year is now more mature than a year ago. He said a pair of Year of the Snake notes might eventually fetch 60 patacas to 70 patacas on the open market, similar to what a pair of Year of the Dragon notes ended up fetching last year after they were issued for a second time.

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business daily January 4, 2013

macau

Snakes and ladders

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Will 2013 be the year Taiwan finally passes a casino gaming law?

Widening gap Whenever an economy has a net inflow of foreign investment it is not surprising that its national income is smaller than its domestic product. In itself, this does not mean much – only that investments in the economy by foreigners make more returns than the economy’s own investments abroad. Macau has had a lot of foreign direct investment. Since 2004 foreign companies have showered the city with investment, especially in gaming and construction, and outflows of profits have risen. So the difference between gross national income (GNI) and gross domestic product has widened.

Michael Grimes

michael.grimes@macaubusinessdaily.com

Matsu – front-runner in Taiwan’s push for casinos

In the beginning, the gap was small. The economy was just emerging, after the return to Chinese rule, from a period of some disinvestment in some industries. Investment in the gaming and associated industries was mainly preliminary, so this investment was producing little, if any, revenue and therefore little, if any, profit. But the gap was already there and began widening in 2006, jumping to the equivalent of 10.1 percent of GDP from 6.4 percent the year before. The widening trend was interrupted in 2007, an atypical year. Inflows and outflows, in effect, cancelled each other in that year, so GDP and GNI were virtually identical. Since then the gap has widened again, reaching the equivalent of almost 14 percent of GDP in 2011, as outflows rise faster than inflows. J.I.D.

86.3 %

GNI as a proportion of GDP in 2011

ome gaming analysts see this year as a potential breakthrough moment for legalising casinos in Taiwan – or at least its outlying islands. GamblingCompliance.com reported in November that Taiwan’s legislature might pass a gaming law by June. But Taiwan journalists and Taiwan watchers know there are many variable factors that could hinder progress this year or even next. “The process of getting the legislation written and passed at the various levels required, is very complicated,” Martin Williams, Taipei-based Asia Editor of GamblingCompliance, told Business Daily. Outlying island groups including Matsu, Penghu and Kinmen (also known as Jinmen) are identified in a 2009 amendment to Taiwan’s Offshore Islands Development Act as being exempted from a national ban on casinos. The local populations must give approval to casino projects via referendums in order for applications to proceed. But exactly what they are being asked to vote for – a Macau- or Las Vegas-style megaresort as a monopoly and dominant

employer and driver of the economy on one or more island group; a pair of smaller resorts on one or more island group; or one multi-resort island – isn’t yet clear. “Ideally the legislation should have been passed before the referendums took place, otherwise people are voting for something for which there is no law and for which the parameters are unclear,” says Martin Williams. “Basic issues such as gaming floor space – in absolute terms or as a proportion of total floor space – have not been resolved,” he adds.

Decades long A plan for casino gaming within Taiwan’s borders—on Penghu— was first presented as far back as 1993. With some stubborn domestic opposition to casino gambling it seems the government believes it’s an easier political sell to make casinos hard for Taiwanese to get to, but much easier for mainland Chinese visitors to frequent. Matsu archipelago is situated off the coast of Fuzhou city in mainland China’s Fujian province. Kinmen is

located off the coast of Xiamen. Chang Wu-ueh, director of the Institute of Mainland China Studies at Taiwan’s Tamkang University, told Business Daily just before Christmas that this could make the business prospects of offshore casinos hostage to the mainland’s politics on questions such as visa issuance. There are growing signs however that the mainland government is willing to be engaged in the process. Weidner Resorts, led by Bill Weidner, a former president of Las Vegas Sands Corp., wants to build an integrated resort costing possibly several billion U.S. dollars on Matsu. On December 7 according to a story filed by GamblingCompliance, Weidner Resorts signed memoranda of understanding with Hong Kongbased high-speed ferry operator Chu Kong Passenger Transport (CKS) and the Chinese government-owned China Duty Free Group. “If the Chinese government are on board in relation to casino gaming in Taiwan, the policy will need to be consistent with their [mainland China’s] unificationist objective. That has been a selling point for the project by the Taiwanese side,” says Martin Williams.

January 4, 2013 business daily | 7

MACAU U.S. eases visa procedures for Macau residents Macau and Hong Kong residents will be able to pay for their visa application fees for the United States in any convenience stores of 7-11 instead of Banco Comercial de Macau SA (BCM) or Dah Sing Bank in Hong Kong. The new payment method will be introduced on March 15. This is regarded as part of the latest measures announced by the U.S. Consulate General for Hong Kong and Macau to streamline the visa application procedure. Applicants can also schedule a visa appointment via a more user-friendly website or phone-calls, the consulate said.

Divert tourists away from crowded downtown: legislators

hifting tourists beyond a handful of under pressure hotspots such as Senado Square and the Ruins of St Paul’s will bring the economic benefits of mass tourism to other parts of the city suggest some legislators. Legislative Assembly member Kou Hoi In and other three members including vice-president Ho Iat Seng say the need to shift the tourism focus beyond a few downtown sites is even more pressing since the opening on Monday of the Guangzhou-Zhuhai Intercity Railway spur to Macau’s border gate at Gongbei. It will draw thousands more mainland tourists daily. The influx “raises doubts towards the city’s capacity” to receive many more visitors, suggested Mr Kou. The Macau Government Tourist Office said last year the upper limit was ideally 29 million visitors per year based on a study from the Institute for Tourism

Follow me – moving tourists uptown

Studies, he told the assembly’s session yesterday. Macau had 25.6 million visitors in the first 11 months of last year, 0.5 percent more than in the equivalent period last year. The

city welcomed more than 28 million travellers in 2011. The easing in 2012 of rules whereby migrant workers living but not registered in Guangdong no longer need to return to their

hometown to apply for a permit to visit Macau has also swelled the numbers. In July the head of the northern Macau’s industrial and commerce association Wong Kin Chong suggested the government should help set up a night market in order to attract more tourists to the district, mirroring one of Taiwan’s initiatives to attract visitors. Mr Kou stressed yesterday the government should explore the potential of old neighbourhoods outside the downtown zone as tourist attractions. But he said they were “yet to see actual moves from the government on rejuvenating the old neighbourhoods”. New MGTO boss Helena de Senna Fernandes pledged on December 20 one of their goals for this year is to “enrich the tourism elements of the entire city to divert visitors to different spots”.

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business daily January 4, 2013

GREATER CHINA

Chinese economy poised for 2013 rebound As debt risks rising for upcoming president Xi Jinping

Xi Jinping aims to reduce the economy’s reliance on investment spending in favour of domestic demand

ncoming President Xi Jinping may find China’s investment-driven economic recovery in the Year of the Snake jeopardised by mounting risks in the finance industry. Gross domestic product is poised to expand 8.1 percent this year, up from 7.7 percent in 2012, according to the median estimate of economists surveyed last month by Bloomberg News. At the same time, an increase in lending fuelled by trust companies and underground banks enhances the risk of loan defaults that would be “severely damaging” to the economy, Standard Chartered Plc says. The danger is that an economic rebound lulls policy makers into complacency, delaying market-driven changes needed to reduce dependence on investment for growth.

Mr Xi needs to rev up consumption and services and ensure credit is diverted from inefficient state enterprises to growth-generating private companies, said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “If China tries to sustain growth by adding debt and investing it inefficiently it will be like cotton candy: a short-term high with no lasting value,” said Mr Loevinger, now an Asia analyst in Los Angeles at TCW Group Inc. “The U.S. got into trouble because institutions like Fannie Mae and Freddie Mac were too big to fail and had a toxic mix of private shareholders and implicit government guarantees. China’s financial system is full of Freddies and Fannies.”

Fannie Mae and Freddie Mac are the U.S. mortgage financiers that have been under U.S. government conservatorship since 2008, after losses on soured loans pushed them to the brink of insolvency.

More leverage Mr Xi and his team are inheriting an economy more leveraged than the one President Hu Jintao took over in 2003. Government, corporate and consumer debt rose last year by 15 percentage points to an estimated 206 percent of GDP, Standard Chartered said in a November report. In March 2003 it stood at 150 percent. Borrowers are using some new loans to “plaster over non- performing credits” while so-called shadow

banking is growing too fast, said economists led by Stephen Green. They estimated that a bad-loan ratio of 12 percent would erase the banking industry’s 7.5 trillion yuan (US$1.2 trillion) in capital. Lending by so-called trust companies surged five times to 1.04 trillion yuan in the first 11 months compared with the whole of 2011. A “large part” of the sector’s lending is to higher-risk entities including local government investment vehicles and property developers that don’t have access to bank loans, the International Monetary Fund said in its Global Financial Stability Report in October.

‘Extremely reluctant’ “Lots and lots of projects have been approved to stimulate this economy,”

Services growth adds to revival hopes Foreign investment into the service sector surpassed that directed to the manufacturing industry Lucy Hornby

rowth in China’s increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world’s second-largest economy. China’s official purchasing managers’ index (PMI) for the nonmanufacturing sector rose to 56.1 in December from 55.6 in November, the National Bureau of Statistics (NBS) said yesterday. Two PMIs on the manufacturing sector earlier this week also suggested China’s economic growth was picking up late in 2012, although signs persist it depends primarily on state-led investment. Data so far suggests only a muted revival in economic growth, rather than a return to the double-digit pace seen in China over the past three decades, Hong Kong-based economist

Dariusz Kowalczyk said. “Absolute levels of both December manufacturing and nonmanufacturing PMIs remain relatively low by historical standards and consistent with only modest rebound in economic activity,” Mr Kowalczyk, Credit Agricole’s senior economist for Asia except Japan, said. He said economic growth picked up in the fourth quarter of 2012 after sliding for seven straight quarters. But in sharp contrast to China’s previous, more pronounced bull runs, it could fade after the first quarter of 2013. The greatest driver in the pick up in the non-manufacturing sector in December was a jump in construction services to 61.9 from 61.3 in November. Industries including transport slumped, the NBS said in an accompanying statement. A reading above 50 indicates

growth is accelerating, while one below 50 indicates it is slowing. The strength in construction services is consistent with other indicators, including rising land prices, that point to a revival in China’s property markets, which support about 40 other industries. Signs of a pick up come despite central government protestations that it will not relax credit and purchasing curbs that have stifled the sector in the past two years. The transport slowdown is also consistent with weak demand for China’s exports in the face of euro area and Japan recessions and an uncertain fiscal outlook in the United States.

Growing sector The official manufacturing PMI survey in December matched

November’s seven-month high of 50.6, the NBS said on Tuesday, while a complementary survey with a greater focus on the private sector reached 51.5, its highest since May 2011. China’s fast-growing services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signalling healthy expansion and hitting a 10-month high of 58.0 in March. That’s partly due to a maturing economy as well as a historic shift in the last decade leading a majority of Chinese to live and work in cities rather than the countryside. China’s services sector generated 43 percent of China’s GDP in 2010 and by 2011 provided nearly 36 percent of new jobs, exceeding the agricultural sector for the first time. Beijing has acknowledged that

January 4, 2013 business daily | 9

GREATER CHINA If China tries to sustain growth by adding debt and investing it inefficiently it will be like cotton candy: a short-term high with no lasting value David Loevinger, Asia analyst at TCW Group Inc.

said Patrick Chovanec, an associate professor at Tsinghua University in Beijing. “The banks are extremely reluctant to lend to them and that says a lot about what they really know about credit risk in this country.” The trust sector was set to overtake insurance as the nation’s secondlargest financial business after banks last year, KPMG LLP said in a July report. Trust assets have expanded more than 10-fold since 2007 and surged 54 percent to 6.3 trillion yuan in the first nine months of 2012 from a year earlier. Trusts make up more than a quarter of the country’s estimated US$3.4 trillion in non-bank lending, according to an October 16 report by UBS AG chief China economist Wang Tao, equivalent to about 45 percent of gross domestic product. The share of non-bank finance in aggregate credit has surged to about 45 percent this year, from 30 percent in 2008, central bank data show. The trusts typically offer better rates of return than banks, pooling deposits from businesses and households to invest in real estate, stocks, bonds, commodities, or other assets.

Bad debts of as much as 9 trillion yuan will impair banks’ ability to lend and begin choking off investment later this year, at a time when there are no alternative growth engines to drive the economy, said Adam Wolfe, senior Asia economist at Roubini Global Economics in London. Growth will slip below 7 percent in the final quarter and to about 5 percent in 2014 as debt drags on the economy, he said. “Faster growth now only pushes China closer to the inevitable sharp slowdown that will come when its debt-fuelled, investment-led growth model collapses,” Mr Wolfe said. For now, signs of an economic recovery are popping up in areas from housing to factories to markets. The value of home sales rose 18 percent in November from October and industrial production and retail sales both increased at the fastest clip since March. Service industries expanded in December at the fastest pace in four months.

at Goldman Sachs Group Inc., referring to the prophet of doom in Greek mythology. “There is still in this economy the capacity for strong performance for some years into the future.” Merk Investments LLC is betting the recovery will benefit the Chinese and Australian currencies. The yuan has the potential to rise 5 percent this year while the Australian dollar may strengthen to US$1.10 from about US$1.048 as China’s infrastructure spending supports the nation’s commodity exports, said founder and President Axel Merk. “The Australian dollar is very much dependent on what happens in China, which is coming out of a slowdown,” said Merk, who started the Merk Asian Currency Fund in 2008. “It can surprise on the upside. We are buying the yuan, and we have the Australian dollar and we like it both on a strategic and tactical basis.” Bloomberg News

Pickup Happening GDP probably expanded 7.8 percent in the October-December period from a year earlier, up from 7.4 percent in the third quarter, according to the survey of economists. The government is scheduled to announce the figure on January 18. “The pickup in growth momentum we have been expecting for some time appears now to be occurring,” said Alicia Garcia-Herrero, chief economist for emerging markets at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. It “is being spurred by the effects of previous monetary easing and an ongoing acceleration in infrastructure spending fuelled by debt, as well as resilient consumer spending.” Markets signal investors are wagering on a rebound. The Shanghai Composite Index has leapt 16 percent since December 3, while the yuan has strengthened 2.4 percent against the dollar from a July 25 low. “The Cassandras have once again bet against China, and lost,” said Ken Courtis, founding chairman of Next Capital Partners LP in Tokyo and former vice chairman for Asia

Faster growth now only pushes China closer to the inevitable sharp slowdown that will come when its debtfuelled, investment-led growth model collapses

Overseas company investment into China’s urban transportation surged 24-fold in the first 11 months from a year ago, followed by a 12-fold rise in telecommunications and other information services, and a sevenfold increase in pipeline transportation industries, at sevenfold, the China Daily said, again citing Ministry of Commerce figures. The sector, formerly the bastion of smaller private businesses, is now important enough to have its own five-year plan, issued in September. Reuters

Bloomberg News

Adam Wolfe, senior Asia economist at Roubini Global

SERVICES PMI HIGHEST IN FOUR MONTHS ADDS TO MANUFACTURING PMIS TO SUGGEST ECONOMY REVIVING SUB INDEX SHOWS CONSTRUCTION SERVICES SECTOR GROWING STRONGLY CONCERNS REVIVAL IS TOO RELIANT ON INVESTMENT Construction – the greatest driver in the services pick up

well as encouraging Chinese service firms to go overseas. Foreign investment into the service sector of US$47.57 billion in the first 11 months of 2012 surpassed that directed to the manufacturing industry, which slumped by 7.1 percent, the China Daily said over the weekend, citing Ministry of Commerce data. The growing services sector has taken up some of the slack from the property sector, which has struggled with investment and purchasing restrictions as well as a credit crunch.

Kelvin Wong

he Hong Kong government’s new rules that require real estate agents to list properties by apartment size not including shared space will help raise transparency for the industry, according to property broker AG Wilkinson. Starting on January 1, real estate agents are required to show potential buyers net areas of the properties they market, after complaints from consumer groups that past rules allowing them to use only gross floor areas, which include shared areas such as lobbies, have misled buyers, according to documents on the Estate Agents Authority Web site. The city’s government has in the past year introduced measures including tightening mortgage lending and imposing extra taxes to curb home prices, which are now the world’s highest. “This will unify industry standard and raise transparency,” said Ringo Lam, a director of valuation at Hong Kong-based AG Wilkinson. “In the past there were agents who deliberately used this loophole to mislead buyers. Hopefully this can help rectify that.” The difference between gross and net areas can be more than 30 percent at some residential projects in the city, according to Mr Lam. Hong Kong’s home prices have doubled in the past four years on near record low mortgage rates, an influx of buyers from other parts of China and a lack of new housing supply. The city is at risk of an abrupt decline in house prices after they climbed 20 percent in 2012 even as the economy cooled, the International Monetary Fund said last month. “The property sector is the main source of domestic economic risk,” the IMF said in a report. Hong Kong’s apartment prices have surged to become the world’s most expensive after low interest rates and limited supply fuelled demand, prompting the government to tighten mortgage lending and add taxes.

KEY POINTS

greater consumer activity is needed to reduce the economy’s reliance on the exports sector and investmentled growth. “Expanding domestic demand will be a major stimulus for China’s economic growth, and the greatest potential will come from the service sector,” Xia Nong, deputy directorgeneral of the Department of Industry under the National Development and Reform Commission, said on Friday, according to the China Daily. Mr Xia pledged to open the services sector to more foreign competition as

HK’s new rules on home area to help improve transparency

10 |

business daily January 4, 2013

ASIA Seoul assigns 45.1 pct of budget to Q1 South Korea said yesterday it has allocated 45.1 percent of its annual budget spending for the current quarter to support the struggling economy, slightly more than last year and the most in more than 10 years. Total funds allocated for the first quarter this year is up by 8 percent to 134.6 trillion won (US$126.56 billion) from 124.7 trillion won a year earlier. “We are advancing budget spending in order to aggressively counter the continuing economic slowdown stemming from the prolonged global uncertainties,” the ministry said in a statement.

Myanmar’s GDP may expand 6.3 percent this year, says the Asian Development Bank

Japan targets Myanmar amid China rivalry Finance minister Taro Aso meets with Thein Sein in his first official foreign visit Andy Sharp

apan’s Finance Minister Taro Aso met with Myanmar’s president and senior officials yesterday in a sign the nation plans to tap a market of 64 million people that has been dominated by China. The trip is Mr Aso’s first official foreign visit since Prime Minister Shinzo Abe’s cabinet took office last month. It coincides with the U.S. and the United Nations expressing concern over government strikes against ethnic rebels in Myanmar’s north. Japan’s push into the nation bordering India and China may produce trade opportunities for its stagnating economy while helping Myanmar President Thein Sein meet a pledge to attract labour-intensive industries to create jobs. Competing Chinese and Japanese efforts risk further straining relations between Asia’s two biggest economies, already at odds over islands in the East China Sea. “China considers Myanmar as its turf, and China is very sensitive of the U.S. and Japan making headway,” said Takuji Okubo, Tokyo-based chief economist at Japan Macro Advisors. “Myanmar could be another source of conflict.” Mr Aso, who is also deputy prime minister, was due to visit an economic zone south of Yangon, the former capital, that companies including Marubeni Corp. and Sumitomo Corp. may help to develop. He met Thein Sein yesterday at the presidential palace in Naypyidaw, the capital.

The U.S. is “deeply troubled” that the military is using aerial weapons in the region of Kachin, State Department spokeswoman Victoria Nuland said on Wednesday. U.N. Secretary-General Ban Ki-Moon said that the government should “desist from any action that could endanger the lives of civilians” or intensify the conflict.

Easing sanctions Democratic reforms since Thein Sein took power in 2011 prompted Western nations to ease sanctions and galvanised lawmakers to focus on economic growth after about five decades of military rule left Myanmar disconnected from the global financial system. Direct foreign investment into the nation will have risen 40 percent to a record US$3.99 billion last year, according to a forecast from the International Monetary Fund. Rich resources span gas, gems and possibly oil, the World Bank says. The Asian Development Bank forecasts that Myanmar’s gross domestic product may expand 6.3 percent this year after an estimated 6 percent gain in 2012. The country has high potential for rapid growth and development given its natural resources, abundant labour force and strategic location between China and India, the ADB said in an August report. “Myanmar could become one of the next rising stars in Asia if

it can successfully leverage its rich endowments,” the development bank said. Relations between Japan and China have been strained by a dispute over sovereignty of uninhabited islands in the East China Sea. China accounted for about half of the foreign investment Myanmar has attracted since 2008, according to the Central Statistical Organization, a government agency in Naypyidaw. In 2011, Thein Sein halted work on the US$3.6 billion Myitsone hydropower dam across the Irrawaddy River that was being built with China Power Investment Corp., saying the project was against the “will of the people.” China Power called the decision “bewildering” and said it

US$3.99 bln Direct foreign investment into Myanmar last year, the IMF forecasts

would hold talks with the government to resume the project. China National Petroleum Corp., China’s biggest energy producer, is building pipelines in Myanmar, and China Nonferrous Metals Co. is developing a nickel mine in the country.

China ‘protectorate’ “Myanmar has been a kind of protectorate of China, but Myanmar is currently seeking alternative sources of investment, given the excessive presence of China,” said Mr Okubo, who formerly worked at Goldman Sachs Group Inc. and Societe Generale SA. Mr Aso had planned to visit the Southeast Asian nation before his ministerial appointment, as a member of the Japan-Myanmar Association, a group established to boost Japanese business opportunities. In November, Japan said it will provide Myanmar with a 50 billionyen (US$573 million) loan once the country clears overdue debt with the ADB and World Bank. The settlement follows a plan by Japan, Myanmar’s biggest creditor, to forgive 303.5 billion yen in debt. Mitsubishi UFJ Financial Group Inc. said on December 28 it would ally with Myanmar’s Co-Operative Bank Ltd to tap growing demand for financial services. Japan’s biggest lender joins Sumitomo Mitsui Financial Group Inc. in forming tieups with local banks. Bloomberg News

January 4, 2013 business daily | 11

ASIA Pakistan Air seeks govt support Pakistan International Airlines Corp., the flag carrier reeling from seven straight years of losses, sought financial assistance from the government for at least a third time since 2007 to pare debt. The carrier, also known as PIA, has asked for 25 billion rupees (US$257 million) from the government, managing director Muhammad Junaid Yunus told Bloomberg. The management is in talks with the finance ministry to raise the capital before March, he said. PIA plans to lease 12 fuel-efficient planes this year, Mr Yunus said.

S.Korea won rises to 16-month high Automakers slump on fears a strong currency would sap profits

he South Korean won rose to a fresh 16-month high yesterday on large dollar sales from exporters seen near the end of onshore trade, breaking free of a tepid session tempered by fears of intervention by foreign exchange authorities. The won was quoted at 1,061.5 against the dollar at the end of domestic trade on its seventh consecutive day of gains, compared with Wednesday’s close at 1,063.5. Its closing level, which was also the intraday high, was the strongest against the greenback since early September 2011. The won had lingered close to Wednesday’s closing level through most of yesterday’s session as nearly equal bids for it and the dollar were seen from Korean exporters and importers. Comments made on Wednesday by finance ministry officials against excessive bets on the won’s appreciation also kept many investors from playing big positions early yesterday. Finance Minister Bahk Jae-wan had warned near the close of trade on Wednesday that foreign exchange authorities were concerned about the won’s rise and that the government could take action to stem its strength. Despite that warning, large bets for the won from exporters near the end of trading sent the won to its fresh high. “Some bets on the dollar from local importers seemed to trigger dollarbuying today but those positions were dashed after exporters started buying the won,” a bank dealer said. The benchmark Korea Composite

KEY POINTS Won rises to highest since September 2011 Currency posts 7th straight winning session Bond prices jump on BOK rate cut expectations

Stock Price Index finished down 0.6 percent as automakers slumped on fears a strong won would sap profits. Foreign investors picked up a net 99.4 billion won (US$93.46 million) worth of South Korean stocks yesterday. Korean bonds jumped as investors continued to bet on additional rate cuts by the Bank of Korea to boost growth, with offshore investors gobbling up contracts. March futures on three-year treasury bonds rose 0.21 points to 106.17. Yields on the benchmark five-year treasury bonds slid 7 basis points to 2.91 percent, while the yield on threeyear treasury bonds fell 5 basis points to 2.77 percent.

Hyundai drops Hyundai Motor Co. and Kia Motors Corp., which forecast their

Stocks were again hit by a stronger won

weakest sales growth in seven years, fell in Seoul trading on speculation a strengthening won will weigh on profits. Hyundai Motor dropped 4.6 percent to close at 206,000 won on the Korea Exchange, its steepest decline since November 5. Affiliate Kia lost 3 percent to 54,600 won. Eight out of the 10 worst performers on the MSCI Emerging Markets Index yesterday were South Korean auto-related companies. Hyundai and Kia are forecasting combined sales to rise 4.1 percent to 7.41 million vehicles in 2013, Chung Mong Koo, chairman of both carmakers, told employees in Seoul

Philippine c.bank T likely to keep rates low As officials expect growth to remain strong In 2013, we foresee continued solid economic growth and stable prices, a relatively stable exchange rate and a responsive banking system that is stable to withstand external shocks Amando Tetangco, Philippine central bank governor

he Philippine central bank will likely keep interest rates low this year and growth should remain on a solid footing, aided by strong domestic consumption and higher government spending, Governor Amando Tetangco said yesterday. Any adjustment to interest rates would depend on the outlook for inflation and the economy’s performance, Mr Tetangco said. “Businesses could expect BSP [the central bank] to keep interest rates at the low level in 2013,” Mr Tetangco told a business forum. “In 2013, we foresee continued solid economic growth and stable prices, a relatively stable exchange rate and a responsive banking system that is stable to withstand external shocks,” he said. The central bank cut its key policy rate by a total 100 basis points last year to a record low 3.5 percent. It said monetary policy was designed to boost economic growth and to manage strong capital inflows. During 2012, the peso was emerging Asia’s second best performing currency after the South Korean won. Foreign investors have been attracted to the Philippines, due to strong domestic demand and higher

on Wednesday. That’s the lowest growth since 2006. “Concerns about the appreciating won are hurting sentiment toward auto stocks,” Park In Woo, an analyst at LIG Investment & Securities Co., said by phone yesterday. “Foreign investors also appear to be disappointed with the companies’ conservative 2013 outlook.” Hyundai Mobis Co., South Korea’s biggest auto-parts maker, sank 5.4 percent, Hyundai Wia Corp. fell 3.9 percent and Hyundai Glovis Co., the logistics unit of Hyundai Motor Group, lost 6.6 percent. Hankook Tire Co. slumped 6.1 percent. Reuters/Bloomberg News

state spending that have keep the Southeast Asian economy resilient despite slowdowns in key export markets in China, Europe and the United States. In the third quarter of 2012, the Philippines had annual economic growth of 7.1 percent, the second fastest pace in Asia after China. The rapid pace makes it likely that growth for all of 2012 will surpass the Philippine government’s 5 to 6 percent target. Mr Tetangco said policymakers will continue to watch global developments to assess their impact on domestic growth and inflation. “We will sharpen our economic surveillance of shifts in domestic and global dynamics, including any brewing asset price pressures,” he said. The central bank meets on January 24 to review policy. Mr Tetangco reiterated the central bank will keep a market determinedexchange rate, adding that the peso has been moving in step with other regional currencies. The central bank will maintain a market-determined exchange rate and comfortable level of reserves while continuing to keep external debt at sustainable levels, the governor said. Reuters

12 |

business daily January 4, 2013

MARKETS Hang SENG INDEX NAME

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

-0.3215434

39766505

CHINA UNICOM HON

12.86

1.100629

24594021

ALUMINUM CORP-H

3.75

-0.530504

74493108

CITIC PACIFIC

13.38

3.881988

33752412

BANK OF CHINA-H

3.63

1.396648

482027610

CLP HLDGS LTD

64.85

-0.8409786

6446943

6.1

0.3289474

46029309

17.3

30.5

0.8264463

3104837

11.76

18.06

4.032258

27126819

ESPRIT HLDGS

11.6

HANG LUNG PROPER

AIA GROUP LTD

BANK OF COMMUN-H BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO

CNOOC LTD COSCO PAC LTD

24.8

1.01833

19934290

CATHAY PAC AIR

14.38

-1.100413

2316059

HANG SENG BK

CHEUNG KONG

120.4

-1.149425

4665740

8.94

1.475596

35495178

CHINA COAL ENE-H CHINA CONST BA-H

6.5

1.088647

343210370

CHINA LIFE INS-H

27.1

0.3703704

63498542

CHINA MERCHANT

25.85

1.571709

3468995

CHINA MOBILE

91.45

0.0547046

CHINA OVERSEAS

24.35

1.458333

9.16

1.103753

CHINA PETROLEU-H

NAME POWER ASSETS HOL

PRICE

DAY %

VOLUME

65.55

-2.017937

5631773 8538925

SANDS CHINA LTD

36.45

1.958042

SINO LAND CO

14.36

0.7012623

6739764

63186743

SUN HUNG KAI PRO

117.7

-0.9259259

4823104

3.703704

17542244

SWIRE PACIFIC-A

97.15

-0.2566735

985496

4.316547

30923369

TENCENT HOLDINGS

259.6

0.8547009

4506468

30.9

-0.1615509

7483578

TINGYI HLDG CO

20.85

-3.472222

15780650

119.3

-0.167364

1417164

WANT WANT CHINA

10.62

-1.666667

14501818

HENDERSON LAND D

55.3

-1.776199

4326100

WHARF HLDG

60.8

-1.697656

4330854

HENGAN INTL

71.4

-1.244813

4964690

HONG KG CHINA GS

21.2

-0.9345794

6201204

139.8

-1.479915

12561820

HSBC HLDGS PLC

83.3

0.1201923

17811044

18202728

HUTCHISON WHAMPO

83.4

1.707317

12241166

20159611

IND & COMM BK-H

5.81

1.929825

384442190

83092970

LI & FUNG LTD

14.52

-0.1375516

27395775

30.6

-1.449275

2304027

HONG KONG EXCHNG

CHINA RES ENTERP

28.4

0.3533569

2949796

CHINA RES LAND

23.3

4.017857

14675704

NEW WORLD DEV

12.32

-0.805153

25093906

CHINA RES POWER

19.78

-3.276284

8240881

PETROCHINA CO-H

11.3

1.073345

112654297

CHINA SHENHUA-H

35.2

-0.2832861

15939212

MTR CORP

PING AN INSURA-H

MOVERS

5 23400

INDEX 23398.6 HIGH

23398.6

LOW

22584.44

52W (H) 23400.74 22580

(L) 18056.4 31-December

2.564103

28399684

PRICE

DAY %

VOLUME

31.35

2.117264

18905162

YANZHOU COAL-H

3-January

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.96

0.5076142

117680388

AIR CHINA LTD-H

6.48

-1.818182

16350541

CHINA PETROLEU-H

9.16

1.103753

83092970

ZIJIN MINING-H

ALUMINUM CORP-H

3.75

-0.530504

74493108

CHINA RAIL CN-H

8.77

-2.011173

15423260

ANHUI CONCH-H

29.4

-0.3389831

13887356

CHINA RAIL GR-H

4.55

-2.360515

35039553

BANK OF CHINA-H

3.63

1.396648

482027610

CHINA SHENHUA-H

35.2

-0.2832861

15939212

CHINA TELECOM-H

CHINA PACIFIC-H

6.1

0.3289474

46029309

4.32

-1.594533

101939799

23.25

-0.6410256

2865826

DONGFENG MOTOR-H

12.28

-0.4862237

28006880

CHINA CITIC BK-H

4.84

1.25523

59642455

GUANGZHOU AUTO-H

7.12

2.298851

7348816

CHINA COAL ENE-H

8.94

1.475596

35495178

HUANENG POWER-H

7.2

-2.571042

15944835

CHINA COM CONS-H

7.64

-2.30179

30161133

IND & COMM BK-H

5.81

1.929825

384442190

CHINA CONST BA-H

6.5

1.088647

343210370

JIANGXI COPPER-H

21.75

1.398601

15661209

CHINA COSCO HO-H

4.2

3.194103

51262464

PETROCHINA CO-H

11.3

1.073345

112654297

27.1

0.3703704

63498542

PICC PROPERTY &

11.72

1.736111

30640038

5.5

-0.9009009

18951183

PING AN INSURA-H

2.564103

28399684

17.92

1.242938

25596866

SHANDONG WEIG-H

7.63

-2.179487

45332968

BANK OF COMMUN-H BYD CO LTD-H

CHINA LIFE INS-H CHINA LONGYUAN-H CHINA MERCH BK-H

9.6

-1.840491

62419005

SINOPHARM-H

24.55

-0.203252

3475512

CHINA NATL BDG-H

12.04

2.555366

52340075

TSINGTAO BREW-H

46.6

-1.997897

1029800

CHINA OILFIELD-H

16.78

1.69697

12080180

WEICHAI POWER-H

36.1

-4.244032

8881113

CHINA MINSHENG-H

NAME

PRICE

DAY %

VOLUME

14.12

2.467344

73564434

3.16

0.9584665

62234130

ZOOMLION HEAVY-H

11.86

-1.001669

20686950

ZTE CORP-H

13.92

-0.143472

13903723

MOVERS

0 12000

INDEX 11987.23 HIGH

11987.23

LOW

11334.26

52W (H) 11989.14 11330

(L) 8987.76 31-December

3-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

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

PRICE DAY %

Volume

PRICE DAY %

Volume

CHINA VANKE CO-A

52W (H) 2717.825 (L) 2102.135

2440

27-December

31-December

FTSE TAIWAN 50 INDEX NAME

NAME

PRICE DAY %

ACER INC

25.1

14335792

FORMOSA PLASTIC

79.8

1.012658

5879076

TAIWAN MOBILE CO

ADVANCED SEMICON

26.8

2.48566

38896899

FOXCONN TECHNOLO

90.5

-0.440044

8447517

ASIA CEMENT CORP

37.5

0.1335113

2193238

FUBON FINANCIAL

35.3

0.5698006

ASUSTEK COMPUTER

326.5

-0.608828

3269317

HON HAI PRECISIO

89.1

AU OPTRONICS COR

13.75

0.3649635

116616478

HOTAI MOTOR CO

239

CATCHER TECH

147.5

0.6825939

23892511

HTC CORP

CATHAY FINANCIAL

31.8

0.3154574

22615381

HUA NAN FINANCIA

CHANG HWA BANK

16.15

0.310559

11692314

LARGAN PRECISION

CHENG SHIN RUBBE

0.1317523

6222857

LITE-ON TECHNOLO

CHIMEI INNOLUX C

16.8

0.9009009

179772090

CHINA DEVELOPMEN

7.62

0.5277045

48620153

CHINA STEEL CORP

28.1

1.811594

36952247

CHINATRUST FINAN

16.95

-2.023121

89726576

CHUNGHWA TELECOM

-1.428571

TPK HOLDING CO L

526

0.9596929

4673359

22454241

TSMC

101

1.405622

44335846

0.4509583

33043877

UNI-PRESIDENT

2.35546

367841

294

-2.970297

25556730

WISTRON CORP

30 -0.3322259

16.95

8301553

YUANTA FINANCIAL

24602009

824 -0.9615385

2278777

YULON MOTOR CO

56.7

1.978417

9176439

0.5025126

6303571

MEDIATEK INC

326

0.3076923

10653300

MEGA FINANCIAL H

23.1

0.8733624

27822690

NAN YA PLASTICS

4.240283

10739380

PRESIDENT CHAIN

157

0.9646302

603143

-1.06383

6615343

QUANTA COMPUTER

68.3

0.8862629

6693628

COMPAL ELECTRON

19.75

0.2538071

10979769

SILICONWARE PREC

31.45

1.125402

5433004

DELTA ELECT INC

106.5 -0.9302326

6443559

SINOPAC FINANCIA

12.75

29133228

FAR EASTERN NEW

33.6

0.9009009

16091268

SYNNEX TECH INTL

56.2

4.267161

10992608

FAR EASTONE TELE

72.6

-1.891892

10600245

TAIWAN CEMENT

38.85 -0.3846154

9710784

TAIWAN COOPERATI

FIRST FINANCIAL

Volume

103.5

17.95

12671964

16.55

0.6079027

9909015

FORMOSA CHEM & F

77.8

3.183024

8617773

TAIWAN FERTILIZE

75.9

0.5298013

4163978

FORMOSA PETROCHE

88.5

0.5681818

1639745

TAIWAN GLASS IND

30.6 -0.6493506

928416

UNITED MICROELEC

MOVERS

6317097

53.9

7745878

12.35

4.661017

171773020 7586441

5 5500

INDEX 5495.71 HIGH

5497.74

LOW

5369.46

52W (H) 5621.53 5360

(L) 4719.96 28-December

3-January

January 4, 2013 business daily | 13

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

MELCO CrOWN ENTErTAINMENT

MGM CHINA HOLDINGS

32.0

47.2

14.6

45.7

14.5

44.2

14.4

31.5

Max 31.8

Average 31.422

Min 31.15

Last 31.15

31.0

SANDS CHINA LTD

Max 47

Average 45.185

Min 42.8

42.7

Last 47

SJM HOLDINGS LTD

Last 36.45

36.4

18.7

22.2

18.6

22.0

18.5

21.8

35.6

18.4 Max 18.62

Average 18.547

Min 18.46

NAME

PRICE

WTI CRUDE FUTURE Feb13

92.66

-0.493986254

0.91483337

109.4300003

80.05999756

BRENT CRUDE FUTR Feb13

111.87

-0.533475593

0.68400684

119.2999954

90.38999939

GASOLINE RBOB FUT Feb13

220.3500032

DAY %

YTD %

(H) 52W

279.25

-0.093019928

1.115255096

292.9699898

937.5

-0.635930048

1.132686084

1031.5

800.25

NATURAL GAS FUTR Feb13

3.215

-0.556758429

-4.058490003

4.090000153

3.049999952

302.55

-0.682795522

-0.20779839

333.4599972

255.6599855

Gold Spot $/Oz

1684.78

0.1808

1.2208

1796.08

1527.21

Silver Spot $/Oz

31.0075

0.8046

2.9807

37.4775

26.1513

Platinum Spot $/Oz

1567.99

0.3963

3.3102

1736

1379.05

704.5

-0.6487

0.6918

725.19

553.75

Palladium Spot $/Oz LME ALUMINUM 3MO ($)

2161

4.245055475

2361.5

1827.25

LME COPPER 3MO ($)

8209

3.505232631

8765

7219.5

LME ZINC

2140

2.884615385

2220

1745

3MO ($)

LME NICKEL 3MO ($)

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

17705

3.78077374

22150

15236

15.05

0.033233632

-0.823723229

16.84000015

14.90999985

691.5

0.108577633

-0.96670247

846.25

511

WHEAT FUTURE(CBT) Mar13

758

0.364117842

-2.570694087

948.25

652

SOYBEAN FUTURE Mar13

1384

-0.59256599

-1.809152182

1728.25

1194.5

ARISTOCRAT LEISU

150.55

0.769745649

4.694019471

249

141.25

SUGAR #11 (WORLD) Mar13

19.68

-0.050787202

0.871348027

25.12999916

COTTON NO.2 FUTR Mar13

75.9

0.71656051

1.011445302

98.5

AGRICULTURE ROUGH RICE (CBOT) Mar13 Mar13

COFFEE 'C' FUTURE Mar13

Average 21.879

Last 21.8

Min 21.8

1.051 1.6222 0.9194 1.3151 87.16 7.9838 7.7511 6.2325 54.465 30.35 1.2219 29.003 40.735 9653 91.602 1.2092 0.8107 8.194 10.4994 114.62 1.03

DAY %

0.3437 -0.4663 -0.7505 -0.7172 -0.1377 0.0013 0 0.0096 -0.1928 0.0329 -0.0818 0.0241 0.2872 0 -0.5022 -0.0422 0.2529 1.0203 0.7305 0.5845 0

1.2719 0.2844 -0.4351 -0.2957 -1.2162 -0.0075 -0.0065 -0.0305 0.9731 0.7578 -0.0409 0.1034 0.6628 1.4503 -2.4836 -0.1422 0.5822 0.2868 0.2953 -0.9161 -0.0097

YTD %

(H) 52W

1.0857 1.6381 0.9972 1.3487 87.36 8.0039 7.7713 6.3964 57.3275 32 1.3006 30.314 44.35 9815 91.757 1.21979 0.8506 8.4894 10.7712 115.99 1.0314

(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 40.735 8875 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029

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

MACAU RELATED STOCKS (H) 52W

(L) 52W

3.23

1.572327

2.539679

3.32

2.16

1225707

CROWN LTD

11.14

2.957486

4.404873

11.19

7.95

1711774

18.30999947

AMAX HOLDINGS LT

0.071

-1.388889

1.428571

0.119

0.055

6705500

66.84999847

BOC HONG KONG HO

24.8

1.01833

2.904563

18.18

19934290

CENTURY LEGEND

0.27

1.886792

1.886798

0.335

0.204

236000

CHEUK NANG HLDGS

5.68

1.428571

-5.175289

6.25

2.75

319604

CHINA OVERSEAS

24.35

1.458333

5.411254

24.55

12.066

20159611

CHINESE ESTATES

12.66

-2.615385

-3.211009

13.26

8.3

73743

CHOW TAI FOOK JE

13.22

1.692308

6.2701

15.16

8.4

13038446

World Stock MarketS - Indices NAME

21.6 Max 22.2

PRICE

(L) 52W

GAS OIL FUT (ICE) Feb13

CORN FUTURE

Last 18.54

CURRENCY EXCHANGE RATES

HEATING OIL FUTR Feb13 METALS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

13412.55

2.353531

2.353532

13661.87

12035.08984

NASDAQ COMPOSITE INDEX

3112.263

3.071653

3.071662

3196.932

2627.23

FTSE 100 INDEX

6018.51

-0.1469961

2.046517

6044.57

5229.76

DAX INDEX

7764.79

-0.1798483

2.001998

7789.94

5914.43

NIKKEI 225

10395.18

0.6994104

10433.63

8238.96

NAME

EMPEROR ENTERTAI

PRICE

DAY % YTD %

VOLUME CRNCY

1.9

-0.5235602

0.5291013

1.92

0.99

460000

1.31

6.504065

7.377047

1.43

0.41

7254000

GALAXY ENTERTAIN

31.15

-0.4792332

2.635913

31.8

13.28

14422942

HANG SENG BK

119.3

-0.167364

0.5054786

120

1417164

HOPEWELL HLDGS

33.9

0.295858

1.954887

34.25

19.049

578200

HSBC HLDGS PLC

83.3

0.1201923

2.460021

83.4

58.55

17811044

HUTCHISON TELE H

3.46

-2.259887

-2.808987

3.88

2.88

6178000

LUK FOOK HLDGS I

27.4

8.300395

12.29508

33.2

14.7

12474000

FUTURE BRIGHT

HANG SENG INDEX

23398.6

0.3715686

3.273524

23400.74

18056.4

9.59

3.675676

6.437289

9.61

5.12

10420168

CSI 300 INDEX

2522.952

1.729925

2717.825

2102.135

MGM CHINA HOLDIN

14.42

0.5578801

2.853064

14.76

9.554

3671600

TAIWAN TAIEX INDEX

7836.84

0.7406912

1.78375

8170.72

6857.35

MIDLAND HOLDINGS

3.94

2.604167

6.486485

5.217

3.249

5584000

NEPTUNE GROUP

0.15

-1.315786

0.222

0.084

3170000

NEW WORLD DEV

12.32

-0.805153

2.495836

13.2

6.3

25093906

SANDS CHINA LTD

8538925

KOSPI INDEX

S&P/ASX 200 INDEX

2019.41

-0.5755502

1.119651

2057.28

1758.99

4740.682

0.7382585

1.973175

4743.4

3985

4399.258

1.214386

1.912828

4401.334

3635.283

FTSE Bursa Malaysia KLCI

1692.65

1.070627

0.2190754

1692.65

1502.09

NZX ALL INDEX

885.843

0.4296794

0.4296838

889.036

718.491

PHILIPPINES ALL SHARE IX

3762.88

0.9683937

1.727501

3776.01

3053.67

JAKARTA COMPOSITE INDEX

14.3

22.4

Commodities ENERGY

Last 14.42

18.8

35.8 Min 35.75

Min 14.4

36.6

36.0

Average 36.187

Average 14.450

WyNN MACAU LTD

36.2

Max 36.5

Max 14.5

MELCO INTL DEVEL

36.45

1.958042

7.363768

36.6

20.65

SHUN HO RESOURCE

1.5

1.351351

7.142859

1.5

78000

SHUN TAK HOLDING

4.22

0.7159891

4.33

2.506

7717215

SJM HOLDINGS LTD

18.54

1.422319

18.76

11.973

6376109

SMARTONE TELECOM

14.34

1.414427

1.846591

17.5

12.96

2193083

WYNN MACAU LTD

21.8

1.160093

4.057275

25.5

14.62

7973900

ASIA ENTERTAINME

3.19

4.248366

4.248368

7.24

2.4

295955

BALLY TECHNOLOGI

45.36

1.453813

1.453816

51.16

38.96

476931 9700

HSBC Dragon 300 Index Singapor

628.84

1.25

STOCK EXCH OF THAI INDEX

1411.03

0.2543607

1.372194

1415.81

1022.04

HO CHI MINH STOCK INDEX

419.27

0.2199116

1.339032

492.44

332.28

BOC HONG KONG HO

3.07

3.3

2.32

Laos Composite Index

1222.9

0.6692629

1249.34

876.33

GALAXY ENTERTAIN

4.1

3.274559

3.274558

4.11

1.79

7500

14.6

3.03458

18.1

10.92

4494504

JONES LANG LASAL

86.1

2.573267

2.573264

87.52

61.39

298156

LAS VEGAS SANDS

48.75

5.610919

58.3216

32.6127

15479880

MELCO CROWN-ADR

17.36

3.087886

3.087885

17.77

9.13

7370271

MGM CHINA HOLDIN

1.85

1.96

1.2863

1000

MGM RESORTS INTE

12.27

5.412371

5.412368

14.9401

8.83

13731220

SHFL ENTERTAINME

14.67

1.172414

18.77

11.64

471090

SJM HOLDINGS LTD

2.38

3.030303

3.030306

2.38

1.5484

500

118.07

4.960441

4.960443

129.6589

84.4902

2486915

INTL GAME TECH

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 4, 2013

Opinion End of the world as we know it and I feel fine Cass R. Sunstein

Felix Frankfurter professor of law at Harvard University and Bloomberg View columnist

ost of us acknowledge that some of our most cherished beliefs are based on faith, not facts. Even so, it takes a lot to dislodge those beliefs. When we are confronted by contrary evidence, we may dig in even more deeply. Consider a cautionary tale, exotic to be sure, but helping to explain why evidence-challenged thinking persists in a lot of areas, including politics and business. Harold Camping, a Christian radio talk-show host, predicted that the world was going to end on May 21, 2011, with the coming of the rapture. He contended that the earth would be ravaged, that all human beings would be judged, and that believers would ascend to heaven. He said that those who weren’t saved would experience five months of “hell on earth” until the annihilation of creation on October 21, 2011. Camping’s programme could be heard daily on his network, Family Radio, one of the largest Christian broadcasting networks in the U.S., which benefited from a budget of tens of millions of dollars. His prediction was followed by millions of people around the world, and a lot of

them seemed to believe it. But did they, really? Social scientists have offered two different hypotheses about those who appear to hold extreme beliefs. The first is that they are entirely sincere. They are influenced by figures of authority and also by trusted peers. When they express a belief that the world is ending – or any other extreme belief that is essentially a matter of faith – they mean it.

Sincere belief The second hypothesis is that people who purport to accept extreme beliefs often lack conviction and are responding to social pressures. If you could somehow get them in private, you would find a lot more scepticism, uncertainty and doubt. It isn’t easy to test the competing hypotheses. Economist Ned Augenblick of the University of California at Berkeley and his co-authors have now provided such a test. At least for Camping’s followers, the answer is unambiguous: Their belief was entirely sincere. Here’s how the test went.

Four weeks before May 21, 2011, Augenblick and his coauthors asked a number of Camping’s followers: Would you prefer to have US$5 today or some greater amount of money after May 21? That greater amount ranged up to US$500. The researchers posed exactly the same questions to members of the Seventh-day Adventist Church, who also believe that Judgment Day is coming, but not by a specified date. The median cut-off answer from the Seventh-day Adventists was US$7 – well within the range of answers given by most people. By contrast, the median cut-off answer from Family Radio members was US$500, meaning that they would prefer US$5 now to US$500 on May 22. As far as the researchers could tell with the payments they offered, there was no amount that Family Radio members would prefer on May 22 to US$5 today – compelling evidence that they sincerely believed that the rapture was coming on May 21. We know, of course, that the rapture didn’t come on that day. Did Family Radio members

Our desire to maintain our deepest convictions may be so intense that contrary evidence doesn’t merely fail to undermine those convictions; on the contrary, and bizarrely, it may fortify them

conclude that the whole idea was a fraud? Not at all. Camping himself quickly recovered, insisting that he had been correct, but that the world wasn’t ending for a while, because of a divine decision to delay implementation: “On May 21 Christ did come spiritually to put all of the unsaved throughout the world into judgment. But that universal judgment will not be physically seen until the last day of the five month judgment period, on October 21, 2011.” This kind of fancy footwork is characteristic of leaders and followers, who often respond by doubling down in the aftermath of false apocalyptic prophecies.

Contrary evidence For decades, social psychologists have invoked findings of this sort to support the idea that people seek to avoid “cognitive dissonance”

by dismissing evidence that is inconsistent with their deepest beliefs. When people are sincerely committed to the truth of some proposition, they will work hard to hold onto it, even if the facts stand in their way. Our desire to maintain our deepest convictions may be so intense that contrary evidence doesn’t merely fail to undermine those convictions; on the contrary, and bizarrely, it may fortify them. For example, researchers have found that after hearing about apparently credible evidence to the contrary, many people who believed that Iraq had weapons of mass destruction ended up thinking the same thing they thought before – only more strongly. The good news is that in the face of clear contradictory evidence, people eventually find it hard to maintain false beliefs. In May 2012, Camping asked for forgiveness for his mistaken prediction about Judgment Day. “God has humbled us through the events of May 21,” he wrote. “We must also openly acknowledge that we have no new evidence pointing to another date for the end of the world.” Bloomberg View

editorial council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes Newsdesk Alex Lee, Stephanie Lai, Tony Lai Creative Director José Manuel Cardoso Designer Janne Louhikari Contributors Frederico Rato, José I. Duarte, Pereira Coutinho, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, John Si, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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January 4, 2013 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Fairfax Digital The world’s 100 richest people got even richer last year, building their collective wealth to US$1.9 trillion. But the fortunes of the two Australians to make the cut – Gina Rinehart and expat Rupert Murdoch – were mixed. Ms Rinehart dropped one rung to rank 39th on the Bloomberg Billionaires Index, with her US$18.6 billion fortune falling 8 percent, partly due to softer iron ore prices last year and to losing investments in media companies. By contrast Rupert Murdoch’s wealth jumped to US$10.7 billion, courtesy of a 44 percent rise in the value of his News Corporation shares.

Bangkok Post BangkokgovernorSukhumbhand Paribatra’s run for governor is off to a bad start after the Department of Special Investigation said it would file charges against him and 10 others at City Hall over a skytrain extensions contract. The DSI has decided to press charges in connection with City Hall’s decision to grant a 30-year contract to skytrain operator Bangkok Transit System Co (BTSC). They are accused of bypassing the Interior Ministry in awarding the 190-billion-baht (US$6.3 billion) contract to BTSC to operate extensions of the skytrain.

Korea Herald South Korea’s National Assembly’s year set off Tuesday with the delayed passage of the budget which included pork-barrel funding at the expense of security, research and other crucial national projects. The 342 trillion won (US$321 billion) spending plan was approved after hours of wrangling over the funding for the naval base on Jeju. The approval came a month after the deadline of December 2 stipulated in the constitution, making it the first time since 1960 when the approval for the coming year’s budget came after the dawn of the New Year.

China Daily A total of 806 products under the Economic Cooperation Framework Agreement (ECFA) between mainland China and Taiwan are tariff-free after the third stage of exemptions of the Early Harvest Programme was launched on Tuesday. Signed in June 2010, the ECFA is a preferential trade deal between the mainland and Taiwan that aims to reduce tariffs and commercial barriers between the two sides. On Tuesday, an extra 14 items of goods from the mainland began enjoying tariff-free treatment, while the mainland exempted the tariffs on another 30 products from Taiwan.

Bankers with borders Howard Davies

Former chairman of Britain’s Financial Services Authority and Deputy Governor of the Bank of England

hen Mark Carney replaces Mervyn King as Governor of the Bank of England in July 2013, the world will be deprived of King’s witty public utterances. My personal favourite came when, commenting on strong retail-sales figures during one Christmas period, he cast doubt on their significance for assessing the state of the economy. “The true meaning of the story of Christmas” he solemnly intoned, “will not be revealed until Easter, or possibly much later.” A new career on the stage, or in the pulpit, surely beckons. King’s most quoted phrase is that “global banking institutions are global in life, but national in death.” They trade globally, across porous borders, attaching little significance to the geographical location of capital and liquidity. But, when the music stops, it is the home regulator, and the home central bank, that picks up the tab, even if the losses were incurred elsewhere. By the same token, a failing bank may leave behind a mess in third countries, which its home authorities may not clean up. Icelandic banks, for example, took deposits in the United Kingdom and the Netherlands, and swept them back to Reykjavik, leaving the host countries out of pocket. Likewise, the collapse of Lehman Brothers left European creditors more exposed than those in the U.S., whose funds had been wired home to New York on the Friday before the end. Regulators have been wrestling with this problem for years, without conspicuous success. In mid-December, the Bank of England (BoE) and the United States Federal Deposit Insurance Corporation (FDIC) announced what seemed like a breakthrough, at least concerning the major banks headquartered in the U.S. or the U.K. – that is, 12 of the 28 institutions regarded by the Financial Stability Board as globally systemic. In their case, a resolution authority, in London or Washington, would take control of the parent company, remove senior management, and apportion losses to shareholders and unsecured creditors.

Sour love It sounded plausible. BoE officials declared firmly that they were prepared to trust their American counterparts, and would not step in to grab subsidiaries or assets based in the U.K. “This is a journey that involves trust,” said BoE Deputy Governor Paul Tucker. But the Anglo-American love-in quickly soured when the FDIC chairman was asked to give the same assurances of confidence in the British authorities. According to

We must hope that the U.S. and British authorities move carefully and do not use their new powers to freeze out foreign competition

the Financial Times, he “laughingly declined.” Indeed, while the FDIC and the BoE were working on their plan, the U.S. Federal Reserve was developing proposals that will expose overseas banks in the U.S. to a far tighter set of controls, and closer supervision, than they have hitherto experienced. The Fed is seeking to oblige foreign banks to create a holding company to own their separately capitalised subsidiaries, effectively giving the Fed direct oversight of their business. They will also be required to maintain stronger capital and liquidity positions in the U.S. The justification offered for these new impositions is that overseas banks have moved beyond their traditional lending business to engage in substantial and often complex capital-market activities. “The crisis revealed the resulting risks to U.S. financial stability,” said Fed Governor Daniel Tarullo. The U.K.’s Financial Services Authority has been invoking the same rationale for requiring foreign banks to establish local subsidiaries,

rather than taking deposits or lending through a branch of the parent bank. On the face of it, these moves appear to be well justified, given the mayhem created by poorly regulated banks in the major financial centres. But we should be clear that these changes are not just tinkering at the edges. They amount to a reversal of decades of policy by American and British regulators.

Risks abound Ernest Patrikis, a former Fed supervisor, points to the clear implication that in the U.S. domestic banks will have a strong advantage over foreign banks. More dramatically, he asserts that “subsidiarisation would be the end of international banking.” Larry Fink, the CEO of the multinational investmentmanagement firm BlackRock, takes a similar view: “It really throws into question [the] whole globalisation of these firms,” with “each country for [itself].” He adds: “I wouldn’t call it a trade war, but I would certainly call it a high level of protectionism.” One delicious irony in Europe is that Chinese banks are contesting the requirement to subsidiarise in London on precisely those grounds. For now, high-octane worries

about protectionism are probably overdone. And it is difficult to deny that the Fed should take a close interest in the funding strategies of foreign banks operating in the U.S. Another Fed governor, Jeremy Stein, has pointed out that foreign banks have dollar liabilities of roughly US$8 trillion, much of it shortterm wholesale funding. But there is a risk that these interventions are the thin end of a dangerous wedge. Forced subsidiarisation causes capital and liquidity to be trapped in local legal entities, reducing the effectiveness with which that capital is used. At a time when bank capital is scarce, that impediment carries significant economic costs. Moreover, tools that may be used wisely and well by institutions with a global outlook, like the Fed and the Bank of England, could take on a different character in countries where a commitment to free and open markets cannot be taken for granted. So we must hope that the U.S. and British authorities move carefully and do not use their new powers to freeze out foreign competition. “Be careful what you wish for” is wise advice in the regulatory world, as it is elsewhere. © Project Syndicate

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business daily January 4, 2013

CLOSING Spain unemployment falls in Dec

Starbucks to open shop in Vietnam

Spain’s registered unemployment fell for the first time in five months in December as service industries boosted hiring over the holiday season. The number of people registering for jobless benefits fell by 59,094 from November to 4.8 million, the Labour Ministry in Madrid said yesterday. That’s the best result on record for December. The number of service-sector workers registered as jobless fell by 49,438. The figures suggest an interruption in the retrenchment of the euro area’s fourth-largest economy, which the Organization for Economic Cooperation and Development predicts will shrink for a second straight year in 2013.

Starbucks, the world’s biggest coffeeshop company, is set to open its first store in Vietnam next month as it continues expanding in Asia. The cafe will be in Ho Chi Minh City, the company said in a statement, with partner Hong Kong’s Maxim Group. Starbucks has seen growth stagnate in the U.S. prompting it to open thousands of stores in China and Asia Pacific. Vietnam is the secondlargest coffee producer in the world behind Brazil. Starbucks has been reorganising its business to focus on the Asia Pacific region, the biggest growth market for the company.

Obama signs ‘fiscal Jet Airways in stake sale talks with Etihad cliff’ legislation Moody’s says more steps needed to save U.S. credit rating

Etihad may pay up to US$330 mln for 24 pct stake

Debt ceiling, spending cuts expected to spark more fights

.S. President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought “fiscal cliff” deal narrowly averted devastating tax increases and spending cuts. The agreement, approved late on Tuesday by the Republican-led House of Representatives and signed by Mr Obama late on Wednesday, was a victory for the president, who had won re-election in November on a promise to address budget woes, partly by raising taxes on the wealthiest Americans. But it set up potentially bruising showdowns over the next two months on spending cuts and an increase in the nation’s limit on borrowing. Republicans, angry the fiscal cliff deal did little to curb the federal deficit, promised to use the debtceiling debate to win deep spending cuts next time. Republicans believe they will have greater leverage over Democrat Obama when they must consider raising the borrowing limit in February because failure to close a deal could mean a default on U.S. debt or another downgrade in the U.S. credit rating. A similar showdown in 2011 led to a credit downgrade. “Our opportunity here is on the debt ceiling,” Republican Senator

Pat Toomey of Pennsylvania said on MSNBC. “We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean.” But Obama and congressional Democrats may be emboldened by winning the first round of fiscal fights when dozens of House Republicans buckled and voted for major tax hikes for the first time in two decades. “While the markets and most taxpayers may breathe a sigh of relief for a few days, excuse us for not celebrating,” said Greg Valliere, chief political strategist at Potomac Research Group. “We have consistently warned that the next brawl represents a far greater threat to the markets – talk of default will grow by February, accompanied by concerns over a credit rating downgrade,” he said. Rating agencies Moody’s Investors Service and Standard & Poor’s said the “fiscal cliff” measure did not put the budget on a more sustainable path. The International Monetary Fund said raising the debt ceiling would be a critical move. “More remains to be done to put U.S. public finances back on a sustainable path without harming the still fragile recovery,” said Gerry Rice, a spokesman for the IMF. Reuters

et Airways said yesterday that it was in talks with Abu Dhabi’s Etihad Airways for a potential stake sale in the Indian carrier, although terms have not been finalised yet. The statement was the first confirmation of a potential deal by either side, a day after an Indian government source said the Gulf carrier could pay up to US$330 million for a 24 percent stake in Jet. Jet shares surged as much as 6.4 percent yesterday. The stock has risen 65 percent since India relaxed rules allowing foreign airlines to buy up to a 49 percent stake in local carriers in September. “Various structures are being explored by the legal and commercial teams,” Jet said in a statement to the Bombay Stock Exchange, adding any structure would comply with Indian rules. The founder of Jet Airways is likely to convert shares owned by its holding company into his personal stake to comply with foreign investment regulations, a government source had said. Tail Winds Ltd, the Isle of Man-

based investment vehicle of Jet founder Naresh Goyal, currently holds 79.99 percent of Jet Airways. Etihad declined comment. Etihad and Jet already have a code-sharing agreement, and a tieup could make Jet a more formidable competitor to state-owned Air India, while strengthening Etihad’s position against Dubai-based Emirates Airline, which carries a big chunk of the traffic between India and the Middle East. A deal between Jet and Etihad could shut the door on grounded rival Kingfisher Airlines, which is in desperate need of cash to fly again and was in talks with Etihad to sell a stake. Etihad’s decision to buy into Jet may be announced in 10 days, the same source quoted earlier said on Wednesday. Etihad, which expanded globally through stake purchases in the likes of Air Berlin and Virgin Australia, is looking to extend its geographical reach to India and other Asian markets, its chief executive said in October.

Market leader Jet Airways was upgraded last year by Bank of America-Merrill Lynch to ‘buy’

Reuters