Macau Business Daily, January 9, 2013 by Business Daily

Year I Number 195 Wednesday January 9, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã MOP 6.00

acau enterprises were involved in more investment projects in mainland China last November judged year-on-year but they put in fewer resources, official data from the mainland authorities show. Macau’s investment projects in the mainland were worth just US$10 million that month. But there’s no background information available from officials

www.macaubusinessdaily.com

More spend less - on mainland investments

in either the mainland or Macau to explain why more people are spending on aggregate smaller amounts of money. Figures released from the Chinese Ministry of Commerce earlier this week show there were 47 projects funded by Macau companies approved in November, up by 38.2 percent from the same period of 2011.

Data also show the ministry approved 277 Macaufunded investments in mainland in the JanuaryNovember period of last year, up by 5.3 percent from the equivalent period last year. But the value of those deals slipped by 27.9 percent to US$480 million. Exports from Macau to the mainland increased five-fold from November 2011 to US$50 million. More on page 3

I SSN 2226-8294

HANG SENG INDEX 23270

23225

23180

23135

23090

January 8

Cold snap, strong yuan, to push up beef again

Tax crimes, money laundering tied – but not until 2014

Food importers are blaming bad weather and the yuan’s appreciation against the U.S. dollar-pegged pataca for a likely rise at Chinese New Year in the price of fresh beef. The price for beef rose six times last year, rising by 37.4 percent to 4,480 patacas (US$561) per 60 kilos at the year’s end. At the end of December, the import price of fresh pork was 22.2 patacas (US$2.78) per kg, while the wholesale price was 24.5 patacas and the retail price 63 patacas, official data show.

A law revision that would allow for tax crimes to be considered as logically linked to money laundering will only be sent to the Legislative Assembly next year. Deborah Ng, director of the Financial Intelligence Office, told Portuguese news agency Lusa the antimoney laundering law must be updated “in order to match new international standards”. In February the international Financial Action Task Force, of which Macau is a member, revised its recommendations for preventing money laundering and terrorist financing.

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Fiscal reserve seeks better returns via yuan investments Page 3

Strong start to January for casinos, say analysts Page 7

Paradise pays boss HK$740 mln for casino game patents Page 7

HSI - Movers Name

%Day

TINGYI HLDG CO

4.22

WANT WANT CHINA

2.55

HENGAN INTL

1.15

SINO LAND CO

0.84

HONG KG CHINA GS

0.71

ESPRIT HLDGS

-2.61

CHINA RES LAND

-2.74

LI & FUNG LTD

-3.27

CHINA LIFE INS-H

-3.31

PING AN INSURA-H

-4.01

Source: Bloomberg

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business daily January 9, 2013

macau

Price of meat certain to rise at Lunar New Year Intense demand for fresh meat will mean further price increases, a supplier says Stephanie Lai

sw.lai@macaubusinessdaily.com

rices of imported fresh beef and pork will rise in February, mainly because of higher demand at the Lunar New Year and interruptions in supply due to winter weather, the city’s main supplier of meat has warned. “During this period in winter the demand for fresh pork and beef usually outweighs supply more than

MOP 125.6

Retail price per kilogram of fresh beef on December 31

in other periods,” the executive deputy general manager of Nam Yue Food Stuff and Aquatics Co Ltd, Tony Chen Wei, told Business Daily. The deputy general manager of fresh meat distributor China Product and Special Production Co, Lo Pui Leong, said: “The pressure mainly comes from [the effect of] harsher winter conditions like more rain and snow on logistics, as well as higher demand in the mainland market.” Macau’s pork is imported from over 30 pig farms in the provinces of Guangdong and Hunan, and most of its beef comes from Inner Mongolia. Given the supply chains and the appreciation of the yuan, Mr Chen and Mr Lo expect the wholesale price of pork to increase by less than 10 percent next month. At the end of December the import price of fresh pork was 22.20 patacas (US$2.78) per kilogram, the wholesale price was 24.50 patacas and the retail price was 63.00 patacas, official data show. For fresh beef the import price

was 45.10 patacas per kilogram, the wholesale price was 73.20 patacas and the retail price was 125.60 patacas. Mr Chen said wholesale prices were adjusted regularly in accordance with price fluctuations in mainland China and Hong Kong, the average cost of animal feed, and transport and quarantine costs. He said the price would be adjusted this month. Last year the wholesale price of pork was adjusted four times, ending the year 1.71 percent lower than at

the beginning. The wholesale price of beef was adjusted six times, ending the year 37.4 percent higher than at the beginning. “In the past two years we saw a rapid increase in the fresh beef wholesale price, but I think this trend may not continue this year because we are expecting more cattle supply,” said Mr Chen. He expects the price of beef to increase by less than 30 percent this year.

Suppliers expect an increase of less than 10 percent in the wholesale price of pork next month

Govt sees no wrong in food prices But considers revising regulations to protect consumers from price fixing

he government taskforce on food prices “so far” sees no illegal behaviour involving food price manipulation in the Macau market – at least in relation to the existing legal framework. But Economic Services Bureau director Sou Tim Peng, a member of the taskforce, said they would work with the Legal Affairs Bureau “to improve the current regulations to guard against any irregularities in food prices”. The Legislative Assembly criticised the special team – set up last June to help stabilise the food prices – during a question and answer session yesterday. Legislator Melinda Chan Mei Yi said: “The cross-departmental [team] has been set up for over six months but [I] do not see any contributions from the taskforce.” Fellow member Lee Chong Cheng criticised the team for so far only managing to publicise data on food products instead of tackling the

surging food prices. Official data show the price of food and non-alcoholic beverages surged 8.7 percent in the first 11 months of this year. Mr Sou defended the taskforce, stressing it had held 12 work meetings and carried out nearly 500 inspections in different stores. The government has also been working with the industry to explore more sources of food supply to stabilise the prices. Authorities organised 10 visits to mainland China and Southeast Asian countries in the last three years. But he added, “The government cannot do everything as it also involves some business decisions”. Apart from looking for new sources to supply Macau’s food needs, the taskforce says it is also considering broadcasting information about local food prices on television to increase ‘transparency’ for consumers. T.L.

January 9, 2013 business daily | 3

MACAU Macau investment projects in the mainland in November were worth just US$10 million

0.86 % Macau’s share of foreign direct investment in the mainland since 1990

More SMEs launch China investment Macau investors are putting less money into more projects in the mainland Tony Lai

tony.lai@macaubusinessdaily.com

acau enterprises were behind more new investment projects in mainland China in November but put less money into them, data from the mainland authorities show. A Macau Chamber of Commerce representative and a commercial law expert told Business Daily the figures are good news, hinting at a bigger involvement of small and medium enterprises (SMEs). The Ministry of Commerce disclosed this week that it approved 47 new investment projects by Macau companies in November, 38.2 percent more than a year before. This is the highest number of new projects funded by Macau companies in any month since the end of 2008. However, the combined value of

the projects was only US$10 million (80 million patacas), the least in any month since last January, when the value was also US$10 million – the lowest figure since the ministry began publishing such data monthly, in 2007. “It is not at all a bad scenario. It means more Macau SME are interested in entering the investment market in China,” said Vong Kok Seng, Macau Chamber of Commerce vice-president. Carlos Simões, a partner at commercial law specialists DSL Lawyers, agrees: “It is preferable to have many smaller companies engaged in small business that have room to grow in the future”. He went even further: “In fact, it is SME that will have the flexibility

and drive to explore the opportunities China has. It is more difficult for bigger companies that already have an established business”.

Service rush The ministry also said that it had approved 277 new investment projects by Macau companies in the first 11 months of last year, 5.3 percent more than in the equivalent period the year before. But the combined value of the projects was only US$480 million, 27.9 percent less than a year before. Mr Vong believes the trend is set to continue, as the Closer Economic Partnership Arrangement between Macau and the mainland further opens up China’s service market.

There is no data on in which sectors the investment went to but the businessman believes most of it is now going to the booming service activities. The investment threshold is lower for services than for manufacturing, where “one has to invest in equipment and property,” Mr Vong stressed. There is also usually less red tape for services, Mr Simões said. “The requirements for industrial activities are much higher, involving special licences, and usually require complex joint ventures” with mainland China firms, he explained. Since 1990 the ministry has approved over 13,100 investment projects by Macau companies, together worth US$10.9 billion. These projects account for 0.86 percent of all foreign direct investment in the mainland. The value of trade between Macau and the mainland surged to US$310 million in November, half as much again as a year before. Macau’s imports from and exports to the mainland both increased. Macau government data show exports to the mainland were worth US$50 million in November, six times what they were worth a year before. However, most of the exports were re-exports – goods shipped in only to be shipped out, with no value added to them here. In the first 11 months of last year the value of trade between Macau and the mainland rose to US$2.6 billion, 15.4 percent more than in the equivalent period the year before Imports from the mainland accounted for 90 percent of the trade. With Vítor Quintã

Greater yuan exposure for fiscal reserve Financial regulator might release more cash for investment in Chinese interbank bond market Tony Lai

tony.lai@macaubusinessdaily.com

he Monetary Authority is considering putting more capital from the fiscal reserve into yuan-denominated investment vehicles – in both the mainland Chinese market and yuan offshore markets. The idea is to get a higher return rate than the reserve is currently achieving. According to data released last month, the reserve earned nearly 1.1 billion patacas (US$137.5 million), or 1.1 percent of its initial value, from its establishment in February last year to October. That was well below the underlying rate of consumer price index inflation for the period, which averaged 6.3 percent across the nine months. Anselmo Teng Lin Seng, the Monetary Authority president said the

body had taken “a safer approach” to investment at the beginning of the reserve’s life, making placements in products such as savings and bonds denominated in Hong Kong or United States dollars. He told the Legislative Assembly yesterday: “There was limited capital we could use at the beginning as we have to comply with the law that [states] the reserve must have enough money for 18 months of the government budget.” The official revealed that the return on investment of the 99.95-billion-pataca reserve had improved to 1.5 percent. But he said the government would continue to aim for more yuandenominated products – with relatively

low risk and higher return – in both mainland and offshore yuan markets like Hong Kong in the future. “In February there was basically no investment involving yuan but the yuan-denominated investment already accounted for over 25 percent of the total by the end of October,” Mr Teng explained. The People’s Bank of China approved last year a quota of 10 billion yuan (12.5 billion patacas) for Macau’s financial regulator to invest in the mainland bond market. “The quota we applied for was a few times higher than 10 billion yuan but in the end we only got 10 billion yuan as a trial,” Mr Teng said. “We may ask for more [quota].” The financial head added they

MOP19,355 New upper income limit for subsidised housing eligibility for singles had more room for “diversified and progressive investments,” including the stock market, after the 2011 surplus of 77.37 billion patacas was transferred into the reserve. He added they would strive for a balance between risk and return, and continue to listen to different opinions from experts.

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business daily January 9, 2013

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HOSPITALITY Turning tides Last year’s data for tourist arrivals suggest the growth in numbers is stalling. The numbers of tourists from most of the places that supply the bulk of our visitors have been increasing only slowly, or decreasing. One of the consequences is that we rely increasingly on mainland Chinese visitors – and the growth in their numbers was less vigorous last year than it was 2011. Assuming that the data for December do not turn out to be exceptional, last year’s growth in tourist arrivals will probably be under 5 percent – perhaps somewhere between 3 percent and 4 percent. In 2011 growth topped 12 percent.

The rates of growth in arrivals of tourists from most of our sources of visitors have been slowing. This is the case with arrivals of tourists from the provinces of Guangdong and Fujian, our two biggest sources of mainland tourists. This trend, if sustained, is a cause for some concern – particularly the slowing of growth in arrivals from Guangdong. In 2011 slightly more than half of our visitors were from Guangdong. Any reduction in arrivals of tourists from Guangdong will have a big effect on the number of arrivals generally. Other mainland provinces that sent us a lot of visitors last year – Fujian, Zhejiang and Hunan – sent much smaller proportions of the total than Guangdong. Zhejiang and Hunan together, and all the other mainland provinces combined sent more visitors, who made up for fewer visitors from elsewhere. All this suggests a slight decrease in Guangdong’s importance as a source of tourists. The proportion of mainland tourists that came from Guangdong was probably two or three percentage points lower last year than the year before.

Reolian hit by new court loss in concession fight Firm chose wrong means to fight for status of public service concessionaire, court says Vítor Quintã

vitorquinta@macaubusinessdaily.com

he Court of Second Instance has for a second time rejected bus operator Reolian Public Transport Co Ltd’s plea to become a public service concessionaire. The company wants all three bus operators, including Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM) – to be considered public service concessionaires. For that purpose Reolian asked the Financial Services Bureau to be granted an exemption from paying road tax on 22 of its buses – a benefit automatically granted to public service concessionaires. The request was turned down in November 2011, as the government claimed the contract signed with Reolian merely involves “providing public transport services”.

The authorities stressed that the company’s revenue does not come from the fees charged from users but from a service charge paid by the government. The judgement released on Monday

MOP 1.64 bln

Service charge Reolian could receive during sevenyear contract

HK eyes Macau extradition deal

J.I.D.

2-3 ppts Estimated fall in proportion of mainland Chinese tourists from Guangdong in 2012

HK’s secretary for Justice, Rimsky Yuen, met Macau court officials on Monday

ong Kong is interested in setting up an agreement for the extradition of convicted individuals between the two SARs, Hong Kong’s secretary for Justice,

Rimsky Yuen Kwok Keung, said in Macau on Monday. Quoted by South China Morning Post, Mr Yuen pledged to work on extradition of criminals with Macau,

reveals that the administration had agreed to pay up to 1.64 billion patacas (US$205 million) to Reolian during the whole contract. Later on the operator did get its road tax money back, after filing a request to the Transport Bureau. As such, approving the appeal would have “no favourable, positive or truly useful repercussion” for Reolian, the Court of Second Instance said. The judges said the operator should have gone for an alternative action, by asking the court to confirm its legally protected rights or to look at how the public transport contract should be interpreted. Reolian has already appealed to the Court of Final Instance – as part of another lawsuit – in its struggle to become a public service concessionaire, general manager Cédric Rigaud told Business Daily in November.

which he called an area of concern. “We can see the necessity to follow up and work on mutual judicial assistance with Macau in areas including civil, business and criminal laws, other than arbitration,” he said. However, the official did not mention any schedule for the introduction of an extradition agreement. There is no extradition law between the two regions, which means it is not mandatory for Macau people to stand trials in Hong Kong and vice versa. In addition, if a person in convicted in one of the regions, it is not obliged to serve the sentence on the other city. For instance, Hong Kong tycoon Joseph Lau Luen Hung was absent from a Court of First Instance hearing on a case in which he is charged with corruption and money laundering. The boss of property developer Chinese Estates Holdings Ltd claimed he was ill but in fact he cannot be forced to attend the trial or, if found guilty, serve the sentence. However, the Public Prosecutions Office could ask the court to freeze Mr Lau’s assets in Macau if he is found guilty. V.Q.

January 9, 2013 business daily | 5

MACAU Public face of G2E Asia trade show stepping down Frank Fahrenkopf, president and CEO of the American Gaming Association – an organiser of the Global Gaming Expo Asia casino equipment trade show held annually in Macau – is to step down at the end of June. He will still be in post at G2E Asia 2013 to be held at CotaiExpo at The Venetian Macao from May 21 to 23. Mr Fahrenkopf came to wider public attention at last year’s show when he criticised local equipment manufacturer LT Game Ltd for using the event to “leverage” its litigation with U.S.-based SHFL entertainment Inc. over an electronic game patent. The AGA didn’t say who will replace Mr Fahrenkopf.

Money laundering law changes due only next year The government is preparing to strengthen the law against money laundering and may permit the freezing and seizure of assets Vítor Quintã

vitorquinta@macaubusinessdaily.com

bill to amend the law to make tax evasion sufficient reason for the authorities to use their powers against money laundering will be submitted to the Legislative Assembly next year. The director of the Financial Intelligence Office, Deborah Ng, has told Portuguese news agency Lusa that the law on money laundering must be amended to meet new international standards. In February the international Financial Action Task Force, of which Macau is a member, revised its recommendations for preventing money laundering and the financing of terrorists. The task force now requires financial institutions to verify the identity of account holders always. Ms Ng said that many of the necessary changes “cannot be simply addressed through reforms at the operational level”. Her office has released a consultation paper on the changes, seeking the opinions of financial institutions, casinos, retailers of expensive goods and estate agents. The consultation was completed in November. Ms Ng said the new measures would affect financial institutions mainly, but also other kinds of companies. “There are big companies, like the gaming firms, and very small operations, like pawnshops, so we cannot apply the same level of requirements. As such, each of the regulators will issue specific guidelines,” she said. These regulators would include the regulator of real estate intermediaries and agents, still to be named. The act regulating estate agents was published on the Official Gazette in November and will come into effect in July.

The U.S. Department of State has repeatedly called for Macau to enhance its ability to support international efforts against money laundering, such as by permitting the authorities to freeze and seize assets. “Even though we are equipped with an overall legal framework that allows for the application of international conventions, we do not have the operational procedures to really implement the measures,” Ms Ng said. The bill would permit the immediate freezing of assets held here by individuals or institutions subject to U.N. sanctions. It would allow the authorities to use their powers against money laundering, and the financing of terrorists as well as nations accused of proliferation of weapons of mass destruction. The United States sanctioned Macau’s Delta Asia Bank Ltd in 2005 after accusing it of laundering money for the North Korean government.

Dubious deals The number of reports of suspicious transactions received by the Financial Intelligence Office rose last year, although the number of cases that it passed on to the Public Prosecutions Office for further investigation fell, official data show. The Financial Intelligence Office received 1,840 reports of suspicious transactions last year, –, up by17.7 percent more than the year before. In the first half it had received one-third more reports of suspicious transactions than a year before. The Financial Intelligence Office passed on 165 cases of suspicious transactions to the Public Prosecutions Office last year, 13.1 percent fewer than a year before.

A new bill would require banks to verify the identity of account holders always

Asset freeze Ms Ng said the Financial Intelligence Office also hoped to send to the Legislative Assembly a bill that would allow the authorities to freeze and seize assets. The Law Reform and International Law Bureau is now drawing up the bill. “We expect to receive a preliminary version by the end of this month,” Ms Ng said. The government will hold consultations about its proposals before sending the bill to the assembly. Ms Ng said her office is still considering whether the government should consult the public at large or only specific interest groups.

1,840 Number of reports of suspicious transactions sent to the Financial Intelligence Office last year

In the first half the Financial Intelligence Office had passed on 115 cases of suspicious transactions to the Public Prosecutions Office, having passed on only 31 a year before, suggesting an upswing in serious crimes such as money laundering. The Financial Intelligence Office passed on to the prosecutors roughly one in 10 cases of suspicious transactions reported to it in the first half, having passed on only one in 20 a year before. Of the suspicious transactions reported to the Financial Intelligence Office last year, 1,328 or 72.1 percent were in the gaming sector.

Most of the other suspicious transactions reported were in the banking or insurance sectors. Casinos must report any transaction worth over 500,000 patacas (US$62,500) to the Gaming Inspection and Coordination Bureau. The bureau then reports transactions that it is suspicious of to the Financial Intelligence Office, and the Financial Intelligence Office passes on the cases of suspicious transactions it considers worth investigating to the prosecutors. Between 2006 and last June the prosecutors took eight cases to court and achieved six convictions.

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business daily January 9, 2013

macau

China’s state lotteries outshine even Macau’s casinos

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Trade steering The value of exports in the first 11 months of last year was 20 percent higher than in the equivalent period the year before. The rise was due mainly to a jump of 32.2 percent in the value of re-exports – that is, goods produced elsewhere that are sent here only to be sent onward. The value of goods produced here and exported continued to follow a slow but steady downward trend. In the first 11 months of last year it fell by about 3.3 percent from a year before. What is intriguing about re-exports is that most go to only a couple of places.

Welfare Lottery and Sports Lottery combined gross equivalent to US$42 bln last year, say mainland authorities Michael Grimes

michael.grimes@macaubusinessdaily.com

The value of re-exports bound for Europe and the Americas is negligible. Only 0.5 percent of reexports for last year and in 2011 went to Europe and only about 1.2 percent went to the Americas. Re-exports to other places – Africa, Asia except mainland China and Hong Kong, and Oceania combined – did not count for much, either. The main markets for our exports were the mainland and Hong Kong. Together they took 46 percent of our domestic exports and at least 75 percent of our re-exports. Unfortunately, it is impossible to be more precise, as the destination of a considerable proportion of our exports is kept confidential. In the first 11 months of last year the destination of more than 20 percent of our re-exports was secret. If the re-exports to destinations unknown were shipped to Hong Kong and the mainland – which is quite likely – then Hong Kong and the mainland were the recipients of more than 90 percent of our reexports. J.I.D. The content of this column is the work of Business Daily’s journalists.

57.4 %

Proportion re-exports shipped to Hong Kong in the first 11 months of 2012

he People’s Republic of China might not have legal casinos, but it certainly has a lot of legal gambling. China’s lottery industry set a new annual revenue record in 2012, bringing in the equivalent of US$42 billion (335 billion patacas), says a new report from GamblingCompliance.com. While the figure is only US$4 billion more than the Macau casino market generated on its own last year – and is distributed across an adult mainland population (those aged 15 and above according to the National Bureau of Statistics) of 1.06 billion – it still works out to around US$3.77 per head. That’s a significant amount in a country where in 2011 – the most recent figures available – the average daily income of rural residents was only US$3.07 – at current prices – according to China’s news agency Xinhua, citing data from the statistics bureau. Total revenue from China’s two legal lottery systems – the Welfare Lottery and the Sports Lottery – in 2012 came to 261.522 billion yuan, up 18 percent from 221.582 billion yuan in 2011, GamblingCompliance.com said, quoting government agencies. This level of growth is not a new phenomenon.

Major growth Xuehong Wang, executive director of the China Center for Lottery Studies at the University of Peking, told delegates at Global Gaming Expo Asia in Macau last May that between 1987 – when the first lottery was created under supervision from the Ministry of Civil Affairs – and 2006, by which time there was also a Sports Lottery (created in 1994 under what is now the State Sports General Administration) – annual revenues rose from 17 million yuan to 70.7 billion yuan. That’s a compound annual growth of nearly 60 percent. The notion of a ‘lottery’ might conjure the idea simply of players being asked to match randomly-

The basic model – China Welfare Lottery shop in Shanghai

drawn numbers in a daily, weekly or monthly draw. But the products available to players are much broader in some provinces, reflecting the growth of Internet and smartphone use in the country, and also the technology available to deliver other random outcome games other than traditional number lotteries. The mainland authorities did several years ago clamp down on the growth of the video lottery terminal market – involving machines that look similar to casino slot machines but where the random number generation is done from a central location. The central government – apparently concerned about the growth of an activity that looked a lot like casino slot gambling – restricted the VLT halls’ hours and prize money. But in the past two years, electronic games of

other kinds have been added to the lottery mix. “The lottery market in China has really had a roller coaster ride in terms of regulatory issues,” says Tony Tong, a Hong Kong businessman who has advised on due diligence issues for investors from Greater China and beyond that are interested in exposure to China’s lottery sector. A recent example of one of the products allowed is “a [virtual] car racing game in Hunan province – that’s doing very well,” he says. Mr Tong adds that despite the occasional rowing back on lottery policy by the central authorities, the potential rewards have kept investors interested. “There’s been major investment by private equity firms and venture capital firms in some of the leading lottery operators and online Internet-based lottery operators in China,” he points out.

January 9, 2013 business daily | 7

MACAU

Casinos generating nearly MOP1 bln daily in early Jan New monthly record on cards – but shifting date of Chinese New Year makes year-on-year comparisons difficult Michael Grimes

michael.grimes@macaubusinessdaily.com

Possible new casino revenue record this month

ocal casinos generated close to one billion patacas (US$125 million) per day in bets for the first six days of this month, suggest several analysts. That’s up to 20 percent more than was being brought in per day on average in most of the fourth quarter. If the trend plays out

across the whole month it’s likely to produce a new all-time monthly revenue record for the jurisdiction, says one. It’s also an apparent continuation of the bounce in revenue seen in the final two days of December, and suggests the partial smoking ban introduced on January 1 has not

Paradise to pay boss HK$740 mln for casino game patents aimed at U.S.

unit of Paradise Entertainment Ltd is buying casino game patents from one of its own shareholders, Macau businessman Jay Chun, for HK$740 million (US$95.5 million) in order to sell products into the United States. The purchasing party is Solution Champion Ltd, a wholly owned Paradise subsidiary registered in the British Virgin Islands according to a filing yesterday with the Hong Kong Stock Exchange. It wants to sell “electronic gaming machines for baccarat, roulette and sic bo games” in the US markets of Nevada, Mississippi, Connecticut, Pennsylvania, New Jersey, California and Florida, says the document. Paradise along with another of its units – LT Game Ltd – is currently in the middle of a patent battle in the Macau market over the right to sell an electronic table version of baccarat that uses a live dealer. In the Hong Kong filing Paradise mentions counter litigation by Shuffle Master Asia Ltd, a unit of SHFL, that seeks to prevent Paradise and its units from claiming a monopoly in Macau

on the relevant technology. Yesterday’s Paradise filing states: “The company and the directors further believe that the [Shuffle Master’s] Macau injunction was initiated as one more phase of a litigation tactic to pressurise the Group, as a result of the infringement proceedings originally filed by Mr Jay Chun, LT Game and Natural Noble, against, inter alia, Shuffle Master, for infringements of Macau Patent I/380 and Macau Patent I/150.” At the time Business Daily went to press, no one was available from Paradise or LT Game Ltd to clarify whether the patents Paradise wishes to exploit in U.S. markets cover technology currently being disputed with Shuffle Master Asia. Yesterday’s filing does however add that the assets being acquired from Mr Chun are “five approved patents in the U.S., which were granted in 2011 and 2012, together with their continuations…” But the document adds that six of these “continuations” are still pending approval. M.G.

so far had a significant impact on casino takings. The more conservative of two estimates for the first six days of January comes from David Bain of Sterne, Agee & Leach, Inc. in the

United States. He says checks with industry sources suggest 5.5 billion patacas in revenue to January 6 inclusive. Such a daily run rate inclusive of slot takings – if sustained – could produce monthly revenues of 29.5 billion patacas, a year-onyear increase of around 18 percent, says Mr Bain. “Both the current run rate – and our estimate – position January Macau GGR [gross gaming revenue] toward record territory from December’s 28.2 billion patacas result; the current all-time monthly record,” he says in a note to investors. Kenneth Fong of J.P. Morgan in Hong Kong, starts with a slightly bigger number for the first six days – 5.8 billion patacas – but comes to a more conservative conclusion for the month as a whole, even when adding in slot revenue. “If we assume that daily revenue for the rest of the month stays at 870 million patacas (same as [the] luck-adjusted December daily run rate), January should end at around 27.6 billion patacas or 10 percent year-on-year growth,” says Mr Fong in a note to his clients. He adds that year-to-year variations in the lunar calendar and therefore the shifting date of Chinese New Year makes it difficult meaningfully to compare January 2012 and January 2013. “It is worth noting that the entire spring festival [Chinese New Year] holiday period fell in January in 2012 while this year all the holidays will be in February. We believe it is more meaningful to combine the January and February to compare,” states Mr Fong.

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business daily January 9, 2013

GREATER CHINA Guangdong Nuclear sells dim sum bonds State-owned China Guangdong Nuclear Power Holding reopened its November 2015 offshore yuan bond, raising 1.5 billion yuan (US$240.8 million) at 3.58 percent, two sources close to the deal said yesterday. The firm sold a 1.5 billion yuan, threeyear dim sum bond earlier with a coupon of 3.75 percent, which was warmly welcomed by investors and was four times oversubscribed. “The total order book was over 4 billion yuan due to strong demand and the bond was priced at the tight end of the final price guidance,” said one of the sources.

Carlyle bags US$4 bln p from insurance exit

Company seeking to raise about US$3.5 bln fo

Guo Shuqing – encouraging dividend payments

China to encourage dividend payouts Companies instructed to pay 30 pct of profits to lure investors

hinese companies trading on the Shanghai Stock Exchange will be encouraged to pay at least 30 percent of their annual profits to shareholders as the bourse seeks to lure more investors to equities. Companies that fail to do so will need to disclose the reason in annual reports, the Shanghai exchange, the nation’s main bourse, said in a dividend-payment guideline on its website yesterday. There was no mention of penalties in the statement. “This is the first time the Shanghai exchange has issued such a guideline on dividend payments,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees US$285 million. “This makes dividend payments for companies more implementable and is positive for the market.” Guo Shuqing, chairman of the China Securities Regulatory Commission, has encouraged dividend payments, tightened rules on delisting companies and cut trading costs to boost the appeal of Asia’s third-largest stock market. The CSI 300 Index of the 300 biggest companies on the Shanghai and Shenzhen stock exchanges entered a bull market on Monday after rallying 20 percent from last year’s low on signs economic growth is picking up. “Only the establishment of an efficient and stable dividend-payment mechanism for listed companies can attract long-term institutional investors seeking steady dividend returns and reasonable capital gains,” the exchange said in the statement. “That’ll make the valuations of the market reasonable and stable.”

Dividend tax The average dividend yield of the 994 companies in Shanghai Composite Index is 2.5 percent, compared with 2.7 for the MSCI Emerging-Markets Index. The

Shanghai index lost 0.4 percent to 2,276.07 at the close. The measure rebounded 17 percent through yesterday from an almost four-year low set on December 3. The Shanghai index trades at 12.6 times reported earnings, compared with a record low of 10.8 in December, according to daily data compiled by Bloomberg since 2006.

This makes dividend payments for companies more implementable and is positive for the market Wu Kan, Dazhong Insurance Co.

As of the end of 2011, 347 companies in the Shanghai exchange paid dividends for three consecutive years, accounting for 40 percent of the companies that have gone public for at least three years, the Shanghai exchange said in the statement. China announced last year it would cut the stock dividend tax by half for individuals who hold shares for at least one year to encourage long-term investment. The tax rate would be lowered to 5 percent starting this year, the Ministry of Finance said in November. The rate was doubled to 20 percent for those who hold shares for one month or less and kept unchanged at 10 percent for those who held equities between one month to one year. Bloomberg News

Carlyle’s exit removes overhang to China Pacific’s share price

arlyle Group LP raised about US$796 million from the sale of its remaining shares in China Pacific Insurance (Group) Co., cementing profits from its largest investment in China as the firm raises money for its biggest Asia buyout fund. The Washington-based privateequity firm sold almost 204 million shares, a 2.2 percent stake, in the Shanghai-headquartered insurer at HK$30.30, the top end of the offering range of HK$30 to HK$30.30 apiece, according to a document obtained by Bloomberg News. After several stake sales in the past two years, Carlyle will finish with a total profit of more than US$4 billion, five times the US$800 million it invested in CPIC between 2005 and 2007 for a 17 percent stake, Thomson Reuters calculations show. China Pacific fell by the most in more than a month after rising 23 percent since December 3 amid a surge in Chinese stocks. The share sale comes as Carlyle is seeking to raise about US$3.5 billion for its fourth buyout fund in Asia, its biggest targeting the region and 37 percent larger than the firm’s last regional fund, completed in 2010, two people familiar with the matter said last year. Carlyle’s exit removes a long-term overhang to China Pacific’s share price and is positive for the stock, according to Jefferies Hong Kong Ltd, which raised the insurer’s target price by 21 percent in a report on Monday. “Investors are expecting insurers to unveil new marketing strategies as the new year starts, which is positive, and the rally in the domestic

stock market is good for insurers’ investments as well,” said Olive Xia, a Shanghai-based analyst at Core Pacific Yamaichi International Ltd. “But China Pacific’s recent upward momentum has been a bit too strong and needs some adjustment.”

Asia funds Carlyle had raised three Asia funds totalling US$5.1 billion between 1999 and 2010, and invested in China Pacific shares from its second fund worth US$1.8 billion. Carlyle, which started in China in 1998, bought about 20 percent in China Pacific between 2005 and 2007, its biggest purchase in the nation. The private-equity firm sold

KEY POINTS Invested $800 mln in Chinese insurer CPIC from 2005-07 Latest sale completes Carlyle’s largest dollar profit Shares priced at top of HK$30 to HK$30.30 range PIC shares drop 2.1 pct, trade above Carlyle’s selldown price

January 9, 2013 business daily | 9

GREATER CHINA CDB worries over Ping An’s stake sale State-run China Development Bank (CDB) has expressed concern over the funding behind the effort of Thai conglomerate CP Group to buy HSBC Holdings Plc’s stake in Ping An Insurance, sources told Reuters, a stance that may scupper the US$9.4 billion deal. About one-fifth of the holding was to be transferred on December 7, with the rest of the purchase is backed by the Hong Kong branch of China Development Bank. “Indeed, there are some problems,” said one of the sources, referring to CDB’s role in the sale.

profit

Hong Kong taking sukuk lessons Secretary K.C. Chan to present bill to the Legislative Council today

or its fourth buyout fund

Yudith Ho

215.8 million China Pacific shares at HK$31.15 apiece in December 2010 for HK$6.7 billion (US$864 million) after a lock-up period ended, according to a term sheet obtained by Bloomberg News at the time. It sold 415.2 million of the Chinese insurer’s Hong Kong-listed shares at HK$33.45 each in January 2011, raising US$1.8 billion. In July last year, the firm planned to sell 250 million shares at HK$30.90, raising HK$7.73 billion, according to three people with knowledge of the transactions at the time. “We have been very privileged and proud to be a major shareholder in China Pacific Insurance Group for more than seven years,” Yang Xiang Dong, managing director and cohead of Carlyle Asia Partners, said in an e-mail statement. “Over these years, we have worked very closely with the company, company management and other shareholders in support of transforming China Pacific into one of the best run and most successful insurance companies in China and a Fortune Global 500 company.” Carlyle and Newark, New Jersey-based Prudential Financial Inc. agreed in December 2005 to take a 25 percent stake in China Pacific Life Insurance Co., a unit of China Pacific, for 3.3 billion yuan, equivalent to US$409 million at the time. The investment was converted into a stake in the parent company in 2007 and then into China Pacific’s Hong Kong-listed shares in 2009 as the insurer sold stock in the city. Bloomberg News/Reuters

aybank Kim Eng Holdings Ltd and Clifford Chance LLP are training Hong Kong staff for the city’s first sukuk sales before lawmakers review a bill to give the debt equal tax treatment. Maybank, the world’s third-largest Islamic bond arranger in 2012, has been preparing its investment banking teams in Hong Kong and China to chase Shariah-compliant deals, chief executive Tengku Zafrul Tengku Abdul Aziz said in an interview. Clifford Chance, the U.K.’s highest grossing law firm, has moved a sukuk specialist from Dubai to the city, Qudeer Latif, the company’s head of global Islamic finance, said before the bill is first debated by the Legislative Council tomorrow. Demand for debt that complies with the Koran’s ban on interest will triple to US$950 billion by 2017, Ernst & Young LLP said in a December 10 report, compared with the US$211 billion of the notes outstanding as of June 2012, Bank Negara Malaysia data show. Clifford Chance’s Mr Qudeer said Chinese companies would benefit from tapping oil wealth from the Middle East, where Saudi Arabia has US$635 billion of

foreign-exchange reserves. “The relocation is testament to the fact that we see a significant upturn in Islamic finance activities in East Asia,” he said in an interview from Dubai. “I would fully expect that a Hong Kong issuer, or issuers in Asia who have assets in Hong Kong, will take the opportunity” to sell Shariahcompliant bonds once the bill is passed, he said.

Standard Chartered Secretary for Financial Services and the Treasury K.C. Chan will present a bill to the Legislative Council today that will exempt sukuk sellers from paying tax on the transfer of underlying assets for four Islamic debt structures, he said in a December 28 statement. This will pave the way for issuers in China and the Middle East to tap Shariah-compliant markets via Hong Kong, and develop the city’s asset-management business by increasing product variety, he said in the statement. Standard Chartered Plc has been preparing staff in Dubai and Malaysia to handle Chinese clients that have expressed a preference to sell sukuk

Banks training HK staff for the city’s first sukuk sales

as soon as the tax changes come into effect, Sabir Ahmed, regional head of Islamic origination in Kuala Lumpur, wrote in an e-mail. Assets managed by Shariahcompliant funds worldwide have been increasing by 10 percent to 15 percent a year and will probably continue growing at this rate, according to a Bank Negara Malaysia report published in September. That’s significantly faster expansion than total global assets under management, which rose 0.7 percent in 2011, according to a June 2012 report by McKinsey & Company Inc. Worldwide sales of Islamic bonds totalled a record US$46.3 billion last year, exceeding the previous high in 2011 by 26 percent, data compiled by Bloomberg show. The Hong Kong Stock Exchange is Asia’s second-largest after Tokyo, with a market capitalisation of US$2.8 trillion at the end of December, according to its website. The city is well-positioned for sukuk sales as Malaysian and Middle Eastern companies, such as Emirates NBD PJSC, a Dubai-based lender, and Qatari investment bank QInvest LLC expand into China, Ashar Nazim, the Bahrain-based global head of Islamic banking at Ernst & Young, said in a January 3 interview. “Conventional jurisdictions are readying for when large sovereign funds from the Middle East and Southeast Asia start making higher allocations for Islamic instruments,” he said. “Not having the enabling infrastructure for a sukuk market could potentially imply a substantial outflow of Shariah- compliant money to other jurisdictions.” Bloomberg News

HTC earnings miss analyst estimates

TC Corp., Asia’s secondlargest smartphone maker, posted operating income that was lower than analysts’ estimates as a lack of new models prompted a loss of market share. Fourth-quarter operating income was NT$600 million (US$21 million), compared with the NT$1.11 billion average of 20 analyst estimates compiled by Bloomberg. Net income was NT$1 billion, the Taoyuan, Taiwan-based company said in a statement yesterday. That’s the lowest since 2004 and less than the NT$10.9 billion it posted a year earlier. Apple Inc.’s iPhone 5 and new Galaxy

models from Samsung Electronics Co. took market share away from HTC, which lacked new offerings for most of the quarter. HTC’s stock dropped 40 percent last year and the company replaced its chief marketing officer after its global share in smartphones dropped by more than half. “HTC’s operating margin barely met expectations and December sales were below what many expected,” said Jeff Pu, a Taipei-based analyst at Fubon Financial Holding Co. in Taipei. “It’s due to non-operating items that net income was as high because some models were not selling as well in the U.S. and China.”

Revenue dropped 41 percent to NT$60 billion, compared with the NT$60.5 billion average of 23 analyst estimates. HTC on October 26 forecast sales of about NT$60 billion, the lowest in 11 quarters. The company didn’t provide details of any non-operating income earned during the period in its statement yesterday. “There were no strong products for HTC in the fourth quarter, so it will be the bottom of their sales and earnings,” said Richard Ko, an analyst at KGI Securities Co. in Taipei. Bloomberg News

10 |

business daily January 9, 2013

ASIA Samsung profit beats estimates Samsung Electronics Co., the world leader in mobiles and memory chips, said it likely earned a quarterly profit of US$8.3 billion, as it sold close to 500 handsets a minute and as demand picked up for the flat screens it makes for mobile devices, including those for rival Apple Inc products. That run of five straight record quarters may end in January-March on weaker seasonal demand, though a strong pipeline of smartphones – the South Korean group’s biggest earner – and improving chip prices have eased concerns that earnings growth could slow this year, powering Samsung shares to record levels last week. The stock dipped 1.1 percent yesterday, in a Seoul market that was down 0.4 percent. “Investors are a bit concerned that Samsung’s momentum may slow in the first half. The smartphone market is unlikely to sustain its strong growth as advanced markets are nearing saturation despite growth in emerging countries,” said Kim Sung-soo, a fund manager at LS Asset Management. Samsung has outpaced Apple despite the U.S. firm’s launch of the latest iPhone 5. While Apple rolled out just a single new smartphone last year globally, Samsung bombarded the market with 37 variants tweaked for regional and consumer tastes, from high-end smartphones to cheaper low-end models.

Sony mulls battery unit sale Sony Corp is considering the sale of its battery business but has made no decision yet, chief executive Kazuo Hirai said, as the company seeks to offload non-core assets and revive its consumer electronics business. Mr Hirai also told reporters on the sidelines of the Consumer Electronics Show in Las Vegas that Christmas sales were “pretty much” in line with expectations, although sales of its handheld game console Vita were at the low end of its expectations. He gave no further details. In November, Sony revised down its forecast for full-year sales of handheld PSP and Vita game consoles to 10 million units, compared with a prediction it made in August for 12 million. Under Mr Hirai, Sony is doubling down on consumer electronics – with a focus on mobile phones, tablets and gaming – while shedding non-core assets, as it seeks to regain ground against rivals like Samsung Electronics Co and bounce back from four straight years of net losses. “The discussion [on selling units] extends to any business that aren’t really adding to the core business,” Mr Hirai said. Helped by sales of assets, Sony expects to eke out a net profit of 20 billion yen (US$230 million) in the year ending March 31, after losing 457 billion yen in the previous financial year.

Seoul to expand nuclear energy South Korea has no option but to expand its nuclear power plant programme despite growing public concern over safety in the wake of Japan’s Fukushima disaster in 2011 and a series of scares that closed two reactors last year. The proportion of South Koreans who considered nuclear power safe fell to 34.8 percent in a survey conducted in November and published yesterday, down from 40 percent in April 2011 and 71 percent in January 2010, the Ministry of Knowledge Economy said. The ministry has been sharply criticised for its role as regulator and operator of the country’s nuclear power plants, and one of its subsidiaries was accused of suppressing negative public opinion after the Fukushima disaster by not publishing polls. A fake parts scandal closed two reactors last year and the industry suppressed details of the closure of the Kori No.1 reactor early in 2012. “It is an urgent priority to recover people’s trust and the safety of reactors just as it is unavoidable to maintain nuclear at a certain percentage of the total power supply, considering the power supply and demand situation,” the ministry said. The two troubled reactors were fully restarted last week, easing fears over winter power shortages.

Singapore ups stake for casino firms with new rules Amendments to the Casino Control Act await formal passage into law John O’Callaghan and Kevin Lim

Singapore – casino operators could see fewer locals in their casinos

n any casino, the odds favour the house. Using its house edge, Singapore is seeking to maximise economic profits and minimise social costs with tighter rules and tougher fines for two casino operators, along with new steps to curb problem gambling. The wealthy and regimented citystate has enjoyed a windfall of tourism, jobs and revenue since Las Vegas Sands Corp and Genting Singapore Plc opened casino complexes in 2010, in part by linking their licences to how

well they develop attractions that are not related to gambling. Under that mandate, the two operators have added theme parks, museums, theatres and high-end hotels, boutiques and restaurants to Singapore’s landscape as the Asian business hub recasts itself as a global city and oasis for the rich. Amendments to the Casino Control Act cleared parliament late last year and now await formal passage into law, giving the operators

of Marina Bay Sands and Resorts World Sentosa little choice but to adapt to the new rules – including fines of up to 10 percent of gaming revenue – and the costs of compliance. “It is timely that the legislation be reviewed and further tweaks be made to ensure that the objectives of setting up the integrated resorts are achieved,” said Yap Wai Ming, a partner at Stamford Law Corp who tracks casino regulation. “They have already invested billions of dollars

Japan to buy Europe bonds to soothe debt crisis: Aso As Abe steps up bid to weaken yen Hiroshi Hiyama

apan’s new finance minister said yesterday that Tokyo would buy bonds issued by Europe’s permanent bailout fund to help soothe the euro zone’s debt problems and stabilise the under-pressure yen. Taro Aso told reporters the new government would tap foreign exchange reserves to pay for the bonds, but declined to say how much it planned to buy. A finance ministry official told AFP the bond buying could start as early as yesterday, when the European Stability Mechanism (ESM) begins selling the paper, adding that Japan “will make a purchasing decision after seeing the terms of the issuance”.

Japan, which counts Europe as a major export market, previously bought billions of dollars in bonds issued by the ESM’s predecessor, the European Financial Stability Facility. “Stabilising Europe’s financial crisis will eventually contribute to the stability of currency [prices] including the yen, and so we plan to keep purchasing ESM bonds using foreign reserves,” Mr Aso said yesterday. Japan has suffered as demand dropped off on the debt-hit continent and reports yesterday said Tokyo was mulling an extra budget worth about 13.1 trillion yen (US$150 billion) to boost the world’s third-largest economy. About 40 percent of that figure

would be earmarked for public works projects, they said, as post-Fukushima Japan struggles to cement a recovery. The Liberal Democratic Party government, which swept to power last month, was also eyeing a stimulus package worth at least 20 trillion yen aimed at creating more domestic demand and new jobs, the Nikkei business daily reported. Europe’s debt crisis has seen four countries ask for bailout cash to help pay their bills, while there were fears that others including Italy and Spain would follow suit as their borrowing costs surged. However, those concerns have eased since September, when the

January 9, 2013 business daily | 11

ASIA It is timely that the legislation be reviewed and further tweaks be made to ensure that the objectives of setting up the integrated resorts are achieved Yap Wai Ming, partner at Stamford Law Corp

and the casinos are still generating very healthy profits despite the enforcement actions.” Marina Bay Sands declined to comment on Singapore’s new rules and a spokeswoman did not respond to another query about the prospects for its non-gaming business. Lim Kok Thay, chairman of Genting Bhd, said last month he expects tourists to play a big part in Resorts World Sentosa’s growth and its non-gambling business to continue to do better than the gaming side that brings in the bulk of revenues.

Fines and bans Although casino takings have dipped as some of the novelty wears off on a small island of 5.3 million people, earnings at both resorts likely topped US$1 billion last year as visitors poured in from China, Indonesia, Malaysia and further afield. But there are rumblings about social ills. Some lawmakers question whether Singapore really needs casinos and counsellors say they see more people who cannot control their betting. Lee Kuan Yew, Singapore’s founding leader and influential elder statesman, resisted casinos for

European Central Bank promised to buy bonds of struggling nations to keep rates down. Amid the turmoil, the safe-haven yen hit record highs around 75 against the dollar in late 2011, sparking panic among Japanese exporters whose goods are made more expensive by a strong currency. However, the unit has since weakened and dropped into a steep decline in recent weeks as Prime Minister Shinzo Abe, who took office last month after a landslide election win, vowed to press the Bank of Japan for more aggressive monetary easing. But reports Tuesday quoted Japanese executives – who pressed officials for months on the surging yen – expressing concern that a further quick drop in the currency could shake investor confidence, dealing a blow to the economy. A weaker currency also makes fuel imports, which have risen steeply in the wake of Japan shutting down its nuclear plants after the 2011 crisis at Fukushima, more expensive. In Tokyo forex trading yesterday afternoon, the euro was up slightly at 114.83 yen from 114.75 yen before Mr Aso’s comments, while the dollar bought 87.43 yen from 87.48 yen in morning deals. AFP

decades. He finally relented, he told National Geographic magazine in 2009, when younger colleagues said “we must have a casino, otherwise we are out of the circuit of this fast set that goes around the world.” The government, which makes citizens and permanent residents pay a casino entry levy of S$100 a day or S$2,000 for an annual pass as part of efforts to deter problem gambling, shows no sign of abandoning its support for the two resorts. But Las Vegas Sands and Genting Singapore could see fewer locals in their casinos under the new rules and risk much costlier punishments for breaking them. The operators, which have been fined for admitting minors and failing to collect the levy for the government, will face a maximum penalty of 10 percent of annual gross gaming revenue. The current cap on fines is S$1 million but, if fully enforced, the new ceiling could be closer to S$200 million. A panel will also be set up by the trade ministry to help the Casino Regulatory Authority determine how attractive the resorts are as tourist destinations – an assessment that will apply to the renewal of their casino licences from January 2015. “Protecting vulnerable groups and the society at large from the harm of casino gambling is another priority,” S. Iswaran, Singapore’s second minister for trade, said in October. For those deemed to be at risk, the new rules include a monthly limit on casino visits to bolster existing safeguards. Under a programme now run by the National Council on Problem Gambling, more than 85,000 people have banned themselves from the casinos and nearly 1,300 more were excluded at the request of family members, the latest data shows. Another 43,000 people who are bankrupt or get state aid are automatically banned. Singapore’s “archaic and outdated” rules on Internet betting are a future target for changes, said Mr Yap at Stamford Law. “Problem gambling and massive tax leakages and lack of visibility continue to pervade this sector,” he said. “This is a space to watch.” Reuters

Boost to military budget Japan will increase military spending in 2013 for the first time in more than a decade, the ruling party said yesterday, as Tokyo summoned the Chinese ambassador over a simmering territorial row. The newlyelected Liberal Democratic Party’s national defence task force has decided to boost the defence budget request by more than 100 billion yen (US$1.15 billion) in response to an emboldened Beijing, a party official told AFP. The relatively small amount is likely symbolic, but it reflects anxiety over what Japan sees as an increasingly hostile region, where China is seen as throwing its weight around. “We have decided that the additional budget will be used for research into a new radar system as well as fuel and other maintenance costs for early-warning aircraft,” the official said. The news came as the foreign ministry called in China’s ambassador to protest over the latest dispatch of official vessels into waters around the Tokyo-controlled Senkaku islands, which Beijing claims as the Diaoyus.

Australia trade deficit widens Pick-up in metal ore exports outweighed by imports of oil, cars

ustralia’s trade deficit in November widened to its largest since early 2008 as imports again outpaced exports, though a recent meteoric rise in the price of iron ore suggests the worst of the trade pain is over for the resource-rich nation. The deficit on goods and services grew to A$2.64 billion (US$2.8 billion) in November from A$2.4 billion the month before, data from the Australian Bureau of Statistics showed yesterday. That was the 11th straight month of deficit and was above forecasts of A$2.3 billion. Yet Chinese demand for iron ore has seen prices for Australia’s single biggest export earner rebound no less than 77 percent from lows hit in September to reach US$153.90 a tonne this week. The steel-making mineral is worth more than A$60 billion a year to Australia, so the recovery is a muchneeded boost to profits, investment and tax receipts. “The marked rise in iron ore values coupled with higher export

US$2.8 bln

AUSTRALIA’S TRADE DEFICIT IN NOVEMBER

volumes should give a double boost in December, so this looks like being the worst of the deficits,” said Michael Workman, a senior economist at Commonwealth Bank of Australia. “The deficits could halve from here if prices stay remotely near where they are now,” he added. The need to offset the drag from trade last year was a major reason the Reserve Bank of Australia (RBA) cut interest rates in October and December, matching the record lows of 3 percent set during the global financial crisis. Markets suspect rates might still ease further, but perhaps not by much should iron ore prices hold their gains and the Chinese economy continue to improve. Australia’s Labor government has also abandoned its goal of achieving a budget surplus by June, so lessening the fiscal pressure on the domestic economy. Yesterday’s data showed Australia’s imports climbed 1.8 percent to a record A$27.3 billion, driven by purchases of cars and oil. Imports of capital goods plateaued for the moment after a very strong run, led mainly by heavy machinery for major mining and liquefied natural gas projects. Total exports of goods and services rose 1.2 percent in November to A$24.7 billion, thanks largely to a 6 percent increase in earnings from metal ores and minerals. And those earnings should expand a lot more given the appetite from Chinese steel makers remains strong. Total exports to China increased by 13.5 percent in November, from October, to a five-month high of A$6.6 billion. Reuters

12 |

business daily January 9, 2013

MARKETS Hang SENG INDEX NAME

NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.4

-0.4909984

27527302

CHINA UNICOM HON

ALUMINUM CORP-H

3.78

-1.305483

18003424

CITIC PACIFIC

BANK OF CHINA-H

3.55

-1.933702

266323515

BANK OF COMMUN-H

5.99

-1.803279

32059836

BANK EAST ASIA

30.4

1073236

16.84

-1.057579

15388960

ESPRIT HLDGS

24.8

-0.2012072

10196740

BELLE INTERNATIO BOC HONG KONG HO

CLP HLDGS LTD

PRICE

DAY %

21496354

NAME POWER ASSETS HOL

65.6

0.6134969

2565893

13.7

-1.29683

24642845

SANDS CHINA LTD

36.9

0.1356852

15798188

65.2

0.1536098

3523475

-1.750292

60579333

COSCO PAC LTD

11.82

-0.3372681

8248760

SWIRE PACIFIC-A

11.2

-2.608696

8416682

TENCENT HOLDINGS

HANG LUNG PROPER

30.65

-0.1628664

4086260

TINGYI HLDG CO

118.9

0.2529511

1645944

WANT WANT CHINA

57.6

0.5235602

6320253

WHARF HLDG

74.95

1.147099

5697785

14.74

0.5457026

3577921

HANG SENG BK

122.4

-0.8906883

3084807

HENDERSON LAND D

CHINA COAL ENE-H

8.78

-1.789709

23918575

CHINA CONST BA-H

6.38

-1.694915

261603328

CHINA LIFE INS-H

26.3

-3.308824

58389850

CHINA MERCHANT

25.1

-1.568627

3949124

CHINA PETROLEU-H

VOLUME

-0.1574803

16.84

CATHAY PAC AIR

CHINA OVERSEAS

DAY %

12.68

CNOOC LTD

CHEUNG KONG

CHINA MOBILE

PRICE

HENGAN INTL HONG KG CHINA GS

21.25

0.7109005

3791876

HONG KONG EXCHNG

143.1

-1.37836

6629755

HSBC HLDGS PLC

82.75

-0.3612282

13067984

88.7

-0.3930376

27057787

HUTCHISON WHAMPO

82.2

-0.9638554

8405416

24.95

-1.383399

14108261

IND & COMM BK-H

5.64

-1.913043

198169707

9.07

-0.3296703

74974741

LI & FUNG LTD

14.22

-3.265306

18154303

CHINA RES ENTERP

28.25

-2.417962

1819129

MTR CORP

30.95

0.3241491

1520659

CHINA RES LAND

23.05

-2.742616

12954780

NEW WORLD DEV

12.54

-0.7911392

25436014

CHINA RES POWER

19.28

-0.3102378

7051000

PETROCHINA CO-H

10.9

-1.801802

64673135

CHINA SHENHUA-H

34.2

-1.582734

11242138

PING AN INSURA-H

68.15

-4.014085

24034461

VOLUME

SINO LAND CO

14.44

0.8379888

5725327

SUN HUNG KAI PRO

120.6

-0.5770816

3923500

96.3

-0.9259259

1481184

255.6

2970898

4.218362

12668450

10.44

2.554028

21051273

61.75

-1.278977

3498433

MOVERS

2 23390

INDEX 23111.19 HIGH

23380.95

LOW

23100.42

52W (H) 23402.44922 23090

(L) 18056.4 4-January

8-January

Hang SENG CHINA ENTErPRISE INDEX PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.86

-2.030457

96861457

CHINA PACIFIC-H

30.2

-2.580645

235964959

AIR CHINA LTD-H

6.66

0.4524887

22405579

CHINA PETROLEU-H

9.07

-0.3296703

74974741

ALUMINUM CORP-H

3.78

-1.305483

18003424

CHINA RAIL CN-H

9.09

-0.87241

ANHUI CONCH-H

28.75

-2.871622

8051867

CHINA RAIL GR-H

4.7

BANK OF CHINA-H

3.55

-1.933702

266323515

CHINA SHENHUA-H

BANK OF COMMUN-H

5.99

-1.803279

32059836

CHINA TELECOM-H

BYD CO LTD-H

23.8

2.807775

4711797

CHINA CITIC BK-H

4.75

-2.464066

CHINA COAL ENE-H

8.78

CHINA COM CONS-H

NAME

PRICE

DAY %

VOLUME

13.88

-2.52809

30353451

ZIJIN MINING-H

3.06

-0.6493506

27977887

12541051

ZOOMLION HEAVY-H

11.8

-2.286902

32075214

ZTE CORP-H

14.08

0.7153076

13548988

34.2

-1.582734

11242138

4.24

-0.9345794

49064435

DONGFENG MOTOR-H

11.96

-2.446982

22766364

31128815

GUANGZHOU AUTO-H

6.87

-2.828854

8472455

-1.789709

23918575

HUANENG POWER-H

7.06

-1.258741

15034195

7.65

-3.652393

24646455

IND & COMM BK-H

5.64

-1.913043

198169707

CHINA CONST BA-H

6.38

-1.694915

261603328

JIANGXI COPPER-H

-3.002309

10970021

CHINA COSCO HO-H

4.34

-2.031603

26002805

PETROCHINA CO-H

10.9

-1.801802

64673135

CHINA LIFE INS-H

26.3

-3.308824

58389850

PICC PROPERTY &

11.14

-4.295533

24444143

CHINA LONGYUAN-H

5.85

32709492

PING AN INSURA-H

68.15

-4.014085

24034461

CHINA MERCH BK-H

17.4

-2.684564

15091777

SHANDONG WEIG-H

7.7

-0.3880983

15179300

CHINA MINSHENG-H

9.28

-4.132231

36779386

SINOPHARM-H

25.95

-0.9541985

6980430

CHINA NATL BDG-H

12.08

-3.205128

34437588

TSINGTAO BREW-H

46.55

1.305767

1123600

CHINA OILFIELD-H

15.74

-4.141291

11222289

WEICHAI POWER-H

34.65

-2.805049

4269062

NAME YANZHOU COAL-H

MOVERS

2 12000

INDEX 11714.15 HIGH

11987.4

LOW

11707.24

52W (H) 11996.19 11700

(L) 8987.76 4-January

8-January

Shanghai Shenzhen CSI 300 NAME

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.84

-1.045296

103867372

AIR CHINA LTD-A

5.69

-0.6980803

17292240

CITIC SECURITI-A

CHINA YANGTZE-A

PRICE

DAY %

VOLUME

PRICE

DAY %

6.84

-0.4366812

20866837

QINGHAI SALT-A

26.24

0.8842753

7163603

13.05

-1.58371

111393980

SAIC MOTOR-A

16.91

-2.479815

37407373

NAME

VOLUME

ALUMINUM CORP-A

5.16

16448946

CSR CORP LTD -A

5.1

-1.734104

45078889

SANY HEAVY INDUS

10.08

-0.6896552

67483698

ANGANG STEEL-A

4.15

-1.425178

30473948

DAQIN RAILWAY -A

6.73

-1.319648

32729015

SHANDONG GOLD-MI

36.67

0.4107338

15958480

ANHUI CONCH-A

18.88

-2.226825

31704266

DATANG INTL PO-A

4.02

15569894

SHANG PHARM -A

11.48

0.08718396

14446291

BANK OF BEIJIN-A

9.19

-2.751323

45001805

EVERBRIG SEC -A

13.56

-2.93486

28664674

SHANG PUDONG-A

10.12

-1.937984

154851189

BANK OF CHINA-A

2.94

-0.3389831

45421333

GD POWER DEVEL-A

2.58

-0.3861004

40654376

SHANGHAI ELECT-A

4.12

0.9803922

11713639

BANK OF COMMUN-A

4.98

-1.581028

72659355

GEMDALE CORP-A

7.11

-1.659751

53265162

SHANXI LU'AN -A

20.78

-2.257761

23258490

BANK OF NINGBO-A

10.45

-0.7597341

19642553

GF SECURITIES-A

14.83

-1.199201

45881388

SHANXI XINGHUA-A

40.39

3.590664

7220180

BAOSHAN IRON & S

4.97

0.4040404

32761775

GREE ELECTRIC

-1.365706

16482650

SHANXI XISHAN-A

13.73

-1.080692

16123478

BBMG CORPORATI-A

7.71

-1.783439

28715982

GUANGHUI ENERG-A

16.5

2.548167

33868493

SHENZEN OVERSE-A

7.27

-1.756757

54680723

BYD CO LTD -A

20.2

0.4975124

5096367

HAITONG SECURI-A

10.03

-2.241715

59743502

SUNING APPLIAN-A

7.08

-1.25523

68319047

CHINA CITIC BK-A

4.26

-2.517162

26279405

HANGZHOU HIKVI-A

29.51

0.3059143

7710856

TSINGTAO BREW-A

33.3

1.555352

1892452

4.7

47809957

HENAN SHUAN-A

61.49

3.257767

5052258

WEICHAI POWER-A

24.65

-1.596806

10768870

CHINA CNR CORP-A CHINA COAL ENE-A

7.75

-0.5134788

11473354

HONG YUAN SEC-A

18.46

-1.912859

14110148

WULIANGYE YIBIN

28.13

2.142338

41889103

CHINA CONST BA-A

4.65

-1.691332

52082439

HUATAI SECURIT-A

9.37

-2.395833

33990648

YANGQUAN COAL -A

14.12

-1.602787

21315965

CHINA COSCO HO-A

4.51

-1.742919

28020017

HUAXIA BANK CO

10.22

-2.200957

40073802

YANTAI CHANGYU-A

48.2

1.816646

2594945

CHINA CSSC HOL-A

23.02

0.3924989

13772435

IND & COMM BK-A

4.14

-2.12766

93522655

YANTAI WANHUA-A

16.19

1.88798

20395033

CHINA EAST AIR-A

3.38

0.2967359

25871677

INDUSTRIAL BAN-A

17.02

-1.958525

106055941

YANZHOU COAL-A

17.84

-1.163435

6703490

CHINA EVERBRIG-A

3.01

-1.633987

160635434

INNER MONG BAO-A

37.55

2.288205

57741703

YUNNAN BAIYAO-A

66.8

2.642901

4577007

CHINA INTL MAR-A

12.64

0.9584665

21951312

INNER MONG YIL-A

23.45

0.08536065

13860520

ZHONGJIN GOLD

16.11

-0.1858736

25602761

CHINA LIFE INS-A

21.22

-3.193431

21384316

INNER MONGOLIA-A

5.39

0.5597015

66075774

ZIJIN MINING-A

3.79

-0.2631579

56235573

CHINA MERCH BK-A

13.59

-0.07352941

103335613

JIANGSU HENGRU-A

29.48

1.550121

6836895

ZOOMLION HEAVY-A

9.19

46636536

95.8

5.506608

8226703

ZTE CORP-A

9.5

70746406

CHINA MERCHANT-A

29.99

-2.21715

20709003

JIANGSU YANGHE-A

CHINA MERCHANT-A

10.15

-2.2158

19993093

JIANGXI COPPER-A

24.71

-1.239009

16240612

CHINA MINSHENG-A

8.19

-1.5625

151430552

JINDUICHENG -A

11.56

0.2601908

11141061

CHINA NATIONAL-A

8.01

1.392405

50312792

JIZHONG ENERGY-A

14.06

-1.609517

24568497

14.1

5.067064

101719863

210.84

3.206226

6528698

CHINA OILFIELD-A

16.51

6545365

KANGMEI PHARMA-A

CHINA PACIFIC-A

21.9

-2.925532

23988057

KWEICHOW MOUTA-A

CHINA PETROLEU-A

6.91

0.4360465

51556884

LUZHOU LAOJIAO-A

35.75

3.174603

13559350

2.27

0.8888889

65747259

MOVERS 133

CHINA RAILWAY-A

6.3

-2.021773

51268660

CHINA RAILWAY-A

3.28

-1.501502

56248039

NINGBO PORT CO-A

2.53

0.3968254

29893912

4.17

-1.650943

95361981

HIGH

2551.81

9.02

-0.3314917

26267837

LOW

2504.55

-1.840491

31247912

CHINA SHENHUA-A

24.99

-0.6756757

12382125

CHINA SHIPBUIL-A

4.71

-0.2118644

39283289

PETROCHINA CO-A

3.8

28116753

PING AN BANK-A

CHINA STATE -A

3.82

-1.799486

138283322

PING AN INSURA-A

45.46

-3.727234

47143884

CHINA UNITED-A

3.5

-0.2849003

74951052

POLY REAL ESTA-A

13.78

-1.147776

57514394

10.12

166448824

QINGDAO HAIER-A

13.18

-1.788376

16680614

NAME

PRICE DAY %

Volume

PRICE DAY %

Volume

ACER INC

26.95 -0.9191176

12140253

FORMOSA PLASTIC

77.6

-2.143758

11851104

ADVANCED SEMICON

21.15

-1.398601

14821938

FOXCONN TECHNOLO

104

-1.421801

36.8

1684382

FUBON FINANCIAL

31.75

305

0.1642036

3040867

11.65

62332662

139

4.511278

14358017

HTC CORP

30.85

-1.121795

17287593

HUA NAN FINANCIA

CHANG HWA BANK

15.2 -0.6535948

4940698

LARGAN PRECISION

596

CHENG SHIN RUBBE

73.7

0.2721088

4104782

LITE-ON TECHNOLO

CHIMEI INNOLUX C

11.5

0.4366812

55072413

MEDIATEK INC

CHINA DEVELOPMEN

6.99 -0.8510638

23103828

MEGA FINANCIAL H

CHINA STEEL CORP

25.8 -0.9596929

10208185

NAN YA PLASTICS

54.8

-1.615799

2211113

PRESIDENT CHAIN

149 -0.6666667

2175194

CHINA SOUTHERN-A

CHINA VANKE CO-A

16 2555

INDEX 2525.33

METALLURGICAL-A PANGANG GROUP -A

151

52W (H) 2717.825 (L) 2102.135

2500

4-January

8-January

FTSE TAIWAN 50 INDEX

ASIA CEMENT CORP ASUSTEK COMPUTER AU OPTRONICS COR CATCHER TECH CATHAY FINANCIAL

CHINATRUST FINAN

NAME

PRICE DAY %

Volume

TAIWAN MOBILE CO

104 -0.4784689

4086226

8435891

TPK HOLDING CO L

382 -0.9079118

2748488

-0.78125

9289677

TSMC

86 -0.8073818

20042789

HON HAI PRECISIO

85.1 -0.8158508

34566357

HOTAI MOTOR CO

212

0.4739336

166744

258

0.3891051

15.85 -0.6269592

16.75

-0.297619

12218943

CHUNGHWA TELECOM

92.1

0.1086957

4441098

QUANTA COMPUTER

COMPAL ELECTRON

20.8

-0.952381

11551601

DELTA ELECT INC

101

6193718

31.95 -0.4672897

FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL

69.2

NAME

UNI-PRESIDENT

51.5 -0.9615385

4359143

UNITED MICROELEC

11.15

8898350

WISTRON CORP

31.15

0.9724473

6979610

7256032

YUANTA FINANCIAL

13.9 -0.7142857

10514423

-1.487603

1159640

YULON MOTOR CO

54.3

37.3 -0.5333333

1774486

0.7727975

5572695

21.95 -0.2272727

326

10919929

6501333

SILICONWARE PREC

30.9

0.4878049

6712132

SINOPAC FINANCIA

11.3

-1.73913

13006288

3956927

SYNNEX TECH INTL

65.3

1.872075

1907790

0.727802

7410081

TAIWAN CEMENT

37.8

0.5319149

11076636

17.35 -0.5730659

4127433

TAIWAN COOPERATI

15.8 -0.3154574

6426352

FORMOSA CHEM & F

73.6 -0.8086253

3684264

TAIWAN FERTILIZE

75.6

0.8

1619756

FORMOSA PETROCHE

84.3 -0.8235294

1127411

TAIWAN GLASS IND

27.95 -0.3565062

1012427

MOVERS

0.1845018

21999748

2485657

3 5475

INDEX 5393.42 HIGH

5471.57

LOW

5368.27

52W (H) 5621.53 5360

(L) 4719.96 4-January

8-January

January 9, 2013 business daily | 13

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

MeLCo CroWN eNTerTaINMeNT

MgM CHINa HoLDINgS

33.6 33.3

51.2

15.2

50.2

15.0

49.2

14.8

33.0 32.7

Max 33.5

average 33.110

Min 32.6

32.4

Last 32.8

Max 51

SaNDS CHINa LTD

average 49.572

Min 48.4

Last 49.85

SJM HoLDINgS LTD

Last 36.9

37.0

19.4

23.2

19.2

23.0

19.0

22.8

36.2

18.8 Max 19.5

average 19.303

NAME

PRICE

WTI CRUDE FUTURE Feb13

93.08

-0.118027698

1.372250054

109.4300003

80.05999756

BRENT CRUDE FUTR Feb13

111.23

-0.152603232

0.10800108

119.2999954

90.38999939

GASOLINE RBOB FUT Feb13

220.3500032

DAY %

YTD %

(H) 52W

Min 18.88

Last 19.08

22.6 Max 23.3

average 23.056

277.62

-0.043205876

0.525038925

292.9699898

940.5

0.026588673

1.45631068

1031.5

800.25

NATURAL GAS FUTR Feb13

3.234

-0.979791794

-3.491495076

4.090000153

3.049999952

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

303.71

0.164902213

0.174812596

333.4599972

255.6599855

1651.24

-0.2139

-0.7943

1796.08

1527.21

30.235

0.1822

0.4151

37.4775

26.1513

1564.35

0.3709

3.0703

1736

1379.05

672.7

-1.6089

-3.8533

725.19

553.75

LME ALUMINUM 3MO ($)

2065

0.242718447

-0.385914134

2361.5

1827.25

LME COPPER 3MO ($)

8071

-0.173160173

1.765225066

8765

7219.5

LME ZINC

2021

-0.931372549

-2.836538462

2220

1745

17210

-0.835494094

0.879249707

22150

15236

15.26

0.328731098

0.560131796

16.84000015

14.89999962

684.25

-0.182348651

-2.005012531

846.25

511

3MO ($)

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

PRICE

(L) 52W

GAS OIL FUT (ICE) Feb13

CORN FUTURE

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

Last 22.95

Min 22.8

1.0495 1.6089 0.9212 1.3127 87.41 7.9842 7.7515 6.2241 55.125 30.45 1.2284 29.034 40.82 9827 91.738 1.20933 0.81593 8.1601 10.481 114.74 1.03

DAY %

-0.0762 0.1868 0.6079 0.6595 0.5491 -0.0075 -0.0065 0.0916 0.1814 0.0328 0.171 -0.0964 0.2278 -1.5976 0.6268 -0.0488 -0.4719 -0.5674 -0.6602 -0.1046 0

1.1274 -0.5378 -0.6296 -0.4776 -1.4987 -0.0125 -0.0116 0.1044 -0.2358 0.4269 -0.5698 -0.0034 0.4532 -0.346 -2.6281 -0.153 -0.0625 0.7034 0.4713 -1.0197 -0.0097

YTD %

(H) 52W

1.0857 1.6381 0.9972 1.3487 88.41 8.0039 7.7713 6.3964 57.3275 32 1.2985 30.203 44.24 9847 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

3.36

1.818182

6.666663

3.44

2.17

2148228

CROWN LTD

11.07

-0.7174888

3.748828

11.3

7.95

1287796

WHEAT FUTURE(CBT) Mar13

751.25

-3.438303342

948.25

652

SOYBEAN FUTURE Mar13

1381.25

-0.522146201

-2.004256829

1728.25

1194.5

ARISTOCRAT LEISU

COFFEE 'C' FUTURE Mar13

149.35

-0.698138298

3.859527121

249

141.25

PRICE

DAY % YTD %

VOLUME CRNCY

SUGAR #11 (WORLD) Mar13

18.89

0.159066808

-3.177857509

25.12999916

18.30999947

AMAX HOLDINGS LT

0.082

5.128205

17.14286

0.119

0.055

84914000

COTTON NO.2 FUTR Mar13

75.22

-0.647206446

0.106467927

98.5

66.84999847

BOC HONG KONG HO

24.8

-0.2012072

2.904563

18.2

10196740 189400

CENTURY LEGEND

0.285

-1.724138

7.547176

0.335

0.215

5.83

-0.1712329

-2.671115

6.25

2.76

221381

CHINA OVERSEAS

24.95

-1.383399

8.008656

25.6

12.066

14108261

CHINESE ESTATES

12.34

-0.3231018

-5.657492

13.26

8.3

33500

CHOW TAI FOOK JE

12.88

-2.571861

3.536981

15.16

8.4

6639800

EMPEROR ENTERTAI

1.88

-0.5291005

-0.5290998

1.93

0.99

2188276

FUTURE BRIGHT

1.49

4.929577

22.13114

1.54

0.41

10896000

CHEUK NANG HLDGS

World Stock MarketS - Indices NAME

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

NASDAQ COMPOSITE INDEX

13384.29

-0.3790041

2.137877

13661.87

12035.08984

32.8

1.705426

8.072486

33.6

13.28

15973202

3098.814

-0.09166068

2.62626

3196.932

2658.83

HANG SENG BK

118.9

0.2529511

0.1684946

120

FTSE 100 INDEX

1645944

6071.32

0.1111371

2.941936

6091.5

5229.76

HOPEWELL HLDGS

33.45

-2.04978

0.6015038

34.3

19.049

1815900

DAX INDEX

7719.95

-0.1643678

1.41296

7789.94

5914.43

HSBC HLDGS PLC

82.75

-0.3612282

1.783514

83.4

58.55

13067984

NIKKEI 225

10508.06

-0.858099

1.085887

10743.69

8238.96

2604000

HANG SENG INDEX

23111.19

-0.9368296

2.004992

23402.44922

18056.4

CSI 300 INDEX

2525.33

-0.4201523

0.09426156

2717.825

TAIWAN TAIEX INDEX

7721.66

-0.4310717

0.2878129

8170.72

GALAXY ENTERTAIN

HUTCHISON TELE H

3.5

-0.2849003

-1.685392

3.88

2.92

LUK FOOK HLDGS I

27.7

-4.317789

13.52459

33.2

14.7

3561450

MELCO INTL DEVEL

10.82

2.268431

20.08879

11.18

5.12

20696000

2102.135

MGM CHINA HOLDIN

14.82

-0.269179

5.706131

15.12

9.573

7747782

6857.35

MIDLAND HOLDINGS

4.03

-2.891566

8.918918

5.217

3.249

3332000

NEPTUNE GROUP

0.157

5.369128

3.289477

0.222

0.084

18450000

NEW WORLD DEV

12.54

-0.7911392

4.326119

13.2

6.63

25436014

SANDS CHINA LTD

36.9

0.1356852

8.689246

37.15

20.65

15798188

SHUN HO RESOURCE

1.48

0.6802721

5.714288

1.5

106500

SHUN TAK HOLDING

4.31

-1.822323

2.86396

4.48

2.506

5027514 6380074

KOSPI INDEX

1997.94

-0.6617775

0.04456035

2057.28

1758.99

S&P/ASX 200 INDEX

4690.25

-0.5739482

0.8883684

4750.7

3985

4397.545

0.1176128

1.873147

4427.652

3635.283

FTSE Bursa Malaysia KLCI

1688.91

-0.3098881

1699.68

1508.93

NZX ALL INDEX

888.933

0.1544681

0.779999

889.036

718.491

SJM HOLDINGS LTD

19.08

-0.625

19.5

12.15

PHILIPPINES ALL SHARE IX

3813.65

0.05089579

3.100042

3820.23

3053.67

SMARTONE TELECOM

14.28

-0.1398601

1.420455

17.5

12.96

1738730

WYNN MACAU LTD

22.95

-0.4338395

9.546535

25.5

14.62

13125223

JAKARTA COMPOSITE INDEX

14.6

CURRENCY EXCHANGE RATES

HEATING OIL FUTR Feb13 METALS

Last 14.82

23.4

Commodities ENERGY

Min 14.78

19.6

36.4 Min 36.4

average 14.94

37.2

36.6

average 36.881

Max 15.04

WyNN MaCaU LTD

36.8

Max 37.15

48.2

HSBC Dragon 300 Index Singapor

627.24

-0.31

0.99

STOCK EXCH OF THAI INDEX

1416.48

0.08196026

1.763733

1425.26

1033.4

HO CHI MINH STOCK INDEX

447.16

2.987172

8.080147

492.44

332.28

BOC HONG KONG HO

3.07

Laos Composite Index

1241.21

-0.1640861

2.176539

1261.55

876.33

GALAXY ENTERTAIN

4.189

1.183575

INTL GAME TECH

14.68

-1.674481

JONES LANG LASAL

85.64

-1.449942

LAS VEGAS SANDS

50.88

-0.6061695

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

ASIA ENTERTAINME

3.37

-2.318841

10.13072

7.24

2.4

501950

BALLY TECHNOLOGI

46.92

0.2349925

4.942968

51.16

39.14

361813

3.3

2.33

9700

5.516372

4.19

1.82

36200

3.599153

18.1

10.92

2046464

2.025253

87.62

61.39

377430

10.2253

58.3216

32.6127

8287533 10959830

MELCO CROWN-ADR

19.25

5.769231

14.31116

19.2775

9.13

MGM CHINA HOLDIN

1.8657

0.8486486

0.8486473

1.96

1.2863

259800

MGM RESORTS INTE

12.68

0.3164557

8.934705

14.9401

8.83

9185573

SHFL ENTERTAINME

14.7104

0.5495557

1.451034

18.77

11.75

340316

SJM HOLDINGS LTD

2.52

1.612903

9.090912

2.52

1.5681

11763

121.19

0.3394602

7.734023

129.6589

84.4902

1501028

WYNN RESORTS LTD

AUD HKD

USD

14 |

business daily January 9, 2013

Opinion Why austerity works and fiscal stimulus doesn’t Anders Aslund

Senior fellow at the Peterson Institute for International Economics

fter five years of financial crisis, the European record is in: Northern Europe is sound, thanks to austerity, while southern Europe is hurting because of half-hearted austerity or, worse, fiscal stimulus. The predominant Keynesian thinking has been tested, and it has failed spectacularly. The starkest contrasts are Latvia and Greece, two small countries hit the worst by the crisis. They have pursued different policies, Latvia strict austerity, and Greece late and limited austerity. Latvia saw a sharp gross domestic product decline of 24 percent for two years, which was caused by an almost complete liquidity freeze in 2008. This necessitated the austerity that followed. Yet Latvia’s economy grew by 5.5 percent in 2011, and in 2012 it probably expanded by 5.3 percent, the highest growth in Europe, with a budget deficit of only 1.5 percent of GDP. Meanwhile, Greece will suffer from at least seven meagre years, having endured five years of recession already. So far, its GDP has fallen by 18 percent. In 2008 and 2009, the financial crisis actually looked far worse in Latvia than Greece, but then they chose opposite policies. The lessons are clear. A successful stabilisation programme must appear financially sustainable so that it can restore confidence among creditors, businesses and people. Usually, a sound stabilisation programme can revive economic growth within two or three years, as Latvia’s did. A few rules of thumb need to be followed. Latvia did them all; Greece not at all.

Regain confidence To regain confidence fast, reforms should be front-loaded. In 2009, Latvia carried out an arduous fiscal adjustment of 9.5 percent of GDP, 60 percent of the total needed, while Greece foolishly tried to stimulate its economy, as Spain, Slovenia, Cyprus and other southern crisis countries did at the flawed advice of the International Monetary Fund under Dominique Strauss-

Kahn, who was then the managing director. In a severe crisis, it is much easier to cut public expenditures than to raise revenue. Moreover, taxpayers think the government should tighten its belt when they are forced to do so. Cuts in public spending accounted for two-thirds of the Latvian fiscal adjustment. It decreased government expenditures from a high of 44 percent of GDP in the midst of the crisis to a moderate level of 36 percent of GDP this year. Latvia has kept a flat personal income tax now at 21 percent and a low corporate profit tax of 15 percent. Greece, by contrast, maintained high public expenditures of 50 percent of gross domestic product in both 2010 and 2011, when it was supposed to be pursuing austerity. It should cut its public spending to 40 percent of GDP to become financially sustainable. Then the Greek crisis would end. Greece has carried out a fiscal adjustment of 9 percent of GDP to date, but that is too little and too late. It is less than Latvia did in the first year, and Greece needs to do more. An advantage of sudden and sharp cuts in public expenditures is that they can’t be even, as some items can’t be cut. Therefore they drive reforms. The Latvian government hit hard at the stifling bureaucracy that swelled during the preceding boom. It fired 30 percent of the civil servants, closed half the state agencies, and reduced the average public salary by 26 percent in one year. It prohibited double-dipping by officials, who had earned more in fees from corporate boards of state-owned companies than in salaries. The ministers took personal wage cuts of 35 percent, while pensions and social benefits were barely reduced. The cuts prompted deregulation, and Latvia saw a boom in the creation of new enterprises in 2011.

During the purported austerity, Socialist Prime Minister George Papandreou increased the number of civil servants by 5,000 from 2010 to 2011, because they were his power base. Transparency International ranks Greece the most corrupt country in the EU. A serious financial crisis requires international emergency funding. Latvia received substantial credits from the IMF, the European Union and neighbouring countries. Altogether, the committed funds amounted to 37 percent of Latvia’s GDP in 2008, but Latvia used 60 percent of the credits committed. In late December it paid back all its IMF loans almost three years earlier than necessary because it can borrow more cheaply on the market. Its six-year bond yields have plummeted to 1.7 percent, while the Greek 10-year bond yields are 11 percent. In May 2010, Greece

The predominant Keynesian thinking has been tested, and it has failed spectacularly

received far more help than Latvia did – the largest IMF credit ever – but its stabilisation programme was neither credible nor executed. The Greek public debt has been excessive, and it remains so after two substantial, yet insufficient, debt reductions. The government needs to seriously cut its spending, reduce its bureaucracy and prosecute corrupt leaders, and the IMF and EU have to become adamant about their conditions. Furthermore, a front-loaded austerity programme shows people that the government is up to the task. Latvia experienced violent riots in January 2009, but in March 2009 Valdis Dombrovskis became prime minister. He stated that there were two alternatives, one bad and one worse, and he preferred the bad alternative. He reached agreement on his stabilisation programme with the trade unions and employers. Nothing works like success. Dombrovskis (with whom I co-wrote a book on the Latvian crisis) was re-elected in 2010 and 2011. Greece has suffered from huge demonstrations and riots, and for good reason. For too long, public employees have maintained their privileges while others expressed frustration with an irresponsible government. Since June, it appears the new Greek government is finally becoming serious.

IMF warning Recently, the IMF warned that cutting government spending had more negative

effects than previously thought. But the fund focuses on one single year. What really matters is how quickly a crisis can be resolved and the longterm growth trajectory, as Latvia shows so elegantly. Last June, the IMF’s managing director, Christine Lagarde, went to Riga to celebrate Latvia’s success and did so in no uncertain terms: “We are here today to celebrate your achievements, but also to make sure that you can build on this success as you look to the future.” Now, however, the IMF complains that Latvia has cut social spending too much. Unemployment remains the main concern, but it has fallen substantially from 20.7 percent in early 2010 to 13.5 percent in the fall of 2012. Latvia is undergoing a major structural change, as an oversized construction sector has collapsed, and new manufacturing companies are expanding. Real adjustment takes time. Another complaint is the country’s inequality, but that can only change gradually. The U.S. situation is quite different. As the world’s biggest economy issuing the dominant reserve currency, it doesn’t feel the pressures from the international credit market that a small economy does if it has a public debt exceeding GDP, as the U.S. now has. With Treasury yields at record lows and a required fiscal adjustment of only 3 percent to 4 percent of GDP, the U.S. fiscal problem might be perceived as too small to solve. That is the great danger for the country. Bloomberg View

‘Most corrupt’ By contrast, Greece has allowed clientelism and corruption to thrive.

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 9, 2013 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Asahi Shimbun Japan’s deputy prime minister has said the government will not press the Bank of Japan to accept a policy accord if it pledges to act aggressively to loosen credit and end deflation. “We do not have to stick to the word ‘accord’ at all,” Taro Aso said. He said the Council on Economic and Fiscal Policy, a key panel whose members include BOJ Governor Masaaki Shirakawa, would reconvene soon. “If, on the panel, we find ourselves in sync with each other, we will not conclude an accord,” said Mr Aso, who also serves as finance minister and has a seat on the panel.

Business Inquirer The Philippines foreign exchange reserves hit an all-time high of US$84.25 billion at the close of 2012, buoyed by the central bank’s dollar purchases that were meant to temper what could have been a sharp appreciation of the peso. The yearend gross international reserves (GIR) were enough to cover a year of the country’s import requirements and were nearly six times the combined foreign currency-denominated debts of the government and private entities maturing within a year. The latest amount of GIR was up by about 12 percent from US$75.30 billion the previous year.

Jakarta Post With demand for gas likely to soar in the coming years in line with rapid industrial and energy-use expansion,Indonesia’sgovernment will pour most of its resources this year into developing several key upstream and downstream gas projects. The strategy is part of the Energy and Mineral Resources Ministry’s 2013 strategic plan in which projects related to gas will dominate the country’s energy sector until 2018. According to a copy of the strategic plan, the ministry will prioritise three gas projects this year, developed separately by France-based Total E&P Indonesie, ConocoPhillips Indonesia and Australia-based Pearl Oil.

Korea Herald South Korea will speed up the development of longer-range missiles capable of striking all of North Korea and deploy them as early as possible, an official on the presidential transition team said on Monday. In October last year, South Korea announced a new missile agreement with the U.S. that allows Seoul to extend the range of its ballistic missiles. “We will work toward quickly putting in force ballistic missiles with the range of 80 kilometres,” said Kim Jangsoo, who has been named to oversee external affairs and North Korean policies for President-elect Park Geun-hye.

The real interest-rate risk Zhang Monan

Fellow of the China Information Centre and a researcher at the China Macroeconomic Research Platform

ince 2007, the financial crisis has pushed the world into an era of low, if not near-zero, interest rates and quantitative easing, as most developed countries seek to reduce debt pressure and perpetuate fragile payment cycles. But, despite talk of easy money as the “new normal,” there is a strong risk that real (inflation-adjusted) interest rates will rise in the next decade. Total capital assets of central banks worldwide amount to US$18 trillion, or 19 percent of global GDP – twice the level of ten years ago. This gives them plenty of ammunition to guide market interest rates lower as they combat the weakest recovery since the Great Depression. In the United States, the Federal Reserve has lowered its benchmark interest rate ten times since August 2007, from 5.25 percent to a zone between zero and 0.25 percent, and has reduced the discount rate 12 times (by a total of 550 basis points since June 2006), to 0.75 percent. The European Central Bank has lowered its main refinancing rate eight times, by a total of 325 basis points, to 0.75 percent. The Bank of Japan has twice lowered its interest rate, which now stands at 0.1 percent. And the Bank of England has cut its benchmark rate nine times, by 525 points, to an all-time low of 0.5 percent. But this vigorous attempt to reduce interest rates is distorting capital allocation. The U.S., with the world’s largest deficits and debt, is the biggest beneficiary of cheap financing. With the persistence of Europe’s sovereign-debt crisis, safe-haven effects have driven the yield of ten-year U.S. Treasury bonds to their lowest level in 60 years, while the ten-year swap spread – the

The tendency in recent decades to suppress interest rates will be reversed within the next few years, owing mainly to rising investment from the developing countries

gap between a fixed-rate and a floating-rate payment stream – is negative, implying a real loss for investors. The U.S. government is now trying to repay old debt by borrowing more; in 2010, average annual debt creation (including debt refinance) moved above US$4 trillion, or almost one-quarter of GDP, compared to the pre-crisis average of 8.7 percent of GDP. As this figure continues to rise, investors will demand a higher risk premium, causing debt-service costs to rise. And, once the U.S. economy shows signs of recovery and the Fed’s targets of 6.5 percent unemployment and 2.5 percent annual inflation are reached, the authorities will abandon quantitative easing and force real interest rates higher.

Cheap finance over Japan, too, is now facing emerging interest-rate risks, as the proportion of public debt held by foreigners reaches a new high. While the yield on Japan’s ten-year bond has dropped to an all-time low in the last nine years, the biggest risk, as in the U.S., is a large increase in borrowing costs as investors demand higher risk premia. Once Japan’s sovereigndebt market becomes unstable, refinancing difficulties will hit domestic financial institutions, which hold a massive volume of public debt on their balance sheets. The result will be chain reactions similar to those seen in Europe’s sovereigndebt crisis, with a vicious circle of sovereign and bank debt leading to credit-rating downgrades and a sharp increase in bond yields. Japan’s own debt crisis will then erupt with full force. Viewed from creditors’

perspective, the age of cheap finance for the indebted countries is over. To some extent, the overaccumulation of U.S. debt reflects the global perception of zero risk. As a result, the external-surplus countries (including China) essentially contribute to the suppression of long-term U.S. interest rates, with the average U.S. Treasury bond yield dropping 40 percent between 2000 and 2008. Thus, the more U.S. debt that these countries buy, the more money they lose. That is especially true of China, the world’s secondlargest creditor country (and America’s largest creditor). But this arrangement is quickly becoming unsustainable. China’s far-reaching shift to a new growth model implies major structural and macroeconomic changes in the medium and long term. The renminbi’s unilateral revaluation will end, accompanied by the gradual easing of external liquidity pressure. With risk assets’ long-term valuation falling and pressure

to prick price bubbles rising, China’s capital reserves will be insufficient to refinance the developed countries’ debts cheaply. China is not alone. As a recent report by the international consultancy McKinsey & Company argues, the next decade will witness rising interest rates worldwide amid global economic rebalancing. For the time being, the developed economies remain weak, with central banks attempting to stimulate anaemic demand. But the tendency in recent decades – and especially since 2007 – to suppress interest rates will be reversed within the next few years, owing mainly to rising investment from the developing countries. Moreover, China’s ageing population, and its strategy of boosting domestic consumption, will negatively affect global savings. The world may enter a new era in which investment demand exceeds desired savings – which means that real interest rates must rise. © Project Syndicate

16 |

business daily January 9, 2013

CLOSING Shenzhen cooperation to involve Qianhai HK to make it harder to identify directors Macau and Shenzhen signed six agreements yesterday on inspection of food heading to the MSAR, medicine supervision and education during a bilateral cooperation meeting held in the mainland Chinese city. But the mayor of Shenzhen, Xu Qin, and the Macau Secretary for Economy and Finance, Francis Tam Pak Yuen, also said the two governments should extend their cooperation to promote opportunities offered in the Qianhai special economic area. Before returning to Macau, the delegation led by Chief Executive Fernando Chui Sai On, visited a Huawei Technologies Co Ltd factory.

Hong Kong proposed amendments that would make it harder to trace the personal details of company directors in the city. The proposal would obscure the residential addresses and full identification numbers of a company’s directors to the public from the first quarter next year, according to a document submitted to the Legislative Council. “In terms of exposing corruption, it does make it harder to identify people when you don’t have an ID number that can be tracked across different databases,” David Webb, the founder of corporate-governance website Webb-site.com, said.

Chinese Pakistan seen needing c.bank to use IMF bailout more policy Regulators ease tools: Chen As rupee drops to a record low before vote

bank asset rules Haris Anwar

PBOC advisor says Banks win more flexible liquidity rules authorities have to from Basel tread cautiously Huw Jones

hina will use a wider range of tools, including interest rates and bank reserve ratios, to guide monetary policy in 2013, rather than just relying on open market operations, an advisor to the People’s Bank of China (PBOC) was quoted as saying yesterday. “Monetary policy tools in 2013 will be more comprehensive – not only relying on reverse repos and other open market operations, but also bank reserve ratios and interest rates,” Chen Yulu, a member of the central bank’s monetary policy committee, was quoted by China’s main news portal, www.sina.com, as saying. But Mr Chen said the central bank should still tread cautiously as consumer inflation may pick up in the second half. The report did not say when and where Mr Chen made the remarks. The central bank delivered two cuts in benchmark interest rates around mid-2012 and three cuts in banks’ reserve requirement ratios (RRR) between late 2011 and May 2012. But fearful of a flare-up in property prices and consumer inflation, it has since refrained from cutting interest rates or RRR, opting to inject shortterm cash into money markets to help ease credit strains. Mr Chen, who is the head of Renmin University in Beijing, expects the economy to grow around 8 percent this year, in line with the mainstream view among government economists. The central bank may target a 13 percent annual rise in broad M2 money supply this year, which will be sufficient for supporting economic growth, said Mr Chen, who advises the central bank but does not have real influence on policy-making. “Inflation may rebound in the second half, we need to have a good grasp of the prudent monetary policy and keep M2 growth below 14 percent,” Mr Chen was quoted as saying. China’s central bank has pledged to continue its prudent monetary policy to keep economic growth stable this year. Reuters

Rupee ‘under serious pressure’ – economist

akistan may require an International Monetary Fund bailout after a tumble in foreign reserves and a plunge in its currency to a record low, as a struggling economy saps support for the government before a general election. The rupee has slid 7 percent versus the dollar in the past year, with reserves down about 19 percent to US$13.8 billion on a trade gap and aid repayments. IMF help is needed to stem the declines, said Standard Chartered Plc and ex-Commerce Minister Mohammad Zubair Khan, ahead of a visit by the lender this week. “The rupee is under serious pressure,” said Sayem Ali, an economist at Standard Chartered in Karachi who previously worked at the World Bank. “The central bank doesn’t have the ability to defend it.” The vote due by mid-2013 would be the first time a civilian Pakistani government finishes its five-year term and transfers power through the ballot box. Probable IMF loan conditions such as tighter monetary policy and curbs on the budget deficit would be politically costly steps for the

administration led by the Pakistan Peoples Party, according to Mr Khan. “Going to IMF while in the middle of an election process is certainly a risky move,” Mr Ali said. “To some extent, they can afford to delay the arrangement until the elections are held, and that technically means that the new set-up will be burdened with taking all the painful adjustments.” An IMF mission is expected in the next two days, Rana Asad Amin, a spokesman at the Ministry of Finance, said on Monday.

‘In talks’ Pakistan is evaluating a possible loan from the IMF as a buffer against shocks, Saleem H. Mandviwalla, the minister of state for finance, told reporters on December 19 in Islamabad. “We are in talks with them but haven’t decided,” he said. Subdued global growth, an unprecedented power crisis and an insurgency on the Afghan border have buffeted Pakistan’s economy. Political instability in the nuclear-armed nation may hinder efforts to reconcile at least some Taliban insurgents with the Afghan

government of Hamid Karzai, as the U.S. plans to withdraw the majority of its combat troops from a decadeold war in Afghanistan by the end of 2014. The Washington-based IMF said in a November 29 statement that Pakistan’s economic growth will slow to about 3.25 percent in the fiscal year through June 2013, from 3.7 percent. Foreign reserves in October were “below adequate levels,” it said. The rupee touched a record low of 98.288 per dollar on December 18, and its 36 percent slide in the past five years is one of the worst in Asia, according to data compiled by Bloomberg. Standard Chartered predicts it will weaken to 100 per dollar this quarter. “To restore stability in the foreignexchange markets, they need IMF endorsement,” said Mr Khan, now a World Bank advisor. An earlier, partially disbursed US$11.3 billion IMF loan programme expired in September 2011 after Pakistan failed to meet the conditions attached to it. The nation has to repay about US$7.5 billion to the lender from 2012 to 2015, Moody’s Investors Service said in July. Bloomberg News