Macau Business Daily, June 22, 2012

August future for Studio City

China PMI moves to ‘Lehman territory’ Pages 8 & 9

Page 16

Year I - Number 60 Friday June 22, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

Page 5

Outlook darkens as Europe slips

Dollar peg, demand, keep inflation up T

he price of a humble tomato went up an eyewatering 85.5 percent in the city last month. Beef was up 22.7 percent, while Thai rice, a staple of local families, now costs 9.7 percent more. Tomatoes and beef are ‘discretionary’ items and food only accounts for a third of the basket of goods used to compute the consumer price index. As a result the overall index for May shows year-on-year inflation, across a basket of consumer items, unchanged from April, at 6.76 percent.

In a system of globalised trade, communities can’t help importing some inflation. But Macau’s economy has structural issues that expose it to extra inflationary pressures, say local experts.

Macau consumer costs are fuelled not only by price hikes in food and household commodities brought over from a still rapidly-growing China, but also by the infamous pataca-U.S. dollar ‘peg’ state several economists. As China’s yuan appreciates and the U.S. dollar depreciates, so it costs more in patacas to buy produce from the mainland.

There’s another problem. “The amount of food products imported is not set according to demand but according to contracts signed with suppliers,” explains economist José de Sales Marques. And supply has been lagging behind growing demand in the city.

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More on pages 2 & 3

HANG SENG INDEX

Niche banking link to Lusophonia

19500

19450

M

acau should become a financial service centre to host banks from Portuguese-speaking countries, a business leader suggested yesterday. Chen Gong Bin, president of the Electronic Financial Industry Trade Promotion Association, said the city’s cultural and linguistic ties to Lusophone countries as well as to China made it well placed to be a springboard for foreign business aimed at the mainland.

19400

19350

19300

Page 4

19250

June 21

HSI - Movers

Justice slow – as well as blind

Name

T

he Macau judicial system is swamped with cases and only half of those filed each year get heard that same year, says a legal expert. The inability of local people to get timely access to justice is a cause for social instability suggests Harry Wang Chao, professor at University of Macau’s Faculty of Law. Lawyers also clog the system with requests for documents – often as a delaying tactic.

Pages 6 & 7

Macau Foundation on shaky ground

%Day

CHINA RES POWER

0.94

ESPRIT HLDGS

0.58

POWER ASSETS HOL

0.00

MTR CORP

0.00

HANG SENG BK

-0.29

CHINA UNICOM HON

-3.65

COSCO PAC LTD

-3.88

CHINA OVERSEAS

-3.94

TENCENT HOLDINGS

-4.43

CHINA RES LAND

-5.32

Source: Bloomberg

T

Brought to you by

he Macau Foundation failed to ensure that the public money it granted to local associations was well spent, says a report from the Audit Commission.

Many associations did not present their activity report but the foundation did not “demand that the granted subsidies be returned,” the commission says. Other associations received “enjoyed more than one subsidy” in the same year.

2012-6-20

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business daily June 22, 2012

macau

Food prices shoot up InBrief but inflation steady Food prices rose sharply but annual rate of inflation unchanged at just under 7 percent last month Vítor Quintã

vitorquinta@macaubusinessdaily.com

Attendance up at G2E Asia Over 6,100 gambling industry professionals from 67 different countries and regions visited the sixth annual Global Gaming Expo Asia (G2E Asia), held last month at the Venetian Macao. The figures released on Wednesday by event organisers Reed Exhibitions and American Gaming Association show an increase of nearly 8 percent. In addition, over 600 people took part in the conference programmes and there were over 130 exhibitors from 24 countries.

Rush to buy BOC notes Over 470,000 Macau residents have already registered online to buy the 100th anniversary commemorative notes of Bank of China (BOC), Portuguese-language newspaper Tribuna de Macau reported. Registration is open until the end of the month. On July 11 the Bank of China, Macau branch will draw 12,800 applicants, who will be able to buy the notes on August 11-12.

A

fter accelerating for two consecutive months, the annual rate of inflation was steady at just under 7 percent in May, official data show, but there does not seem to be an end to the surge in food prices.

According to the Statistics and Census Service, the consumer price index was 6.76 percent higher last month than a year before.

But the annual rate of inflation of prices of food and non-alcoholic drinks, which account for almost one-third of household budgets, rose for the fourth consecutive month, to 9.9 percent from 9.5 percent in April.

Almost 30 percent the inflation rate was due to a 9.4 percent increase in the cost of eating out or ordering in, and 20 percent to an 11.6 percent rise in the price of food.

Fresh meat and vegetables were more expensive, tomatoes costing 85.5 percent more than a year before, Chinese lettuce 50.9 percent more, beef 22.7 percent more and Thai rice, a staple, 9.7 per cent more.

Poorer households, which spend a bigger slice of their budget on food, took a bigger hit.

For about half of all households, those with a monthly income between 6,000 patacas (US$750) and 19,000 patacas, annual inflation was 7.2 percent.

Higher food prices are usually due to inflation imported from mainland China, Macau’s biggest supplier.

Annual consumer price inflation in the mainland moderated in May to 3 percent, although food prices rose much faster, by 6.4 percent.

Full liberalisation

Govt gets back plot for wholesale market The Macau Government has taken back a 6,193-square-metre plot at the Zhuhai-Macau Cross-border Industrial Park where it will build a new wholesale market, the head of the society in charge of running the park, Paulina Santos, told Portugueselanguage newspaper Ponto Final.

The current wholesale market in Ilha Verde will be replaced by a new border crossing between Macau and neighbouring Zhuhai.

Yacht Club cancels controversial deal The Macau Yacht Club has cancelled a controversial land deal with Realgain because the British Virgin Island offshore was unable to build the clubhouse on time, the club board told Portuguese-language newspaper Tribuna de Macau. The club is now waiting to see if it will get an extension of the construction schedule from the Land, Public Works and Transport Bureau.

But economists warned not all inflation is imported from the mainland.

“There is what I call the implicit exchange rate. The yuan is getting stronger while the US dollar, to which the pataca is loosely pegged is depreciating,” Jacky So Yuk Chow told Business Daily.

“Even if the food cost had not changed, it would have still gone up due to the yuan appreciation,” the dean of the Faculty of Business Administration at the University of Macau said.

Economist José de Sales Marques agreed. “There are some factors in play here that are linked to the Macau market itself,” he told Business Daily.

The most important factor was inelasticity of supply, Mr Marques said.

“The amount of food products imported is not set according to demand but according to contracts signed with suppliers.”

Supply had been lagging behind growing demand, fuelled by more hotels and restaurants and an increase in the number of tourists, he said.

In the first four months of this year the city had over 9.3 million visitors, 6.3 percent

more than a year before.

Mr Marques said full liberalisation of fresh food imports had long been touted as a solution.

But “it’s impossible to change it overnight,” he said.

He said fresh food imports “follow pre-determined channels”, and that the government had been trying to open up new channels, through deals with producers in the provinces Hefei and Anhui and the Inner Mongolia region.

However, the economist said it was up to private companies to take those opportunities, and that some might not be able or willing to do so.

Attracting new companies into the food import business might help, he said.

But Mr Marques said the city remained a small market, where “many hotels and restaurants have their own supply channels”.

A deeper study could help find out whether the demand here is enough to attract more importers, he said.

Even if the food cost had not changed, it would have still gone up due to the yuan appreciation

The amount of food products imported is not set according to demand but according to contracts signed with suppliers

Jacky So Yuk Chow, dean of the Faculty of Business Administration at the University of Macau

Up in smoke The cost of alcoholic drinks and tobacco increased by 31.9 percent in the year ended May, mainly because of by a new tobacco duty introduced in December.

The prices of jewellery and watches, products aimed mainly at tourists, rose by almost 10 percent.

Housing and fuel prices increased by 7.3 percent, accounting for 20 percent of inflation overall.

Although gasoline prices dropped, rents increased by 11.3 percent.

Transport costs rose by only 1.8 percent, but are set to rise much faster in future, with the government allowing the taxi flag fall charge to rise to 15 patacas next month from

Sales Marques, economist and former president of Macau’s provisional city hall

June 22, 2012 business daily | 3

MACAU

Prices of food and non-alcoholic drinks rose for the fourth consecutive month in April

13 patacas.

Communication services costs were the only important category of goods or services in which prices fell – by 6.6 percent, as CTM reduced the price of its residential broadband internet services last August.

The biggest increases in prices in May from April were for clothing and footwear, which cost 3.4 percent more, owing to the “new arrival of summer clothing”, according to the Statistics and Census Service.

Prices in Macau seem immune from the easing of inflation in the mainland, which led the government to forecast that inflation would also decrease here.

Mainland annual inflation has fallen steadily from a peak of 6.5 percent in July 2011 in response to weakening economic activity and monetary policy actions, including higher bank reserve requirements.

Over-optimistic Last month Liu Cheng Kun, a programme coordinator at the Univer-

Y-on-y increase in the price of tomatoes

sity of Science and Technology’s Faculty of Management and Administration, told Business Daily he expected inflation here to stabilise only in the third quarter of this year.

This month, the Economist Intelli-

gence Unit predicted that inflation here would slow to 4.2 percent this year before accelerating to 4.5 percent in 2013.

But that forecast increasingly seems over-optimistic.

In the first five months of 2012, annual inflation averaged 6.74 percent.

To hit 4.2 percent by the end of 2012, inflation would have to slow to an average of less than 2.4 percent for the rest of the year.

HK inflation in 15-month low H ong Kong’s inflation cooled to 4.3 percent in May, the slowest pace since February 2011, after economic growth moderated along with food and rental costs.

The rise in the consumer-price index from a year earlier compared with April’s rate of 4.7 percent and matched the median estimate

of eight economists surveyed by Bloomberg News. The underlying inflation rate, excluding distortions from temporary government subsidies, was 5.1 percent.

Weaker inflation may aid incoming Chief Executive Leung Chun Ying, who begins a five-year term on July 1, by limiting public discontent in the city with Asia’s biggest wealth gap.

“A downtrend in inflation in the second-half of this year could turn around again next year when the global economy starts to turn for the better,” said Kelvin Lau, an economist at Standard Chartered Plc in Hong Kong.

Before his election victory, Mr Leung said that inflation and uneven income distribution were among “deep-rooted problems” in the city.

Hong Kong’s Gini coefficient, an income inequality measure, gained to 0.537 in 2011, from 0.525 in 2001, the Census and Statistics Department said this week.

The gap is wider than in Canada, the United Kingdom, the United States, Australia and Singapore, the department said.

Macau’s Gini coefficient, which was last published in 2007/2008, was at 0.37.

Hong Kong’s currency peg to the dollar robs the city of an independent monetary policy, with official interest-rate moves mirroring those of the United States Federal Reserve.

Mr Leung said last week that there are no plans to adjust the arrangement after former Hong Kong Monetary Authority head Joseph Yam called for a review.

Such a move would affect the pataca, which is loosely pegged to the United States dollar through the Hong Kong dollar. with Bloomberg

4 |

business daily June 22, 2012

macau Brought to you by

HOSPITALITY Platform Macau The intense flow of visitors was set in motion by the development of gaming.

That and the opening of the border have flooded the region with tourists. One could, as is often said, build on the flow to develop services aimed at various kinds of visitors. That would be one way to diversify the economy. Looking at the information on package tours, and using the April data on visitors as a sample to test the hypothesis, what can we conclude?

Ideas traded on finance industry Macau seeks a role in the internationalisation of the yuan

Tours: Vistors’ destinations Apr-12 Macau & Other (10%) Macau & Mainland (5%)

Macau Only (85%)

For only a small fraction of tourists is a visit to Macau part of a more extensive tour. Of the close to 600,000 visitors in April, only 15 percent visited another destination apart from Macau. Just over 35,500, or 5 percent, also went to mainland China, and 68,000 or 10 percent, also went somewhere else. Of course, the totals hide the fact that most visitors come from the mainland and, in particular, Guangdong. If we look only at the continent of origin of visitors, how would it change the picture?

Tours: Vistors’ destinations, by place of residence

Xi Chen

Apr-12

xi@macaubusinessdaily.com

100% 90%

M

80% 70% 60% 50% 40% 30% 20% 10% 0%

AMERICAS

EUROPE

OCENIA

AFRICA

Macau only Macau & Mainland Macau & Other

Fewer than 10 percent of package tourists go somewhere else apart from Macau.

And very few visitors coming from other continents visit Macau as a part of a more extensive tour. If we bear in mind that many will have landed in Hong Kong, it becomes apparent that there is a lot of work still to be done to integrate Macau with the wider network of Asian tourist destinations.

J.I.D.

acau could be an ideal host for foreign banks, especially those in Portuguesespeaking countries, given similar legal frameworks, the president of the Electronic Financial Industry Trade Promotion Association, Chen Gong Bin, said yesterday.

He was speaking at an international forum on the development of China’s e-financial industry, in which experts looked at Macau’s role in the yuan internationalisation process.

China’s trade with Portuguesespeaking countries increased by 28 percent last year, with Brazil taking the lion’s share, while rapid growth was seen in trade with East Timor and Cape Verde, according to official data.

Macau could also serve as a banking information centre and provide more offshore financial services, both in the region and globally, according to Mr Chen.

Zhen De Cheng, vice-president

and chief economist at Guangzhou Securities, suggested that the position of Macau should be seen in the context of the Pearl River Delta and mainland China.

He drew special attention to the joint economy of Guangdong province, Hong Kong and Macau being bigger than that of South Korea last year.

These regions were also greatly developed in terms of banking, he said, and there was need to further integrate banking and information systems to facilitate cross-border payments and trade settlements.

Aside from leveraging Macau’s connections with Portuguesespeaking countries, Mr Zhen said the city could also be a platform for trade with the euro zone.

He also highlighted the importance of Hengqin Island and called for Macau to use the island’s preferential policies to develop a high-valueadded financial industry.

He said Macau would do well as to deploy capital in investment funds or venture capital firms.

He argued that Guangdong, Hong Kong and Macau needed to have

an integrated approach in using financial resources.

Macau could also consider offering more yuan-denominated retail financial products tailored to individual needs, Lao Chi Ngai, senior administrative office at the University of Macau, said.

He said there were few investment channels for individuals, and encouraged the city’s banks to capitalise on the opportunity to create more financial products to satisfy demand.

There was reference in his speech to the setting-up of Macau’s fiscal reserve.

He called for the city’s surplus to be put to good use.

Organised by the Electronic Financial Industry Trade Promotion Association, the forum gathered experts in the fields of economics, finance and law to exchange ideas on the future of Macau’s financial industry.

Hong Kong is now the only offshore centre for yuan trading, while London, Singapore and Japan are all seeking to become the next trading centre for the mainland currency.

June 22, 2012 business daily | 5

MACAU

Photo by Manuel Cardoso

Studio City restart ‘by August’: analyst

Share price catalyst – MPEL’s Studio City project could restart in 45 days

S

hares in Macau casino operator Melco Crown Entertainment Ltd rose to a three-week high in New York after an analyst said its Studio City resort on Cotai will resume construction by early August.

MPEL’s American depositary receipts jumped 2.8 percent to US$12.23, the highest price since May 29. It traded 3.5 percent above the Hong Kong shares, the largest premium since March 8. MPEL has dropped 10 percent this quarter after surging 42 percent in the first.

Construction of MPEL’s US$1.9

billion Studio City resort will resume in about 45 days and begin operations within three years, Sterne Agee & Leach Equity Research analyst David Bain said in a report titled ‘Macau Studio City Catalyst Getting Closer’ yesterday, without citing a source for the information.

A request from Business Daily to MPEL for confirmation of the statement was not forthcoming at the time of going to press.

MPEL took a controlling 60 percent stake in the scheme at a cost of US$360 million last year. The resort had been due to open in 2009,

New association to promote MICE

David Chow wants innovation in the Meetings, Incentives, Conventions and Exhibitions sector

A

new business association to promote the Meetings, Incentives, Conventions and Exhibitions (MICE) industry was launched on Wednesday, aimed mainly at working with small- and medium-sized companies.

Macau already has at least one trade body for the MICE sector – the Macau Convention and Exhibition Association, run by Eva Lou I Wa. It was set up in 2002 and according to its website has 91 members – 40 percent of them described as ‘international organisers and service providers’ and 11 as ‘listed firms’.

The new body – Macau Federation of Convention and Exhibition Industry – is headed by David Chow Kam Fai, boss of Macau Landmark and Fisherman’s Wharf Investment Company. It’s aimed says the federation, at service industry SMEs. It adds that 60 businesspeople from

the construction, logistics, tourism, marketing, public relations and event planning sectors have joined.

“Through mutual aid and sharing of resources, the association hopes to strengthen the conference and exhibition sector by finding new development opportunities and boost participations in regional cooperation, thus creating a brand for the sector,” said Mr Chow. He said he hoped to create innovation by “internal and external actions”.

The number of companies operating in this area is estimated to be around 300, Mr Chow stated.

Macau held 1,045 MICE events last year; the lowest figure since the city’s Statistics and Census Service began collecting data on the sector in 2009. In the first quarter the industry continued to struggle, despite a government subsidy for organisers of such Macau events.

X.C.

according to an earlier version of its website. Deadlock among some of the previous shareholders following the global financial crisis of late 2008 had led to the suspension of construction on the scheme.

“A pipeline in Macau is very difficult to come by, and Melco [Crown] has it,” said Mr Bain; a reference to the three other Macau concessionaires currently waiting for either land concessions or building permission on Cotai.

“The shares have traded down this quarter and don’t yet reflect the Studio City project,” he added.

On June 13 MPEL’s American depositary receipts sank to US$11.75. The ADRs, each representing three underlying shares in the company, traded 3.1 percent below its Hong Kong stock Mr Bain was quoted by Bloomberg as saying at that time: “There’s a lot of scrutiny on MPEL because it’s a pure play on Macau,” adding, “however, Melco [Crown] stands to benefit from another interest rate cut in China and will certainly be helped by getting approval for the construction of its Studio City project.”

A.E./Bloomberg

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business daily June 22, 2012

macau

Jurist urges more conciliation

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An academic says it can help the city deal with its backlog of court cases

Inflation of indexes

Tony Lai

The Statistics and Census Service publishes every month the consumer price index – or to be precise, three consumer price indexes.

The one that most of us have in mind when we talk about inflation is the composite CPI. The others, CPI-A and CPI-B, are calculated according to the consumption patterns of different classes of people. CPI-A measures inflation for those whose average expenditure is between 6,000 patacas (US$751) and 18,999 patacas, who comprise about 50 percent of households. CPI-B measures inflation for those whose average expenditure is between 19,000 patacas and 34,999 patacas, who comprise about 30 percent of households.

Consumer Price Indices:

Shares of main components (%)

100 80 60 40 20

CPIC

PI-A

CPI-B

0 Food & Bev

Transport

Hous & Fuel

Rec & Culture

Cloth & Foot

Education

The chart indicates the differences in weight given to the various components – 12 subindexes – of the CPIs. It shows just the top six components as measured by the size of their shares. Together they account for 81.3 percent of the composite CPI, 83.5 percent of CPI-A and 83.5 percent of CPI-B. We can see the main differences in their shares are found in the top two categories of expenses: the food and beverages category, and the housing and fuels category. These two categories account for 55.6 percent of the composite CPI, 64.2 percent of CPI-A and 53.3 percent of percent of CPI-B. What do these differences mean for the behaviour of the three indexes?

Consumer Price Indices 100 = apr08-mar09

120

100

80

CPI-B

CPI-A

CPI-C

20

00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11

60

For most of the period covered here, the indexes move almost identically. At the end of 2011 the composite CPI was at 110.3 points, CPI-A at 109.49 points and CPI-B at 110.63 points. The biggest relative difference over the past five years was about 1 percent.

The differences in the three indexes seem to have little practical significance.

J.I.D.

tony.lai@macaubusinessdaily.com

M

acau’s judicial system is not effective and only handles only about half of the cases filed each year, particularly in the lower courts, a jurist says.

A well-planned conciliation mechanism might ease the problem, he says.

“The low efficiency in court is one of the reasons for instability in society,” Harry Wang Chao, professor in the University of Macau’s Faculty of Law, told Business Daily.

He says the Lower Court does not handle civil cases adequately as there are loopholes in the Civil Code lawyers can exploit.

Lawyers can deliberately request a number of documents and evidence in the preparation stage to delay matters.

“The law does not define a time period to finish a case,” Mr Wang said.

The latest court statistics show the Court of First Instance handled over 20,000 cases last year and about two-thirds were disposed of. “The translation of documents between Portuguese and Chinese also takes time,” said Mr Wang.

“I don’t mean the inefficiency is completely caused by this, but it is a fact.”

Even though residents were predominantly Chinese, most case files were translated into Portuguese as many lawyers and judges understood only Portuguese, Mr Wang said.

According to a study, labour disputes linked to wages or work accidents, and traffic mishaps led the list of unresolved cases in the lower courts between 2008 and 2009.

Mr Wang completed research last year on non-litigation mechanisms for solving legal disputes.

Commissioned by the government’s Law Reform Consultative Council, the study looked at over 2,000 lower court cases from those two years.

Legislator Au Kam San has proposed the setting up of a court specialised in tackling labour disputes, to raise efficiency.

The government replied last month, admitting that a new court would

speed up judicial proceedings.

However, they said there were not enough human or land resources to carry out this plan.

Mr Wang feels a new batch of judges and prosecutors could help the government set up courts for labour disputes and family affairs next year.

He said: “It would help improve efficiency but it wouldn’t help much.”

Mr Wang suggests that the incorporation of conciliation in the judicial system would have a better impact.

“Macau is a society of acquaintances and many residents know each other,” he said.

3,578 Number of pending civil cases at the end of 2011

“The conciliation suits the social norm of the city and not many of them are willing to start a lawsuit against one another.”

But conciliation is not common in Macau, even though a judge can try to settle a case during the preparatory stage.

“The judge has yet to be familiar with the case in the preparation stage, except some superficial evidence, but the same judge will take care of the hearing if a settlement cannot be reached,” he said.

“A judge will become less neutral in hearing than he is supposed to be.”

Mr Wang proposes an individual conciliation mechanism in the court system, with a few judges or prosecutors taking responsibility.

The case can first pass through the conciliators and move on to the court only if conciliation fails.

Mr Wang said this would not put further pressure on the scarce

human resources in the judiciary, because “four or five judges” would be enough, but that it could solve cases more quickly than a lawsuit with fewer and simpler procedures.

“Conciliation is also more acceptable and executable for the parties as they reach a decision together,” he said.

But Mr Wang thinks conciliation has its own shortcomings, as one party may get less than it deserves in order to reach a settlement.

And there is always the possibility of failing to reach an agreement.

A law information centre could be set up outside the judicial system to complement court conciliation.

It would involve providing consultation, conciliation and arbitration services to the public, without charges or for low fees.

But Mr Wang is less inclined towards the idea of sole arbitration, since such centres in Macau are not popular and receive only a few cases.

The city has five arbitration centres: the Consumer Council, the World Trade Centre, the Macau Monetary Authority, the Macau Lawyers Association, and the Housing Bureau.

“The Consumer Council arbitration

conciliation suits the social norm of the city and not many of them [residents] are willing to start a lawsuit against one another Harry Wang Chao, Chinese law professor at University of Macau

Weather Beijing 32/22o C Changchun 28/18o C

Harbin 30/19o C

Xian 36/25o C Shanghai 27/23o C Chengdu 28/20o C Kunming 23/16o C Haikou 33/26o C Sanya 30/24o C

Guangzhou 31/25o C

MACAU (18 June-23 June) Day

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Manila

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June 22, 2012 business daily | 7

MACAU Labour disputes take too long to solve

I

A well-planned conciliation mechanism could help ease the number of pending court cases, says legal expert Harry Wang Chao

centre has by far more cases, as it is the only centre with judges as arbitrators,” he said.

“Local residents tend to trust judges, whom they believe to have more credibility and better

knowledge.”

He added: “Another tricky point is that the decision made by the arbitrators is final and the parties cannot appeal as they voluntarily took the case to the centre.”

Audit report slams Macau Foundation Groups received billions of patacas but Foundation didn’t check money was well spent, says report Vítor Quintã vitorquinta@macaubusinessdaily.com

T

he Macau Foundation is failing to adequately monitor adequately the associations to which it grants subsidies, thus breaching its own internal rules, the Audit Commission wrote in a report released yesterday.

The foundation, led by Wu Zhiliang, granted about 1.3 billion patacas (US$163 million) to associations for 1,217 initiatives between January 2010 and July 2011.

But even though many associations failed to present their activity reports, the institution took no measures to ensure public money is well spent, the commission wrote.

The foundation made a list of these associations but did not demand that the granted subsidies be returned, the report says.

A list alone “produces no punitive or deterrent effects … nor does it prevent the non-compliance from happening again”.

Activity reports should be examined thoroughly and the foundation must probe “situations of abnormal revenue or spending”, the commission wrote.

If the reports were not filed and if the initiatives were not taken, it should “apply the adequate penalties”.

In five cases, associations failed to declare money received from other institutions, while asking for a sub-

sidy from the Macau Foundation.

One association said it had asked for 30,000 patacas but it received a staggering 6.8 million patacas in the end.

The Audit Commission stresses that this issue “prevents the Macau Foundation from knowing whether the subsidies granted were adequate” and called for deadlines for applicants to declare all relevant information while requesting a subsidy.

The foundation only grants one annual subsidy per applicant, except in “special situations”.

“Some applicant associations were registered in the same address and with the same chairman of the general assembly or the management board,” the report says. “These associations enjoyed more than one subsidy during the same year.”

The foundation should “immediately take continuous control and supervision measures”, the commission said.

The Macau Foundation granted subsidies to different associations registered in the same address and with the same board

The parties would only have the right to appeal after arbitration, if procedural laws formally allowed it, he said.

“But then I do not see much difference between arbitration and litigation.”

t takes too much time for the Labour Affairs Bureau to tackle boss-worker disputes says Harry Wang Chao, Chinese Law professor at the University of Macau. He blames in part cumbersome administrative procedures.

For conflicts such as delays in salary payments, the bureau will carry out an inquiry after receiving a complaint. Mr Wang said the bureau takes at least eight months to complete such investigations, but in general it takes them even longer – about a year and a half.

If the matter cannot be resolved upon investigation, the bureau will refer the case to either the Public Prosecution Office or the Lower Court, which means the issue will take yet more time to solve, he said.

It’s too long for cases that only involve a small amount of salary, the legal expert added. He attributed the bureau’s inefficiency to the lack of human resources, as well as the administrative procedures.

Official data show that the bureau received over 2,420 labour dispute cases in the first 11 months of 2011, an increase of 23 percent from a year ago.

The bureau was unavailable for comment.

T.L.

8 |

business daily June 22, 2012

Greater China

Manufacturing contraction may reach 2008 levels Factories in eighth month of contraction

C

hina’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.

The preliminary reading was 48.1 for a purchasing managers’ index yesterday from HSBC Holdings Plc and Markit Economics. Above-50 readings indicate expansion.

The lowest crisis level was 40.9 in November 2008, when industrial output grew 5.4 percent from a year earlier, compared with 9.6 percent last month.

Yesterday’s report contrasts with comments by officials expressing confidence growth will rebound, with President Hu Jintao saying in remarks published June 17 that China has taken “targeted measures” to boost domestic demand. Asian stocks fell and the yuan weakened for a second day against the dollar.

“Beijing’s policy easing so far has not been enough,” Qu Hongbin, Hong Kong-based chief China economist

for HSBC, said in a Bloomberg Television interview. “Probably more needs to be done if they really want to stabilise the growth.”

If confirmed on July 2, the gauge would be at the lowest since November 2011 and equal the run of below-50 readings from August 2008 to March 2009.

“Economic activity going into June is still quite soft in general,” said Kevin Lai, an analyst at Daiwa in Hong Kong.

Economic growth is widely expected to have slid for the sixth straight quarter in April through June, as the country feels the impact of the euro area debt crisis and as property controls weigh on domestic demand.

The yuan was at 6.3638 at 3:04 p.m. in Shanghai. The MSCI Asia Pacific Index of stocks dropped 0.6 percent, while the Shanghai Composite Index declined 1.4 percent.

The Chinese government signalled a more-aggressive approach to sustaining expansion last month when Premier Wen Jiabao called for more efforts toward stabilising growth. The People’s Bank of China on June 7 cut interest rates for the first time since 2008 and the economic planning agency is stepping up approvals of investment projects.

Loosening policy

With external headwinds remaining strong, exports are likely to decelerate in the coming months Qu Hongbin, HSBC’s chief China economist

A quarterly central bank survey of 3,000 bankers in China, published last Tuesday, found that 32 percent said monetary policy will be loosened next quarter, compared with 6.7 percent in the prior survey.

About 68 percent of respondents deem current monetary policy “appropriate,” up 8.6 percentage points from the previous quarter.

Exports may slow in the coming months, and falling prices and moderation in new orders “suggest weak domestic demand” that will probably weigh on the labour market, Mr Qu said in a statement.

The expansion is starting to accelerate, according to some officials. The economy is rebounding this month after a “pretty obvious” downward trend in April and May, Chinese Commerce Minister Chen Deming told reporters on Wednesday in Los Cabos, Mexico.

Zhang Zhiwei, Nomura Holdings Inc.’s Hong Kong-based chief economist for China, said in a note yesterday that the report “does not change our view that, underpinned by increasingly accommodative monetary and fiscal policies, China’s economy is in the process of bottoming out.” The HSBC index has risen in June in just two of the last eight years, he said.

Mr Zhang forecasts growth of 7.8 percent this quarter followed by 8.6 percent in the third period and 8.9 percent in the last three months of the year.

Connie Tse, an economist at

Forecast Ltd in Singapore, said she sees an “increasing chance” that second-quarter annual growth will edge close to 7 percent, which would be the weakest pace of expansion since early 2009.

Falling borrowing costs for firsthome buyers in China may indicate that the government wants to limit the slowdown in the property market caused by a clampdown on speculation. Home values fell in a record 54 of 70 cities tracked by the government in May. Yesterday’s preliminary reading, called the Flash PMI, is based on 85 percent to 90 percent of responses to a survey of more than 420 companies, according to HSBC. The government releases its own monthly index on July 1. That gauge has shown six straight months of expansion while declining to 50.4 in May from 53.3 in April.

Bloomberg/Reuters

Chinese cities getting expensive B

Beijing has risen to fifth most expensive city in Asia for international employees – survey

eijing and Shanghai are rapidly moving up the list of most expensive cities in Asia for international employees, surpassing Singapore and Hong Kong, according to a study by human resources consultancy ECA International.

China’s capital has risen to fifth from eighth in a similar survey last year, while Shanghai has moved to sixth from ninth, ECA said.

Singapore has fallen from sixth to eighth position in the rankings of the most expensive Asian cities for expatriate workers, while Hong Kong moved to ninth from seventh.

Tokyo remains the most expensive city in Asia and in the world, said ECA, whose study compares a basket of consumer goods and services commonly purchased by assignees in 400 locations around

the world. Certain living costs such as accommodation, utilities, car purchase and school fees are not included in the survey.

“The rate of increase in the prices of goods and services commonly purchased by assignees in China has gone up sharply in the past year,” said Lee Quane, Regional Director, Asia for ECA International.

The strengthening of the yuan against other currencies is also one of the reasons that the cost of posting employees to China has gone up more than other cities such as Singapore.

Globally, ECA’s study found that Norwegian capital Oslo was the second most expensive city for international assignees, while Beijing ranks 20th, Shanghai 26th and Singapore came in at 32nd.

Reuters

June 22, 2012 business daily | 9

GREATER CHINA analysis

China PMI link to commodity imports Clyde Russell

I

China’s export orders sentiment hit its weakest level since early 2009

Central banks in talks to buy dim sum bonds Appetite for on yuan bonds after Europe crisis

A

sian central banks are in talks with the Hong Kong Monetary Authority to buy Chinese government yuandenominated bonds at a sale in the city this month, as they seek to shield their wealth from Europe’s debt crisis.

Foreign central banks are keen on yuan bonds after the European crisis, Sun Xiaoxia, head of the finance department at China’s Ministry of Finance, said at a forum in the city yesterday. The government said on June 14 it plans to offer 23 billion yuan (US$3.6 billion) of Dim Sum debt this month, with 2 billion yuan offered to global central banks.

“We have been in touch with some central banks in the region,” Peter Pang, HKMA’s deputy chief executive, told reporters yesterday. “A couple of them have expressed interest.”

Hong Kong will mark 15 years since it returned to Chinese rule on July 1 and investors are predicting measures to expand use of the yuan globally that will help the city’s financial markets. The currency has fallen 0.9 percent this year as China’s economic growth slows.

The deteriorating outlook for the yuan is sapping offshore demand for assets denominated in the currency, driving up yields on Dim Sum bonds. The average yield has climbed to 4.27 percent, up from 2.61 percent a year ago, according to an index that tracks the debt compiled

by HSBC Holdings Plc. Issuance of yuan bonds in Hong Kong rose 20 percent to 87 billion yuan this year from a year ago, according to data compiled

by Bloomberg.

“The higher yield and the attraction of the potential growth for the Dim Sum and yuan bond market probably interests central banks,” said Nizam Idris,

head of Asian fixed income and currencies at Macquarie Bank Ltd in Singapore. Still, “central banks are most concerned about liquidity and you don’t quite get that yet with Dim Sum,” he said.

Standard Chartered Plc suggested that the Ministry of Finance could sell 30 billion yuan to 40 billion yuan of yuan bonds in Hong Kong each year to increase liquidity of state bonds in the city, Stephen Green, head of Greater China research at the bank in Hong Kong, said at the forum yesterday. The ideal frequency would be a quarterly sale of 7.5 billion yuan to 10 billion yuan, he added.

Bloomberg

Hong Kong plans to offer 23 billion yuan of dim sum debt this month

s there still a point at looking China’s Purchasing Managers’ Indexes as gauges of commodity demand, given the apparent breakdown between the indicators and imports of oil, iron ore and copper?

The HSBC flash PMI did nothing to soothe investor nerves about a hard landing in China, falling to a seven-month low of 48.1 in June from May’s final reading of 48.4.

While it was always a bit optimistic to expect much improvement in the HSBC reading, given its focus on smaller, private firms, the weak reading shows that any stimulus efforts by the government have yet to make a difference.

Realistically, there is unlikely to be much improvement in the HSBC and official PMIs for several months, although the government’s measure may turn upwards first, given its emphasis on large, state-controlled companies that will likely first feel the benefit of looser credit and infrastructure spending.

But for the resource sector, the question has to be whether the PMIs are still relevant as an indicator of demand in the world’s biggest importer of commodities.

In recent years, there has been a fairly strong correlation between the PMIs and import demand, usually with a lag of a month or two.

Both PMIs started falling at the start of 2010, before bottoming around the middle of that year, with the HSBC measure dropping briefly into negative territory below the 50 mark that demarcates expansion and contraction on a monthly basis.

Crude oil imports went through a soft patch from May to October, falling in three of those months, while iron ore imports were also weak over the same period, declining for four months.

In recent years, there has been a fairly strong correlation between the PMIs and import demand, usually with a lag of a month or two

However, both crude and iron ore imports recovered strongly in the months after the PMIs regained strength toward the end of 2010.

But since then both the PMIs have trended lower, with the HSBC measure below 50 since November 2011, and the official index weakening toward the 50-level, despite a brief uptick in April this year.

However, imports of crude oil have continued to grow strongly, with May a record and four of five strongest months yet coming in the first five months of this year.

Yes, part of the strength in oil imports is probably because China is building stockpiles, both for commercial purposes as new refining units prepare to come online and for strategic reasons given concern over the future of Iranian cargoes as Western sanctions against Tehran’s nuclear program ramp up.

But it’s also worth pointing out that the record monthly oil imports came at a time of high prices, meaning either the Chinese are very worried indeed about Iran, or demand for fuel is stronger than the PMIs would suggest, or perhaps a bit of both.

For iron ore, while imports haven’t yet surpassed their record from January last year, for the first five months they have averaged 61.7 million tons a month, 7.5 percent above the average for the whole of 2011.

Now, if industrial output was in as dire a shape as the HSBC PMIs seems to indicate, you would expect iron ore to be the canary in the coal mine.

But instead of weakening, iron ore imports have surprised to the upside, just as with crude.

So far, I haven’t talked about copper, which has also surprised with stronger-than-expected imports.

But there are special reasons that could explain the strength of copper imports despite weakening industrial output, namely the shift in inventories from London Metals Exchange warehouses to bonded facilities in China, and the role of copper as a collateral for financing.

Nonetheless, even the distorting factors for copper serve to illustrate the main point, namely that the PMIs have been poor lead indicators of commodity imports in China.

However, there are some reasons to believe that the strength in commodity imports has been driven by unusual factors, and these may not continue.

If worries over Iran ease, the crude imports for storage may decline, if stimulus doesn’t come through in China in the next few months, iron ore demand may ease and looser credit conditions may erode the advantages of using copper.

Assuming the above occurs, then the PMIs may regain their leading indicator status for commodity imports.

Reuters market analyst

10 |

business daily June 22, 2012

asia

Mongolia’s leader ponders mine InBrief partners for resources boom New law limits foreign ownership of strategic sectors NZ economy posts surprise growth New Zealand said yesterday its economy grew at its fastest rate in five years in the January-March quarter, boosted by strong performances in the farming and manufacturing sectors.

The 1.1 increase, more than double forecasts of 0.5 percent, meant the economy expanded 1.7 percent in the year to March, compared with 1.5 percent in the previous 12 months, Statistics New Zealand said.

Malaysian Air seeks profit by 2014 Malaysian Airline System Bhd said it’s targeting a return to profit by 2014.

The airline, which reported total losses of 2.69 billion ringgit (US$848 million) over the past five quarters, has a threeyear plan to reduce costs by about 20 percent, Chief Executive Officer Ahmad Jauhari Yahya told reporters yesterday. “Malaysian Air will use proper and efficient planes for certain routes, reducing aircraft maintenance cost and manpower,” he said.

Petronas inks gas pacts for US$5.2b Malaysian state energy firm Petronas said yesterday about US$5.2 billion will be invested in its North Malay Basin project off the east coast over the next five years. The money will be invested equally by two production sharing contractors – Petronas Carigali, a unit of Petronas, and Hess Exploration and Production Malaysia. “The project will commercialise around 1.7 standard trillion cubic feet of gas reserves from the area,” the company said in a statement.

Vietnam eyes 6pct GDP growth Vietnam is targeting economic growth of 6-6.5 percent in 2013 versus likely growth of 5.5-6.0 percent this year, the government said. The government also plans to restructure the country’s financial markets and consolidate state-owned businesses and investment, it said this week in a statement on a government website.

Parliament approves BOJ board nominees Japan’s parliament yesterday approved the nominations of two prominent economists for the Bank of Japan’s policy-setting board, allowing it to be at full strength for the first time since early April. Takehiro Sato, chief economist at Morgan Stanley MUFG Securities, and Takahide Kiuchi, chief economist at Nomura Securities, are set to join the nine-member board at dates due to be decided later.

David Stanway

M

ongolia is still open to foreign investments in the western block of the giant Tavan Tolgoi coal mine and has not yet decided on whether to go alone on developing its prized asset, President Tsakhia Elbegdorj said.

Talks with foreign groups to develop Tavan Tolgoi have been in stalemate since July last year after the government withdrew a decision to hand mining rights to a consortium comprising China’s Shenhua Group, U.S.-based Peabody and a Russian-Mongolian group headed by Russian Railways.

An executive with the state-owned firm in charge of the Tavan Tolgoi project said in April that Mongolia might develop the entire mine on its own.

“I think in balancing investors, it is essential that it is in line with foreign policies and in line with our national security,” Mr Elbegdorj said in an interview on Thursday.

“We have two big neighbours and we need investment. I think the door is still open in the negotiations with big national investors.”

Mongolia was also planning to list the eastern Tsankhi block of the Tavan Tolgoi project on overseas stock exchanges in the first half of this year, but the share sale has been postponed to after the parliamentary election on June 28.

Coal project Mr Elbegdorj said dealing with the Tavan Tolgoi project would be one of the major priorities of the next government, which will be formed after the country goes to the polls.

Speaking at his office in Mongolia’s Government House, the president also said the government will boost

Big decisions – President Tsakhia Elbegdorj must use resources boom wisely

foreign investments in other sectors such as agriculture, food and tourism.

“There is great worry that this economic growth is coming from mining investments and mining profits and because of that we have to think about really seriously diversifying our economic input,” he said.

“The Mongolian economy mostly has one colour, and we would like to make this a rainbow economy.

I have a message to our investors don’t see Mongolia as only mines.

There are great opportunities in investing in other sectors.”

Mongolia’s US$10 billion economy is at the beginning of a mining boom and foreign investors have rushed

in on hopes of cashing in on the country’s huge deposits of copper, gold, coal and uranium.

But many investors have been concerned about a surge in populist resource nationalism, especially ahead of the June 28 poll, with parliament last month rushing through a new law aimed at controlling foreign ownership of “strategic” sectors.

National control The law was widely believed to have been drawn up to prevent China’s state-owned metals giant, Chinalco, from acquiring a majority stake in the Mongolian coal producer,

June 22, 2012 business daily | 11

asia KEY POINTS Mongolia considering foreign partners in massive Tavan Tolgoi coal mine Need to diversify from resources to a ‘rainbow’ economy – president Mongolian economy worth US$10 billion annually v.

China’s US$1.897 trillion in exports alone during 2011 Arrest of ex-president for corruption proves rule of law developing – president

SouthGobi Resources.

Mr Elbegdorj denied that the law was specifically targeting Chinese investors, but conceded:”We need to make growth for the Mongolian businesses and the Mongolian people.”

The president said the biggest challenge for the next government was the fight against corruption, saying the country had already “made great progress in cleaning up corrupt practices.”

He said the recent arrest on corruption charges of his predecessor, Nambaryn Enkhbayar, should be welcomed by foreign investors because it proved that Mongolia was committed to improving the rule of law.

Reuters

Nissan to chop Japan production by 15pct: reports Rival Toyota may also move work overseas citing labour costs

N

issan Motor is cutting its production in Japan by 15 percent from next month in a response to surging manufacturing costs driven by a stronger yen and weakening domestic demand, reports said on Thursday.

The company will suspend one of two production lines at the Oppama

automaker, has trimmed domestic output since shuttering a Tokyoarea plant about a decade ago.

Some of the Oppama plant’s Tiida Latio production will be moved to Thailand, the Nikkei said.

Separate reports have said rival Toyota Motor will gradually cut its annual domestic production by

Japan’s quake-tsunami disaster last year, flooding in Thailand in late 2011 and wobbly domestic demand.

However Nissan still posted a 341.43 billion yen (US$4.29 billion) net profit in the fiscal year to March, up seven percent year-on-year.

The company also said sales rose to a record 9.41 trillion yen with 4.85

factory south of Tokyo, resulting in its domestic annual output falling to 1.15 million vehicles from 1.35 million, according to the Nikkei business daily and domestic agencies Jiji Press and Kyodo News.

A Nissan spokesman confirmed plans to suspend one line at the plant, adding that it will still be used to test new models. He said no job cuts were planned but did not confirm other details.

400,000 units to 3.2 million while boosting overseas production due to high manufacturing costs at home.

The industry was also battered by

million vehicles sold globally, largely driven by foreign demand, particularly in its biggest market, China.

Thailand-bound The move will end domestic production of four models including the Note and Tiida hatchbacks, and Tiida Latio sedans, the spokesman said, marking the first time that Nissan, Japan’s second-biggest

Apple fined US$2.29 mln over Australian ‘4G’ iPad ‘Message sent’ to global firms – regulator

A

pple was on Thursday fined Aus$2.25 million (US$2.29 million) for “deliberately” misleading Australian consumers about the local 4G capability of its latest iPad. The tech giant was also ordered to pay Aus$300,000 in costs by the Federal Court in a case brought by regulators, who said the penalty sent a message to global companies that there were consequences for breaching the law.

Justice Mordy Bromberg found that Apple misled people with claims in its advertising implying that the “iPad with WiFi + 4G” could connect with fourth generation cellular networks in Australia, when it could not.

The judgment ruled that the

company engaged in conduct liable to mislead the public and contravened Australian consumer law.

“The conduct concerned was deliberate and very serious,” Bromberg said.

“It exposed a significant proportion of Australian consumers of tablet devices to a misleading representation.”

The Australian Competition and Consumer Commission, which initiated the proceedings, said it was delighted with the outcome.

“The US$2.25 million penalty reflects the seriousness of a company the size of Apple refusing to change its advertising when it has been put on notice that it is likely to be misleading consumers,” chairman Rod Sims said.

AFP

AFP

12 |

business daily June 22, 2012

MARKETS Hang SENG INDEX PRICE

Day %

VOLUME

PRICE

Day %

VOLUME

25.95

-0.9541985

17922447

CHINA UNICOM HON

10.02

-3.653846

53650694

ALUMINUM CORP-H

3.33

-2.346041

17328058

CITIC PACIFIC

11.84

-1.003344

2265960

BANK OF CHINA-H

2.91

-0.3424658

274520350

CLP HLDGS LTD

64.65

-0.5384615

1909304

BANK OF COMMUN-H

5.11

-1.919386

17653660

CNOOC LTD

14.98

-3.229974

75375077

BANK EAST ASIA

26.25

-2.052239

2163831

9.67

-3.87674

4481509

BELLE INTERNATIO

12.12

-2.258065

13246896

ESPRIT HLDGS

10.36

0.5825243

13212588

BOC HONG KONG HO

23.35

-0.6382979

13542296

HANG LUNG PROPER

25.25

-1.750973

6137209

CATHAY PAC AIR

12.48

-0.6369427

3014332

HANG SENG BK

103.6

-0.2887392

CHEUNG KONG

92.5

-0.4841313

2475200

HENDERSON LAND D

41.3

CHINA COAL ENE-H

6.69

-3.463203

24838210

CHINA CONST BA-H

5.29

-0.3766478

150966490

CHINA LIFE INS-H

19.4

-1.522843

24305759

CHINA MERCHANT

22.45

-2.813853

2814341

NAME AIA GROUP LTD

CHINA MOBILE

NAME

COSCO PAC LTD

HENGAN INTL HONG KG CHINA GS

NAME

PRICE

Day %

POWER ASSETS HOL

56.6

0

2708536

SANDS CHINA LTD

25.8

-1.901141

12014791

SINO LAND CO

11.14

-2.792321

9124735

SUN HUNG KAI PRO

89.65

-0.3335186

3239345

88.9

-0.5036374

1227390

228.8

-4.427736

4623491

TINGYI HLDG CO

19.2

-0.4149378

2523257

1133813

WANT WANT CHINA

9.51

-3.058104

4856195

-1.196172

1742597

WHARF HLDG

42.2

-1.28655

4095852

76.15

-0.6523157

1502962

SWIRE PACIFIC-A TENCENT HOLDINGS

MOVERS

2

16.4

-0.4854369

5222870

HONG KONG EXCHNG

108.7

-0.911577

3856076

HSBC HLDGS PLC

68.25

-0.2921841

20756951

HUTCHISON WHAMPO

65.95

-1.493652

4176326

4.36

-1.580135

243111252

15.32

-2.791878

11015291

HIGH

19556.11

25.7

0

1075815

LOW

19265.07

82

-0.6662629

9612478

-3.935185

51619863

IND & COMM BK-H

CHINA PETROLEU-H

7

-0.4267425

44855258

LI & FUNG LTD

CHINA RES ENTERP

22.8

-2.35546

2732716

CHINA RES LAND

14.96

-5.316456

22764387

NEW WORLD DEV

9.1

-1.086957

14483300

CHINA RES POWER

15.06

0.9383378

5379295

52W (H) 22835.03

PETROCHINA CO-H

10.46

-1.506591

60243960

CHINA SHENHUA-H

26.7

-3.085299

16258828

PING AN INSURA-H

60.5

-3.122498

10448981

(L) 16170.35

MTR CORP

45

2 19560

INDEX 19265.07

16.6

CHINA OVERSEAS

VOLUME

19260

19-Jun

21-Jun

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

DAY %

VOLUME

24.2

-3.2

6314709

7

-0.4267425

44855258

ZIJIN MINING-H

CHINA RAIL CN-H

6.5

0.619195

27747928

CHINA RAIL GR-H

3.26

1.557632

48368913

274520350

CHINA SHENHUA-H

26.7

-3.085299

16258828

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.04

-0.6535948

57328902

CHINA PACIFIC-H

AIR CHINA LTD-H

4.64

0.8695652

17274328

CHINA PETROLEU-H

ALUMINUM CORP-H

3.33

-2.346041

17328058

ANHUI CONCH-H

22.6

-1.525054

10078133

BANK OF CHINA-H

2.91

-0.3424658

5.11

-1.919386

17653660

CHINA TELECOM-H

3.44

-1.994302

50849530

15.24

-1.167315

2014022

DONGFENG MOTOR-H

12.9

-3.007519

9845087

CHINA CITIC BK-H

3.94

-1.5

23889360

GUANGZHOU AUTO-H

6.77

-2.449568

2068807

CHINA COAL ENE-H

6.69

-3.463203

24838210

HUANENG POWER-H

5.55

1.092896

21836050

CHINA COM CONS-H

6.76

-1.601164

9763672

IND & COMM BK-H

4.36

-1.580135

243111252

CHINA CONST BA-H

5.29

-0.3766478

150966490

JIANGXI COPPER-H

17.38

-1.314501

18042534 60243960

BANK OF COMMUN-H BYD CO LTD-H

3.6

-2.96496

12149290

PETROCHINA CO-H

10.46

-1.506591

CHINA LIFE INS-H

19.4

-1.522843

24305759

PICC PROPERTY &

8.93

-1.975851

7810218

CHINA LONGYUAN-H

5.19

-2.808989

3687528

PING AN INSURA-H

60.5

-3.122498

10448981

CHINA MERCH BK-H

14.62

-1.615074

13983998

SHANDONG WEIG-H

8.83

-1.450893

5591837

CHINA COSCO HO-H

NAME

PRICE

DAY %

VOLUME

12.26

-3.159558

12967633

2.7

-4.255319

38758707

ZOOMLION HEAVY-H

10.36

-4.428044

13252057

ZTE CORP-H

14.94

-0.5326232

3184299

YANZHOU COAL-H

MOVERS

3

0 9860

INDEX 9663.42 HIGH

9855.53

LOW

9663.42

CHINA MINSHENG-H

7.12

-1.248266

24010894

SINOPHARM-H

20.3

-1.932367

1702282

52W (H) 12902.97

CHINA NATL BDG-H

8.97

-2.181025

26729344

TSINGTAO BREW-H

46.2

-0.8583691

3101965

(L) 8058.58

11.08

-3.986135

6523316

WEICHAI POWER-H

32.7

-2.533532

961175

CHINA OILFIELD-H

37

9660

19-Jun

21-Jun

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.54

-0.3921569

73693713

DATANG INTL PO-A

5.78

0.6968641

3804545

SANY HEAVY INDUS

13.97

-0.4985755

21416871

AIR CHINA LTD-A

6.1

-1.134522

14847536

DONGFANG ELECT-A

20.6

-3.693315

10095116

SHANDONG GOLD-MI

34.52

-3.278229

11072796

6.55

-1.946108

7473202

EVERBRIG SEC -A

12.86

-3.670412

16707247

SHANG PUDONG-A

8.44

-0.7058824

39423884

ANHUI CONCH-A

15.74

-1.809108

14467509

GD MIDEA HOLDING

11.38

0

23335964

SHANGHAI ELECT-A

5.08

-1.740812

6849015

BANK OF BEIJIN-A

9.51

-1.040583

11725140

GD POWER DEVEL-A

2.71

-0.3676471

36025816

SHANXI LU'AN -A

21.83

-3.832599

15456217

6.83

0.1466276

32465904

SHANXI XINGHUA-A

36.5

-2.144772

2309988

30

-4.701398

13560688

SHANXI XISHAN-A

15.62

-3.461063

17235993

SHENZ DVLP BK-A

14.9

-2.166776

14483296

6.6

0.1517451

18882689

15.82

-0.06317119

1739889

NAME ALUMINUM CORP-A

NAME

BANK OF CHINA-A

2.84

-0.3508772

9529988

GEMDALE CORP-A

BANK OF COMMUN-A

4.51

-0.4415011

33541945

GF SECURITIES-A

BAOSHAN IRON & S

4.41

-0.8988764

13561794

GREE ELECTRIC

NAME

21.69

0.649652

8760875

13.9

-3.872752

24166490

SHENZEN OVERSE-A SINOVEL WIND-A

22.72

-1.942167

1889003

GUANGHUI ENERG-A

CHINA CITIC BK-A

4.01

-1.231527

14032391

HAITONG SECURI-A

9.7

-3.769841

63366867

CHINA CNR CORP-A

4.12

-1.199041

26911783

HANGZHOU HIKVI-A

26.05

-0.3442999

2905015

SUNING APPLIAN-A

8.54

-2.28833

25324694

2.84

-1.730104

23693443

TSINGTAO BREW-A

38.8

-0.2570694

3144201

63

-0.5367856

1615595

WEICHAI POWER-A

31

-2.053712

3273358

BYD CO LTD -A

HEBEI IRON-A

CHINA COAL ENE-A

8.2

-1.085645

9177803

CHINA CONST BA-A

4.52

-0.2207506

34754477

HENAN SHUAN-A

CHINA COSCO HO-A

4.75

-2.263374

7908042

HUATAI SECURIT-A

10.34

-5.570776

37579893

WULIANGYE YIBIN

32.35

-1.820941

9482453

CHINA CSSC HOL-A

22.46

-2.347826

5371919

HUAXIA BANK CO

9.36

-1.473684

16810867

XIAMEN TUNGSTEN

46.46

0.1724881

8389554

CHINA EAST AIR-A

4.12

1.228501

21626162

IND & COMM BK-A

3.91

-0.7614213

28326219

YANGQUAN COAL -A

16.33

-4.83683

19005567

CHINA EVERBRIG-A

2.82

-0.7042254

21342508

INDUSTRIAL BAN-A

12.77

-1.54202

26401433

YANTAI CHANGYU-A

70.8

-1.07587

665756

17.59

-2.060134

11773782

INNER MONG BAO-A

44.22

0.5457026

35049470

YANTAI WANHUA-A

14.49

-1.895735

9045208 5179615

CHINA LIFE INS-A CHINA MERCH BK-A

10.9

-1.178604

23749957

INNER MONG YIL-A

20.9

-0.2386635

12347454

YANZHOU COAL-A

20.72

-3.358209

CHINA MERCHANT-A

11.8

-3.515944

22503079

INNER MONGOLIA-A

5.54

-2.807018

57030729

YUNNAN BAIYAO-A

56.2

-1.368901

1887570

CHINA MERCHANT-A

24.85

1.304525

8793911

JIANGSU HENGRU-A

27.67

-0.9663565

2312815

ZHONGJIN GOLD

23.16

-2.93378

13550186

CHINA MINSHENG-A

6.24

-0.4784689

66800802

JIANGSU YANGHE-A

CHINA NATIONAL-A

6.19

-1.118211

136.21

-1.993093

1773040

ZIJIN MINING-A

3.99

-1.724138

47041673

9487519

JIANGXI COPPER-A

24.48

-3.011094

9357056

ZOOMLION HEAVY-A

10.38

0.4840271

27851962

JINDUICHENG -A

13.13

-2.956393

6766250

ZTE CORP-A

14.96

-0.729927

12662043

16.09

-5.01771

21837622

CHINA OILFIELD-A

16.3

-3.948144

6014638

CHINA PACIFIC-A

21.64

-2.214189

15537675

JIZHONG ENERGY-A

CHINA PETROLEU-A

6.4

-0.621118

40471971

KANGMEI PHARMA-A

13.86

-0.9292352

13626682

CHINA RAILWAY-A

4.59

-0.2173913

22930008

KWEICHOW MOUTA-A

239.78

-1.551979

1703403

40.51

-1.912833

4346978

-1.968504

29774963

CHINA RAILWAY-A

2.63

-0.754717

19485605

LUZHOU LAOJIAO-A

CHINA SHENHUA-A

23.38

-2.257525

9632917

METALLURGICAL-A

2.49

CHINA SHIPBUIL-A

5.29

-1.672862

16518474

NARI TECHNOLOG-A

19.57

0

4122883

2.54

-1.167315

7062738

MOVERS

32

255

13 2580

INDEX 2512.185

CHINA SOUTHERN-A

4.71

-0.2118644

27022600

NINGBO PORT CO-A

CHINA STATE -A

3.39

0.8928571

67927454

PANGANG GROUP -A

7.3

0

23294285

9.12

-1.511879

11662165

HIGH

2577.36

LOW

2504.47

CHINA UNITED-A

3.84

-2.290076

61386792

PETROCHINA CO-A

CHINA VANKE CO-A

9.03

0

31852780

PING AN INSURA-A

44.77

-2.758471

27521340

CHINA YANGTZE-A

6.8

-0.4392387

15593599

POLY REAL ESTA-A

11.5

-0.3466205

43644380

CITIC SECURITI-A

12.65

-5.597015

121653850

QINGDAO HAIER-A

12.06

-0.08285004

8729642

CSR CORP LTD -A

4.77

-1.649485

13013051

QINGHAI SALT-A

32.05

1.778342

10235167

DAQIN RAILWAY -A

7.25

-1.494565

35041530

SAIC MOTOR-A

14.38

-1.506849

13852983

PRICE DAY %

Volume

PRICE DAY %

Volume

PRICE DAY %

Volume

79.8 -0.3745318

3609397

TAIWAN MOBILE CO

93.5 -0.5319149

4216998

52W (H) 3140.102 (L) 2254.567

2500

19-Jun

21-Jun

FTSE TAIWAN 50 INDEX NAME ACER INC ADVANCED SEMICON ASIA CEMENT CORP ASUSTEK COMPUTER

32.65

NAME

NAME

0.4615385

11592604

FORMOSA PLASTIC

26 -0.3831418

19008510

FOXCONN TECHNOLO

109.5

1.388889

7850389

TPK HOLDING CO L

478

0

3311725

2917588

FUBON FINANCIAL

29.55

-1.5

9834539

TSMC

80.6

-1.22549

27063632

UNI-PRESIDENT

46.65

-1.374207

5159893

UNITED MICROELEC

12.85

1.181102

35929608

37.25

0

295

-1.172529

3637757

HON HAI PRECISIO

86.1

-1.034483

19145109

12.05 -0.8230453

18657744

HOTAI MOTOR CO

200

-1.477833

536558

CATCHER TECH

201 -0.4950495

8469057

HTC CORP

380

-2.813299

11232052

WISTRON CORP

38.05

-2.933673

7685988

CATHAY FINANCIAL

29.4

-1.176471

7008318

HUA NAN FINANCIA

16.2

-1.818182

5266263

YUANTA FINANCIAL

13.45

-1.824818

8753439

CHANG HWA BANK

15.6

-1.265823

4496948

LARGAN PRECISION

605

-2.733119

1760434

YULON MOTOR CO

52.6

-1.865672

3823823

CHENG SHIN RUBBE

75.2

0.2666667

6972553

LITE-ON TECHNOLO

37.8 -0.7874016

3200727

CHIMEI INNOLUX C

12.4

0.8130081

26481714

MEDIATEK INC

271

-1.811594

4995324

CHINA DEVELOPMEN

7.03 -0.7062147

27982755

MEGA FINANCIAL H

21.05

-2.546296

26826704

CHINA STEEL CORP

27.9

-1.413428

16535913

NAN YA PLASTICS

56.1

-2.094241

3791026

CHINATRUST FINAN

17.4

-1.694915

19782052

PRESIDENT CHAIN

156.5

-1.26183

517159

CHUNGHWA TELECOM

91.7

0.2185792

5438711

QUANTA COMPUTER

78.1

-3.461063

15799639

COMPAL ELECTRON

28.3

-1.906412

10198878

SILICONWARE PREC

DELTA ELECT INC

88.7

0.7954545

6809462

SINOPAC FINANCIA

10.9

-1.801802

15596950

30.65 -0.9693053

6771066

SYNNEX TECH INTL

73.3 -0.2721088

3051559

TAIWAN CEMENT

AU OPTRONICS COR

FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL

64

-1.234568

6532181

17.05

-2.292264

11337211

FORMOSA CHEM & F

79.6 -0.7481297

3820528

TAIWAN FERTILIZE

FORMOSA PETROCHE

82.6

1205447

TAIWAN GLASS IND

-1.314217

TAIWAN COOPERATI

31.25 -0.7936508

35

7

40

3 5060

INDEX 5000.28

4199198

-1.269394

2960340

17.45 -0.8522727

2728701

68.5

MOVERS

0

1112098

24.95 -0.9920635

3066304

HIGH

5057.25

LOW

4985.36

52W (H) 6026.51 (L) 4643.05

4980

19-Jun

21-Jun

June 22, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GAlAXy ENtErtAINMENt

MElco crowN ENtErtAINMENt

MGM cHINA HolDINGS

20.6

12.4

31.3

20.5 20.3 20.1

Min 19.98

last 19.98

19.9

SANDS cHINA ltD

Max 31.25

Average 31.07

Min 30.55

last 31.25

26.0 25.8

Min 25.6

25.6

last 25.8

Average 14.69

NAME

PRICE

WTI CRUDE FUTURE Aug12

80.77

-0.834868017

-18.53756934

111.3799973

77.65000153

BRENT CRUDE FUTR Aug12

91.78

-0.981756498

-12.84778274

124.6999969

91

GASOLINE RBOB FUT Jul12

DAY %

YTD %

(H) 52W

Min 11.94

last 11.94

256.91

-0.814608911

-5.363391903

332.1799994

246.4999914

821.5

-1.822527637

-8.620689655

1046.5

811.5

NATURAL GAS FUTR Jul12

2.574

2.264600715

-20.62904718

4.890000343

2.095999956

257.37

-0.529489062

-9.462834629

331.9299936

255.4199934

Gold Spot $/Oz

1599.08

-0.8181

2.1835

1921.18

1478.78

Silver Spot $/Oz

27.9653

-1.3876

0.4681

44.2175

26.085

Platinum Spot $/Oz

1463.25

-0.7717

4.9301

1915.75

1339.25

Palladium Spot $/Oz

617.75

-1.19

-5.4705

848.37

537.54 1897.5

LME ALUMINUM 3MO ($)

1905

-1.090342679

-5.693069307

2675.25

LME COPPER 3MO ($)

7545

-0.841109213

-0.723684211

9905

6635

LME ZINC

1867

-1.710976573

1.192411924

2539.5

1718.5

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep12 Dec12

WHEAT FUTURE(CBT) Sep12 SOYBEAN FUTURE Nov12 COFFEE 'C' FUTURE Sep12

18.5

14.8

18.4

14.7

18.3

14.6

18.2

14.5

18.1

Min 14.4

18.0

last 14.4

Max 18.48

Average 18.16

last 18.2

Min 18.02

PRICE

17200

0.643651258

-8.070550508

25195

15980

14.625

-0.813835198

-2.694610778

18

13.95499992

555.25

-1.985878199

-5.287846482

673.5

499

676.75

-0.915080527

-3.562522266

853.5

606.75

1380

-1.110713006

14.59414573

1400

1115.75

152.65

0.164041995

-34.83457844

288.8500061

MAJORS

ASIA PACIFIC

CROSSES

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

DAY %

1.0173 1.5725 0.9473 1.2679 79.9 7.9922 7.7595 6.3649 56.35 31.69 1.2704 29.869 42.375 9482 81.28 1.20106 0.80629 8.057 10.1334 101.3 1.03

YTD %

-0.206 -0.0191 -0.0739 -0.0552 -1.164 -0.0025 -0.0026 -0.0801 -0.3571 -0.568 -0.1968 -0.0335 -0.5664 -0.5484 -0.9584 -0.0183 0.036 0.0881 0.0562 -1.1056 0

(H) 52W

-0.3526 1.1709 -0.9712 -2.1758 -3.7422 0.0926 0.1018 -1.0982 -5.8296 -0.4418 2.0623 1.3727 3.4572 -4.3556 -3.5039 1.3097 3.3611 0.9582 2.1572 -1.619 0.0097

(L) 52W

1.1081 1.6618 0.9772 1.4578 84.18 8.0449 7.8113 6.4909 56.555 31.96 1.3199 30.716 44.35 9662 88.637 1.24736 0.90835 9.4168 11.6817 117.74 1.0311

0.9388 1.5235 0.7071 1.2288 75.35 7.9823 7.7529 6.2769 43.855 29.63 1.1992 28.661 41.879 8458 72.057 1.00749 0.79505 7.8544 9.8423 95.6 1.0288

MACAU RELATED STOCKS (H) 52W

(L) 52W

ARISTOCRAT LEISU

NAME

PRICE 2.85

DAY % YTD % -1.041667

29.54545

3.25

1.88

VOLUME CRNCY 2333992

150.0999908

CROWN LTD

8.54

-1.157407

5.562421

9.29

7.45

4005177

SUGAR #11 (WORLD) Oct12

20.76

-1.001430615

-9.067017083

26.03999901

19.23999977

AMAX HOLDINGS LT

0.078

4

-10.34483

0.124

0.06

2066000

COTTON NO.2 FUTR Dec12

70.61

-2.888185944

-19.61520947

103

64.61000061

BOC HONG KONG HO

23.35

-0.6382979

26.90218

24.45

14.24

13542296

CENTURY LEGEND

0.236

0

2.608694

0.4

0.204

0

3

0.6711409

7.142859

4.36

2.3

14087 51619863

CHEUK NANG HLDGS

World Stock MarketS - Indices NAME

CHINA OVERSEAS

16.6

-3.935185

27.88906

18.48

9.99

CHINESE ESTATES

8.99

0.2229654

-28.08

13.68

8.3

102750

CHOW TAI FOOK JE

9.76

3.062302

-29.88506

15.16

8.55

17607200

EMPEROR ENTERTAI

1.36

1.492537

22.52252

2.04

0.97

1620000

FUTURE BRIGHT

0.88

2.325581

109.5238

1.09

0.3

1916400

GALAXY ENTERTAIN

19.98

-1.333333

40.30899

24.95

8.69

21929294 1133813

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

12824.39

-0.1007998

4.966868

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

US

2930.45

0.02355142

12.48681

3134.17

2298.89

HANG SENG BK

103.6

-0.2887392

12.42539

125

84.4

FTSE 100 INDEX

GB

5598.14

-0.4295403

0.4640893

6084.08

4791.01

HOPEWELL HLDGS

20.5

-1.204819

3.222555

24.903

18.56

426500

DAX INDEX

GE

6372.21

-0.3116332

8.03377

7523.53

4965.8

HSBC HLDGS PLC

68.25

-0.2921841

15.67797

78.85

56

20756951

NIKKEI 225

JN

8824.07

0.8198978

4.360798

10255.15

8135.79

HUTCHISON TELE H

3.44

-3.098592

15.05017

3.71

2.35

2444000

HANG SENG INDEX

HK

19265.07

-1.300179

4.506141

22835.03

16170.35

LUK FOOK HLDGS I

15.8

-2.106568

-41.69742

46.15

14.7

4198000

MELCO INTL DEVEL

6.3

-1.098901

9.185442

10.76

4.3

2224595

CSI 300 INDEX

CH

2512.185

-1.583712

7.095542

3140.102

2254.567

MGM CHINA HOLDIN

11.94

-3.241491

24.47674

17.183

7.6

2179188

TAIWAN TAIEX INDEX

TA

7279.05

-0.7577751

2.926575

8842.17

6609.11

MIDLAND HOLDINGS

3.79

-2.319588

-4.148837

5.217

2.887

556000

NEPTUNE GROUP

0.098

-1.010101

-11.71171

0.153

0.08

3000

NEW WORLD DEV

9.1

-1.086957

45.36741

11.279

6.13

14483300

SANDS CHINA LTD

25.8

-1.901141

17.53986

33.05

14.9

12014791

SHUN HO RESOURCE

1.15

0

15

1.32

0.82

0

SHUN TAK HOLDING

2.72

-2.508961

6.286192

4.668

2.241

3031825 9206529

KOSPI INDEX

SK

1889.15

-0.7861899

3.473114

2192.83

1644.11

S&P/ASX 200 INDEX

AU

4087.568

-1.085943

0.7643808

4657.4

3765.9

ID

3901.788

-1.0677

2.087816

4234.734

3217.951

FTSE Bursa Malaysia KLCI

MA

1601.43

-0.1844938

4.618716

1609.33

1310.53

NZX ALL INDEX

NZ

760.962

-0.8278228

4.269892

806.015

700.441

JAKARTA COMPOSITE INDEX

PHILIPPINES ALL SHARE IX

11.9

14.9

(L) 52W

GAS OIL FUT (ICE) Aug12

CORN FUTURE

Average 12.23

CURRENCY EXCHANGE RATES

HEATING OIL FUTR Jul12 METALS

Max 12.34

14.4 Max 14.84

Commodities ENERGY

30.5

wyNN MAcAu ltD

26.2

Average 25.86

12

SJM HolDINGS ltD 26.4

Max 26.35

12.1

30.7

20.0 Average 20.25

12.2

30.9

20.2

Max 20.6

12.3

31.1

20.4

PH

3380.94

-0.4041642

11.03105

3518.96

2695.06

SJM HOLDINGS LTD

14.4

-2.306649

15.149

20.711

10.079

14.88

-0.9320905

10.71429

18.5

9.8

786000

WYNN MACAU LTD

18.1

-2.056277

-7.179487

27.48

14.807

9863600

SMARTONE TELECOM

HSBC Dragon 300 Index Singapor

SI

544.98

0.38

9.8

na

na

ASIA ENTERTAINME

4.07

-1.213592

-30.78231

10.8692

3.66

23952

STOCK EXCH OF THAI INDEX

TH

1157.89

-1.308343

12.92963

1247.72

843.69

BALLY TECHNOLOGI

47.5

-0.3357113

20.07077

49.32

24.74

314817

HO CHI MINH STOCK INDEX

VN

431.14

-0.4042597

22.63975

492.44

332.28

BOC HONG KONG HO

3

0

25.14666

3.15

1.81

2200

Laos Composite Index

LO

1011.19

-0.5311876

12.4219

1107.3

876.33

GALAXY ENTERTAIN

2.58

1.574803

37.96791

3.24

1.08

26400

INTL GAME TECH

14.94

-0.3335557

-13.13954

19.15

13.12

4572021

JONES LANG LASAL

73.45

0.3415301

19.8988

99.89

46.01

274668

46

-0.605013

7.652704

62.09

36.08

6331413

MELCO CROWN-ADR

12.28

3.193277

27.65073

16.15

7.05

4935621

MGM CHINA HOLDIN

1.55

3.333333

30.06704

2.2131

1.0025

1000

MGM RESORTS INTE

11.24

0.8976661

7.766056

16.05

7.4

9223339

SHUFFLE MASTER

13.67

-1.156905

16.63822

18.77

7.35

357417

1.88

1.621622

16.94649

2.6037

1.2624

1500

104.89

0.3539992

-5.06833

165.4931

95.82

1555844

LAS VEGAS SANDS

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

SJM HOLDINGS LTD WYNN RESORTS LTD

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business daily June 22, 2012

Opinion

EU-U.S. free trade deal offers painless stimulus for both Max Berley James Gibney Bloomberg View editors

B

efore the end of the month, U.S. and European Union trade officials will recommend whether to pursue a freetrade agreement.

Such a deal has the potential to jump-start economic growth and create millions of jobs, even as it sidesteps the paralysing debate on both sides of the Atlantic over austerity versus stimulus. A trade agreement is necessary, achievable and urgent.

The economic relationship between the U.S. and the 27 countries of the EU is the biggest in the world, accounting for almost onethird of all trade. About US$5 trillion in trade and investment flows each year between markets representing 54 percent of global gross domestic product.

This back and forth is largely in balance. (The U.S. runs a deficit in goods, a surplus in services and direct investment is roughly even.)

In 2011, Europeans bought three times more U.S. goods (US$286.1 billion) than did the Chinese, and

Europeans sold about twice as much merchandise to the U.S. (US$368 billion) as they did to China. Investment flows dwarf these figures: In 2010, U.S. direct investment in the EU reached US$1.9 trillion, while the EU’s share in the U.S. was US$1.5 trillion. About 15 million jobs are directly linked to the transatlantic trade.

Low tariffs The benefits of increasing these flows are unequivocal. Although the remaining tariffs on goods are comparatively low (5 percent to 7 percent, on average), bringing them to zero would increase U.S.-EU trade by more than US$120 billion within five years and generate combined GDP gains of about US$180 billion, according to a study by the U.S. Chamber of Commerce, which, along with its European counterpart, BusinessEurope, is pushing hard for a comprehensive agreement. Further, more than one-third of transatlan-

tic trade is conducted between affiliates of the same companies, and eliminating the tariffs they pay would make companies on both sides more competitive.

There are even larger prizes to be had from pruning regulatory barriers to trade – the myriad restrictions on the sometimes specious basis of health standards, national-security concerns or consumer protection. A study by ECORYS that was commissioned by the European Commission showed that eliminating just half of these so-called non-tariff barriers would increase GDP by 0.7 percent in the EU and by 0.3 percent in the U.S. The recognition of this codependency – and its potential to provide pain-free stimulus – should be reason enough for trade officials to recommend moving ahead with a free-trade agreement. Their report this month will assess whether the two sides can overcome enduring and pesky irritants (such as EU restrictions on

genetically modified foods, or U.S. laws limiting maritime freight and airline ownership) that have derailed at least three attempts over the past 20 years to close a formal U.S.-EU trade deal. A final decision is due by the end of the year, and negotiations could begin immediately after. The EU trade commissioner, Karel De Gucht, has said he thinks an agreement could be concluded by mid-2014.

That is a tall order, but it is doable. The economies of the EU and the U.S. don’t have the disparities in social, labour and environmental standards that have made other bilateral trade agreements so difficult.

And this one has some powerful champions, including German Chancellor Angela Merkel, U.K. Prime Minister David Cameron, business leaders and associations on both continents. Even the AFL-CIO and other labour unions, which traditionally oppose trade deals, have urged negotiators to push ahead. This month, the President’s Export Council, the principal national advisory committee on international trade, sent a letter to President Barack Obama recommending that the negotiations begin before the end of the year.

Chlorinated chicken Areas still in dispute are only about 1 percent to 2 percent of the total trade in goods and services. These issues include perennial arguments over agricultural products such as U.S.produced chicken washed in chlorine or tit-for-tat recriminations over unfair subsidies to the aircraft manufacturers Boeing Co. (BA) and Airbus SAS. Other sticking points include access to markets for services, which account for about 70 percent of both sides’ economies; EU concerns over Internet privacy and the flow of electronic data; and the lifting of restrictions on investment and bidding for public procurement contracts.

The two sides have been meeting since November

to assess whether some of these points can be resolved pre-emptively.

These exploratory discussions could ensure that no single issue, industry or interest group can sabotage the talks, as has happened in the past.

A deal could have benefits beyond the immediate effect on growth. By enhancing competition and reducing regulatory barriers, it could compel the countries of the EU to adopt the more flexible economic, investment and labour policies that many economists say will be necessary to restore growth and bring down deficits. In other words, it could help achieve what many European governments say they want, but lack the political clout to do. It also could serve as a template for future trade negotiations with rising powers such as China and India, setting common EU-U.S. standards on regulation, tariffs and investment rules.

A deal could have benefits beyond the immediate effect on growth. It could help achieve what many European governments say they want, but lack the political clout to do

When Obama and European leaders gather at the Group of 20 meeting in Mexico this week, they will talk about ways to prevent Europe’s troubles from dragging the world into recession or worse. A new trade alliance would be a good place to start.

Bloomberg View

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June 22, 2012 business daily | 15

OPINION

Clarity about austerity wires Business Leading reports from Asia’s best business newspapers

Taipei Times Taiwan’s capital gains tax may be passed in July, minister of Finance Chang Sheng-ford said on Wednesday. He said he hopes the legislature will pass the amendment for the implementation of a capital gains tax on securities transactions next month, to bring to an end the issue and its impact on the stock market. Mr Chang said the version finalised by the Chinese Nationalist Party (KMT) legislative caucus, which based its proposal on the Cabinet-vetted draft, would be the version with the least impact on the TAIEX.

Korea Herald About 200,000 taxi drivers staged their first one-day nationwide strike on Wednesday, demanding a fare increase and the right to burn diesel amid rising fuel costs. In Seoul, tens of thousands of drivers gathered for a protest rally at Seoul City plaza to press the government to accept their demands. The 28 percent surge in the past three years in prices for the liquid petroleum gas taxis are required to burn and a 2,400 won (US$2.07) cap on initial fares since 2009 are squeezing drivers’ income, according to Kim Do Gil, a spokesman for the taxi association that led the walkout.

Bangkok Post Thailand’s industrial confidence remains high despite concerns the eurozone crisis is beginning to weigh on exports. Export growth of 15 percent remains possible for 2012 as manufacturers adjust to the euro-zone crisis, says the Federation of Thai Industries. The Thai Industries Sentiment Index (TISI) rose for the sixth consecutive month, hitting 106 points in May from 104 in April. “This shows that business operators believe the Thai economy still has the potential to grow, especially when the flood situation returns to normal,” FTI chairman Payungsak Chartsutthipol was quoted as saying.

Business Inquirer Metro Manila continues to be the most cost-effective office destination, outperforming 18 other central business districts in the Philippines, according to real estate firm CB Richard Ellis Philippines. The report points out that the strong demand for alternative office locations has pointed multinational companies toward Asia, which opens opportunities for the Philippines. “The Philippines is becoming the lifeboat for many U.S. and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back home,” said the company chairman Rick Santos.

Michael Spence

Nobel laureate in economics and Professor of Economics at New York University’s Stern School of Business.

I

have just had the privilege of speaking at the main annual conference of Germany’s Economic Council, the economic and business arm of the Christian Democratic Union, the current governing party. Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble were among the other speakers.

It was an interesting event – and, more important, an encouraging one.

It seemed clear that Germany (or at least this rather large gathering of government, business, and labour leaders) remains committed to the euro and to deeper European integration, and recognises that success will require Europe-wide burden sharing to overcome the ongoing Eurozone crisis. The reforms in Italy and Spain are rightly reviewed as crucial, and there appears to be a deep understanding (based on Germany’s own experience in the decade and a half following reunification) that restoring competitiveness, employment, and growth takes time.

Greece has no good options, but a serious contagion risk remains to be contained in order to prevent derailment of the fiscal and growth-oriented reforms in Italy and Spain.

In the face of high systemic risk, private capital is leaving banks and the sovereign-debt markets, causing governments’ borrowing costs to rise and bank capitalisation to fall. This in turn threatens the functioning of the financial system and the effectiveness of the reform programs.

Thus, the central European Union institutions, along with the International Monetary Fund, have an important role to play in stabilisation and the transition to sustainable growth. Their efforts are needed to bridge the gap created by the exodus of private capital, thereby enabling the reform programs to be completed and begin to take effect. The IMF’s role reflects the huge stake that the rest of the world – advanced and developing countries alike – has in Europe’s recovery: it is a high-return investment.

All of this seemed to me to

Buying time for reform to work requires socialisation of short-term risk.

There is no other way to keep bond yields under control and banks functioning

be well understood among German politicians and business leaders. Moreover, this kind of support is and should be conditional on the extent of the reforms carried out in Italy and Spain, the Eurozone’s third- and fourth-largest economies, respectively.

Labour-market liberalisation in pursuit of competitiveness and growth is crucial – and remains to be implemented.

Buying time for reform to work requires socialisation of short-term risk. There is no other way to keep bond yields under control and banks functioning, and there is no ironclad guarantee that the reform programs needed to do the job will be approved.

Beyond fiscal focus Eurobonds, viable in the longer term, are thus premature, because they imply a relaxation of conditionality, thereby weakening incentives to implement reforms.

But if it all works, sharing risk now will not be expensive in the end. It might even yield a positive return.

What, then, of the much-discussed conflict between austerity and growth? I believe that it is based on a fairly serious misunderstanding. For Germans, austerity, in the form of sustained wage and income restraint, was an important part of the growth-oriented reforms that their country completed in 2006. Much time and effort was devoted to ensuring that the considerable burden of restoring flexibility, productivity, and competitiveness was shared equitably across the population.

But, on the receiving end of the message in southern Europe (and across the Atlantic), “austerity” is interpreted largely in fiscal terms – as an excessively rapid and potentially growth-destroying drive to cut deficits faster than the economy can structurally adjust and fill the gap in aggregate demand. In other

words, harsh austerity is being viewed largely through a Keynesian lens.

Finding the right balance between excessively rapid and dangerously slow deficit reduction is important, and not all that easy. But that is just one component of rebalancing. Growth is essential to bringing down public debt/ GDP ratios, and thus is a key part of fiscal stabilisation. And it is true that the benefits of deficit reduction, if achieved too fast, will be more than offset by the negative effect on growth.

At the same time, to restart an economy’s growth and employment engines, other measures are needed, and vary somewhat across countries, owing to different initial conditions. But they generally include removing rigidities and other barriers to competition in labour, product, and service markets; investment in skills, human capital, and the technology base of the economy; and rebuilding safety nets in ways that promote and support, rather than impede, structural adjustment.

Restoring growth These reforms require the sacrifice of certain kinds of protections, as well as of

income and consumption growth. The benefits come in the form of sustainable patterns of growth and employment in the future. Discipline and austerity thus entail intertemporal and intergenerational choices about the price to be paid now – and how fairly that burden is to be borne – for greater economic opportunity and social stability in the future.

After all, restoring stability and growth is only partly about reviving short-term aggregate demand. It is also about structural reform and rebalancing, which comes at a cost. Achieving a sustainable pattern of growth requires choices that affect not just the level of aggregate demand, but also its composition – for example, investment versus consumption.

Whether one calls this austerity or something else is a matter of semantics. But the confusion that has resulted is anything but harmless. On the contrary, it has become a major impediment to a common understanding of current challenges, and thus to achieving a broad consensus on the right path forward – one with well-defined and differentiated responsibilities – in confronting them. © Project Syndicate

16 |

business daily June 22, 2012

CLOSING Air France to cut 5,000 jobs

Japan to vote on tax bill next week Japan’s ruling party and the opposition have agreed in principle to vote on a bill doubling the sales tax on Tuesday, media said, inching closer to the enactment of legislation aimed at curbing ballooning public debt. In a breakthrough for a country long trapped in a cycle of revolving-door governments and policy gridlock, Prime Minister Yoshihiko Noda’s Democratic Party last week clinched a deal with major opposition parties on a plan to raise the sales tax. The planned voting in the lower chamber comes after the current parliament session was extended to September 8.

Air France-KLM Group plans to eliminate more than 5,000 jobs from its French workforce as it seeks a return to profitability. The cuts, equivalent to 10 percent of posts at the Air France unit, will be achieved through voluntary departures and attrition, with the Paris-based company seeking to avoid firings, it said yesterday in a statement.

Chief executive Jean Cyril Spinetta said in January he’s seeking a deal to deliver more than 2 billion euros (US$2.5 billion) in annual savings that he reckons are needed to secure the longterm future.

Eurozone downturn becoming entrenched Economic activity drags down European heavyweights

T

he downturn in the eurozone’s private sector is becoming entrenched, business surveys showed yesterday, painting a darker outlook for the world economy.

June was the fifth consecutive month that activity across the eurozone has declined, dragging down heavyweights Germany and France and putting pressure on the European Central Bank to take further action to support the economy.

“We are at the point where the economy is increasingly losing traction and it’s hard at this stage to see what will give us a lift.

The ECB will do more, that will probably involve a rate cut – which is symbolic – but is action,” said Peter Dixon at Commerzbank.

With economic recovery showing increased fragility in the United States, the Federal Reserve delivered another round of monetary stimulus on Wednesday and said it was ready to do even more to help if the situation in Europe deteriorated.

The eurozone’s private sector contracted at its fastest pace since June 2009, when the bloc was mired in a deep recession, according to Markit’s Flash Composite Purchasing Managers’ Index for June.

A combination of the services and manufacturing sectors which is seen as a guide to growth, the PMI fell to 46.0, slightly better than the fall to 45.5 predicted by economists in a Reuters Poll.

But the index has been below the 50 mark that divides growth from contraction in all but one of the last 10 months. The euro fell after the data

The eurozone’s private sector contracted at its fastest pace since June 2009

and European stocks traded lower.

Analysts struggled to find much hope in the numbers.

“The only remotely positive spin that can be put on the dismal euro zone (PMI) is that there was no further deepening in the overall rate of contraction. Hardly a cause for celebration,” said Howard Archer at IHS Global Insight.

The data pointed towards a second quarter contraction of around 0.6 percent, Markit said.

Having held steady at the start of the year, the bloc’s economy will contract 0.2 percent in the current

quarter and narrowly escape recession by stagnating again in the next, according to economists polled by Reuters last week.

Earlier data from Germany, Europe’s largest economy, showed its manufacturing sector contracted at its fastest pace since June 2009, while its service sector barely expanded, posting its lowest reading in seven months. In France, activity declined in both sectors, albeit it at a more moderate pace than last month.

“For the time being, and if we cannot sort out the financial crisis, the euro zone is likely to remain in

recession,” said Dominique Barbet at BNP Paribas.

The danger of Greece crashing out of the eurozone eased after pro-bailout parties won weekend elections, but risks are mounting that Spain, the euro zone’s fourthlargest economy, will need a fullblown international rescue.

Spain’s medium-term borrowing costs soared to euro-era record levels at an auction yesterday, hours before an independent audit was due to reveal how big a capital hole in Spanish banks needs to be filled by a bailout.

Reuters

Euro blueprint to include option on bills More integrated bank supervision to be proposed

E

Van Rompuy’s blueprint will be presented to EU leaders next week

uropean Union President Herman Van Rompuy’s blueprint for the future of the euro is shaping up to include a discussion of jointly issued short-term bills, a debt-redemption fund and common banking supervision, according to two officials familiar with the work on the project. The findings will be presented to EU leaders in Brussels next week. The report is confidential and still in development, and it isn’t clear whether it will include a recommended course of action along with its highlighted topics, said the officials, who asked not to be identified.

Euro-area finance chiefs met yesterday in Luxembourg as policy makers struggle to find ways to shore up confidence in the euro as Greece’s debt woes and soaring Spanish bond yields tear at the fabric of the 17-nation currency bloc.

EU leaders clashed over joint debt sales in May, leading them to ask Mr Van Rompuy to set out “building blocks” toward more integration. Jointly issued debt and cross-border deposit insurance were two of the areas flagged for closer study.

As the report comes together, the officials said, work is focusing on two possible debt

options: jointly issued short-term bills and a debt redemption fund, as has been proposed by economic advisers to German Chancellor Angela Merkel. Neither idea has gained traction with Ms Merkel, who also is resisting separate proposals for direct sovereign-debt purchases through the euro-area bailout fund.

Issuance of short-term bills and a debt redemption fund would each represent progress from current country-specific borrowing arrangements, though both have limits that may make them intermediate steps toward jointly issued mediumand long-term debt. Euro bills would have very short maturities, thus limiting common exposure, said one of the officials. A redemption fund could use pooled money to pay down existing bonds and lower the debt levels of participating nations, without changing the way countries borrow going forward, one of the officials said.

On the banking front, the report may clear the way for more integrated bank supervision by signalling plans to consolidate regulation across the 17-nation euro area and possibly other countries as well, the officials said.

Bloomberg