Macau Business and Economic News

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In Macao Special Administrative Region, gross domestic product rose by 8.5 percent in the first quarter of 2005.

Compared with the same period last year, Macao's export volume dropped while imports increased with growing demand.

Individual expenditures also rose in the first three months of this year.

The booming tourism industry in Macao has contributed to the GDP rise.

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The Hong Kong and Macau governments plan to discuss a comprehensive double taxation agreement with the hope of finalising it as soon as possible, the Financial Services & the Treasury Bureau says.

Clauses will be included to facilitate the exchange of relevant tax information between the two sides so tax-enforcement authorities can combat tax-avoidance activities more effectively, the bureau added.

In a statement today, the bureau welcomed Monday's announcement of the Macau government's modification of its Offshore Institution Regime, to cope with Macau's recent developments

It is conducive to co-ordinating a balanced development in the Greater Pearl River Delta and eliminating the imbalances in tax competition within the region, it said.

Hong Kong practises a territorial basis of taxation: Only profits arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong are chargeable to profits tax.

As for the tax avoidance arrangements that make use of overseas companies, the Inland Revenue Department is constantly on the lookout for improper transactions resulting in possible loss of revenue to Hong Kong.

There are anti-avoidance provisions in the Inland Revenue Ordinance and well-established procedures for assessing whether Hong Kong companies have siphoned off profits improperly to offshore affiliates, as well as clear stipulations on the penalties for such offences.

Regime aimed to help Macau's commercial development

The former Macau government introduced the Macau Offshore Institution Regime in 1999, reflecting the then economic conditions, before the Macau SAR Government was established.

The regime was to help develop Macau into an offshore commercial centre.

Available concessions under the scheme include the exemption of profits tax, business tax and stamp duty on purchase of offices by offshore institutions; and the exemption to professional tax (equivalent to salaries tax of Hong Kong) on the offshore institution's non-Macau resident managers and specialised technicians for the first three years.

Qualifying offshore institutions must pursue the offshore activities indicated in a table approved by a decision of the Macau Chief Executive.

Effective June 14, 2005, (the day after the Administrative Order was published), the scope of the approved offshore activities is restricted from the original 20 items to eight items, which are mainly technical support activities.

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The latest statistics from Macau show an economic slowdown, but observers describe the trend as a temporary setback and a sign of healthier growth.

The explosion of mainland tourist arrivals appears to be reaching a plateau, with package-tour visitor arrivals from the mainland dropping 14.1 per cent year on year in April to 189,000.

In the first quarter of the year, the number of mainland visitors rose only 13.5 per cent year on year to 2.48 million, marking the lowest growth rate since the Sars (severe acute respiratory syndrome) outbreak in 2003 and since the solo travel scheme started.

"This could be a warning alarm, especially if the trend continues in the long run," said Patrick Ho Wai-hong, assistant professor of economics at the University of Macau.

Hotel occupancy rates are also falling. Occupancy of the city's 10,636 rooms slipped to 65.67 per cent in the first quarter, the lowest since Macau recovered from the Sars outbreak.

Industry sources say if the higher occupancy rates on Fridays and Saturdays of about 70 to 80 per cent are taken into account, this means some hotels, especially four- and five-star ones, are half-empty during the rest of the week.

But Karman Yeung Ka-man, vice-chairman of the Macau Hotels Association, said slipping occupancy rates were due partly to the rising number of rooms. "The number of hotel rooms jumped, so it's just natural that a full house doesn't occur as often as before," he said. The number of hotel rooms rose 14 per cent from last year.

The worrying signs for the tourism industry occur against a background of slowing economic growth. For the first time since the Sars outbreak, Macau's gross domestic product growth has fallen to single digits in the first quarter at 8.5 per cent.

While deflation persisted from 1999 until last June, the April 2005 consumer price index rose 3.22 per cent year on year.

"Data from one quarter or one month is too insignificant to judge the overall health of an economy," said Professor Ho.

Consultant Kelvin Tan, of Manila-based gaming consultancy Sinorex, believes mainland visitors will continue to flock to Macau.

"When you see mainland visitors arriving in Macau and running from the ferry to the immigration lines, that shows you their propensity to gamble," he said.

"Those are the gamblers who cannot waste one minute getting to the tables, and they will keep coming."

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51.2 percent of the visitors from the Chinese mainland to Macao Special Administrative Region (SAR) were under the Individual Visit Scheme, according to official statistics issued on Tuesday.

The figures from the Statistics and Census Service indicated that the number of visitor arrivals in the SAR totaled 1,539,534 in May 2005, representing a year-on-year increase of 16 percent.

Compared with in May last year, the number of visitors from the Chinese mainland, Hong Kong and Taiwan increased 7.3 percent, 18.8 percent and 47.8 percent respectively, according to the statistics.

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A public survey here Tuesday showed that 58.4 percent of the respondents are satisfied with the present economic situation in Macao.

According to the Macao Residents Social Situation Assessment Survey, jointly-launched by the Union for Construction of Macao and the University of Hong Kong, 17 percent of the respondents are not satisfied with Macao's economy.

Twenty-one percent described the economy as "so-so,"

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The Brazilian government said Wednesday that Macao can serve as a platform through which Brazilian products can enter the Chinese market.

President Luiz Inacio Lula da Silva welcomed the role of the Chinese special administrative region in the development of economic and trade relations between Brazil, China and other Portuguese-speaking countries, said Edmund Ho Hau Wah, chief executive of China's Macao Special Administrative Region (SAR).

Lula has vowed to reinforce relations with Macao through the Development, Industry and Foreign Trade Ministry, Ho told a press conference after talks with Lula.

Brazil and Macao have planned to hold working meetings to make use of Macao's advantages, especially on language and trade, so asto increase Brazilian exports to the Chinese market, he added.

Macao, a former Portuguese colony, will hold a ministerial meeting of Portuguese-speaking countries in September, together with a fair.

After talks with Lula, Ho also met Senate President Renan Calheiros.

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Macao's composite consumer price index (CCPI) in May rose 3.68 percent from the same period of lastyear, according to official statistics issued on Thursday.

The figures from the Statistics and Census Service showed that the index grew 3.31 percent in the first five months from the sameperiod of last year.

The rise was mainly due to increases in housing rents and rising prices of interior decoration, summer garments, footwear and fresh vegetables, according to the statistics.

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As if Las Vegas developers weren’t expanding their own city’s offerings quickly enough, now one of them is preparing to build a copy of the Vegas Strip’s Venetian Resort on Macau, a Chinese island off of Hong Kong.

The 10.6-million-square-foot, 3,000-room hotel and casino is being developed by Las Vegas Sands, and like the original, will feature replicas of Venice landmarks like the Doges Palace, the Rialto Bridge, and several famed palazzos. It will be roughly three times the size of the Vegas version. HKS principal Jeff Jensen, whose firm is designing the project along with Wilson and Company, says the complex will be, “like a Venetian on steroids.”

The resort will include over 1,500 feet of retail-lined canal, which is three-times the length of the Vegas version. Its 500,000-square-feet of gaming is five times the area of the original, and the complex will also contain a 15,000-seat arena. Jensen says that his clients chose this tested theme instead of one of the modern designs that many Vegas developers are using. “We said, ‘why recreate the wheel?’”

Macau was once a Portuguese colony, and has long been the center of China’s gambling world, but until recently has been rife with crime and poverty. Developers, mostly from Las Vegas, are hoping to change that by developing the “Cotai Strip,” a line of high-end casinos. which is being master-planned by Skidmore, Owings, and Merrill and EDAW (RECORD, October 2003, page 38). The market looks strong. Jensen says that when his client’s Sands casino opened on Macau, visitors literally tore its doors off.

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MACAU -- The way Macau property prices are soaring while rows of new apartment blocks stand nearly empty, investors could be forgiven for thinking that the mushrooming casino business is providing the gas for a property bubble.

The former Portuguese enclave on China's southern tip has drawn speculative flows from Shanghai, which is being officially cooled after an explosion of real estate investment, and Hong Kong, where rising interest rates are starting to bite.

Macau developers can still sell sparkling high-rise blocks in just a couple of weeks, but buyers are taking a big risk. There is hardly any rental market -- only around one-tenth of new apartments inhabited.

"There's a tremendous feeling of a gold-rush town," said Elaine Young, chief executive of Hong Kong serviced-apartment firm Shama, which is looking to expand into Macau.

"The property market has risen outrageously."

Apartment prices rose 50 percent last year. Property agents predict the same in 2005, and analysts at investment bank Merrill Lynch expect the cost of an apartment to double in three years.

But the rampant speculation, mostly by people from Hong Kong and the rest of China, is based on economic fundamentals.

Gross domestic product grew 28 percent last year thanks to a 40-percent jump in tourists visiting the only place in China where casinos are legal. Per capita gross domestic product for Macau's 465,000 residents rose to the level of New Zealand's from that of Slovenia in just one year.

Officials predict 20 million visitors will pour in this year, one-fifth more than in 2004.

Investors are betting there will be a bigger boom in 2007, with the opening of the first phase of the Cotai Strip of opulent casinos, plush hotels and shopping malls, which is being built on about 5 square kilometers of land reclaimed from the silt-clogged Pearl River delta.

The 60,000-room, seven-casino, three-phase project was dreamed up by Las Vegas gaming tycoon Sheldon Adelson. Hoteliers involved include Hilton Group, Marriott International and Four Seasons Hotels.

"I don't see a bubble," said Gregory Ku, head of property consultants Jones Lang LaSalle in Macau, who has privately invested in two Macau apartments.

"A bubble means there are no good things to support the market. But Macau has many."

China could clamp down on loan sharks that fund gambling trips, and some analysts say competition from Singapore's planned casinos could stack the odds against another Macau boom.

But the demands of the industry itself, regardless of its success, are having an impact.

"Until the casinos raised their glamorous heads, there was no need for serviced apartments," Young said. "Now there will be human resources people, entertainers, people to run the hotels and convention business, designers, architects, civil engineers."

The excitement began in 2002, when Macau ended a gaming monopoly held by shipping and gambling tycoon Stanley Ho, who boasts of having once fought off a pirate attack.

A typical 180-square-meter, three-bedroom luxury apartment costs $900,000, but that is still only one-tenth the price of some apartments in Hong Kong, an hour away by ferry or 10 minutes by helicopter.

Authorities are considering market-cooling measures, such as a cut in bank loans to 70 percent of a property's value, from 90 percent, but Merrill Lynch analyst Hillman Wong points out that similar moves in Hong Kong did little to quell speculation there in the 1980s and 1990s.

He expects Macau home buyers to pay up to 188 months' salary for a flat, against 118 months' worth now. At the height of the bubble in Hong Kong in 1997, home buyers paid 440 months' salary.

"People in Macau are getting wealthy, and there's big demand for upgrading accommodation," Wong said.

"Construction workers got 40 to 60 percent pay rises last year. Junior casino dealers will get 13,000 [Hong Kong] dollars [$1,670] a month," compared with Macau's average of 5,500 Hong Kong dollars per month now.

The narrow streets of peninsular Macau are crammed with graying concrete apartment blocks with a smattering of mustard and pink colonial buildings, their arches and shuttered windows remnants of four centuries of Portuguese rule that ended in 1999.

Most of the new construction is on nearby Taipa Island, which is fused by the Cotai Strip to Coloane Island and to mainland China by a causeway.

Only a handful of outside developers, mostly from Hong Kong, have chiseled a foothold in the tight-knit market, including Hopewell Holdings, Shun Tak, Kowloon Development and Far East Consortium.

A joint venture between Morgan Stanley, Hong Kong-listed Pioneer Global and Wachovia managed to buy a 22-story office tower.

"Even if a deal is on the table, people pull it because they are petrified of selling too cheaply," Young said.

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Independent shareholders of 139 Holdings, a listed auto equipment maker, have rejected the firm's plan to buy a four-star hotel in Macau from China Travel International Investment Hong Kong for HK$500 million.

Some 88.75 percent of independent shareholders who attended the special annual general meeting Monday voted against the acquisition as well as the bond sale to China Travel as part of the deal, said the company.

139 Holdings offered to buy Hotel Grandeur Macau in February for HK$250 million in cash and HK$250 million in convertible bonds.

``The failed approval from shareholders will not have any impact on the existing operations ... We will continue to explore investment opportunities for its future development,'' said 139 Holdings in a statement Tuesday.

Hotel Grandeur Macau is a 26-story hotel with about 350 guest rooms but no casino operations.

139 Holdings said earlier that the acquisition would provide a chance for the firm to tap into Macau's gaming sector-led tourism boom and help it seek future investment opportunities.

The company said proceeds it raised from a HK$62.4 million placement will be changed to general capital instead of funding the proposed acquisition.

China Travel could have become 139 Holdings' largest shareholder after it swapped the bonds sold by the company to pay for the hotel.

139 Holdings' three executive directors - Howard Wong, Wong Yat-fai and Wu Qing - hold a combined 5.64 percent stake in the company.

Two companies listed on the main board, Radford Capital Investment and Heritage International Holdings, each hold 8.19 and 5.85 percent, respectively.

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Macao recorded 1.56 million hotel guests in the first five months, a marginal increase of 0.9 percent over the same period of last year, according to official statistics issued here on Wednesday.

The figures from the Statistics and Census Service showed that the total of 75 hotels logged 329,184 guests in May alone, a year- on-year rise of 4.6 percent, while the average room occupancy rate fell 4.1 percentage points to 67 percent over the same month of last year.

Travelers from the Chinese mainland made up 55.7 percent of all hotel guests in May, followed by those from Hong Kong, 27.9 percent and Taiwan, 3.3 percent, according to the statistics.

Source: Xinhua

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MACAO, July 18 (Xinhuanet) -- Jose Manuel Barroso, president of the European Union (EU) Commission, told media here on Monday that Macao's 28-percent gross domestic product rise in last year is "very impressive."

The EU chief hailed Macao's growing role as "a platform" for the booming cooperation between China and EU.

Barroso reviewed his China tour starting from Beijing on July 14 and termed his meetings with the Chinese leaders as "a pleasure."

Barroso met with Edmund Ho Hau Wah, chief executive of Macao Special Administrative Region on Monday.

He expressed gratitude to the Macao chief for the invitation and congratulated the latter for the region's recent entry into the World Heritage List.

The former Portuguese prime minister, who arrived here the previous day, visited the local community having Portuguese ancestry Sunday.

He will leave here for Hong Kong later on Monday to continue his five-day China trip, covering cities of Beijing, Shanghai, Macao and Hong Kong.

This is Barroso's first visit to China as president of the EU Commission, the executive arm of the EU.

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25/7/2005 15:20

Macau's composite consumer price index (CCPI) rose 3.51 percent year-on-year in the first half of the year, according to an official statistics issued on Monday.
The figures from Macau's Statistics and Census Service showed that the index increased 4.47 percent in June over the same month of last year.
The index rose 1.01 percent between May and June, it showed.
The CCPI is an indicator of whether consumers are paying more or less for goods and services and a measure of inflation or deflation.

Xinhua News

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The number of visitors to Macao hit a new record in the first half of this year, with an increase of 15 percent from the same period last year.

Statistics from the Macao Special Administrative Region shows that the city witnesses an influx of 8.92 million tourist from January to June.

The majority of tourists are from Chinese Mainland, followed by Hong Kong and Taiwan.

Among the mainland tourists, more than 2.5 million tour Macao on their own.

Macao has a population of less than 470,000, yet the small city hosts more than 10 million visitors each year. Enditem

(Source: CRIENGLISH.com)

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Luxury hotel operator Shangri-la Asia plans to open a new hotel in Macau, but it's unlikely to include a casino, and would instead offer auxiliary leisure services, cashing in on the territory's gaming-induced tourism boom.

``The opportunities for new hotels in Macau are obviously driven by the casinos, but a hotel doesn't necessarily have to have a casino,'' Shangri-la chief operating officer, Symon Bridle, said. ``We're looking very closely at the opportunities available.''

Bridle said potential revenues to be generated in Macau from hotel accommodation and leisure services could eventually overtake gaming proceeds. ``For example, in Las Vegas, what's spent on hotel rooms and the shows is actually more than casino revenues,'' he said.

``If Macau positions itself correctly as a venue for high-quality leisure services, it can quite easily attract a significant market place,'' Bridle said.

Macau offers Shangri-la opportunities to introduce a deluxe five-star hotel, or a business travelers' hotel under its Traders franchise.

Shangri-la currently operates 47 hotels, including eight Traders hotels, mainly in Greater China and Southeast Asia, and is due to open 33 more in China, India and the Middle East by 2008 at a cost of more than US$1 billion (HK$7.8 billion).

More than 20 hotels are being built in Macau, mostly linked to casino interests, which are controlled by four government-sanctioned operators - tycoon Stanley Ho's Sociedade de Jogos de Macau, US gambling magnate Steve Wynn, US operator Las Vegas Sands, and tycoon Lui Che-woo's Galaxy Group.

Bridle said Shangri-la is still awaiting the ``right market opportunity'' to open a third hotel in Hong Kong, but indicated the group is more inclined to open a Traders hotel here, rather than another five-star hotel.

``In cities where we operate more than one hotel, such as Beijing, we like to have a combination of deluxe and business hotels,'' he said. ``Therefore, it would probably make more sense to open a Traders [in Hong Kong].''

A third Hong Kong hotel for Shangri-la could incorporate service apartments. ``The group doesn't normally look for a standalone service department development,'' Bridle said. ``We tend to offer service apartments as part of a mixed-use development, which would allow us to benefit from joint branding and economies of scale.''

Two of Shangri-la's rivals in Hong Kong - Mandarin Oriental and Four Seasons hotels - are shortly to open new five-star hotels which will also combine service apartments.

The new hotel openings won't bring down room rates and occupancy at current hotel operators, Bridle said. ``The additional supply will be quite easily absorbed, as Hong Kong continues to benefit from increased tourist arrivals, especially from China.''

Shangri-la has raised its room rates in Hong Kong by about 20 percent so far this year, Bridle said, but they were accompanied by increased occupancy rates - a sign of the strength of the market.

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Aug. 4 (Bloomberg) -- Dah Sing Banking Group Ltd., a Hong Kong-based lender, agreed to buy most of the Macau-based assets of Portugal's Banco Comercial Portugues SA, tapping into the growing economy of the neighboring city known for its gaming industry.

Dah Sing will pay HK$1.67 billion ($215 million) in cash for Banco Comercial de Macau, the city's third-biggest bank by branches, and 96 percent of its two insurance units, it said in a statement carried in local newspaper today.

``The acquisition will enable (Dah Sing) to enter the Macau market, which is an increasingly affluent market with a growing economy, and to gain significant market share in each of the banking, general insurance and life assurance businesses,'' the company said in a statement.

The move represents the latest purchase in the Hong Kong lender's buying spree, following its parent Dah Sing Financial Holdings Ltd.'s announced investment in a new life insurance venture in China earlier this week and the acquisition of a consumer finance company in Hong Kong in June.

The two insurance units sold by Comercial Portugues, Portugal's No. 2 bank by assets, are Companhia de Seguros de Macau, the city's biggest general insurer, and Companhia de Seguros de Macau Vida, the fifth-biggest life insurer.

The economy in Macau, a city known for its Las Vegas-style casinos, grew 8.5 percent in the first quarter after expanding 28 percent in 2004. The former Portuguese colony changed to Chinese rule in 1999.

More Tourists

The number of visitors to Macau climbed 10 percent in April and 16 percent in May, Goldman, Sachs & Co. analyst Steven Kent wrote in a research note yesterday.

Banco Comercial Portugues is selling the stakes because it wants to focus on its main markets in Europe, the Oporto-based lender said yesterday in a filing with Portugal's securities regulator.

Dah Sing agreed to buy Pacific Finance for HK$936 million ($120 million) to expand its business in Hong Kong in June. Dah Sing Financial, which owns 78.3 percent of Dah Sing, agreed on Aug. 2 to invest $7.4 million for a 20 percent stake in Great Wall Life Insurance Co. in China.

Dah Sing said it will sell its stakes in the two Macau insurance units to parent Dah Sing Financial, which holds the insurance interests of the group, after the deal is completed.

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Macao's merchandise exports dropped while imports rose in the first half of the year, according to official statistics issued here on Wednesday.

The figures from the Statistics and Census Service showed that the value of total exports, comprising domestic and re-exports, recorded a year-on-year drop of 27 percent while the value of imports logged an increase of 3.8 percent.

Textile and garment exports accounted for 72.5 percent of Macao 's total export value in the first six months, the figures showed.

Source: Xinhua

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0817 GMT [Dow Jones] Banco BPI says Banco Comercial Portugues (BCP.LB) sale of Macau banking, insurance units a positive, helps boost capital ratios. Price BCP got looks "quite attractive," estimated at 3X price to book value for 04 and 27X PER for 04. "We believe this might be a good short-term trigger for the stock." BCP unchanged at EUR2.10 early. BPI rates stock accumulate. (ETB)

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Dah Sing Banking Group, one of Hong Kong's smaller financial institutions, is in talks with banks to arrange up to US$250 million (HK$1.95 billion) of subordinated debt sale, sources familiar with the situation said.

The move comes after Dah Sing Banking announced Wednesday the US$215 million cash acquisition of Banco Comercial de Macau and a 96 percent stake in the lender's two insurance units.

Dah Sing Banking last sold debt in April when Deutsche Bank arranged a 10-year, US$150 million subordinated floating rate note that was priced to yield 62 basis points over the London interbank offered rate.

The bonds were rated ``BBB+'' or three grades above non-investment grade by Fitch Ratings, while Moody's Investor Services rated them a one-notch lower, ``Baa2.'' Standard & Poor's gave the bonds a similar ranking of ``BBB.''

Following that bond sale, the bank's parent, Dah Sing Financial Holdings, paid US$120 million to buy Hong Kong-based consumer finance firm Pacific Finance from JPMorgan and Jardine Matheson.

Subordinated debt has a lesser claim on the assets of a borrower than ordinary bonds, requiring a higher interest rate to attract investors. Holders of the bonds, however, still rank above shareholders in the event of bankruptcy.

Dah Sing Banking, the eighth-largest publicly traded bank in Hong Kong, is part of the larger Dah Sing Group, whose businesses are mainly based in Hong Kong. Dah Sing Banking plans to sell the two Macanese insurers it agreed to buy, Companhia de Seguros de Macau and Companhia de Seguros de Macau Vida, to Dah Sing Financial upon completion of the acquisition. That is expected by the end of the year.

The bank said it wanted to enter the Macau market to capitalize on the strong economic growth the territory had seen since the government liberalized the casino sector.

The gaming market in Macau, where the economy jumped 28 percent last year, attracted Las Vegas gambling heavyweights including Steve Wynn and Sheldon Adelson who have announced plans for and opened new gaming centers.

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The All India Association of Industries (AIAI) said that it has signed an agreement for co-operation with Word Trade Centre, Macau, China.

Vijay Kalantri, said that the signing associations shall encourage and promote, in accordance with their respective laws and regulations co-operation between the two Associations in the field of bilateral trade on the basis of equality and mutual benefit and shall determine, by mutual agreement, the areas and subjects of such cooperation.

The cooperation contemplated in the present Agreement includes the Exchange of trade and investment related information, Exchange of publications and information of bilateral trade, Development of joint venture and technology transfers and investment, any other form of bilateral trade cooperation as may be mutually agreed upon, Exchange of trade enquires and business proposals for joint ventures, Exchange of trade delegations, Promoting technology transfer, joint venture and investment.

This Agreement will go a long way in furthering business ties between India and Macau -China, said Kalantri.