Macau Business Daily, January 8, 2013 by Business Daily

www.macaubusinessdaily.com

Year I Number 194 Tuesday January 8, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã MOP 6.00

he city’s property markets last year produced the highest ever recorded sales revenue according to official data released yesterday. That’s not even counting the December numbers. With limited new supply in the key residential, commercial and industrial real estate sectors and plenty of so-called ‘hot money’ investors – cash rich and with no need of loans – to be found locally and beyond Macau’s borders, the effect was to super charge the property sector. The total value of property sales in the first 11 months of 2012 surpassed the previous record by almost 19.2 billion patacas (US$2.4 billion). From January to November last year, the aggregate value of property transactions sold hit 95.4 billion patacas, up by more than a third year-on-year, the Statistics and Census Service revealed. More on page 4

Joseph Lau’s illness delays La Scala trial M

acau’s assistant prosecutorgeneral said yesterday Joseph Lau Luen Hung – head of Hong Kong-listed Chinese Estates Holdings Ltd – had “deliberately” absented himself from what should have been day one of his corruption trial. It’s alleged he bribed Ao Man Long, a nowjailed former secretary for Transport and Public Works with HK$20 million (US$2.5 million) to secure a land plot in 2006 near the airport. The defence will be seriously undermined unless given access to books in which Mr Ao recorded bribes, say Mr Lau’s lawyers. Page 3

I SSN 2226-8294

‘Made in Macau’ clothing to make a comeback? A once-familiar phrase – ‘Made in Macau’ – could again be seen on clothing exported around the world. But this time most of the manufacturing process is likely to be done in a poorer place – such as Myanmar – with the garments sent to Macau for finishing, says Jose Tang Kuan Meng, vice-chairman of Industrial Association of Macau, following a fact finding trip to the southeast Asian country. Page 6

HANG SENG INDEX 23400

23360

23320

23280

23240

January 7

HSI - Movers Name

Zhuhai taxi policy flagged as mistake by Macau investors A decision by the Zhuhai government creating a ‘quick fix’ to the shortage of cabs in Macau’s nearest mainland neighbour means a haircut for Macau investors, they say. Under the policy, each Zhuhai taxi licence can be split between three vehicles. More taxis on the street is good news for the public but is depressing the amount that taxi licence-holders from Macau can make via leasing. Page 5

%Day

HENDERSON LAND D

2.78

CHINA OVERSEAS

2.43

CHEUNG KONG

2.15

SUN HUNG KAI PRO

2.10

PING AN INSURA-H

1.94

CHINA MOBILE

-1.77

TINGYI HLDG CO

-1.95

WANT WANT CHINA

-2.49

BELLE INTERNATIO

-2.63

CHINA RES POWER

-3.54

Source: Bloomberg

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business daily January 8, 2013

macau

Junket investor offering up to US$150 mln in shares AERL significantly underperformed Macau VIP market in 2012 Michael Grimes

michael.grimes@macaubusinessdaily.com

sia Entertainment & Resources Ltd, a Nasdaq-listed Macau junket investor, is considering selling up to US$150 million worth of shares in the company - or the equivalent in other currencies -

according to a regulatory filing in New York. No specific underwriter, dealer or agent is mentioned in the document, although AERL says it might also sell shares directly.

The firm has not yet issued its results for 2012, but as of September 30 it had debts of US$121 million (966 million patacas) – split almost equally between shortterm unsecured shareholder loans, and long-term shareholder loans convertible to shares. AERL significantly underperformed the Macau VIP market last year, with rolling chip volume down nine percent. By comparison VIP rolling chip volume across the whole of Macau in 2012 was up 6.2 percent year-on-year according to data compiled by the Hong Kong office of J.P. Morgan, a bank. Asia Entertainment & Resources said the decline was attributable to its tightening of credit to agents due to the slowing economy on the mainland. AERL’s 2012 rolling chip turnover was US$18.23 billion, an average of US$1.52 billion per month. Rolling chip volume is not the same thing as gross revenue, because of the system of issuing non-negotiable chips to high rollers and only converting them to cashable

chips when they win. But rolling chip performance is an indicator of junket operators’ performance. The Macau market has in the past few years seen increasing consolidation in the junket segment. That involves large junket investment companies with greater access to junket capital and to networks of agents and players, entering into profit share deals with, or buy outs of, smaller junket operators. AERL promotes four VIP rooms in Macau: at Galaxy Entertainment Group Ltd’s StarWorld Macau and Galaxy Macau properties; at Sands China Ltd’s The Venetian Macao and at Melco Crown Entertainment Ltd’s City of Dreams resort on Cotai. AERL is therefore one of the smaller junket investors and more susceptible to volatility in its results if it loses or gains one big player.

Business model AERL was set up in 2010 as a vehicle for junket operations founded by Lam Man Pou, a 22-year veteran of the Macau VIP sector from the days of Stanley Ho Hung Sun’s monopoly. In September AERL went from a commission model to a revenue share model on VIP gambling. Revenue share deals theoretically offer a bigger cut to the junkets than fixed commission but carry more risk. If the house is unlucky in VIP baccarat in a particular quarter – i.e. holds below the statistical house advantage for the game – then there is a smaller amount of revenue for the casino to share with the junket. But under a revenue share regime there are also opportunities for the casinos to add volume incentives for the junkets.

Macau’s brave new world of high rolling Losing share in VIP rolling volume needn’t mean falling profits in age of ‘premium mass’ players Michael Grimes

michael.grimes@macaubusinessdaily.com

elco Crown Entertainment Ltd saw the largest monthon-month decline in VIP share in December when judged by rolling chip volume says a note from J.P. Morgan in Hong Kong. The biggest gains in share based on VIP rolling volume during the period were by SJM Holdings Ltd with a 1.6 percent month-onmonth increase, followed by Galaxy Entertainment Group Ltd with 0.7 percent improvement and Sands China Ltd with a 0.5 percent share expansion by rolling volume. However MCE’s decline in VIP rolling share isn’t necessarily indicative of any decline in its profitability in the period. A report last Thursday from Deutsche Bank AG in Hong Kong says MCE has been the most aggressive among the operators in converting its mass-market tables at its flagship Cotai resort City of Dreams into so-called ‘premium mass’ tables. These have minimum bets typically of HK$2,000 (US$258) per hand. In the bank’s research period – many months observing the mass floor on Fridays, a traditionally

busy period – on average 49 percent of tables on the main floor were designated premium mass, says DB. This market development is thought by a number of analysts to be the creation of a new segment of middle class customers – people happy to play on a cash basis rather than with credit, Macau’s traditional business model for serving high limit players. It’s been suggested that because premium mass players bet in cash and the casino recruits them directly rather than sharing revenue via commission or profit share with player agents, this makes margins on the premium mass business much better than on the higher volume traditional VIP segment. Analysts are divided however on how much profit margins on VIP tables vary from mass-market ones. Some argue that when VIP chip ‘roll’ is taken into consideration – i.e. how many times non-negotiable VIP chips are played before the player wins and can convert them to cashable chips – the house advantage produces margins close to the 30 percent gross margin the casinos enjoy on massmarket table gambling.

January 8, 2013 business daily | 3

MACAU

No-shows put back La Scala trial again With six of the eight accused absent, the start of the La Scala trial is postponed anew Tony Lai

tony.lai@macaubusinessdaily.com

I saw Mr Lau looking healthy in media reports in recent days, like going to yum cha Paulo Martins Chan, assistant prosecutor-general

The start of the La Scala corruption trial has been postponed for a second time (Photo: Manuel Cardoso)

he start of the latest trial arising from the web of corruption woven by Ao Man Long when he was a government secretary was postponed again yesterday because one of the accused, Hong Kong tycoon Joseph Lau Luen Hung, was ill. Mr Lau, the boss of property developer Chinese Estates Holdings Ltd, was absent, along with five other accused. He and another Hong Kong businessman, Steven Lo Kit Sing, are charged with giving Ao, then the secretary for Transport and Public Works, a bribe of HK$20 million (US$2.5 million) in exchange for the grant in 2006 of a plot of land near the airport. Mr Lo is chairman of BMA Investment Group Ltd. An upmarket housing project called La Scala was being built on the plot before the government rescinded the grant last year, along with the grant of extra of land in 2011. Mr Lau has denied that he or his company bribed Ao. Mr Lau controls almost 75 percent of Hong Kong-listed Chinese Estates. Only two of the eight accused, who are variously charged with corruption and money laundering, showed up at the Court of First Instance yesterday: Mr Lo, and Fong Chun Yau, managing director of ATAL Engineering Ltd. Mr Fong is charged with bribing Mr Ao to get sewage treatment contracts for his company. Presiding judge Mário Silvestre postponed the start of the trial because of the absence of six of the accused.

public announcement to notify the defendants about the next hearing so that [the trial] can proceed next time, even in their absence,” said Mr Silvestre. The trial was originally due to start in September, but the original presiding judge, Alice Costa, was taken ill and had to be replaced. Counsel for Mr Lo, Jorge Neto Valente, said he believed the trial would now start in March or April. Mr Valente told reporters that he was confident that there would be no more delays. He said he thought judge Silvestre would handle the trial in the same way as judge Costa would have done. Counsel for Mr Lau, Leong Weng Pun, submitted to the court documents supporting his assertion that his client was too ill to attend. Mr Leong said chronic diabetes was one ailment that prevented Mr Lau from coming to Macau. Assistant prosecutor-general Paulo Martins Chan was unhappy with Mr Lau’s excuse. Mr Chan told the court: “I saw Mr Lau looking healthy in media reports in recent days, like going to yum cha. He is deliberately absent and stalling the hearings.” While accepting Mr Lau’s excuse, judge Silvestre ordered counsel for the accused to submit to the court within 10 days a detailed explanation of his absence and a prediction of when he might be well enough to attend court.

Bouts of illness

Mr Leong told reporters that he would obey the judge’s orders, but he would not promise that his client would show up next time. Another of the accused, Luc Vriens, the chief executive of Waterleau

Judge Silvestre said he would set another date as soon as possible once he knew they would be available. “The court will use the format of

Much too busy

Group NV, Luc Vriens, also sought to justify his absence. Counsel for Mr Vriens told the court his client was busy attending to business in Belgium, where Waterleau is based. The Belgian newsletter Incidences last year quoted Mr Vriens as denying

the charges against him and saying that he would not show up for his trial. Three of the other accused that were absent are businessman Pedro Chiang, Mr Ao’s wife Camila Chan Meng Ieng – both of whom have fled Macau – and Xu Jianping, general manager of China Construction Engineering (Macau) Co Ltd. Like Mr Vriens and Mr Fong, they face corruption charges arising from the award of contracts to run the sewage treatment plants on Coloane and in the Zhuhai-Macau CrossBorder Industrial Park. The other accused that was absent is the deputy general manager of China Overseas Civil Engineering Ltd, Chan Ying Lun, who is charged with bribing Ao to get a contract to put up a building in the Cross-Border Industrial Park. A court convicted Ao of corruption last May and sent him to prison for 29 years. with Bloomberg

CCAC still probing Ao corruption: judge Hong Kong tycoons want to review former secretary’s ‘friendship books’

he Commission Against Corruption’s has not finished investigating the corruption scandal involving former Secretary for Transport and Public Works Ao Man Long, said judge Mário Silvestre. Mr Silvestre said during a Court of First Instance hearing yesterday that the graft watchdog’s ongoing investigations made it difficult for the defendants and their lawyers to have full access to Mr Ao’s “friendship books”. “Friendship books” are allegedly the personal notebooks that the former secretary used to record information on the public deals he approved and the bribes he received from the winners. The lawyers representing Chinese Estates Holdings Ltd boss Joseph Lau Luen Hung and BMA Investment chairman Steven Lo Kit Sing asked to be allowed to fully review the “friendship books from 2004 to 2006” and other personal

notebooks of Mr Ao. The two Hong Kong businessmen are accused of bribing the former secretary with HK$20 million (US$2.5 million) to secure a land plot in 2006 where the luxury residential project La Scala was being built. Mr Lau’s lawyer Leong Weng Pun said right now they could only read “five lines of four pages” in the friendship books, which are in the hands of the watchdog. He added: “This will damage my client’s right to defence as we are not able to see the other content of the books.” Mr Silvestre, the presiding judge, said they would further discuss the issue with the graft buster. Mr Ao was sentenced to a compound prison sentence of 29 years for corruption in three separate trials in 2008, 2009 and last year. T.L.

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business daily January 8, 2013

macau New bid for trade union law in February Legislator José Pereira Coutinho will put forward a second trade union draft bill in late February, he said in an interview with Portuguese-language newspaper Tribuna de Macau. The proposal will be sent to the legislative assembly while a regional meeting of the Public Services International is held in the city, said the head of the Macau Civil Servants Association. Mr Coutinho said he was confident on the approval of the proposal but admitted it would depend on the votes of the seven chief executiveappointed legislators.

Property sales have now set new records for three consecutive years

A banner year for real estate sales The value of sales of homes, shops and industrial space was higher than ever last year Vítor Quintã

vitorquinta@macaubusinessdaily.com

ast year was a record year for the property market, the value of sales of homes, shops and industrial space being the highest ever, even before sales in December are counted. Data released yesterday by the Statistics and Census Service show the value of property sales in the first 11 months of last year was 95.4 billion patacas (US$11.95 billion), over onethird more than a year before, and more than the 76.3 billion patacas posted for all of 2011, the previous record year. This means property sales have set new records for three consecutive years. M os t of t he inc re ase in the value of sales last year was in the housing market. The value of homes sold in the first 11 months rose to 69.9 billion patacas, a new record and 24.8 percent more than a year before. Sales of shops and industrial space sold also set records. The value of commercial space sold in the first 11 months rose to

15.6 billion patacas, more the 9.7 billion patacas worth sold in 2011, the previous record year. The value of industrial space sold in the first 11 months rose to 7.1 billion patacas, more than the 4.7 billion patacas worth sold in 2011 – again, the previous record year. Only sales of offices have yet to set a new record.

MOP4.4 mln

Average price of a home sold in first 11 months of 2012

The value of office space sold in the first 11 months rose to nearly 2.9 billion patacas, less than the 3 billion patacas worth sold in 2011. However, once December’s sales of offices counted, last year could well turn out to be a record year for this segment of the market, too.

Prices surge Worryingly for those seeking a cooler property market, the value of sales was higher not because more premises were sold, but because those sold were more expensive. The number of sales in the first 11 months of last year was 24,023, over 2,000 fewer than a year before. The average price of a home rose to 4.4 million patacas in the first 11 months. In 2011 buying a home cost, on average, 3.4 million patacas. Over 40 percent of all homes sold in the first 11 months cost more than 4 million patacas, and only 8.6 percent cost less than 1 million patacas. Financial Services Bureau data

show the average price per square metre of residential floor space was almost 59,500 patacas in the first 11 months, over one-third more than a year before. The biggest rise was in the price of commercial space. The average price of a shop in the first 11 months was 7.3 million patacas, almost two-thirds more than a year before. The price of offices rose more slowly. The average price of an office in the first 11 months was to 3.9 million patacas, 21.9 percent more than a year before. The proportion of non-residents among buyers of property decreased, after the government took measures to curb speculation in the market. Non-residents were parties in 10.7 percent of property transactions in the first 11 months, having been parties in 17 percent in 2011. Non-residents spent 18.2 percent of the money spent on property in the first 11 months, having spent 24.5 percent in 2011.

Macau, HK closer on arbitration rulings M acau signed an agreement with Hong Kong yesterday to provide mutual recognition and enforcement of arbitral decisions in both regions. The secretary for Administration and Justice, Florinda Chan, and Hong Kong’s secretary for Justice, Mr Rimsky Yuen, signed the deal at the government’s headquarters. Under the agreement, the Macau

courts will be required to recognise and enforce arbitral awards made in Hong Kong under the region’s Arbitration Ordinance. Likewise, the Hong Kong courts will have to accept arbitral decisions made in Macau. “There was a need to sign a deal in order to better match the growing issue of civil and trade conflicts,” Ms Chan’s cabinet said in a statement.

The Hong Kong government said the deal would “provide a simple and effective mechanism” for the mutual enforcement of arbitral decisions, as well as foster legal and judicial cooperation between the two sides. In addition, it will “enhance Hong Kong’s position as a regional arbitration centre for commercial disputes in Asia Pacific,” the authorities said in a statement.

Macau has three arbitration centres but they have only handled five cases altogether. Parties locked in dispute would rather go to Hong Kong centres, experts told our sister publication Macau Business magazine in February. The deal will come into effect after being published on the Official Gazette. V.Q.

January 8, 2013 business daily | 5

MACAU

Zhuhai cab experiment riles Macau investors The sub-licensing of cabs in Zhuhai is reducing the amount of money that Macau investors in Zhuhai taxi licences make, a Macau taxi association says Stephanie Lai sw.lai@macaubusinessdaily.com

Over 300 more taxis are expected to be plying the streets of Zhuhai by May

he sub-licensing of taxis, being tried out since December across the border in Zhuhai in an effort to increase the number of cabs there, has angered Macau owners

of Zhuhai taxi licences. The trial has reduced the amount that owners of Zhuhai taxi licences can charge taxi drivers for the use of their licences, so hitting Macau investors in

such licences in the pocket, according to the vice-president of a Macau taxi association, Ben Leng Sai Vai. Taxi licences in Zhuhai are valid for either 50 years or 30 years.

The trial allows a licence holder to sub-license three cabs for 12 to 15 years. The Zhuhai authorities suggest that the licence holders charge drivers 4,000 yuan (5,125 patacas) per month for the use of a full licence and 2,000 yuan per month for the use of a sub-licence. But the nine taxi companies in Zhuhai now charge only 2,000 yuan to 3,100 yuan per month for the use of a licence, whereas they used to charge around 6,000 yuan per month, reducing the money that Macau investors in Zhuhai licences can make. The Macau investors bought licences from individuals or companies in Zhuhai that had bought them in public auctions, the latest of which was held in 2001. Mr Leng told Business Daily that the fall in charges would mean a loss of over 1 million yuan for a Macau investor that owned a 30-year Zhuhai taxi licence, but did not elaborate. “The Macau owners are not really pleased with this new sub-licensing policy and we have complained to the Zhuhai administration,” he said. At least 400 Zhuhai taxi licences are held by Macau investors, he said. “In the end, we came up with a suggestion for the Macau owners to set up a taxi company in Zhuhai. But no final decision has been made,” he said. Another 303 taxis are expected to be plying the streets of Zhuhai by May because 153 Zhuhai taxi licence holders have applied to take part in the sub-licensing trial. This would raise the number of taxis in the city to 2,155, the Zhuhai Transport Bureau told Business Daily.

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business daily January 8, 2013

macau Stanley Ho’s Portugal casino operation loses chairman Mário Assis Ferreira has left the managing board of Estoril-Sol, SGPS, SA, the company controlled by Macau gaming tycoon Stanley Ho Hung Sun that operates three casinos in Portugal, Portuguese newspaper Diário de Notícias reported. Estoril-Sol’s shareholders will meet on February 4 to elect a managing board. Mr Assis Ferreira has held executive positions in the company during 28 years. Estoril-Sol has seen its profits tumble in the last few years, forcing the operator to fire several hundred employees.

Investors lukewarm on Myanmar plants Macau textile firms see the labour advantages in the newly opened-up country, but the infrastructure there is poor Stephanie Lai

sw.lai@macaubusinessdaily.com

fter visiting Myanmar, executives of Macau textiles companies are mulling the country’s readiness to welcome their business and factories. A 16-year embargo on exports of textiles to the United States, which was Myanmar’s main market for garments before 2003, was lifted in November. “Local firms are still musing over whether to invest in Myanmar or not, and I do not think any one of them has really made up its mind,” the vicechairman of the Industrial Association of Macau, Jose Tang Kuan Meng, told Business Daily. Many members of business associations have been making visits to Myanmar since last year, including one organised by the Industrial Association of Macau. “We have visited the chambers of commerce in Myanmar and met trade department officials. We spent seven days in Yangon and the current capital, Naypyidaw,” said Mr Tang, the director of Lei Un Factory Ltd, a textiles company. Macau companies see potential in Myanmar’s garment manufacturing industry, as long as its products can be shipped here for finishing before being exported, Mr Tang said. “For the process to run that way

and produce a ‘made in Macau’ product, we just need to invest a bit more in human resources and manufacturing experience,” he said. “We could sell the garments produced in Myanmar to Southeast Asia. We could also import labour from Myanmar to help make the finished product here in Macau,” he said.

Labour intensive The greatest competitive edge that Macau companies think Myanmar has is its young and large workforce, labour costs there being lower than neighbouring countries. Last June the labour authorities in Myanmar set a minimum wage equivalent to 10 patacas per day for garment workers. “From what we have understood, the workers’ wage has been at a level of around US$2 [16 patacas] per day, or around US$80 per month,” said Mr Tang. Though labour costs may appear an advantage for manufacturers willing to set foot in Myanmar, Mr Tang said huge hindrances were apparent in its weak telecommunications network, power supply and logistics. “Transport is not an easy task. For instance, for maritime transport,

Jose Tang Kuan Meng was one of the Macau businessmen that visited Myanmar recently

the ports in Myanmar are linked only to China’s Guangzhou or Guangxi provinces, and Thailand,” he said. “And if we are to run a factory in the country, we have to purchase our own power generators, which is really like the situation in mainland China some 20 or 30 years ago,” he said. Among the dozens of textile companies still operating in Macau, the business potential in Myanmar appeals more to those that are less

dependent on machinery. “For those making hats or handbags, they see no urgent need to set up a plant anywhere other than in mainland China, as production is largely reliant on machines,” said Mr Tang. “But the labour-intensive companies, like those making polo shirts, will see Myanmar as another possible choice among Southeast Asian countries like the Philippines, Bangladesh Laos or India.”

January 8, 2013 business daily | 7

MACAU

No timetable on housing exclusive to Macau residents Secretary Lau Si Io pledges to make issue a priority Tony Lai

tony.lai@macaubusinessdaily.com

Reclaimed land – new policy under study (Photo: Manuel Cardoso)

he government admitted it does not have a timetable on preparing a policy to provide houses exclusively for Macau residents. But it claims nonetheless that the issue is a priority. Secretary for Transport and Public Works Lau Si Io told the Legislative Assembly yesterday he would instruct a “local, third-party, academic institute” to carry out the study in the first half of this year. But legislators demanded more information, asking when the government will have the study ready and be able to implement the procedures, especially for the new

reclaimed land. Assembly member Ho Ion Sang said the government should quickly complete the research and lay out “a future housing blueprint” for the residents. He said the administration ought to follow the footsteps of neighbouring Hong Kong, which introduced a similar policy last year. The Hong Kong government announced a pilot programme to implement the ‘Hong Kong land for Hong Kong people’ project on two land parcels last year. About 1,100 homes are to be built there to Hong Kong permanent residents only. But Mr Lau responded: “Even

though Macau and Hong Kong are only an hour apart by ferry, our situation here is different … I have doubts whether what works in Hong Kong can be applied [here].” The secretary promised to put the issue “in first place” and conduct the study on the concept. But he did not provide a timeframe. “After the completion of the study, we will analyse the ideas and listen to [public] opinions and then make decisions,” said Mr Lau. “This ‘Macau land for Macau people’ concept involves a lot of complexities in the legal field and [there are several] factors for

consideration, such as whether it is a measure to respond to the surge in housing price or a long-term housing policy,” he added. The study will also analyse whether the sales of houses should be restricted to individuals or include companies as well, and look at other issues such as the re-sale of such properties. The administration added that its reform of urban construction rules would consider turning regular building inspections – conducted by private landlords using governmentapproved inspectors but nonmandatory at present – into a mandatory responsibility.

Legislators eye heavier telecom blackout fines Telecommunications regulator mulls setting up mechanism to compensate users Tony Lai

tony.lai@macaubusinessdaily.com

egislators are asking for the option of stiffer fines on Macau’s telecommunications operators for licence infringements such as service failures – to try and force the telecoms firms to put their businesses in order. The city had five blackouts of various types and lengths last year. Legislator Ho Ion Sang said during a questions and answers session at the Legislative Assembly yesterday that the current fines “are too light for companies which earn over 100 million patacas a year”. His fellow member Lee Chong Cheng even questioned the “legitimacy of the calculation [mechanism] for the fines”. Macau endured five telecommunications service interruptions last year involving two operators – three incidents by Companhia de Telecomunicações de Macau (CTM) and two by Hutchison Telephone (Macau) Company Ltd. The Bureau of Telecommunications Regulation has so far only fined CTM 800,000 patacas (US$100,000) and 180,000 patacas respectively for its first two blackouts.

“The amount of fines is not our focus,” bureau director Lawrence Tou Veng Keong told the assembly. “We will revoke the operators’ licences as the worst-possible case, if the operators do not improve.” He said the administration was studying the possibility of setting up a mechanism that would require operators to compensate consumers after telecommunications blackouts. The bureau would also look into better cooperation between the city’s telecommunications companies in case one of them failed to provide services, the official added. Mr Tou also said the bureau would instruct a consultancy company this year to evaluate the companies’ operations, as well as giving suggestions for the administration’s management. “There is still room for the bureau to improve in its supervision,” he admitted. The government would also provide more resources to train professionals for the industry in cooperation with the operators because of their difficulties in finding suitable labour, Mr Tou said.

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

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business daily January 8, 2013

GREATER CHINA No end to coldest winter in 28 years Southern China will be hit by a new cold front this week, extending the country’s chilliest winter in 28 years, the country’s weather agency said. Temperatures in Southern provinces including Guangdong will dip to as low as minus 5 degrees Celsius on January 11 and 12, the China Meteorological Administration said. Provinces including Guizhou and Hunan may experience snowstorms, it said. The cold weather will prove challenging as the Chinese Lunar New Year holiday approaches, with icy rain and snow disrupting transportation, power supplies and electricity networks, the agency said.

Student interns highlight labour shortage As companies shift factories away from higher-cost centres in the Pearl River Delta Lucy Hornby

n September, the largest factory in the northeastern Chinese coastal city of Yantai called on the local government with a problem – a shortage of 19,000 workers as the deadline on a big order approached. Yantai officials came to the rescue, ordering vocational high schools to send students to the plant run by Foxconn Technology Group, a Taiwanese maker of smartphones, computers and gaming equipment. As firms like Foxconn shift factories away from higher-cost centres in the Pearl River Delta in southern Guangdong province, they are discovering that workers in new locations across China are not as abundant as they had expected. That has prompted multinationals and their suppliers to use millions of teenage students from vocational and technical schools on assembly lines. The schools teach a variety of trades and include mandatory work experience, which in practice means students must accept work assignments to graduate. In any given year, at least 8 million vocational students man China’s assembly lines and workshops, according to Ministry of Education estimates – or one in eight Chinese aged 16 to 18. In 2010, the ministry ordered

Foxconn – nearly 3 percent of workers are student interns

vocational schools to fill any shortages in the workforce. The minimum legal working age is 16. Foxconn, the trading name of Hon Hai Precision Industry Co Ltd, employs 1.2 million workers

across China. Nearly 3 percent are student interns. The company “has a huge appetite for workers”, Wang Weihui, vice director of the Yantai Fushan Polytechnic School, told Reuters

during a recent visit to the city. “It tightens the labour market,” said Mr Wang, whose school sends its students to work at Foxconn and other firms. Local governments eager to please

Stock rally may end with Breaking big state-controlled enterprises can boost economy, says head of the Shanghai government’s investment arm

Stocks – awaiting economic reform

hina’s new leaders need to push ahead with reform of state-owned companies to extend the biggest monthly gain for Chinese stocks in two years, according to the Shanghai government’s investment arm. The new generation of Communist Party leaders headed by Xi Jinping needs to break the monopoly of government enterprises by introducing more competition and to ease financing for smaller companies to keep economic growth at about 7 percent to 8 percent over

the next 10 years, Pang Yang, chief executive with the financial-service advisory unit of Shanghai Alliance Investment Ltd, said in an interview at a Bloomberg hedge-fund forum in Shanghai on Saturday. The benchmark Shanghai Composite Index rebounded 16 percent from an almost four-year low on December 3 after policy makers said they would increase investment in urban development and pledged to deepen economic reform including improving state-owned companies. The benchmark measure posted its largest monthly gain since July 2009 last month and closed 0.4 percent higher at 2,276.99 on January 4, the first trading day of 2013. “For the short term, the stock market may have some problems as these reforms take a long time to materialise,” Mr Pang said. “But for the long term, I am optimistic as it looks like the new leaders are quite determined to reform.” Shanghai Alliance is a wholly owned unit of the Shanghai government’s State-owned Assets Supervision and Administration Commission. It takes stakes in

January 8, 2013 business daily | 9

GREATER CHINA Toyota December sales fall 15.9 pct Toyota Motor Corp’s sales in China fell 15.9 percent last month from a year earlier, still dogged by a sales crisis Japanese carmakers are suffering following a territorial row between the two countries. Toyota and its two Chinese partners sold 90,800 vehicles in December, compared with 108,000 cars in December 2011, it said yesterday. In 2012, Toyota sold a total of 840,500 vehicles, down 4.9 percent from 2011. Toyota’s December sales fall followed declines of 22 percent in November, 44 percent in October and almost 50 percent in September.

new investors lean on schools to meet any worker shortfall. That’s what Yantai, in Shandong province, did in September when Foxconn had trouble filling Christmas orders for Nintendo Co Ltd’s Wii game consoles. “It has been easier to recruit workers in the Pearl River Delta than some inland locations,” Foxconn told Reuters in written comments in late December.

Rising wages Some companies cite rising wages in southern China for the shift elsewhere. Wages are a growing component of manufacturing costs in China, making up to 30 percent of the total depending on the industry, according to the Boston Consulting Group. Wages began to rise around 2006 as the migration of rural workers to Guangdong ebbed. China’s one-child policy, plus a jump in higher education enrolment, further depleted the number of new entrants to the workforce, forcing up wages. That prompted American carmakers, Korean electronics manufacturers and private Chinese firms to look for new sites. Cheaper electricity, land and tax incentives as well as a growing consumer class in regions beyond the booming southern coastal provinces were other reasons to relocate. Minimum wages in Yantai can be as low as 1,100 yuan (US$180) a month compared to 1,500 yuan in Shenzhen, a city near Hong Kong. What makes vocational students attractive is they can be paid less than full-time workers, although some firms – including Foxconn – pay the same base wages. Even if they pay the same base salary, employers can save 10-40

Smartphone profit to fund Lenovo’s 8 million emerging market push in 2013

Vocational students handle China’s assembly lines and workshops

percent per person because legally they do not have to pay health insurance or social security benefits for student interns. Zhang Weifang, head of human resources at the Yantai factory of LG Innotek, estimates the city’s employable 16- to 18-year-olds has halved since her firm began production in 2004. LG Innotek is the components unit of South Korea’s LG Electronics Inc. “It’s really hard to find people nowadays,” she said. About 2,400 young workers staff Ms Zhang’s factory, of which one-third are vocational students or workers contracted through agencies. Students are sought after by plants which need extra workers during peak production periods, especially since China’s 2008 Labour Law makes firing employees cumbersome. Yantai shows how much China’s labour market has changed. Reuters

hout reform: Pang companies in industries ranging from alternative energy, information technology to financial services. The eight largest companies by market value in the Shanghai index are state-controlled, data compiled by Bloomberg show. More than 25 percent of government-run enterprises are unprofitable and productivity growth has trailed nonstate firms by about 66 percent the past three decades, the World Bank said in a February report. State businesses may become a long-term drag on economic growth, the Washington-based lender said. The nation’s gross domestic product probably expanded 7.8 percent in the fourth quarter from a year earlier, from a three-year low of 7.4 percent in the previous three months, according to the median estimate of 34 economists surveyed by Bloomberg last month. The GDP data are scheduled to be released January 18. The government is also seeking to shore up smaller companies on concern slowing economic growth may led to bankruptcies and job losses. China approved local government financing vehicles in five cities to sell

a combined 15 billion yuan (US$2.4 billion) of bonds in a pilot programme to raise funds for small businesses, two people familiar with the matter said late last month. The government will “fully deepen reforms” in the economy and “firmly promote opening-up” next year, the official Xinhua News Agency reported on Dec. 17 after the end of an annual conference that sets the tone for government economic policies the following year. China will also seek a higher “quality” of growth in 2013, the report said. Vice Premier Li Keqiang, who is poised to become the nation’s next premier in March, has promoted urbanisation as a driver for economic growth. The move is expected to spur 40 trillion yuan of investment by 2020, the Southern Metropolis Daily reported, citing a draft plan by the nation’s top planning agency. “China needs to find one or two drivers to sustain its growth,” said Mr Pang. “Reforms of big state-owned enterprises such as breaking big ones apart and introducing competition can unleash a lot of value.” Bloomberg News

Net income forecast to gain 24 pct in the year ending March 31

enovo Group Ltd’s smartphone business in China is about to turn its first profit, enabling the company to expand margins even while funding a handset push in emerging markets, chief executive Yang Yuanqing said. “Very soon you will see we’ll start to make money in the China smartphone area,” Mr Yang said in an interview at company headquarters in Beijing.

If we cannot improve our existing business like smartphones in China, we will not have the money to invest in new areas like smartphones in other emerging markets Yang Yuanqing, Lenovo’s chief executive

“We will improve our profit not just in absolute dollars, but the pretax income ratio as well.” Lenovo shares surged 36 percent in Hong Kong last year as it added market share to become the world’s biggest vendor of personal computers and China’s secondlargest seller of smartphones. Mr Yang is under pressure to maintain profit growth after the costs of that expansion snapped Lenovo’s streak of 12 straight quarters with net income growth of at least 25 percent. The company’s net income is forecast to gain 24 percent in the year ending March 31, and 22 percent next fiscal year, according to the average of 18 analysts’ estimates compiled by Bloomberg. Those estimates compare with a 73 percent gain last year. The projection for slowing profit growth is largely because of the company’s expansion of

smartphones out of China into markets where it lacks home-field advantage, said Alberto Moel, an analyst at Sanford C Bernstein & Co. in Hong Kong.

India, Indonesia Lenovo, which introduced its first touch-screen handset in China in 2010, in the past six months expanded sales to Russia, India, Indonesia, Vietnam and the Philippines. “They are moving into markets where the costs of starting up are higher,” Mr Moel said. “As they grow unit shipments, the fixed costs are growing. They are going to run out of ability to maintain their margins.” Mr Yang said Lenovo can boost its pre-tax margins by one percentage point in the next three years, to more than 3 percent, from 2.4 percent recorded in the September quarter. “You have to invest in new areas but meanwhile you must manage the profit growth as well,” he said. “Even though we will further invest in new areas, we are still committed to our shareholders.” Mr Yang cut his stake in the company last month to 9.04 percent from 9.32 percent, Lenovo said in a filing to the Hong Kong Stock Exchange. In the next 12 months, Lenovo’s shares are projected to rise to HK$7.76, according to the average of 27 analysts’ estimates compiled by Bloomberg. That would be a 3.4 percent gain from Friday’s closing price of HK$7.50. “The profit expectations in the stock that are being baked in are for 20-plus percent growth numbers this year and next, and I’m sceptical of that,” Mr Moel said. Mr Yang has said he intends to use that dominant position in PCs to expand in mobile devices, including smartphones and tablet computers. Lenovo vaulted to second place in China’s smartphone market in the second quarter from seventh place the previous quarter, market researcher IDC said in August. “If we cannot improve our existing business like smartphones in China, we will not have the money to invest in new areas like smartphones in other emerging markets,” he said. Bloomberg News

10 |

business daily January 8, 2013

ASIA Philippines to fight child labour The Philippine government will roll out a programme that aims to combat child labour in the country, a senior government official said yesterday. Labour Secretary Rosalinda Baldoz said the government has allotted 9 billion pesos (US$220 million) to implement the programme dubbed as H.E.L.P. M.E., which stands for “health, education, livelihood, prevention, protection and prosecution, and monitoring and evaluation”. Ms Baldoz said it would be implemented starting this year until 2016. The programme aims to liberate 75 percent of the 2.9 million child labourers in the country in three years, she added.

draft showed. The stimulus package would also establish a 200 billion yen fund with the Japan Bank for International Cooperation (JBIC), another statesponsored lender, to encourage foreign mergers and takeovers. It also includes 83 billion yen in loan guarantees and low-interestrate loans for small firms, the draft showed. A LDP sub-committee approved the draft yesterday, and it could be approved by the Cabinet as soon as this week.

Funding not detailed

Japan stimulus include US$4.9 bln business support PM Shinzo Abe sets priority on economy in new govt

Govt counting on fiscal spending to boost economy

apan’s new government will set up schemes worth nearly US$5 billion to boost businesses, including helping them buy foreign companies, according to a draft economic stimulus package seen

by Reuters yesterday that could be approved later this week. Prime Mi n i s ter S h i n zo A b e has made reviving the economy his top priority after his Liberal Democratic Party (LDP) won elections last month, combining aggressive monetary easing with fiscal spending to encourage investment and spur growth. Mr Abe told business leaders yesterday that he hopes to compile the measures this week.

His spending promises have raised concerns Japan’s public debt burden, already the worst among major economies, could deteriorate further, and some economists say structural reforms might have a bigger impact after years of stop-start growth. The Development Bank of Japan (DBJ), a state-backed lender, will administer a 150 billion yen (US$1.7 billion) lending scheme to encourage firms to develop new technologies and collaborate on new business lines, the

The government will set aside 100 billion yen for the lending scheme with the DBJ in an extra budget, and the state-backed lender will use its own capital for the remaining 50 billion yen, according to the draft policy. Government expenditure for the scheme with JBIC will total 70 billion yen. Lending from JBIC and private-sector banks will account for the remaining 130 billion yen, the draft showed. Mr Abe has instructed the finance minister to disregard borrowing limits set by the previous government, and the draft document did not say how the how the package would be funded. While Japan’s public debt is more than twice gross domestic product, Finance Minister Taro Aso said last week that the government doesn’t need to adhere to a 44 trillion-yen cap on new bond issuance in this fiscal year. “The scale of this budget suggests that Abe’s new administration is serious about stimulating the economy,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. “It’ll be very helpful in the near-time, but the problem in the medium-to-long term is that we have to pay this back.” The total size of the government’s

AirAsia founders to launch Tune insurance IPO Floatation may take place in February – sources

he founders of Malaysia’s AirAsia Bhd are expected to launch a US$65 million initial public offering (IPO) of Tune Insurance Bhd by the end of February, two sources close to the deal told Reuters. The flotation would be the first of three IPOs due to raise a combined US$500 million that Tony Fernandes and Kamarudin Meranun, founders of Asia’s largest budget carrier, are planning this year. “An investor road show will begin towards the end of this month,” one of the sources said, declining to be named as the matter is still private.

Tune Insurance officials were not immediately available to comment. A source with direct knowledge of the deal told Reuters in October that Tune Insurance, a unit of financial services-to-discount hotel conglomerate Tune Group owned by Mr Fernandes and Mr Kamarudin, is looking at a market capitalisation of US$260 million upon listing. The IPO, comprising 210 million shares, will help to fund Tune Insurance’s expansion plans in the underinsured Southeast Asia region, Mr Fernandes, who is due to take on the hire-or-fire role

of would-be employer in an Asian adaptation of “The Apprentice” TV show, told reporters last September. RHB Investment Bank is the principal adviser for the IPO. CIMB Group Holdings Bhd, CLSA, ECM Libra Financial Group Bhd and RHB are the joint book runners. AirAsia’s long-haul arm, AirAsia X, last year hired CIMB, Malayan Banking Bhd and Credit Suisse Group AG for a US$250 million IPO. The group is looking to list its Indonesia operations in a deal that could raise up to US$200 million. Reuters

AirAsia founder, Tony Fernandes

January 8, 2013 business daily | 11

ASIA Singapore Exchange sees capitalisation up 20 pct The stock market capitalisation of Singapore Exchange (SGX) grew by 20 percent in 2012, although the whole year turnover declined 12 percent, the bourse said yesterday. The SGX reached a turnover of S$321.5 billion (US$261.4 billion) in 2012, down 12 percent compared with the previous year, according to statistics released by the bourse. Meanwhile, the securities average daily value was at S$1.3 billion, also a drop of 12 percent. The benchmark Straits Times Index also surged nearly 20 percent, closing at 3,167.08 points on the last trading day of 2012.

Japanese PM may delay U.S. trip Japanese Prime Minister Shinzo Abe may postpone his first overseas visit to the United States scheduled in January due to U.S. President Barack Obama’s busy agenda of the month, local media reported yesterday. The visit has become difficult as Obama his preparing his presidential inauguration ceremony set for January 21, Japan’s Kyodo News Agency quoted government officials as saying. Aiming at enhancing Japan-U.S. alliance, the January visit was planned during a telephone talks between the two leaders after Mr Abe reclaimed premiership late December last year. Mr Abe said many times after becoming Japan’s prime minister that the Japan-U.S. relationship remains the core of his country’s foreign policies and he will restore the relationship scratched by the issue of relocating a key U.S. air base in Japan’s Okinawa.

stimulus package could be around 10 trillion yen, with half devoted to public works, a source close to Mr Abe told Reuters last month. Yesterday’s draft did not contain any details of plans for public works spending. Japanese media reported yesterday that the government will announce around 12 trillion yen in fiscal stimulus measures to boost the nation’s shrinking economy. Senior members of the LDP have said they want to spend some of the stimulus on repairing roads, tunnels and public schools, raising concerns the LDP is falling back on the excessive public works spending that was the hallmark of its more than half a century of nearly non-stop rule of the country. Reuters/Bloomberg News

South Korea seen resisting rate cut As won threatens exports and weakening yen helps competitors Shamim Adam and Eunkyung Seo

he Bank of Korea may refrain from cutting rates at its first meeting since President Park Geun Hye’s election even as Asia’s best-performing currency of the past year threatens exports. All 10 economists surveyed by Bloomberg News forecast borrowing costs will remain at 2.75 percent on Friday. At the same time, seven of 16 economists in a separate survey see a 25 basis-point reduction by March. The government led by incoming President Park already plans a fiscal boost in the first half of the year by allocating 72 percent of budget spending for 2013, or US$200 billion. In Japan, new Prime Minister Shinzo Abe is driving down a yen that has fallen about 20 percent against the won in the past year, aiding Japanese exporters of cars and electronics. South Korea’s currency is up 9.3 percent against the dollar. “The economy is on a recovery path but the tepid momentum is making policy makers pretty nervous, as their latest decision on fiscal frontloading suggests,” said Lee Sang Jae, a senior economist at Hyundai Securities Co. in Seoul. “We may see a rate cut in March or April if there is no clear sign of faster and sustained economic recovery.” The won led gains in Asian currencies last week after the U.S. averted US$600 billion of

Bloomberg News

Exports unexpectedly fell in December for the first time in three months

tax increases and spending cuts, easing the risk of a slowdown in the world’s largest economy. The South Korean currency gained 0.6 percent against the dollar and 3.2 percent against the yen.

Conglomerate sales Automaker Kia Motors Corp. is among South Korean companies that may be hit by gains in the won and weakness in the yen because of their competition with Japanese rivals, Daiwa Capital Markets said in a report last month. South Korea’s exports unexpectedly fell in December for the first time in three months.

Asian markets lower as profit-taking offsets U.S. data Traders cashed in after shares jumped last week Danny McCord

sian markets mostly fell yesterday as last week’s gains prompted profittaking, overshadowing Friday’s Wall Street rally and upbeat U.S. job creation figures. The yen rose slightly against the dollar and euro, although it remains under pressure on expectations the Japanese central bank will further loosen monetary policy. Tokyo Stock Exchange – which on Friday hit its highest level since before

the quake and tsunami of March 2011 – slipped 0.83 percent, giving up 89.10 points to 10,599.01. Sydney shed 0.14 percent, or 6.5 points to 4,717.3 and Seoul was flat, dipping 0.68 points to 2011.26. Hong Kong finished flat, dipping 1.34 points to 23,329.75, but Shanghai closed up 0.37 percent, or 8.37 points, at 2,285.36, with traders optimistic about upcoming data, including inflation and trade figures, due out of Beijing soon.

Korea’s technology companies, shipbuilders, and automakers could be the biggest losers from strength in the currency against the dollar and the yen, while steelmakers and utilities would benefit, Daiwa said. The nation’s 30 largest conglomerates accounted for 84 percent of exports in 2010, according to the latest available figures from the Federation of Korean Industries, which represents the nation’s biggest companies. An increasing number of bond dealers are betting on a rate cut as early as this week, and yields on government debt have begun to reflect such expectations, said Kong Dong Rak, a fixed-income analyst at Hanwha Investment & Securities Co. “If policy makers share the view that the economy will rebound too weakly and slowly, with a strengthening won limiting exports, they may decide to take pre-emptive actions, employing all possible stimulus both from fiscal and monetary fronts simultaneously,” Mr Kong said.

“With the major indexes having run up so far so fast, alarm bells have sounded about technical overheating,” an equity trading director at a foreign brokerage told Dow Jones Newswires. “Some players want to take some cash off the table... but demand remains strong overall, and this does not look like a tipping point in terms of a more profound sell-off.” Traders cashed in after shares jumped last week in the wake of the

The economy is on a recovery path but the tepid momentum is making policy makers pretty nervous, as their latest decision on fiscal front-loading suggests Lee Sang Jae, Hyundai Securities Co.

deal in Washington to avert the fiscal cliff of tax hikes and spending cuts that economists had warned would tip the United States into recession. Providing some buying support was news out of Washington on Friday showing the world’s biggest economy added 155,000 jobs in December. While the figure is not huge and was in line with expectations, it does show some confidence. On currency markets the dollar eased against the yen after hitting its strongest point against the Japanese unit in more than two years last week. The greenback stood at 87.82 yen in afternoon Tokyo trade compared with 88.15 yen in New York late Friday. The euro was at 114.57 yen and US$1.3043 from 115.19 yen and US$1.3067. Oil prices were lower with New York’s main contract, light sweet crude for delivery in February, shedding 29 cents to US$92.80 a barrel. Brent North Sea crude for February lost 10 cents to $111.21. AFP

12 |

business daily January 8, 2013

MARKETS Hang SENG INDEX NAME

NAME

PRICE

DAY %

VOLUME

30.55

-1.132686

31515052

CHINA UNICOM HON

ALUMINUM CORP-H

3.83

0.2617801

27037340

CITIC PACIFIC

BANK OF CHINA-H

3.62

263697006

6.1

36360054

30.4

-0.3278689

1499697

BELLE INTERNATIO

17.02

-2.631579

16670118

ESPRIT HLDGS

BOC HONG KONG HO

24.85

15259151

HANG LUNG PROPER

AIA GROUP LTD

BANK OF COMMUN-H BANK EAST ASIA

CLP HLDGS LTD

PRICE

DAY %

VOLUME

NAME

12.7

-0.6259781

22998354

POWER ASSETS HOL

13.88

1.166181

29440280

SANDS CHINA LTD

PRICE

DAY %

65.2

-0.6097561

VOLUME 2402520

36.85

0.5457026

7005747 5755722

SINO LAND CO

14.32

-0.13947

SUN HUNG KAI PRO

121.3

2.104377

9553893

97.2

-0.3587904

1111716

65.1

-0.1533742

3571459

CNOOC LTD

17.14

-1.153403

48783733

COSCO PAC LTD

11.86

-0.5033557

3974666

11.5

0.174216

10331456

TENCENT HOLDINGS

255.6

-1.388889

3956756

30.7

-0.6472492

4962949

TINGYI HLDG CO

20.15

-1.946472

13256784

SWIRE PACIFIC-A

CATHAY PAC AIR

14.66

1.103448

3209546

HANG SENG BK

118.6

-0.7531381

1274294

WANT WANT CHINA

10.18

-2.490421

33136935

CHEUNG KONG

123.5

2.150538

5854372

HENDERSON LAND D

57.3

2.780269

6859453

WHARF HLDG

62.55

1.295547

4428298

CHINA COAL ENE-H

8.94

0.6756757

21014003

HENGAN INTL

74.1

1.298701

5519433

CHINA CONST BA-H

6.49

-0.1538462

208295234

CHINA LIFE INS-H

27.2

0.7407407

35624935

CHINA MERCHANT

25.5

-1.734104

3101740

89.05

-1.76503

30138518

HUTCHISON WHAMPO

4831998

25.3

2.42915

26683579

IND & COMM BK-H

5.75

-0.6908463

178739439

9.1

-0.4376368

61759216

LI & FUNG LTD

14.7

1.37931

16056239

0.3252033

2067046

CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H CHINA RES ENTERP

HONG KG CHINA GS

21.1

-0.2364066

5422791

HONG KONG EXCHNG

145.1

1.753156

9886669

HSBC HLDGS PLC

83.05

1.280488

14646281

28.95

-0.5154639

3539410

MTR CORP

30.85

23.7

0.8510638

15341586

NEW WORLD DEV

12.64

1.771337

32432047

CHINA RES POWER

19.34

-3.541147

9077836

PETROCHINA CO-H

11.1

-0.8928571

70152067

CHINA SHENHUA-H

34.75

-0.1436782

10155514

PING AN INSURA-H

1.938263

16731141

CHINA RES LAND

MOVERS

5 23400

INDEX 23329.75 HIGH

23398.6

LOW

23176.05

52W (H) 23402.44922 (L) 18056.4

23170

3-January

7-January

Hang SENG CHINA ENTErPRISE INDEX PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.94

-0.2531646

85157058

CHINA PACIFIC-H

0.3236246

10772868

YANZHOU COAL-H

AIR CHINA LTD-H

6.63

0.6069803

22110500

CHINA PETROLEU-H

9.1

-0.4376368

61759216

ALUMINUM CORP-H

3.83

0.2617801

27037340

CHINA RAIL CN-H

9.17

0.1091703

ANHUI CONCH-H

29.6

2.068966

11398500

CHINA RAIL GR-H

4.81

BANK OF CHINA-H

3.62

263697006

CHINA SHENHUA-H CHINA TELECOM-H

NAME

PRICE

DAY %

VOLUME

14.24

1.714286

31323757

ZIJIN MINING-H

3.08

57473433

16565000

ZOOMLION HEAVY-H

11.8

13734320

2.777778

49116300

ZTE CORP-H

13.98

1.895044

11795211

34.75

-0.1436782

10155514

6.1

36360054

4.28

-0.4651163

64699636

23.15

1.31291

3493165

DONGFENG MOTOR-H

12.26

1.827243

38430358

CHINA CITIC BK-H

4.87

1.458333

37941557

GUANGZHOU AUTO-H

7.07

-0.9803922

5396557

CHINA COAL ENE-H

8.94

0.6756757

21014003

HUANENG POWER-H

7.15

0.4213483

24994550

CHINA COM CONS-H

7.94

2.583979

24683622

IND & COMM BK-H

5.75

-0.6908463

178739439

CHINA CONST BA-H

6.49

-0.1538462

208295234

JIANGXI COPPER-H

21.65

5370829

CHINA COSCO HO-H

4.43

5.47619

46623575

PETROCHINA CO-H

11.1

-0.8928571

70152067

CHINA LIFE INS-H

27.2

0.7407407

35624935

PICC PROPERTY &

11.64

0.5181347

16888299

CHINA LONGYUAN-H

5.85

5.405405

28650000

PING AN INSURA-H

1.938263

16731141

CHINA MERCH BK-H

17.88

0.5624297

18306710

SHANDONG WEIG-H

7.73

1.710526

19557624

BANK OF COMMUN-H BYD CO LTD-H

CHINA MINSHENG-H

9.68

1.573977

25478048

SINOPHARM-H

26.2

4.38247

10378705

CHINA NATL BDG-H

12.48

2.800659

32213796

TSINGTAO BREW-H

45.95

-2.441614

1486724

CHINA OILFIELD-H

16.42

-0.3640777

4904850

WEICHAI POWER-H

35.65

-0.4189944

5950850

NAME

MOVERS

5 12000

INDEX 11973.07 HIGH

11987.4

LOW

11836.25

52W (H) 11996.19 (L) 8987.76

11830

3-January

7-January

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.87

-0.6920415

139115899

AIR CHINA LTD-A

5.73

-1.376936

19769979

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

6.87

-0.5788712

15010990

QINGHAI SALT-A

26.01

-1.923077

7091843

CITIC SECURITI-A

13.26

89789565

SAIC MOTOR-A

17.34

-1.421262

22226091

CHINA YANGTZE-A

NAME

VOLUME

ALUMINUM CORP-A

5.16

-0.7692308

24701774

CSR CORP LTD -A

5.19

0.3868472

68787735

SANY HEAVY INDUS

10.15

-2.309913

51417250

ANGANG STEEL-A

4.21

-0.9411765

55470931

DAQIN RAILWAY -A

6.82

33180909

SHANDONG GOLD-MI

36.52

-1.669359

27513356

ANHUI CONCH-A

19.31

2.223399

40595614

DATANG INTL PO-A

4.02

0.7518797

15638965

SHANG PHARM -A

11.47

4.17802

21662527

BANK OF BEIJIN-A

9.45

1.612903

48447347

EVERBRIG SEC -A

13.97

-0.427655

15337377

SHANG PUDONG-A

10.32

2.994012

248200915

BANK OF CHINA-A

2.95

-0.3378378

39926588

GD POWER DEVEL-A

2.59

-0.7662835

35531586

SHANGHAI ELECT-A

4.08

0.4926108

5547998

BANK OF COMMUN-A

5.06

98027683

GEMDALE CORP-A

7.23

1.687764

77641992

SHANXI LU'AN -A

21.26

-0.3748828

19053272

10.53

-0.1895735

13393618

GF SECURITIES-A

15.01

-1.831262

53882350

SHANXI XINGHUA-A

38.99

-2.646692

6396694

29833907

GREE ELECTRIC

26.36

4.107425

23305694

SHANXI XISHAN-A

13.88

1.018923

17608206

BANK OF NINGBO-A BAOSHAN IRON & S

4.95

BBMG CORPORATI-A

7.85

0.127551

17843402

GUANGHUI ENERG-A

16.09

0.5625

17677319

SHENZEN OVERSE-A

7.4

-2.245707

55507029

BYD CO LTD -A

20.1

0.4497751

5292805

HAITONG SECURI-A

10.26

40514185

SUNING APPLIAN-A

7.17

2.86944

115768150

CHINA CITIC BK-A

4.37

1.157407

29201436

HANGZHOU HIKVI-A

29.42

1.238816

5197839

TSINGTAO BREW-A

32.79

-1.175407

1358325

59.55

4.254202

5195684

WEICHAI POWER-A

25.05

-1.416765

14526626

CHINA CNR CORP-A

4.7

0.8583691

75318770

HENAN SHUAN-A

CHINA COAL ENE-A

7.79

0.2574003

12858943

HONG YUAN SEC-A

18.82

-0.1591512

10633890

WULIANGYE YIBIN

27.54

-1.290323

32221651

CHINA CONST BA-A

4.73

0.6382979

40505418

HUATAI SECURIT-A

9.6

-0.621118

27840159

YANGQUAN COAL -A

14.35

0.3496503

15357835

CHINA COSCO HO-A

4.59

2.455357

49451600

HUAXIA BANK CO

10.45

1.161665

29429329

YANTAI CHANGYU-A

47.34

0.6591537

2412331

CHINA CSSC HOL-A

22.93

0.6143045

13508918

IND & COMM BK-A

4.23

0.2369668

82037683

YANTAI WANHUA-A

15.89

4.74621

22163979 5386546

CHINA EAST AIR-A

3.37

-1.749271

31890202

INDUSTRIAL BAN-A

17.36

3.394878

122506485

YANZHOU COAL-A

18.05

-0.4961411

CHINA EVERBRIG-A

3.06

-0.3257329

182882588

INNER MONG BAO-A

36.71

-2.367021

48587869

YUNNAN BAIYAO-A

65.08

-0.03072197

4064067

CHINA INTL MAR-A

12.52

3.045267

24165248

INNER MONG YIL-A

23.43

4.832215

16451077

ZHONGJIN GOLD

16.14

-0.3088326

19967731

CHINA LIFE INS-A

21.92

1.481481

17285805

INNER MONGOLIA-A

5.36

-1.470588

70273155

ZIJIN MINING-A

66805535

99469543

JIANGSU HENGRU-A

29.03

1.93118

7374651

ZOOMLION HEAVY-A

90.8

-2.376089

5567100

ZTE CORP-A

CHINA MERCH BK-A

13.6

0.5173688

CHINA MERCHANT-A

30.67

-2.604001

16375533

JIANGSU YANGHE-A

CHINA MERCHANT-A

10.38

-0.2881844

18467334

JIANGXI COPPER-A

25.02

-0.7536692

23568985

CHINA MINSHENG-A

8.32

4.260652

210150795

JINDUICHENG -A

11.53

-1.284247

13170437

CHINA NATIONAL-A

7.9

-1.126408

42236169

JIZHONG ENERGY-A

14.29

4.306569

42053012

13.42

0.07457122

55646523

204.29

-1.280564

4127139

CHINA OILFIELD-A

16.51

-0.1209921

7513080

KANGMEI PHARMA-A

CHINA PACIFIC-A

22.56

-1.74216

14454216

KWEICHOW MOUTA-A

6.88

-1.149425

31424962

LUZHOU LAOJIAO-A

34.65

-1.646324

7991930

METALLURGICAL-A

2.25

0.4464286

72156901

CHINA PETROLEU-A CHINA RAILWAY-A

6.43

0.7836991

63712920

CHINA RAILWAY-A

3.33

3.416149

134740050

NINGBO PORT CO-A

2.52

-0.7874016

47878747

4.24

0.952381

MOVERS 150

CHINA SHENHUA-A

25.16

-0.03972984

14672385

82731227

HIGH

2551.81

CHINA SHIPBUIL-A

4.72

-0.4219409

29372388

PETROCHINA CO-A

9.05

31092581

LOW

2485.56

3.8

-1.298701

28564938

PING AN BANK-A

16.3

1.938712

35716925

CHINA STATE -A

3.89

-1.518987

145617876

PING AN INSURA-A

47.22

0.2334961

28328430

CHINA UNITED-A

3.51

0.5730659

59405321

POLY REAL ESTA-A

13.94

-1.761804

61086314

10.12

166448824

QINGDAO HAIER-A

13.42

18095734

NAME

PRICE DAY %

Volume

PRICE DAY %

Volume

ACER INC

25.2 -0.7874016

11486648

FORMOSA PLASTIC

ADVANCED SEMICON

25.7

-1.908397

20773714

FOXCONN TECHNOLO

37 -0.5376344

2796643

CHINA VANKE CO-A

-0.2624672 -0.1086957

46636536

9.5

-2.263374

59922987

21 2555

INDEX 2535.985

PANGANG GROUP -A

CHINA SOUTHERN-A

129

3.8 9.19

52W (H) 2717.825 (L) 2102.135

2480

31-December

7-January

FTSE TAIWAN 50 INDEX

ASIA CEMENT CORP ASUSTEK COMPUTER AU OPTRONICS COR

319 -0.1564945 13.05

NAME

PRICE DAY %

-0.373599

4973683

TAIWAN MOBILE CO

88.2

-1.452514

7488044

TPK HOLDING CO L

FUBON FINANCIAL

35.35

17034745

TSMC UNI-PRESIDENT

53.8

-1.102941

7535456

UNITED MICROELEC

12.2

-1.612903

55917332

2122346

HON HAI PRECISIO

86.8

-1.363636

46871853

-5.090909

153347667

HOTAI MOTOR CO

242 -0.4115226

297230

CATCHER TECH

145

-2.684564

20273216

HTC CORP

288

0.3484321

15927876

CATHAY FINANCIAL

31.6

0.3174603

11149590

HUA NAN FINANCIA

16.6 -0.5988024

4052117

YUANTA FINANCIAL

CHANG HWA BANK

15.9

-0.625

6643121

LARGAN PRECISION

746

-6.982544

3777648

YULON MOTOR CO

CHENG SHIN RUBBE

74.7

-1.059603

3447103

LITE-ON TECHNOLO

-1.515152

2386433

CHIMEI INNOLUX C

15.9

-5.357143

135432575

301.5

-1.309329

15748409

CHINA DEVELOPMEN

7.54 -0.1324503

31074981

MEGA FINANCIAL H

22.8 -0.6535948

11328640 10774870

CHINA STEEL CORP

MEDIATEK INC

14708375

NAN YA PLASTICS

58.9

-1.833333

CHINATRUST FINAN

16.7

35171795

PRESIDENT CHAIN

156

-1.265823

573308

CHUNGHWA TELECOM

93.9

6537550

QUANTA COMPUTER

-2.587519

11439631

COMPAL ELECTRON

19.25

-1.282051

11820354

SILICONWARE PREC

31.4 -0.1589825

4024719

DELTA ELECT INC

104.5 -0.9478673

3446594

SINOPAC FINANCIA

12.6

0.8

6796176

FAR EASTERN NEW

33.25 -0.7462687

7216283

SYNNEX TECH INTL

54.6 -0.7272727

9504401

38.9 -0.2564103

5067416

FAR EASTONE TELE

73.7

4211335

TAIWAN CEMENT

FIRST FINANCIAL

17.8

0.2816901

6632537

TAIWAN COOPERATI

16.25 -0.9146341

6272334

FORMOSA CHEM & F

78.5 -0.1272265

6814808

TAIWAN FERTILIZE

74.9 -0.3989362

3104271

FORMOSA PETROCHE

85.6

3119387

TAIWAN GLASS IND

29.9

1169127

-2.727273

Volume

-2.287582

WISTRON CORP

MOVERS

105.5

1.932367

511

-3.766478

3104498 5904556

100.5 -0.9852217

40328657

30.25

1.340034

4050329

0.6711409

10537239

56.9

0.7079646

3731514

4 5500

INDEX 5417.42 HIGH

5497.74

LOW

5401.28

52W (H) 5621.53 (L) 4719.96

5400

3-January

7-January

January 8, 2013 business daily | 13

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

Max 32.45

average 32.281

MeLCo CroWN eNTerTaINMeNT

Min 31.9

Last 32.25

32.6

48.4

15.0

32.4

48.1

14.8

32.2

47.8

14.6

32.0

47.5

14.4

31.8

SaNDS CHINa LTD

average 36.912

Max 37.05

Max 48.4

average 47.68

Min 36.7

47.2

Last 36.85

Max 14.88

average 14.704

Min 14.44

Last 14.86

WyNN MaCaU LTD 19.4

23.2

37.0

19.2

23.0

36.8

19.0

22.8

36.6

18.8 Max 19.28

average 19.135

PRICE

WTI CRUDE FUTURE Feb13

92.62

-0.504887743

0.871269876

109.4300003

80.05999756

BRENT CRUDE FUTR Feb13

110.86

-0.404276345

-0.22500225

119.2999954

90.38999939

GASOLINE RBOB FUT Feb13

275.3

-0.408783417

-0.315023355

292.9699898

220.3500032

932

0.134300295

0.539374326

1031.5

800.25

3.319

0.973532096

-0.954938824

4.090000153

3.049999952

NATURAL GAS FUTR Feb13 HEATING OIL FUTR Feb13 Gold Spot $/Oz Silver Spot $/Oz

DAY %

YTD %

(H) 52W

Min 18.96

Last 19.2

22.6 Max 23.15

301.32

-0.149120191

-0.61349797

333.4599972

255.6599855

1654.05

-0.1238

-0.6254

1796.08

1527.21

30.11

-0.6123

37.4775

26.1513

1557.74

-0.0327

2.6348

1736

1379.05

Palladium Spot $/Oz

683.95

-0.6724

-2.2454

725.19

553.75

LME ALUMINUM 3MO ($)

2060

-2.646502836

-0.627110468

2361.5

1827.25

LME COPPER 3MO ($)

8085

-0.96766291

1.941747573

8765

7219.5

LME ZINC

2040

-2.298850575

-1.923076923

2220

1745

3MO ($)

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

WHEAT FUTURE(CBT) Mar13 SOYBEAN FUTURE Mar13 COFFEE 'C' FUTURE Mar13

PRICE

(L) 52W

Platinum Spot $/Oz

average 23.027

Last 23.05

Min 22.75

17355

-0.828571429

1.72919109

22150

15236

15.27

-0.098135427

0.626029654

16.84000015

14.89999962

685.5

0.771775083

-1.825993555

846.25

511

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

1.0484 1.6044 0.9279 1.3029 87.77 7.9833 7.7509 6.2298 55.125 30.46 1.2325 29.006 40.913 9670 92.015 1.20889 0.81203 8.1138 10.4004 114.35 1.03

DAY %

0.0382 -0.1556 -0.3556 -0.3061 0.4329 -0.0038 0.0052 0.0128 -0.0907 0.0328 -0.43 0.0517 0.0293 1.2203 0.4097 -0.0405 0.1305 0.0049 -0.1558 0.7521 -0.0097

1.0214 -0.816 -1.3471 -1.2206 -1.9027 -0.0013 -0.0039 0.0128 -0.2358 0.394 -0.9006 0.0931 0.2249 1.272 -2.9213 -0.1166 0.4175 1.2781 1.25 -0.6821 -0.0097

YTD %

(H) 52W

1.0857 1.6381 0.9972 1.3487 88.41 8.0039 7.7713 6.3964 57.3275 32 1.3006 30.245 44.35 9815 92.845 1.21846 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 NAME

(H) 52W

(L) 52W

3.3

2.167183

4.761902

3.32

2.17

1083241

CROWN LTD

11.15

1.363636

4.498593

11.19

7.95

1126416

751.5

0.568752091

-3.406169666

948.25

652

1378.25

0.80453465

-2.217098262

1728.25

1194.5

ARISTOCRAT LEISU

147.1

-0.169664065

2.294853964

249

141.25

PRICE

DAY % YTD %

VOLUME CRNCY

SUGAR #11 (WORLD) Mar13

19.02

0.901856764

-2.511532547

25.12999916

18.30999947

AMAX HOLDINGS LT

0.078

5.405405

11.42857

0.119

0.055

77975000

COTTON NO.2 FUTR Mar13

75.61

0.746169221

0.625499068

98.5

66.84999847

BOC HONG KONG HO

24.85

3.112032

18.2

15259151 192000

World Stock MarketS - Indices NAME

COUNTRY

PRICE

DOW JONES INDUS. AVG

NASDAQ COMPOSITE INDEX

FTSE 100 INDEX

CENTURY LEGEND

0.29

9.433968

0.335

0.215

CHEUK NANG HLDGS

5.84

1.038062

-2.50417

6.25

2.76

449100

CHINA OVERSEAS

25.3

2.42915

9.523808

25.6

12.066

26683579

CHINESE ESTATES

12.38

-5.351681

13.26

8.3

59000

CHOW TAI FOOK JE

13.22

0.1515152

6.2701

15.16

8.4

4676650

EMPEROR ENTERTAI

1.89

1.069519

1.92

0.99

1402000

FUTURE BRIGHT

1.42

7.575758

16.39344

1.43

0.41

10086000

DAY %

YTD %

(H) 52W

(L) 52W

13435.21

0.3274499

2.526456

13661.87

12035.08984

GALAXY ENTERTAIN

32.25

1.415094

6.260295

32.5

13.28

14659762

3101.657

0.03518712

2.720415

3196.932

2658.83

HANG SENG BK

118.6

-0.7531381

-0.08424343

120

1274294

6078.75

-0.1821066

3.067917

6091.5

5229.76

HOPEWELL HLDGS

34.15

0.5891016

2.706767

34.25

19.049

1059400

DAX INDEX

7759.19

-0.2209257

1.928432

7789.94

5914.43

HSBC HLDGS PLC

83.05

1.280488

2.152518

83.4

58.55

14646281

NIKKEI 225

10599.01

-0.8336366

1.960813

10743.69

8238.96

3490000

HANG SENG INDEX

23329.75

-0.005743409

2.969645

23402.44922

18056.4

CSI 300 INDEX

2535.985

0.4585628

0.5165855

2717.825

TAIWAN TAIEX INDEX

7755.09

-0.6520634

0.7219929

8170.72

HUTCHISON TELE H

3.51

1.73913

-1.404493

3.88

2.92

LUK FOOK HLDGS I

28.95

4.324324

18.64754

33.2

14.7

8843000

MELCO INTL DEVEL

10.58

5.378486

17.42508

10.7

5.12

19158000

2102.135

MGM CHINA HOLDIN

14.86

3.337969

5.991437

14.88

9.573

7857192

6857.35

MIDLAND HOLDINGS

4.15

5.597964

12.16216

5.217

3.249

6791000

NEPTUNE GROUP

0.149

2.758621

-1.973681

0.222

0.084

24485000

NEW WORLD DEV

12.64

1.771337

5.158066

13.2

6.63

32432047

SANDS CHINA LTD

36.85

0.5457026

8.541971

37.1

20.65

7005747

SHUN HO RESOURCE

1.47

-1.342282

5.000002

1.5

100000

KOSPI INDEX

2011.25

-0.03429526

0.7110463

2057.28

1758.99

S&P/ASX 200 INDEX

4717.325

-0.136649

1.470762

4750.7

3985

4397.935

-0.274035

1.882185

4427.652

3635.283

FTSE Bursa Malaysia KLCI

1692.16

-0.02481419

0.1900638

1699.68

1508.93

SHUN TAK HOLDING

4.39

4.773268

4.48

2.506

8277941

NZX ALL INDEX

887.562

0.3280356

0.6245694

889.036

718.491

SJM HOLDINGS LTD

19.2

1.052632

6.666667

19.28

12.15

5169757

PHILIPPINES ALL SHARE IX

3811.71

0.8807891

3.047596

3811.71

3053.67

SMARTONE TELECOM

14.3

0.140056

1.562501

17.5

12.96

2553000

23.05

3.131991

10.02386

25.5

14.62

12549939

JAKARTA COMPOSITE INDEX

14.2

37.2

NAME

CORN FUTURE

Last 48.4

CURRENCY EXCHANGE RATES

GAS OIL FUT (ICE) Feb13

METALS

Min 47.5

SJM HoLDINgS LTD

Commodities ENERGY

MgM CHINa HoLDINgS

WYNN MACAU LTD

HSBC Dragon 300 Index Singapor

629.19

-0.58

1.3

STOCK EXCH OF THAI INDEX

1419.74

0.2174128

1.997941

1425.26

1033.4

HO CHI MINH STOCK INDEX

434.19

1.908182

4.945252

492.44

332.28

BOC HONG KONG HO

3.07

Laos Composite Index

1243.25

0.909054

2.344475

1249.34

876.33

GALAXY ENTERTAIN

4.14

2.475248

4.282115

14.93

1.564626

5.363443

18.1

ASIA ENTERTAINME

3.45

7.8125

12.7451

7.24

2.4

310837

BALLY TECHNOLOGI

46.81

1.518109

4.696938

51.16

39.14

629865

3.3

2.33

9700

4.14

1.82

9500

10.92

3483337

INTL GAME TECH JONES LANG LASAL LAS VEGAS SANDS

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

86.9

0.4856614

3.526325

87.62

61.39

242443

51.1903

2.874397

10.89753

58.3216

32.6127

10555785 4194185

MELCO CROWN-ADR

18.2

1.5625

8.076009

18.28

9.13

MGM CHINA HOLDIN

1.85

1.96

1.2863

1000

MGM RESORTS INTE

12.64

1.444623

8.591062

14.9401

8.83

9495856

SHFL ENTERTAINME

14.63

1.597222

0.8965517

18.77

11.75

354600

SJM HOLDINGS LTD

2.48

3.76569

7.35931

2.48

1.5681

15850

120.78

1.206637

7.369546

129.6589

84.4902

2129025

WYNN RESORTS LTD

AUD HKD

USD

14 |

business daily January 8, 2013

Opinion Alternative fiscal medicine? Jean Pisani-Ferry

Director of Bruegel, an international economics think tank, and Professor of Economics at Université Paris-Dauphine

orget the fiscal cliff. The real issue is the fiscal mountain. According to the International Monetary Fund, the challenge of reducing the public debt/GDP ratio to a safe level is daunting for most advanced countries. In Europe, many governments, having embarked on the path of fiscal consolidation while their economies were still weak, are now struggling with the growth consequences. As a result, debt stabilisation seems to be an increasingly elusive target. In the U.S., consolidation has barely begun. Because the private economy is now stronger, it may benefit from more auspicious growth conditions, but the magnitude of the fiscal retrenchment needed – more than ten percentage points of GDP, according to the IMF – is frightening. In Japan, not hing has been done thus far and the size of the required effort defies imagination. All advanced-country governments are still officially committed to undergoing the pain of adjustment. But how many will become exhausted before implementing this programme in full? Willingly or not, some may seek recourse to inflation or administrative measures aimed at trapping domestic savings into financing the state

and keeping bond rates low (what economists call financial repression) – or, eventually, to outright debt restructuring. All three unorthodox remedies have been used in past debt crises. They can be regarded as alternative forms of taxation, albeit implicit rather than explicit. In the end, they are different methods of forcing current and future generations to shoulder the burden of accumulated debt. Is it preferable to adjust in full? Or is it advisable to blend consolidation with a dose of alternative medicine? Here, the discussion is often couched in moral terms. Adjustment, we are told, is morally commendable, whereas the alternatives all amount to repudiating the contracts that governments entered into with bondholders.

adjustment to be distributed precisely. The decision belongs to the legislator. Some adjustments, like in France nowadays, weigh mostly on high-income, highwealth individuals; others, like in Italy, weigh on pensioners. These choices were made democratically, in parliaments, as part of budget decisions. The unorthodox techniques, however, are less nimble and more opaque. Inflation affects those with assets (cash, bonds) or incomes (wages, income from saving accounts) that are not indexed (or are under-indexed) to prices. Financial repression is basically a form of

Democratic choices This may be true, but governments are political animals. They care more about voters’ welfare than about moral principles. So it is worth discussing in purely economic terms what orthodox and unorthodox choices imply from the standpoints of equity and efficiency. Start with equity. From this perspective, adjustment is hard to beat. Combining taxation and spending cuts allows the burden of

Rather than flirting with illusions, governments should confront the hard choices ahead of them

administrative taxation of domestic savings. And restructuring is a levy on bondholders’ wealth, including that of middle-class pension savers. On distributional grounds, there does not seem to be a good reason to resort to them in lieu of relying on outright taxation. There are exceptions, though. First, governments and parliaments may be politically unable to take responsibility for distributional choices and prefer to keep them hidden. This is not a good reason, but it does happen. Second, restructuring concentrates the burden on those holding bonds issued before a certain cut-off date. It thus draws a line between the past and the future – leading to what John Maynard Keynes called “euthanasia of the rentier.” When the burden of past turpitude is too heavy, there may be no other way to protect future generations. Finally, both inflation and restructuring put some of the burden on non-resident bondholders (through exchange-rate depreciation and the direct reduction of the value of assets, respectively). For taxpayers, this is a tempting formula, especially when a large share of the debt is held externally. To make foreigners pay is, however, disputable. After all, they were not the beneficiaries

of the public goods or transfers financed by the issuance of debt. So it should be reserved for cases when the country as a whole has grown insolvent. Turn now to efficiency. Large-scale adjustments may leave an economy with a weaker capacity to generate growth, because high taxes have deterred investment or cuts in public spending have eroded the quality of infrastructure and education. But this is true of the unorthodox remedies as well. Financial repression distorts choices by channelling savings to budget financing and away from investment. Inflation implies higher long-term interest rates until markets regain confidence in the central bank. And restructuring weakens banks, which generally hold large portfolios of government bonds, thus making them less able to finance the economy. Indeed, restructuring undermines the foundation of the entire financial system: the safe-asset role of sovereign debt. As developing countries have learned from experience, all these effects are bad for capital allocation and growth. But an exception can again be made: When both the private and public sectors are overburdened with debt, adjustment leads to a debtdeflation spiral, particularly when conducted under a fixed exchange-rate regime. In such conditions, full adjustment risks becoming self-defeating, or at least unreasonably painful, as illustrated by the Greek case. Despite their economic costs, restructuring public debt or eroding all public and private liabilities through inflation can be less detrimental options. In the end, the alternatives to adjustment are not soft. Barring extreme situations, they generally underperform fiscal adjustment from the standpoint of equity, and are no better in terms of efficiency. So the idea that they offer an easy way out of advanced countries’ current predicament is a fantasy. Rather than flirting with illusions, governments should confront the hard choices ahead of them. Relying on alternative remedies is sometimes necessary, but they are not painless. They should be considered treatments of last resort. © Project Syndicate

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 8, 2013 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Times of India Kingfisher Airline Ltd may theoretically have two years to restart operations but top aviation ministry sources say that unless the airline does so in the next month or two, it could well be the end of the road for it. For the airline’s international flying rights-which remain in demand even when domestic traffic is dipping sharply-are going to be given to other Indian carriers, along with its airport slots, in the coming summer schedule if the airline shows no sign of life soon.

Yomiuri Shimbun Kirin Holdings Co. plans to sell buildings used for its current head office in Chuo Ward, Tokyo, and one used by group company Kirin Brewery Co. in Shibuya Ward, Tokyo, this year to reduce its interest-bearing debts, sources close to the company said. Based on market values for real estate in those areas, the holdings company expects its head office building to sell for between 5 billion yen (US$56.7 million) and 10 billion yen, and Kirin’s head office building to sell for between 10 billion yen and 20 billion yen.

Wall Street Journal Subaru, the car-making unit of Fuji Heavy Industries Ltd, is recalling 633,842 vehicles to fix a potential electrical problem that could cause fires. In a document filed with the National Highway Traffic Safety Administration, the company said the recall includes Legacy and Outback vehicles from the 2010 and 2011 model years, Tribeca SUVs from the 2006 through 2012 model years that were sold before January 2012, and certain 2009 through 2012 Forester SUVs sold before January 2012.

Bangkok Post The dispute between Thai-Lao Lignite (TLL) and the Laotian government has taken a new twist benefiting the latter, with the recent verdict by a Malaysian court setting aside an arbitration award that Vientiane was ordered to pay the Thai firm. The verdict of the High Court in Kuala Lumpur nullifies the previous award granted in 2009 to TLL. The company sought US$57 million in compensation after the Laotian government “improperlyterminated”itspowerdevelopment agreement with the company in 2006.

Europe’s New Year’s irresolution Joschka Fischer

Germany’s foreign minister and vice-chancellor from 1998 to 2005

ill the euro zone crisis end in 2013, or will it drag on throughout the year, and perhaps even deteriorate anew? This is likely to be not only the crucial question for the European Union’s further development, but also a key issue affecting the performance of the global economy. While the EU clearly needs internal reforms, two external political factors are central to its prospects this year. The first is America’s self-imposed fiscal cliff, which could throw the United States into recession, with massive repercussions for the world economy, and thus for Europe. Second, a hot war in the Persian Gulf, in which Israel and/or the U.S. confronts Iran over its nuclear programme, would result in a sharp rise in global energy prices. Either scenario would greatly aggravate Europe’s crisis: soaring oil costs or another U.S. recession would harm even the strong northern European economies, to say nothing of the alreadydepressed countries in Europe’s south. But, even then, the humanitarian consequences – especially in the case of another Middle East war – would most likely overshadow these scenarios’ impact on the European crisis. Indeed, Europe’s crisis only seems to be economic or financial in nature; in reality, it is political to the core, for it has revealed that Europe lacks two things: a political framework – that is, more statehood – for its monetary union, and the vision and leadership to create it. Since the eruption of the European crisis in 2009, the EU and the euro zone have experienced massive, unprecedented changes. Today, the euro zone is on its way toward implementing a banking union, probably followed by a fiscal union, which in turn will lead to a genuine political union that centralises sovereignty over essential economic policymaking. But these developments have not come about as part of a strategy. Had there been no crisis, German Chancellor Angela Merkel and other national leaders in the EU would never have been prepared to take these steps. And this is not likely to change in 2013. Even today, with the euro zone’s essential players apparently convinced that they are out of the woods, national narrow-mindedness is experiencing a revival in the EU, and the desire for change seems to be slackening. In particular, Merkel wants to be re-elected in 2013, and appears content to leave Europe for later. Unfortunately, with the election set for September, that means that threequarters of the year will

be wasted. And, because another Merkel-led coalition seems to be more likely (at least from today’s vantage point) than a real change in government, post-election Germany, absent renewed pressure from the crisis, will remain wedded to the politics of small or tiny steps, leaving Europe treading water.

Growing problem As a result, developments in southern European will remain a key factor determining Europe’s course in 2013. The depression will continue, dimming prospects for economic growth throughout the EU and the euro zone. The gap between the rich north and the crisis-ridden south will widen, highlighting their contradictory interests and thus exacerbating Europe’s tendency toward separation, primarily between the north and the south, but also between the euro zone and the rest of the EU. The European Central Bank will serve as the euro zone’s centre of power even more than it does today, because it is the monetary union’s only institution that can actually act. Though the ECB has absolutely nothing in common with the old Deutsche Bundesbank, the German public has not recognised this. But the fact that the ECB’s power is only a technocratic substitute for the euro zone’s missing democratic political institutions will remain a growing problem in 2013. This is also true, more generally, of German dominance of the EU. Should it continue without new institutional regulations that mutualise its role within the euro zone, 2013 will be a year

of further disintegration. It will also be a year of destiny for France, whose government is keenly aware that, without painful reforms, the country might be doomed; the only question that remains is whether it can implement them. The answer will determine not only President François Hollande’s political future, but also the future

Europe’s crisis only seems to be economic or financial in nature; in reality, it is political to the core

of the EU, because, without a strong German-French tandem, Europe’s crisis cannot be overcome. Meanwhile, Europe’s negative political trends are reinforced by uncertainty in Britain about whether to remain in the EU, Italy’s upcoming general election, and aggressive nationalism in many member states. Given this, Europe’s condition is quite obviously far from being stabilised, despite some leading Europeans’ recent statements suggesting otherwise. Europe in 2013 will continue to need the pressure from the crisis in order to find a way to overcome it once and for all. Regardless of electoral outcomes in important EU member states, Europeans will remain unable to expect much from their political leaders, because opposition forces generally have little more to offer than the incumbents do. We should wish Europe a successful year, but it would be foolish to bet on it. © Project Syndicate

16 |

business daily January 8, 2013

CLOSING LG wants to increase investment

Xinhua plans domestic IPO: regulator

South Korea’s LG Group has announced plans to increase investment, in an attempt to boost its market share amid strong competition. The firm said it would invest 20 trillion won (US$19 billion) in various subsidiaries, including LG Electronics, in 2013. The investment will be used to boost production facilities and fund research and development of products. Almost two-thirds of the investment will be allocated to increase production facilities at the group’s electronics businesses. This will include expanding production lines to manufacture ultra-high resolution liquid crystal display (LCD) and organic light emitting diode (OELD) display panels.

China’s official Xinhua news agency plans to list its online news portal, the securities regulator said, which would make it the second state-owned media outlet to offer shares domestically. Xinhuanet.com has applied to the China Securities Regulatory Commission for approval of an initial public offer for a future Shanghai listing, the regulator said. The commission gave no timetable or size for the offer. The Xinhua stock offer, if carried out, would follow a similar move by the Communist Party’s mouthpiece the People’s Daily last year. The newspaper raised 1.4 billion yuan (US$225 million) in April last year.

phased timetable for the introduction of the liquidity coverage ratio ... will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery,” said Mr King, who is also Bank of England governor.

Regulators ease bank asset rules

Market pressure

Banks win more flexible liquidity rules from Basel Huw Jones

International banks had been fearing tougher liquidity rules

lobal regulators gave banks four more years and greater flexibility to build up cash buffers so they can use some of their reserves to help struggling economies grow. The pull-back from a draconian earlier draft of new global bank liquidity rules, which aim to help prevent another financial crisis, went further than banks had expected by allowing them a broader range of eligible assets. Banks had complained they could not meet the January 2015 deadline to comply with the new rule on minimum holdings of easily sellable assets, known as the liquidity coverage ratio and

devised by the Basel Committee of banking supervisors, and at the same time supply credit to businesses and consumers. The committee’s oversight body agreed on Sunday to phase in the rule from 2015 over four years and widen the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds. The new, less liquid assets can only be included at a hefty discount to their value, but the changes are a significant move from the draft version of the rule unveiled two years ago. Bank shares in Asia edged higher yesterday, with the MSCI financial

subindex for Asia Pacific shares outside Japan up 0.3 percent, while Hong Kong-listed shares of HSBC Holdings Plc, which has high exposure to Europe where liquidity concerns are greater, rose 1.1 percent. The Basel Committee, drawn from nearly 30 countries representing nearly all the world’s markets, hopes the amendments will stop banks from shrinking loan books to comply with the rule. “For the first time in regulatory history, we have a truly global minimum standard for bank liquidity,” the oversight body’s chairman Mervyn King told a news conference in Basel, Switzerland. “Importantly, introducing a

“The inclusion of good quality RMBS in the liquidity buffer is a very welcome twelfth night present,” said Simon Hills, executive director of the British Bankers’ Association. “It will make a real difference to issuance volumes by improving their marketability so that banks are better able to manage their balance sheets and provide funding to the real economy,” Mr Hills said. The wider pool of assets will also make it easier to implement the rules for banks in Asia, where illiquid government and corporate bond markets or low credit ratings for emerging market debt had complicated the outlook for compliance. However, there will be some concerns that the easing of the rules will let banks off too easily. “A lot of the banks in Asia really do need to improve their liquidity risk management and my fear is this will give them an excuse to delay doing anything,” said Simon Topping, a former Hong Kong bank regulator who is now Asia-Pacific head of KPMG’s Financial Services Regulatory Centre of Excellence. The rule requires banks to hold enough liquid assets such as government and corporate bonds to cover net outflows for up to a month, to avoid taxpayers having to bail them out. Reuters

Yuan makes tiny gain But central bank seen blocking major appreciation

he yuan was little changed against the dollar yesterday, as the central bank signalled its intention to keep appreciation pressure in check, traders said. The yuan closed at 6.2296 per dollar in heavy trading, 0.01 percent stronger than Friday’s close of 6.2303. The central bank set its midpoint at 6.2872 on Friday, a shade stronger than Friday’s fix of 6.2897. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 1 percent from the

midpoint it sets each morning. Traders are wary of predicting the yuan’s movements in 2013, but most expect the yuan to remain relatively stable, after it appreciated by 1 percent in 2012. The PBOC’s recent midpoints have clearly signalled a preference for stability, with the daily fixes confined to a range of less than 100 pips since the beginning of December. Suspected intervention by the central bank has stifled pressure created by corporate demand for the yuan to appreciate.

Big banks still apparently buying dollars on behalf of central bank

The yuan hit the top-end limit of its daily trading band nearly every day in November and early December. That created a deadlock which trading volume evaporated as dollar bids were absent from the market. The deadlock was broken when major state banks – apparently acting on behalf of the PBOC – stepped in to buy dollars. That

restored liquidity to the market but left traders wondering if the market could sustain normal functioning without central bank support. Traders say that major state banks are still apparently serving as dollar buyers of last resort, even as corporate clients continue to demand more yuan than dollars. Reuters