As of 12 p.m. ET DJIA 18085.05 g 0.33% FTSE 100 6844.80 0.15% Nikkei 225 20868.03 0.28% Shanghai Comp. 4690.

0.15 2.48% Hang Seng 27404.97 0.26% S&P Sensex 27729.67 g 0.27% S&P/ASX 200 5686.80 0.04%

OPINION:
U.S. Barely
Keeps Trade
Leadership
Page 9

LIFE & STYLE Page 7

ASIA EDITION

VOL. XXXIX NO. 208

(India facsimile Vol. 7 No. 12)

THURSDAY, JUNE 25, 2015

WSJ.com

Disputes Cloud Greek Talks Hanoi Hits Snag

In Textile Trade

Athens, creditors
struggle to bridge
remaining rifts

BY TOM WRIGHT
AND MARK MAGNIER

BY NEKTARIA STAMOULI
BRUSSELSMajor divisions remain between Greece
and its creditors over measures Athens must implement
to receive bailout aid, according to a document seen by
The Wall Street Journal ahead
of a critical meeting of eurozone finance ministers.
The policy makers want to
reach a deal on what Greece
must do to get funding from
its existing 245 billion ($274
billion) bailout plan to avoid a
default and potential exit
from the euro. But cracks
were appearing in the newfound optimism sparked by a
last-ditch proposal from
Greece.
The actions set out in the
five-page document are in line
with Greeces latest plan,
which was welcomed Monday
by the institutions overseeing
Greeces bailoutthe International Monetary Fund, the European Central Bank and the
European Commission. But
according to the document,
creditors are calling for reducing Athenss proposed tax
increases on businesses, dou-

Inside

REUTERS

SK. MENPEN R.I. NO: 01/SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998

Australia: A$6.00(Incl GST), Brunei: B$8.00, China: RMB28.00, Hong Kong: HK$23.00(Incl Macau), India: Rs100.00, Indonesia: Rp25,000(Incl PPN), Japan: Yen620(Incl JCT), Korea: Won4,000,

MCI (P) NO. 124/10/2014

Malaysia: RM7.50, Pakistan: Rs140.00, Philippines: Peso100.00, Singapore: S$5.00(Incl GST), Sri Lanka: Slrs500(Incl VAT), Taiwan: NT$110.00, Thailand: Baht80.00, Vietnam: US$4.50

KDN PP 9315/10/2012 (031275)

Apples New HomeKit

Needs Renovation

Greeces Alexis Tsipras and European Commission President Jean-Claude Juncker on Wednesday.
bling defense cuts, raising
more from sales taxes and
cutting into pension benefits
rather than relying mostly on
increased contributions.
Greek Prime Minister
Alexis Tsipras, who was in

Malaysian investment
fund 1MDB defends the
price it paid for a
power firm in 2012.
Markets...................24

have the same impact on cutting its deficit, the creditors

should accept that.
Please turn to page 3
Paradox lies at heart of
eurozones plight........................ 3

Back to Wall, Sharp Asks

Suppliers to Slash Prices
BY TAKASHI MOCHIZUKI

Ahold and Delhaize

agree to a merger,
creating one of the
largest supermarket
operators in the U.S.,
with a combined value
of over $29 billion.
Corporate News ...... 22

Brussels on Wednesday to
meet with the heads of the institutions, attacked the creditors demands in posts on his
official Twitter account. He
argued that as long as Greece
introduces measures that

TOKYOSharp
Corp.,
warning its survival could be
at stake, is pushing suppliers
for deep price cuts and considering Chinese alternatives
to Japanese parts for its liquid-crystal-display screens,
according to several people
familiar with the matter.
Sharp, which is based in
Osaka, Japan, has been rocked
by a plunge in the price of
LCD panels for smartphones,
which the company makes for
Apple Inc. and other brands.
Rival panel makers have marketed their displays aggressively to rising Chinese smartphone makers, and Sharp is
struggling to keep up, analysts say.

For the business year

ended in March, Sharp recorded a loss of 222 billion
($1.8 billion) because of writedowns of its panel-making operations, warning last month
of potential material uncertainty regarding its future.
Yet Sharp added that it was
confident it can implement
steps to maintain the companys viability as a going
concern.
In May, the companys
main lenders agreed to provide a 200 billion lifeline,
Sharps second bank bailout in
three years, in exchange for
restructuring measures including a 10% workforce cut
and minor management
changes.
At Sharps annual meeting

this week, Chief Executive

Kozo Takahashi fended off
calls for his resignation from
some shareholders, saying he
would stay on to restructure
the company. While some analysts say Sharp should merge
the display unit with another
maker or get out of the business, Mr. Takahashi says he
wants Sharp to keep full ownership of the division, calling
it the core of the company.
Sharps sales to Apple
reached 553 billion in the financial year ended in March,
about one-fifth of the companys total, according to a
regulatory filing. But Sharp is
responding to the lower
prices for LCD panels by seeking cuts of 25% or more from
Please turn to page 16

HANOIThe U.S., aiming

to bolster American exporters, is stipulating that countries joining its new Pacific
trade zone cut back on imports from Chinaa proposal
that is meeting resistance
from businesses and officials
who say it will disrupt global
supply chains.
The Senate was expected
to pass on Wednesday legislation to expand President Barack Obamas trade-negotiating powers after a bruising
battle that has put pressure
on proponents to show that
the 12-nation Trans-Pacific
Partnership will create jobs in
the U.S.
To that end, American
trade negotiators are demanding that Vietnam, a major garments exporter, reduce its reliance on textiles made in
China, which isnt part of the
trade pact, to get preferential
market access to the U.S.
The goal is to create new
markets in Vietnam for the
U.S. textile industry, which
employs a quarter of a million
Americans and exported $20
billion last year.
The U.S. and Mexico are
especially large textile pro-

ducers, said Eliza Levy, a

spokeswoman for the National
Council of Textile Organizations. Vietnam would simply
have to shift its sourcing of
yarns and fabrics from China
to the U.S. and Mexico.
U.S. fashion brands oppose
this approach, which they say
ignores the complexities of
global supply chains. Vietnam
is the second-largest exporter
of apparel and footwear to
the U.S., behind China, with
$13.1 billion in sales last year.
But the country produces only
enough fabric to meet a fifth
of its needs and buys about
$4.7 billion worth from China,
or about half of its total annual imports.
Clothing brands want
duty-free entry to the U.S. for
all goods made in the new
free-trade zone, no matter
where the fabric is produced.
The trade negotiations could
slash U.S. duties on many of
Vietnams exports of garments and shoes to zero from
between 7% and 32%.
Julia Hughes, president of
the U.S. Fashion Industry Association, a trade group representing American brands,
said U.S. textile exporters
wont be able to feed Vietnams appetite in sufficient
Please turn to page 18

Oracle Cloud
Applications
HCM

Human Capital
Recruiting
Talent

CRM

Sales
Service
Marketing

ERP

Financials
Procurement
Projects
Supply Chain

More Enterprise SaaS Applications

Than Any Other Cloud Services Provider

Copyright 2015, Oracle and/or its affiliates. All rights reserved.

2 | Thursday, June 25, 2015

HK JP ID

MU

KO

ML PH SI

TL

TW

THE WALL STREET JOURNAL.

IN

PAGE TWO

Whats News

Inside

U.S. News: A symbol

of the South faces
greater resistance. 5

ASSOCIATED PRESS

A girl wears a cape made of dried banana leaves Wednesday to celebrate the feast day of St. John the Baptist in the village of Bibiclat, Nueva Ecija province, in
northern Philippines. Villagers pay homage to their patron saint by gathering in silence in a swampy field to cover themselves in mud and don mud-drenched capes.

Business & Finance

n Central banks in emerging markets are running down their foreign-currency reserves at the fastest pace since the financial crisis,
reducing some countries capacity
to weather potential shocks, such
as a rate increase in the U.S. 19
n Boeing said CEO Jim McNerney
will step aside next week after a
tumultuous decade at the aerospace giant and hand over the
companys top job to Chief Operating Officer Dennis Muilenburg. 20
n Citigroup plans to double the
number of wealth-management
clients in Asia in the next five
years to one million, as it seeks to
capitalize on growing affluence in
the region. 20
n Monsantos CEO said the com-

pany remained committed to acquiring rival pesticide-and-seed

maker Syngenta, but the window
for a deal is measured in months,
not years. 21
n Bouyguess rebuttal of Patrick
Drahis offer for its telecom unit
sent chills through the French
telecom sector as the prospect of
the French market going to three
mobile rivals from four moved
further away. 22
n The leader of the Blackshades
operation, which sold computerhacking software to thousands of
buyers around the world, was sentenced to four years and nine
months in prison. 23
n Europes antitrust police have
asked a broad swath of Internet
commerce firms to hand over sensitive business information as part
of a sweeping investigation into

possible abuses in the sector. 23

n Syscos deal for US Foods was
blocked by a U.S. federal judge.
The ruling is a victory for the
FTC, which had filed a suit challenging the merger. 22
n China Merchants Securities
plans to raise up to $5 billion in a
Hong Kong IPO in the fourth quarter, in what could be one of the
years top listings globally. 24
n Chinas first real-estate investment trust is set to go public on
Friday after a long-awaited channel
for property firms to raise funds
received regulatory approval. 24
n The SEC obtained a court order
to freeze the assets of a Chinabased trader over what it called
suspicious activity ahead of a $9
billion buyout offer for a U.S.listed Chinese Internet firm. 26

World-Wide
n Australia confirmed it would
join the AIIB, saying negotiations
with China and other partners had
eased its concerns over how the
fund will be run. 18
n Businesses avoid paying $200
billion annually in taxes by channeling their overseas investments
through offshore financial hubs, a
U.N. agency estimated.
n Zambia will roll back contentious mining taxes next week,
backing down from a standoff that
hit profits and output in Africas
second-biggest copper producer.
n Dutch politician Geert aired
cartoons of the Prophet Muhammad on Dutch national television,
in what critics condemned as his
latest provocation against Islam.

ONLINE TODAY
Indonesia Real Time

wsj.com/indonesiarealtime

China Real Time

wsj.com/chinarealtime

Photos of the Day

Expat

wsj.com/expat

When U.S. expats

return from China:
readjusting to
American business
culture.

Is there a market
for 40-year-old
meat? Gangs of
meat smugglers in
China think so.

In Depth: U.S. housing

rally leaves poor areas
behind. 12-13

InnovAsia: A risktaker recalls his path

to startups. 16
THE WALL STREET JOURNAL
Dow Jones Publishing Company (Asia)
25/F, Central Plaza, 18 Harbour Road, Hong Kong
Tel 852-2573 7121 Fax 852-2834 5291
www.wsj-asia.com
SUBSCRIPTIONS and Address Changes, please
telephone our local customer service hotline, Hong Kong:
800 901 216; Australia: 0011 8000 322 8482; China: 400
991 1174; India: 000 800 440 1938; Indonesia: +62 21
3983 1281; Japan: 0120 779 868; Korea: 0030 844 0063;
Malaysia: 1800 804 612; New Zealand: 0800 442 434;
Philippines: 1800 1441 0033; Singapore: 1800 823 2042;
Taiwan: 00801 444 141; Thailand: 001800 441 8323. Or
email: service@wsj-asia.com
ADVERTISING SALES worldwide through Dow Jones
International. Hong Kong: 852-2831 2504; Singapore: 656415 4300; Tokyo: 81-3 6269-2701; Frankfurt: 49 69
29725390; London: 44 207 842 9600; Paris: 33 1 40 17
17 01; New York: 1-212 659 2176. Or email:
wsja.publisher@dowjones.com
Trademarks appearing herein are used under license from
Dow Jones & Company. USPS 337-350 ISSN 0377-9920

SUBSCRIBE TODAY

Waste management
is the most
prominent
environmental
issue in Indonesia,
according to a poll.

www.wsj.com/sub
or scan this code

Images behind the stories

making news world-wide
wsj.com/photosoftheday

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 3

WORLD NEWS: EUROPE

Paradox Lies at Heart of Eurozones Plight

[ Capital Account ]
As Greece
struggles to reach
a deal that keeps
it in the euro, the
currency bloc has
already turned to
the bigger question of how to fix
the flaws that brought it so close
to dissolution.
In a detailed road map
released Monday, the president
of the European Commission,
Jean-Claude Juncker, proposed
more sustainable fiscal and
economic policies to prevent
crises, and better shock
absorbers for when crises and
recessions inevitably strike.
But the report sidesteps the
paradox at the heart of the
regions problems: that the euro
itself fueled the imbalances that
produced the crisis, and robbed
members of the ability to absorb
the shock. The fixes the bloc has
undertaken since 2010 and the
ones Mr. Juncker has now put
forward dont fully resolve that
paradox.
To understand why, recall
what monetary union means.
When a country has its own
currency, its inflation,
productivity and interest rates
can vary significantly from those
of its trading partners. If higher
inflation or lower productivity
makes it uncompetitive, its
currency can adjust to resolve the
resulting trade deficits.
In return for the economic and
political benefits of monetary
union, member states gave up
that safety valve. The euros
architects assumed that as a
result, economies would
converge, with inflation, labor
costs and budgets in the south
looking much like those in the
north.
The euro did achieve

BLOOMBERG NEWS

BY GREG IP

Pedestrians enter the Bank of Greece in Athens on Tuesday, as the euro fell for a third consecutive day against the dollar.
convergence in one respect:
capital poured across borders and
interest rates throughout the
periphery plunged to German
levels. Perversely, however, this
financial convergence obstructed
economic convergence. Borrowing
booms produced housing bubbles
in Ireland and Spain and gigantic
budget deficits in Greece and
Portugal. That drove up wages,
even as Germany made its labor
market more flexible, keeping
wages down. Manufacturing in
Greece, Portugal, Spain and Italy
shrank and their economies
became less diversified. Their
trade deficits ballooned as
Germanys surplus grew.
Interest-rate convergence also
sapped southern governments
incentive to fix their structural
economic shortcomings. A
penetrating analysis by the
academic economists Jess
Fernndez-Villaverde, Luis

Garicano, and Tano Santos notes

that reforms of rigid labor
markets, monopolized product
markets, failed educational
systems, or hugely distortionary
tax systems plagued by tax
evasion were abandoned or even
reversed.
Countries hit by a crisis and
recession usually respond with
some combination of lower
interest rates, currency
devaluation and fiscal stimulus
(borrowing to finance higher
spending or tax cuts). The euro
ruled all three out: crisis
countries couldnt devalue, could
barely borrow because investors
worried they would default (a
nonissue for countries that print
their own currency), and didnt
get the benefit of the European
Central Banks low interest rates
because funds were fleeing their
banks.
Instead, all had to undertake

painful fiscal austerity and

internal devaluationforcing
their prices and wages down to
regain competitiveness against
Germany.
Budget and trade deficits have
since narrowed sharply. But the
price was deep recessions, even
as Germany boomed. There is
now significant divergence across
the euro area, Mr. Juncker
concedes. In some countries,
unemployment is at record lows,
while in others it is at record
highs. In short, the euro has
achieved the opposite of what
was intended.
There are three potential
channels to mending this. One is
to eliminate sovereign default
risk from the financial markets.
Here, major progress has been
made, through the European
Stability Mechanism bailout fund
and the European Central Banks
willingness to act as lender of

last resort. A related step is to

insulate banks from the fate of
their national governments, Mr.
Juncker notes, via single bank
supervision, single bank
resolution and single deposit
insurance.
The second fix would be a
fiscal union, like the U.S., that
transfers money from strong to
weak states and allows deficits to
expand and contract with the
business cycle. Mr. Juncker
proposes a common treasury that
would eventually make budget
decisions now controlled by
national governments. But the
political reality is that true fiscal
union remains a distant dream.
Third and most important is
eliminating the competitiveness
gap between north and south.
Here, Mr. Juncker recommends
the reforms already under way:
more efficient labor and product
markets and stronger public
institutions (i.e. less
bureaucracy and corruption).
Bringing prices and costs in the
south in line with those of the
north will correct the competitive
gap.
But that is a slow and painful
process, which Mr. Juncker
concedes will never occur as
quickly as exchange rate
adjustment.
The crucial question, then, is
whether southerners will tolerate
the years of high unemployment
and lower wages necessary for it
to work. Greeks ran out of
patience and elected a
government that has come
perilously close to shredding the
euro. Investors worry Spain could
be next.
To be sure, skeptics often
underestimate the euros political
appeal; leaders and voters in
southern Europe equate inclusion
in the common currency with
membership in Europe. That may
ultimately prove to be its
salvation, not the conflicted
economic logic at its heart.

Disputes Between Greece and Its Creditors Cloud Talks

Greeces Athex Composite index
was more than 2% lower late in the
session. In the U.S., the S&P 500
was down around 0.1% after the
opening bell. Without an agreement
before the end of the month, Greece
is set to default on a 1.54 billion
payment to the IMF on June 30.
Expectations have risen this
week that the creditors will unlock
aid. The ECB kept lending to Greek
banks unchanged Wednesday at
nearly 89 billion under its emergency program, according to a person familiar with the matter, as
bank withdrawals by nervous Greeks
stabilized.
Lending under the program,
known as emergency liquidity assistance, or ELA, has been rising
steadily in recent days as uncertainty over Greeces future in the
eurozone sparked an outflow of deposits from its banks that reached
about 1 billion per day before slowing Monday. An ECB spokesman declined to comment.
The document seen Wednesday
outlines the set of laws Greece must
pass through parliament before it
can get any aid disbursement, and
includes the creditors feedback in
notes in the text.
German Chancellor Angela
Merkel has said that at least some

of these so-called prior actions have

to be passed in Greece before she is
willing submit any rescue agreement to her own parliament.
Key points of disagreement are
corporate taxation, the overhaul of
Greeces pension system and valueadded taxes, according to the document.
For instance, Greece had planned
to increase corporate taxes to 29%,
but in the document creditors limited the increase to 28%. Creditors
also dont appear to accept Greeces
proposal to introduce a one-off cor-

porate tax of 12% on companies

whose profit exceeds 500,000.
These may cause new budget shortfalls that need to be plugged with
other measures.
Big differences also persist in the
field of sales taxation, where creditors insist on revenues worth 1% of
gross domestic product, compared
to the 0.74% proposed by the Greek
government. In the document, they
call for eliminating further exceptions to the highest rate of 23%, for
instance on catering and restaurants.

BLOOMBERG NEWS

Continued from first page

The repeated rejection of equivalent measures by certain institutions never occurred before, neither
in Ireland nor Portugal, Mr. Tsipras
said, referring to two other eurozone countries that have received
bailouts in recent years.
This odd stance seems to indicate that either there is no interest
in an agreement or that special interests are being backed, he added.
The German finance ministry
stood firm, saying it was up to Athens to compromise. Our impression
is that there is still a long road
ahead of us, Finance Minister Wolfgang Schubles spokesman Martin
Jger told reporters. We have realistic expectations for this meeting.
A senior European Union official
said early Wednesday that the expectation of EU leaders is that even
if eurozone finance ministers have
to negotiate through the night, work
should be completed before leaders
convene for a summit in Brussels on
Thursday afternoon.
The Stoxx Europe 600 was 0.3%
lower in the afternoon, on course to
snap a three-day rally. The index
had been little-changed in early
trade, but shares declined by as
much as 0.7% after Mr. Tsiprass
comments.

Protesters attending a pro-European Union demonstration in Athens on Monday.

Another point of divergence is

Greeces planned pensions overhaul.
The Greek government has proposed
increasing revenues largely by raising social-security contributions
from employers and limiting early
retirement, while creditors, especially the IMF, have put more emphasis on cuts.
In the document, the creditors
insist on savings worth 1% of
Greeces gross domestic product by
next year and also call for eliminating a supplementary payment to the
poorest pensioners, known as EKAS,
by the end of 2017. The Greek proposal wanted EKAS to be phased out
only between 2018 and 2020.
Greece was also hoping to start
implementing the pension overhauls
at the end of October, but creditors
changed the document to call for
enactment as of July 1. On top of
that, creditors demand Greece adopt
legislation that will fully offset the
effects of a court ruling on previous
pension cuts, which could cost an
extra 1.5 billion.
The creditors also double the
target Greece sets for military
spending cuts to 400 million for
2016.
Laurence Norman
and Brian Blackstone
contributed to this article.

4 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

WORLD NEWS

U.S. Doubles Down on Europe Defense

TALLINN, EstoniaThe U.S.

plans to send tanks, heavy artillery
and other equipment across Eastern
Europe to bolster security and deter
Russia from attempting another incursion in the region, Defense Secretary Ash Carter said on Tuesday.
The surge of equipment, including a total of 250 tanks, Bradley
fighting vehicles and self-propelled
howitzers along with an additional
900 vehicles and other equipment,
is headed to temporary bases in six
nations: Bulgaria, Estonia, Latvia,
Lithuania, Poland and Romania, Mr.
Carter said.
The announcement came a day
after Mr. Carter unveiled a separate
suite of U.S. military aid for a new
North Atlantic Treaty Organization
rapid response unit designed to address security crises within days.
Both moves signal a reinvigorated approach to collective security
in Europe and come as NATO defense ministers gather to discuss
both conventional and nuclear
threats from Moscow. The U.S. is
pushing the alliance to strike a more
assertive profile in a region that is
increasingly jittery following President Vladimir Putins incursion into
Ukraine last year.
The tendency by Russia to try
to turn back the clock and go backwards in history, rather than go forwards in historywere not going
there with them, Mr. Carter told a
group of sailors and Marines aboard
an American amphibious ship
docked here after it participated in
exercises in the Baltic Sea.
Russian officials didnt respond
to a request to comment on Mr.
Carters announcements.
In announcing the positioning of
U.S. military gear throughout the region, Mr. Carter was fulfilling a plan
under development over the past
several months. The equipment will
be stored at a series of temporary
bases in those nations and hauled
out by U.S. troops for a continuing

MINDAUGAS KULBIS/ASSOCIATED PRESS

BY GORDON LUBOLD

U.S. Marines this month attend the opening ceremony of a multinational military exercise north of Vilnius, Lithuania.
series of exercises the U.S. and
other nations have been conducting
in the region.
American rotational forces need
to more quickly and easily participate in training and exercises in Europe, Mr. Carter told reporters here
Tuesday while flanked by his counterparts from three Baltic nations
most anxious about Russian aggression: Estonia, Lithuania and Latvia.
The significance of this is that it
allow us to do more training, more
exercises, and with more forces than
wed otherwise do.
The equipment announced on
Tuesday amounts to an American
brigades worth of geara potent
symbol of Western commitment, but
likely no match by itself for a Rus-

sian force should Mr. Putin opt to

strike into a neighboring country
again.
Mr. Putins annexation of Crimea
last year has awakened the alliance,
which last year was focused more
on drawing down forces in Afghanistan.
Mr. Carter, during a five-day
swing through Europe, stopping in
Estonia, Germany and Belgium, has
said the U.S., NATO and other allies
must scrap the Cold War playbook
in responding to Russia and think
anew about the array of security
challenges.
Mr. Putin last week announced
that he would locate 40 intercontinental ballistic missiles in the region, adding to regional anxieties.

A question confronting NATO

ministers is how Mr. Carter and regional military officials can assert
their military might without being
provocative. While Moscow is sure
to portray the latest move as American and NATO saber-rattling, American officials view it differently, a senior military official said.
Were talking about 250 armored vehicles, tanks, Bradleys and
howitzers that would not fill up the
parking lot of your average high
school and they will be distributed
in formations in several different
countries, said the official, noting
that a typical Russian exercise can
equate to tens of thousands of
troops.
The plan to store the equipment

wont place American troops in

those temporary bases, even though
Estonia, Latvia and Lithuania had
specifically requested that NATO do
so. Instead, American troops would
rotate into those countries on a
temporary basis to use the equipment before returning it to the storage sites and returning to their permanent bases elsewhere in Europe.
The U.S. has about 65,000 service members permanently stationed in Europe, primarily in Germany, the United Kingdom, Italy and
Belgium. The Pentagon would primarily draw from forces already
based in Europe to use the newly
positioned military gear.
Part of the idea of the plan is to
save time and shipping costs for the
Pentagon, which has had to move
equipment for each exercise. But
more critically, basing the equipment at the sites also helps demonstrate American resolve in the region.
Mr. Carter also announced a
smaller initiative in which NATOs
Cooperative Cyber Defense Center
of Excellence, an academic institution based in Estonia, would help
regional nations develop better cyber defense strategies.
The initiative to pre-position
weapons in European nations is
similar to a bilateral agreement that
has been in place between the U.S.
and Norway for more than three decades, according to Scandinavian officials briefed on the plans.
Oslo agreed to store military
equipment and ammunition in 1981
on behalf of the U.S. to facilitate a
response to what was seen as the
biggest danger at the time: a Soviet
invasion.
Norway, Sweden and Finland
would welcome the U.S. stacking of
weapons at their Baltic neighbors
because it would mark a reaffirmation of the U.S. commitment to collective security in Europe following
concerns that Washingtons focus
was drifting toward Asia, the Scandinavian officials said.

Russias New Nuclear Stance Has NATOs Attention

BRUSSELSNATO defense ministers gathered on Wednesday in the
face of a challenge they havent confronted since the end of the Cold
War: an assertive Kremlin that is
expanding its nuclear arsenal.
Russian President Vladimir Putin
said last week he was adding 40 intercontinental ballistic missiles to
Russias arsenal. Moscow has incorporated nuclear components into its
recent military exercises, and it has
increased flights of nuclear-capable
bombers. Russias leaders in recent
months have repeatedly cited the
countrys nuclear capabilities.
The North Atlantic Treaty Organization is struggling to respond
without further stirring tensions.
Alliance officials say privately they
are taking a preliminary look at
NATOs current nuclear strategy before deciding whether to undertake
a deeper review.
The nuclear messaging of Russia is destabilizing, its unjustified,
and its dangerous, NATO Secretary-General Jens Stoltenberg said
Monday. What we learned during
the Cold War is that everything related to nuclear weapons has to be
dealt with in a very cautious way.
Douglas Lute, the American ambassador to NATO, said Tuesday

that the U.S. and NATO were reviewing their options. The U.S. has
accused Russia of violating the 1987
Intermediate Nuclear Forces treaty
by testing a medium-range missile.
There is a general assessment
under way in Washington, and a
parallel assessment here in NATO,
to look at all the possible implications of what Russia says about its
nuclear weaponsand what we actually see on the ground in terms of
development and deployment, Mr.
Lute said.
The 28 NATO defense ministers
convening in Brussels will explore
everything from military spending
to a U.S. proposal to locate military
equipment in Eastern Europe. But
even amid such contentious issues,
the nuclear issue is expected to get
much attention.
NATO officials concede they are
unsure whether the Kremlin is engaged in rhetorical chest-beating, or
is signaling a more significant
change. Moscow may be emphasizing its nuclear capabilities because,
even though it is rebuilding its conventional forces, they are weaker
compared with the Wests than they
were during Soviet times.
Either way, the renewed talk of
ICBMs and nuclear treaties is reminiscent of the dark stretches of the
Cold War.

It should scare people, said Ivo

Daalder, a former U.S. ambassador
to NATO. Now we are in a situation
where its not inconceivable that
there might be a military confrontation, and this kind of bluster contributes to the possibility of miscalculation.
Mr. Daalder, now president of
Chicago Council on Global Affairs,
noted that Mr. Putin had previously
pledged to add 50 new ICBMs to his
arsenal, so the recently stated goal
of 40 is actually a reduction.
Vice Adm. James G. Foggo III,

commander of the U.S. 6th Fleet

and a NATO commander, said the
Kremlins language hasnt changed
his approach. His ships were still
operating in a Phase Zero status,
he said, meaning peacetime conditions.
I consider it just rhetoric,
Adm. Foggo told reporters from
aboard the USS San Antonio during
a recent NATO exercise. Responsible nations are bound by a number
of treaties and limitations.
The Russian mission to NATO,
responding to a written inquiry, said

AGENCE FRANCE-PRESSE/GETTY IMAGES

BY NAFTALI BENDAVID

An ICBM system in the Victory Day military parade in Moscow on May 9.

Russia takes its nonproliferation responsibilities seriously. Russia is in

the midst of a well-publicized modernization of its nuclear arsenal, the
mission said, as allowed under the
New START treaty.
Our military doctrines are
purely defensive, including in terms
of nuclear strategy, and do not include elements that could be considered as a threat to any country,
the mission said in an email. As we
often hear from representatives of
some Western countriestheir security is nonnegotiable. Well, so is
ours.
But Western military leaders say
they cant write off the rhetoric as
empty talk.
I consider it to be extraordinary
reckless, Gen. Martin Dempsey,
chairman of the Joint Chiefs of
Staff, told The Wall Street Journal
recently. He added, They have a capability and have maneuvered it,
and we cant take that lightly.
Whether or not the rhetoric escalates into something more serious, it is reopening an arena of confrontation long thought closed. The
U.S. and Russia signed the New
START treaty in 2010, limiting each
side to 800 launchers and 1,550 deployed warheads. An older INF
Treaty bans medium-range nuclear
missiles in Europe.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 5

WORLD NEWS: U.S.

A Symbol of the South

Faces Greater Resistance
The Souths fraught relationship
with the Confederate battle flag is
changing rapidly following the apparent embrace of the symbol by
the South Carolina church-shooting
suspect.

Office of Personnel Management Director Katherine Archuleta testifying before Senators at a hearing on Tuesday.

Breached Networks
Security Is Criticized
BY DAMIAN PALETTA

WASHINGTONA federal security system that failed to prevent

millions of sensitive files on government employees from being improperly accessed has been plagued by
delays and is largely unable to stop
the most sophisticated attacks, current and former U.S. officials said.
The security system in place at
the Office of Personnel Management,
known as Einstein, is incapable in
most cases of stopping previously
unknown malware from penetrating
government networks. It mostly relies instead on signatures from
past computer breaches, and then
looks for similar digital fingerprints.
In this particular case, it did not
detect it at first because it had not
seen it before, Phyllis Schneck, a
top cybersecurity official at the Department of Homeland Security, said
in an interview.
Stopping hacks from never-before-seen spywarecalled zero-day
exploitsis a challenge for both
the government and corporations.
Private-sector firms such as FireEye
Inc. and Palo Alto Networks Inc. sell
technology that sometimes detects
previously unknown threats, while
other systems quickly respond with
protective security patches once a
new intrusion code appears.
The Office of Personnel Management had been working with outside
firms to provide some protection
against zero-day threats, but the
coverage didnt protect the entire
network, people familiar with the
matter said. Investigators believe the
hackers were able to slip through an
unprotected part of the OPMs system. Since the breach, the agency
has expanded protection across the
network using outside firms.
Another vulnerability of Einstein,
which is used by most government
agencies, is that it does little to stop
people from breaking into government networks using stolen login
credentials, current and former U.S.
officials said. Recorded Future, a
Massachusetts Internet-technology
company, has found stolen login credentials available online for roughly
50 federal agencies, including the
Office of Personnel Management.
OPM Director Katherine Archuleta
disclosed Tuesday that the intruders
in the attack, which the agency revealed earlier this month, obtained a
compromised user credential from
a government contractor, Keypoint
Government Solutions, that they used
as part of the breach. Keypoint didnt

respond to a request for comment.

OPM officials said they have been
working for more than a year to
overhaul their computer-security
protocol, and the agencys inspector
general has said the agency has
made improvements to what was
once a decentralized and fragmented
system. Ms. Schneck said the DHS is
working to expand Einsteins capability so it will be able to better defend
against zero-day exploits. But there
is no timeline for this expansion.
Similarly, U.S. agencies are supposed to use something called a
continuous diagnostics and mitigation program, which hunts for spyware after something has breached
a network. But many agencies havent fully adopted this program.
Major security weaknesses remain, Michael Esser, the assistant
inspector general for audits, said
Tuesday, adding that OPM has not
yet implemented a mature continuous monitoring program.

The computer-security
system has been marked
by controversy and delay.
The DHS has spent at least $529
million on Einstein implementation
through 2014, the agency said. Einstein covers civilian federal networks, while the Pentagon uses different security systems.
Using new spyware lacking fingerprints to break into a computer
network is considered a sophisticated and expensive way to steal
data. The technique often is deployed by hackers linked to foreign
countries, security experts said.
Hackers in China have used such
spyware in the past, several U.S. officials said, and they believe the OPM
breach was carried out this way.
Intrusions by criminal hackers and
foreign countries have breached U.S.
government computer networks for
more than a decade, including systems controlled by the Navy, Energy
Department and many other agencies,
to steal a wide range of information.
OPM is just the most recent example of the governments systemic
failure to protect itself, Sen. John
Boozman (R., Ark.) said at a hearing
about the breach on Tuesday.
U.S. officials are now scrambling
to reinforce their computer-security
protocols. They are forcing network
administrators to use multifactor

login credentials to make it harder for

people to break into databases. They
also are looking at expanding encryption of data as well as masking, a
technique that essentially hides private records, and data fragmentation,
which breaks data sets into multiple
pieces, making it harder for intruders
to steal a cache of information.
U.S. officials said they need to
put in place multiple safeguards because hackers have numerous ways
to penetrate networks. The adversariesthey only need one way in,
Richard Spires, the former chief information officer at Department of
Homeland Security, told a Senate
subcommittee Tuesday.
Scrutiny of Einstein intensified
after the OPM breach, and Senate
lawmakers are working on a bill that
would require the DHS to study its
effectiveness at preventing attacks.
The agency has defended Einstein, saying it helped detect the
spyware in the OPM breach, but
lawmakers have pointed out that
Einstein did nothing while hackers
extricated millions of sensitive personnel records for more than a year.
While DHS has developed Einsteinit only detects known intruders, proving that it is completely
useless in the latest OPM hacks,
Rep. Jason Chaffetz (R., Utah), the
House Oversight and Government
Reform Committee chairman, said at
a hearing last week.
Einsteins history has been
marked by controversy and delay.
The Bush administration rolled out
the first version in 2004, but few
agencies participated because it was
voluntary and simply monitored network traffic, doing little to prevent
attacks. In 2008, the Bush administration required agencies to comply
with a new version, dubbed Einstein
2, which for the first time looked to
identify malware and intrusions.
As hackers became more aggressive, the DHS and National Security
Agency began developing Einstein 3,
which aims to block known intruders.
But concerns about the NSAs role
and a lack of uniform agency networks bogged the down the process.
A number of federal agencies, including the OPM, still hadnt adopted
Einstein 3 as of several weeks ago.
I think Einsteinin whatever iterationcan probably be considered
to be outdated technology, said Gus
Coldebella, the former top DHS lawyer. Its better than nothing, but
unless the bad guys are using something thats already identified in
Einstein, its not going to pick it up.

Tuesday, South Carolinas Senate

introduced a bill to remove the flag
from the Statehouse grounds, heeding a call from Republican Gov. Nikki
Haley, in the wake of last weeks killing of nine African-American churchgoers in Charleston. The suspect in
the rampage, a white man said to
have harbored racist views, had Confederate emblems on a license plate
and appeared to be shown on a website waving Confederate flags. Supporters of removing the flag said
they expect to muster the two-thirds
majority needed in both houses.
Meantime, the House speaker in
Mississippi, Philip Gunn, called for
removal of the battle emblem from
his state flagthe only remaining
state to display it on its banner.
Other governors called for the emblem to be removed from state license plates. Retailers Amazon.com
Inc., Sears Holdings Corp. and eBay
Inc.joined Wal-Mart Stores Inc. in
saying they would no longer carry
Confederate flag merchandise. Two
prominent flag makers said they
would stop selling it.
Its amazing the difference today compared to 15 years ago, said
David Beasley, a Republican former
South Carolina governor who proposed in 1996 that the flag be removed from its perch then atop the
Statehouse dome. People 15 to 20
years ago that would have said no
way are now saying its a good idea.
Mr. Beasley, who said he got
death threats for trying to take the
flag down and who lost a re-election
bid after one term, thinks the flag
will be down by the end of July.
And Im going to celebrate with a
thank you Lord, he said.
Sen. Larry Martin, a Republican
who voted for a measure in 2000
that moved the flag to Statehouse
grounds, said he had changed his
position on what the flag means to
the people of South Carolina. The
actions of that deranged young man
have really illuminated things for a
lot of us, he said.
For generations, versions of the
battle flag were the most recognizable symbol of Southern pride,
adorning everything from state flags
to belt buckles. With its large blue
X of stars, it was born in the early

GETTY IMAGES

DREW ANGERER/GETTY IMAGES

By Cameron McWhirter in
Columbia, S.C.,
Josh Dawsey
in Charleston, S.C.,
and Lindsay Ellis
in Atlanta

days of the Civil War, when soldiers

became confused by Confederate national and Union flags that looked
similar in the smoke and heat of
battle. Southern state governments
starting in the 1940s embraced the
image to show resistance to civil
rights. Beginning in the 1970s, the
flags image spread throughout popular culture, emblazoned on the
General Lee, the car on the television show Dukes of Hazzard, on
Lynyrd Skynyrd albums and on cigarette lighters.
But for black Southerners and
others, the emblem was seen as
commemorating slavery and oppression of African-Americans. As the
Souths population has become more
diverse and drawn new and multinational businesses, streets, statues
and other symbols of the Confederacy have been renamed or removed.
The trajectory slowly but surely
is to minimize the flags presence,
said John Coski, historian at the
American Civil War Museum in
Richmond, Va., and author of a cultural history of the battle flag.
Now, the Charleston church
shooting has opened a new chapter.
Valley Forge Flag Co. and Annin
Flagmakers said Tuesday they would
no longer produce or sell versions of
the flag, sales of which are small,
both companies said. We hope that
this decision will show our support
for those affected by the recent
events in Charleston and, in some
small way, help to foster racial unity
and tolerance in our country, said
Reggie VandenBosch, Valley Forge
Flags vice president of sales.
Nascar, some of whose fans display Confederate memorabilia at
races, reiterated Tuesday that it
doesnt allow use of the symbol officially, and it urged consideration at
its events. While Nascar recognizes
that freedom of expression is an inherent right of all citizens, we will
continue to strive for an inclusive
environment at our events, the
company said. Amazon said Tuesday
that it would stop selling Confederate items, under pressure on social
media from critics who noted sales
of the battle flag had soared
throughout the day.
Ms. Haley came under significant
pressure to call for the flags removal from leaders of multinational
and South Carolina businesses after
the shootings, according to people
involved in the discussions. Michelin
North America, based in Greenville,
S.C., was among companies calling
for immediate removal of the flag.
We are ready to support our
elected officials as they take the
necessary steps to do so, Michelin
Chief Executive Pete Selleck said.
Jeff Bennett
contributed to this article.

The Confederate flag flying at the Capitol in Columbia, S.C., on Tuesday.

6 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

WORLD NEWS

Feds Powell Sees September Rate Hike

BY BEN LEUBSDORF
AND VICTORIA MCGRANE
WASHINGTONFederal Reserve
governor Jerome Powell predicted
the U.S. central bank will begin raising short-term interest rates as
soon as September, with an additional rate increase coming in December.
Mr. Powell said he expects significantly stronger economic growth
after the first quarter, further gains
in the job market and a greater basis for confidence that inflation
will rise toward the Feds 2% targeta combination that could lead
to a September rate move.
I dont think the odds are
100%, he said Tuesday at an event
hosted by The Wall Street Journal.
Theyre probably in the 50-50
range that we will realize those conditions. But thats my forecast.
Mr. Powell is the third Fed policy
maker to emerge in recent days with
a road map of where rates could go
over the course of 2015. Federal Reserve Bank of San Francisco President John Williams predicted on Friday two rate increases this year of
0.25 percentage point each. Federal
Reserve Bank of Cleveland President
Loretta Mester said the same day she
thinks the economy could support an
increase of 0.25 percentage point.
The central bank affirmed after its
policy meeting last week that it plans
to raise rates before year-end. But a
split emerged among officials about

whether to move one, two or three

times this year. The median forecast
among officials suggests two moves,
and Mr. Powell is in that group.
The Fed likely would raise rates
at a gradual pace, Mr. Powell said,
in part because inflation is expected
to continue undershooting the central banks 2% annual target. The
precise timing and pace of rate increases will depend on incoming
economic data, he said, and officials
dont want to fall into a pace of
mechanical increases.
Mr. Powell said his forecast
calls for liftoff in September and
for an additional increase in December and further increases of about
one percentage point a year are
likely. But he cautioned that rate
forecasts are accompanied by great
uncertainty.
The Fed has kept short-term interest rates near zero since December 2008 to support the economy
through the financial crisis, recession and recovery.
Fed officials have said they want
to be transparent as the time for
higher rates approaches and more
and more of them, it seems to me,
are being open about what their
forecasts are, Nomura Securities
chief U.S. economist Lewis Alexander said.
In the coming months, Mr. Alexander said, Chairwoman Janet Yellen and other key officials will have
plenty of opportunities to drop
cluesin the July policy statement,

BLOOMBERG NEWS

Growth expectations, confidence in rising inflation likely put bank on path to gradually tighten monetary policy

Federal Reserve governor Jerome Powell, shown at a March Senate hearing, is

forecasting stronger growth and job gains for the U.S. economy.
minutes of the June and July meetings, and speeches and other public
appearances.
As we approach September,
people are going to have to signal:
either its on or its not, Mr. Alexander said.
One potential complication for
the Fed is the stronger dollar, which
Mr. Powell said can create a bit of
a headwind to growth by making
U.S. exports more expensive. He also
acknowledged that continued weak
global growth would present a challenge for the U.S. economy, though
he noted that things are looking a
little better in Europe.
He said the Feds models take all

those factors into account and monetary policy will adjust to any slower
growth because of a stronger dollar.
Mr. Powell said tough postcrisis
capital and liquidity rules are likely
contributing to a decline in bondmarket liquidity, but said they arent
the only factor. He also said higher
volatility sparked by the decline in
market liquidity is unlikely to leave
much of a mark on the U.S. economy.
Ms. Yellen said in May that equity-market valuations at this point
generally are quite high. Mr. Powell
on Tuesday said overall equity values
are certainly higher than normal
but that he doesnt see evidence of

bubble-like conditions. in valuations or a buildup of risk taking and

leverage in financial markets
Asked about legislation pending
in the Senate that seeks to overhaul
several aspects of the Feds operations and structures, Mr. Powell
echoed Ms. Yellen, who last week
questioned the need for such
changes.
The Fed works, said Mr. Powell, a Republican who earlier this
year was dispatched to make the
central banks case to congressional
Republicans on various Fed measures.
The Fed is not perfect, he said,
but we reach decisions; we do so
transparently; people dissent respectfully, on the record. They explain their arguments. He added, I
dont accept the idea theres something wrong here that needs to be
addressed.
Mr. Powell also defended the
Feds handling of confidential information, amid multiple investigations
into the leak of details of marketsensitive policy deliberations in
2012. Meetings with financial-market participants are valuable to policy makers, he said, but officials are
careful to listen rather than share
any information themselves.
No one should want us to be
making monetary policy in an ivory
tower with no contact with people
who are actually working in the
economy and financial markets, Mr.
Powell said.

France Plays Down

U.S. Spying Tensions

BY INTI LANDAURO
AND SAM SCHECHNER

PARISThe French government

moved to play down tensions with
Washington after WikiLeaks published documents alleging that the
National Security Agency spied on
President Franois Hollande and his
predecessors.
Mr. Hollande convened a meeting
of senior security advisers Wednesday, while Foreign Minister Laurent
Fabius summoned the U.S. ambassador to France, Jane D. Hartley, to his
offices. Mr. Hollande spoke by phone
later in the day with President Barack Obama, who reiterated his firm
commitment to prevent such practices, the French presidency said.
The exchange provided the opportunity to clarify the principles
that must govern relationships between allies when it comes to surveillance, Mr. Hollandes office said.
Government spokesman Stephane Le Foll said France didnt expect
the WikiLeaks allegations to hurt relations between the allies. Frances
intelligence coordinator, Didier Le
Bret, he said, plans to meet with
NSA officials to ensure that the
agency is honoring pledges that the
Obama administration made in the
wake of leaks from former NSA contractor Edward Snowden.
We need to keep a measured response given what is at stake, Mr.
Le Foll said.
WikiLeaks and two French publications published late Tuesday six
documents describing purported
U.S. surveillance of internal deliberations and conversations of Mr. Hol-

lande, as well as former French

presidents Nicolas Sarkozy and
Jacques Chirac.
These are unacceptable facts
that have already led to clarifications between the United States and
France, Mr. Hollandes office said.
France will not tolerate any acts
that compromise its security and
the safeguarding of its interests.
After the documents were published, the White House said it
wasnt currently spying on Mr. Hollande and wouldnt conduct such
surveillance of him in the future.
The statement didnt deny that spying had taken place in the past.
We do not conduct any foreign
intelligence surveillance activities
unless there is a specific and validated national-security purpose,
said Ned Price, a spokesman for the
White House National Security
Council. This applies to ordinary
citizens and world leaders alike.
Still, the latest leak detailing alleged U.S. spying on European allies
is a reminder of the simmering
trans-Atlantic tensions over surveillance. The disclosure of widespread
spying has also put European governments on the defensive over
their gathering of intelligence.
France ranks among the most sophisticated countries when it comes
to electronic surveillance. U.S. intelligence and law-enforcement officials have cited France as one of the
countries with the capabilities to
spy on the U.S., though Mr. Le Foll
reiterated on Wednesday that
France doesnt spy on allies.
William Horobin
contributed to this article.

Home Security in HD

HIGH-RESOLUTION SPYING ON YOUR HOUSEOR PUPPY PAGE 8

Thursday, June 25, 2015

asia.WSJ.com

Smart Home Needs Improvement

Apples HomeKit isnt reliable enough yet to get you talking to your connected home

[ Personal Technology ]

How to Make Siri Run Your Home

With an iPhone and the right HomeKit-compatible appliances, you can
command lights, thermostats and morebut you must know the lingo.

Its Day One for

HomeKit, Apples
ambitious plan to
automate our
homes. But its
been a rough first

day.
HomeKit is supposed to help
iPhones run lights, thermostats
and all sorts of other appliances
that can now connect to the Internet. It turns voice-assistant Siri
into a genie who makes things
happen around the house. You just
say, Turn on the lights, and
presto, theyre on.
Unfortunately, Siri just isnt
very reliable. Im running the first
HomeKit hardware in my house,
with hubs by Insteon and Lutron
Casta, but when Siri gets involved, I sometimes want to
throw the iPhone out the window.
She should know all my HomeKitconnected devices by name, but
when I say, Turn on the air filter, Siri presents a list of stores
where I might buy one.
And when I ask her to turn on
the lights, she sometimes
obligesand other times says,
Sorry, Geoffrey. Wasnt this exactly how things went awry in
2001: A Space Odyssey?
Apple is trying to do something
very hardand very important
with HomeKit. The smart home is
personal techs Wild West, and Apple wants the iPhone to play sheriff. Google, Samsung, Amazon and
many others also want to run our
smart homes, but arguably none of
them have Apples sway to make a
zillion other brands adopt a common set of privacy, security and
programming standards. Setting up
a smart home today is hellish, and
could use a good dose of Apple
simplicity.
Maybe Apple still can pull that
off, but this first public showing is
uncharacteristically crude. Yes, Apple has done the work of creating a
common language for home devicesalready, competing products
light up together because of HomeKit. But for now, Siri is still in the
dark. Did Apple bite off more than
it can chew? My bet is that simplifying the smart home is so complicated, its still years away.
If youre all in on the Apple lifestyle and insist on future-proofing
your smart home now, youre going
to have to buy new stuff. Even if
you bought a connected appliance
in an Apple store, it may not be
compatibleit needs to have the
HomeKit logo. Many well-known
brands are making new hubs or
add-on hardware to make existing
devices work with Apples system.

JASON HENRY FOR THE WALL STREET JOURNAL (2)

BY GEOFFREY A. FOWLER

Turn on the desk fan

action

device

Turn off the lights in the office

action

Some of the first HomeKit-compatible

devices come from Insteon, including
light bulbs and dimmers.

Thats mainly because of the high

security and privacy bars the company sets: It requires encryption so
that even a hacker sneaking onto
your home network couldnt mess
with your appliances.
Several companies have announced HomeKit products, but for
the moment only two are shipping.
Insteon sells a $150 HomeKit hub
and Insteon+ app that serves as the
brain of a variety of separately sold
HomeKit-compatible devices, including light bulbs, plug switchers
and dimmers. Still, thats just a
fraction of the gear out thereno
door locks or security cameras yet.
Lutrons system is just for its Casta lights, sold in a $230 pack
that includes two dimmers, two remote controls and a HomeKit hub.
Regardless of your particular
appliances, youll need one other
piece of hardware: a $69 Apple
TV. It serves as a secure bridge
from your iPhone into the house
when youre away from your home
Wi-Fi network. (The Apple TV
wont be required when Apple integrates HomeKit with iCloud in
iOS 9 this fall.)
It would probably be less confusing if Apple got involved with
the setup of HomeKit products.
Its doing a lot in the background,
but theres no Home app in iOS 8
like the Health one that helps
iPhones track fitness devices.
The Insteon+ appwhich has
the ability to aggregate and control HomeKit devices even made
by its competitorsguides you to
assign each device a name and
place. Thats where you learn the
HomeKit lingo. There are devices which live inside rooms
which are in zones (upstairs/
downstairs) inside homes. There
are also scenes, which can combine devices across rooms, like a
movie mode for the lights around
your TV. These categories provide
the basic grammar when it comes
time to operate your home with
Siri. Turn off the lights in the
kitchen activates a group of de-

set of devices

room

Set the temperature upstairs to 68

vices in a room.
As any iPhone owner can testify,
Siri is occasionally hard of hearing.
Shes gotten a lot better, but she
still sometimes confuses words
(scene/seen, up/off, lamp/lap). Siri
also doesnt ask for confirmation
before she takes action, so I hope
she doesnt one day mishear you
saying Unlock the front door.
But even when Siri does hear
you correctly, too often she just
doesnt understand. She doesnt
yet know what I mean by Im
leaving home. Other times, apparently, Im just saying things
wrong: When I say, Turn off all
the office lights at midnight, she
ignores the last part and just
turns them all off right away. I
learned that I couldnt say, Turn
the lights to 50%you have to
say, Set the lights to 50%.
Isnt the whole goal of natural
language systems like Siri to avoid
making you memorize commands?
Apple doesnt even provide a list
of Siri-approved phrasings, so
youre left shouting at your phone
like a weirdo. Then there are just
old-fashioned bugs. Even a basic
command like Turn on the lights
causes Siri to occasionally reply,
Sorry, Geoffrey, I wasnt able to
find any lights this time.
In my tests, the Insteon and
Lutron devices both worked fine
when I controlled them with their
own apps, suggesting the problem
is with how they communicate
with HomeKit. On Sunday, an Insteon update addressed some Siri
problems, and both companies say
theyre working closely with Apple to make performance improvements. That said, Lutron hasnt
yet turned on the ability for Siri
to perform certain functions, like
operate individual lights or launch
lighting scenes.
Clearly, theres still a lot of
work to be done. Apple has already
announced some improvements in
iOS 9 coming this fall, including
the ability to understand getting
up, leaving home, returning home

action

zone

Set the bedroom relaxing

action

scene, including lights

and radio

Apples HomeKit allows you to command connected lights, fans and

thermostats with voice-assistant Siriif she understands you.
and going to bed. An update to the
Apple Watch will also let the wrist
version of Siri operate your house.
If youre building or upgrading a
house, you still might want to
choose HomeKit gear, even if its capabilities today are limited. Despite
the fact that many DIY smart-home
control systems have hit the market, theyve all fallen short.
Theres reason to believe Apple
can get things right, and plenty to
like in what Apple has laid out. I
agree with Apple that voice commands should play an important
role around the house. And HomeKit has the right structure to
make devices from lots of different makers play well together. In
my tests, HomeKit got this hard
function right: With the Insteon+
app, I could create scenes around
my house that combined Insteon

and Lutron devices.

One more thing: Apples approach to privacy couldnt be
more different than that of rival
Google, whose Nest system relies
on data collection to tease out
patterns that can make a house
run on its own. HomeKit encrypts
every command so that Apple can
never see or record your activity.
That may pay off, as more people
come to realize that their house
can spy on themjust like their
Facebook accounts and Gmail inboxes. (Nests CEO Tony Fadell
says that to be convenient, smart
home tech has to strike a really
good balance between sharing
too much and too little data.)
For today, turn down your expectations for what HomeKit can
do. Or, as Siri would prefer you say,
Set the expectation level to low.

8 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

LIFE & STYLE

DREW EVANS/THE WALL STREET JOURNAL (2)

Keep Watch Over Your Home in HD

The Nest Cam automatically kicks on its night-vision setting when the lights
go off, left. Above, the Nest app has all the controls you need to monitor
your footage.
BY JOANNA STERN
I run a covert spy
operation. I really
shouldnt even be
talking about it.
You see, a few
months ago, when
I decided my new puppy wasnt to
be trusted, I installed a Dropcam
Pro webcam in my living room.
Now through the app, I have
eyes on the little guy 24/7. While
at work, I can check in to make
sure he hasnt pooped on the carpet or, you know, invited his comrades over to play poker.
Then last week I found out my
surveillance (or shall I say, furveillance?) system is totally obsolete.
Nest, the Google-owned company
that acquired Dropcam last year,
released the brand new $200 Nest
Cam. Its ostensibly a Dropcam Pro
replacement with crisper 1080p
video recording, better night vision
and a new designbecause everything in this world needs to be
slimmer, even our webcams.

In a menagerie of
security cameras on the
market, Nests superior
picture quality and
reliability stand out.
The new Nest Camor any of
the dozens of competing do-ityourself security webcamsisnt
just for us pet snoops. Despite the
apparent creepiness of having a
running Web recording of our private living spaces, the connected
cams have become popular for
monitoring everything from the
front door to the babys crib. If
you havent bought one yet or
even considered it, the promise is
being in two places at the same
time. These little cameras can be
your eyes and ears.
So does the Nest Cam now
make my old Dropcam look like
dog poop? And, with competing
cameras such as the $200 Simplicam bringing talents like familymember face recognition, is Nest
even the best? After testing it
against its closest competitors,
the Nest Cam is at the top of my

recommendation list. However,

the monthly recording cost is a lot
to swallow and the cameras motion detection still cries wolf far
too often.

Some Cam to Watch Over Me

Nest Cam and Simplicam by ArcSoft are the smartest DIY home security cameras
on the market. Heres how they stack up.

A Webcam You Can Admire

Next to each other, the Dropcam Pro and the Nest Cam look
like a weight-loss ads Before and
After. The Nest Cam shares the
Dropcams shiny black-plastic finish, but it does look like it underwent liposuction treatment in the
mid-region.
There is some practical benefit
to the slim design with rotatable
neck. Its much easier to position
and the magnetic base can be easily stuck to a fridge. It still needs
its 3-meter power cord, but at
least the cord is long enough for
the camera to sit a good distance
from an electrical socket.
Figuring out where to place the
Nest (and how to get that perfect
angle) is the hardest part of the
setup. The restgetting the camera on Wi-Fi and then getting
started with a live feedis a cinch
with Nests new app. Overall, I
prefer the app to others. Its
faster and easier to navigate (and
now, even people with earlier
Dropcam models can use it).
One thing Nest didnt fix? How
hot the camera gets when its on
for more than a few hours. The
company assures me this is normal and that there havent been
any customer issues reported.

Capturing Higher Quality

But see all your belongings in

crystal clear 1080p! Right? Truth
is the higher resolution isnt everything its cracked up to be.
Theres little difference between
a 1080p camera and a 720p camera
if you are just monitoring your pet.
Thats especially true when the
camera is a couple of meters away
and you tend to view the footage
streamed over the Internet on your
phones little screen.
When streaming to mobile devices over cellular connections,
the Dropcam and Nest Cam transmit lower-resolution video to save
on bandwidth and battery. Still,
even with my iPhone 6 on Wi-Fi, I
couldnt spot any significant quality difference between the 720p
Dropcam and the 1080p Nest. In
the instances where I thought

Nest Cam

Simplicam

Price of Camera

$200

$200

Monthly Cloud
Recording

$10 for 10 days of

recording, $30 for
30 days

Includes a year of 1-day

recording; after that, $5
for 1 day, $13 for 11 days

Max Video
Resolution

1080p

720p

Camera View
Angle

130 degrees

107 degrees

Apps

iPhone, Android, Web

iPhone, Android, Web

Likes

Speedy, well-designed
mobile and Web apps
Great video, night-vision
quality

Deeper motion detection

settings
More control over
notications

Dislikes

No more lower-tier
subscription options
Motion detection still
needs to be smarter

Mobile app performance can

be spotty
Facial detection features not
good enough yet

there was a slight difference, it

didnt matter much. Both 130-degree lenses clearly captured my
puppy eating a toilet-paper roll.
Quick, call National Geographic!
You would see the benefits of
the higher resolution if you used
it as a security camera, especially
streamed to a computer monitor.
In the name of science, I
dressed up as a burglar and stood
4.5 meters away from each of the
cameras during the day. When I
downloaded the full-resolution
clips and zoomed in on them on a
high-resolution laptop screen, the
Nest Cams footage was slightly
more detailed than with my old
Dropcam and the 720p Simplicam.
I could better make out my facial
features and even some details on
my shoes.
The Nest Cam defaults to 720p
recording, mostly to save your
home broadband bandwidth, but I
didnt notice any network degradation when I used 1080p. If you
stick with 720p, youll still get the
Nest Cams superior night vision.

When the fake burglar appeared

at midnight, it was again easier to
see facial details with the Nest.
Like many others, the Nest has
a microphone and speaker for twoway, walkie-talkie-like communication using the Nest phone or Web
app. The Nests speaker was the
loudest of my test subjects. Warning: Yelling into the microphone
when your spouse is home alone
will land you in the doghouse.

Motion DetectedAgain

The original Dropcams motion

detection has evolved. Today, its
reasonably good about motion and
sound alerts, as is the Nest that inherited it. I have noticed fewer
pop-ups when my dog is at his water bowl or when the sun rises. But
it still has far too many slip-ups. In
the past week, I still got alerts triggered by shifts in the rooms sunlight and movement on the TV. I
end up ignoring these notificationsand the important ones, too.
Obviously, I really only want
these notifications when Im away.

Dropcam could tell when you were

gone, but Nest killed this geofencing feature. Now, I have to manually tell the app that Im headed
out the dooror buy the motionsensing, pattern-recognizing Nest
thermostat for that.
This is where I think this entire category of devices needs to
keep evolving. The Simplicam,
made by Arcsoft, has the right
idea. The app gives you more control over notifications, and once I
tweaked the sensitivity, its software was better at puppy detection. It has rudimentary facial detection that is supposed to
identify family members so you
arent alerted every time the camera spots them. Yet after I registered my face, the app continued
to say that an unrecognized person was in my apartment.
Simplicam is solid and ambitious, but I preferred Nest for the
fundamentals: video quality and
app design. I just wish Nest had
Simplicams more competitive
pricing. For $200, you get the
camera and a year of one-day recording. That means footage is
kept for review in the app for a
day; after that it is deleted.
Nest offers a 30-day service
trial. But, like Dropcam before it,
Nest Cam costs you $10 a month
to review and rewind footage.
That plan includes 10 days of recorded footage and theres no
cheaper option.
I am cognizant of the security
and privacy implications of having
a camera aimed at my family, especially one thats constantly uploading footage to servers in the
cloud. Nest requires a strong
password and encrypts all video.
The company also assured me that
there have been no known instances of Nest products being
hacked remotely.
That said, I do find the camera
provides peace of mind and thats
why I keep paying the monthly
fee. Id consider upgrading to Nest
Cam if my Dropcam Pro died. For
now, though, I dont need the extra specs to keep up with my pup.
Watch Joanna Stern break into
her own home with Nest Cam
watching at WSJ.com/PersonalTech. Write to Joanna at joanna.stern@wsj.com and on Twitter @joannastern.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 9

OPINION: REVIEW & OUTLOOK

Lessons From a U.S. Trade Victory

ro-growth policies have been all

too rare in the Obama era, so
Tuesdays Senate vote to block a
filibuster against trade-promotion authority is worth celebrating. The narrow
margin of likely victory in both the
House and Senate also offers lessons for
the future of trade politics.
The victory means the U.S. can again
begin to reassert trade leadership after
a decade on the sidelines. The 12-nation
Pacific-trade talks can now get down to
the hard choices, as other countries will
know that Congress cant rewrite the
deal. It will have to vote yes or no. Fasttrack authority lasts six years, so the
next President will also have more flexibility to pursue other trade accords.
i

While the victory is bipartisan, its

clear the bill could only pass when Republicans control Congress. The three bilateral trade pacts left over from the
Bush Administration (Colombia, Panama
and South Korea) were ratified only after
Nancy Pelosi was deposed as House
Speaker in 2010, and trade authority
moved only when Harry Reid lost the
Senate in 2014. The same Republicans
Mr. Obama excoriates as cynical partisans put their partisanship aside to help
the country.
The bad news is that the number of
pro-trade Democrats is dwindling in Congressthis time to 28 in the House and
13 in the Senate with a Democratic Presi-

dent, compared to 25 in the House and American exports would gain in these
20 in the Senate in 2002 for George W. markets, as they have in countries where
Bush. This reflects the ferocity of union the U.S. has bilateral trade pacts.
and environmental opposition, which
The Pacific talks are also crucial to
makes pro-trade Democrats like Rep. Ron breaking down cartels in Japan and elseKind of Wisconsin and Sen. Ron Wyden where that block U.S. competition in servof Oregon all the more
ices. American companies
Ted Cruz inhales
laudable.
are highly competitive in
The Democratic stamretail, insurance,
the Elizabeth Warren finance,
pede against trade also
softwareyet they face
vapors.
reflects the broader rehigher barriers overseas
treat of liberal economists
than do U.S. goods. New
and intellectuals. Its
protections for intellectual
striking how many leading voices on the property, such as drug patents, will also
left have walked away from the free- help prevent countries from robbing
trade support they provided as recently Americas most creative industries.
as the 1990s.
Its odd that liberals complain about
For decades through the 1920s, Re- low American wages but then sneer at
publicans were the protectionist party. trade deals that would increase the numHoover signed the Smoot-Hawley Tariff ber of highly paid American knowledge
to catastrophic effect, and amid the jobs. Liberals who oppose freer trade are
Great Depression the Roosevelt Adminis- harming the high-wage, high-tech industration worked to rebuild a global trade tries in which U.S. companies have a
order, starting with bilateral trade deals. comparative advantage.
These grew into multilateral pacts after
i
i
i
World War II that were supported by
Sorry to say, but the trade debate
JFK and Bill Clinton.
has also revealed cynicism on the politThe liberal trade flip-floppers claim ical right. Much of the opposition has
that tariffs are now so low that gains been pure opportunism, an attempt to
from free trade are overstated. But while parlay distrust of all-things-Obama into
U.S. tariffs are low, that isnt true every- talk-show rating points or Internet
where. The average tariff in Vietnam and clicks. The hucksters make up false acMalaysia is three times the U.S. average, cusations and spread them like Elizaand tariffs range up to 70% on cars, 35% beth Warren.
on chemicals and 75% on consumer
Top prize for such opportunism goes
goods in countries in the Pacific talks. to Ted Cruz, who turned against the

trade bill at the last minute. In April he

wrote an op-ed with Rep. Paul Ryan in
these pages endorsing the bill and freer
trade because they would create more
opportunity for this country. We praised
him for it. But on Tuesday he took to an
antitrade website to announce his switch
because of corrupt, backroom dealings
in Congress.
What are those? Well, he says Majority Leader Mitch McConnell promised a
vote to reauthorize the Export-Import
Bank. We opposed Ex-Im before Mr. Cruz
was in short pants, but a vote on the
bank was going to happen no matter the
trade bills fate.
The Texas Senator also embraced the
fiction promoted by WikiLeaks that a
separate trade-in-services negotiation
would let Mr. Obama evade U.S. immigration law. The Cato Institutes Scott Lincicome has demolished this argument, but
in any case theres little chance the service talks will be done while Mr. Obama
is still President. But then the best rebuttal to Mr. Cruz was provided by . . .
Mr. Cruz, who asked Mr. Ryan to write
an explicit provision barring a trade deal
from changing U.S. immigration law. The
provision is part of a related customs
bill.
The good news for trade politics, and
the U.S. economy and national interest,
is that cooler heads are prevailing over
the false demagoguery of the left and
right.

Obamas Cyber Meltdown

f you thought Edward Snowden

These background checks are also a
damaged U.S. security, evidence is treasure trove of names, containing senbuilding that the hack of federal Of- sitive information on an applicants
fice of Personnel Management (OPM) spouse, children, extended family,
files may be even worse.
friends, neighbors, employers, landlords.
When the Administration disclosed Each of those people is also now a tarthe OPM hack in early June, they said get, and in ways they may not contemChinese hackers had stolen the personal plate. In many instances the files coninformation of up to four million current tain reports on applicants compiled by
and former federal emfederal investigators, and
ployees. The suspicion The Chinese attack on thus may contain inforwas that this was another federal personnel files mation that the applicant
case of hackers (presumisnt aware of.
keeps getting worse.
ably
sanctioned
by
Of particular concern
Chinas
government)
are federal contractors
stealing data to use in
and subcontractors, who
identity theft and financial fraud. Which rarely get the same security training as
is bad enough.
federal employees, and in some scenarYet in recent days Obama officials ios dont even know for what agency
have quietly acknowledged to Congress they are working. These employees are
that the hack was far bigger, and far particularly ripe targets for highly somore devastating. It appears OPM was phisticated phishing emails that attempt
subject to two breaches of its system in to elicit sensitive corporate or governmid-to-late 2014, and the hackers ap- ment information.
pear to have made off with millions of
The volume of data also allows the
security-clearance background-check Chinese to do what the intell pros call
files.
exclusionary analysis. Were told, for
These include reports on Americans instance, that some highly sensitive
who work for, did work for or attempted agencies dont send their background
to work for the Administration, the mili- checks to OPM. So imagine a scenario in
tary and intelligence agencies. They which the Chinese look through the
even include Congressional staffers who names of 30 State Department employleft governmentsince their files are ees at a U.S. embassy. Thanks to their
also sent to OPM.
hack, theyve got information on 27 of
This means the Chinese now possess them. The other three they can now assensitive information on everyone from sume are working, undercover, for a
current cabinet officials to U.S. spies. sensitive agency. Say, the CIA.
Background checks are specifically done
Or imagine a scenario in which the
to report personal histories that might Chinese cross-match databases, running
put federal employees at risk for black- the names of hacked U.S. officials against,
mail. The Chinese now hold a blackmail say, hotel logs. They discover that four
instruction manual for millions of tar- Americans on whom they have backgets.
ground data all met at a hotel on a cer-

tain day in Cairo, along with a fifth

American for whom they dont have data.
The point here is that China now has
more than enough information to harass
U.S. agents around the world.
And not only Americans. Background
checks require Americans to list their
contacts with foreign nationals. So the
Chinese may now have the names of
thousands of dissidents and foreigners
who have interacted with the U.S. government. Chinas rogue allies would no
doubt also like this list.
This is a failure of extraordinary proportions, yet even Congress doesnt
know its extent. The Administration is
still refusing to say, even in classified
briefings, which systems were compromised, which files were taken, or how
much data was at risk.
i

While little noticed, the IRS admitted

this spring it was also the subject of a
Russian hack, in which thieves grabbed
100,000 tax returns and requested
15,000 fraudulent refunds. Officials have
figured out that the hackers used names
and Social Security data to pretend to
be the taxpayers and break through
weak IRS cyberbarriers. As Wisconsin
Senator Ron Johnson has noted, the U.S.
Health and Human Services Department
and Social Security Administration use
the same weak security wall to guard
ObamaCare files and retirement information. Yet the Administration is hardly
rushing to fix the problem.
Way back in March 2014, OPM knew
that Chinese hackers had accessed its
system without having downloaded files.
So the agency was on notice as a target.
It nonetheless failed to stop the two
subsequent successful breaches. If this

were a private federal contractor that

had lost sensitive data, the Justice Department might be contemplating indictments.
Yet OPM director Katherine Archuleta
and chief information officer Donna Seymour are still on the job. Mr. Obama has
defended Ms. Archuleta, and the Administration is trying to change the subject
by faulting Congress for not passing a
cybersecurity bill. But that legislation
concerns information sharing between
business and government. It has nothing
to do with OPM and the Administrations
failure to protect itself from a cyberattack.
Ms. Archuleta appears before Congress this week, and she ought to remain seated until she explains the extent of this breach. While Russia and
Islamic State are advancing abroad, the
Obama Administration may have allowed
a cyber 9/11 at home.

Pepper . . . and Salt

THE WALL STREET JOURNAL

Look! Its the blue bird

of 4% GDP growth.

10 | Thursday, June 25, 2015

**

THE WALL STREET JOURNAL.

OPINION

BY JASON L. RILEY
With last weeks murder of
nine black churchgoers in
Charleston, S.C., the liberal
standby that nothings really
changed in America has resurfaced. But a lot has changed in
the U.S., and for the better, even
though the political left has a
vested interest in pretending otherwise.
When Klansmen bombed the
16th Street Baptist Church in Birmingham, Ala., in 1963 and killed
four black girls, it was the fourth
such incident in that city in less
than a month. There had been
some 50 bombings of black homes
and sanctuaries in Birmingham
since World War II, and none of
the crimes had been solved by the
all-white, Klan-infested police
force. One black residential neighborhood experienced so many
bombings that it was known as
Dynamite Hill.
It would be 14 long years before anyone was prosecuted for
the 16th Street bombing, and there
was no shortage of sympathy for
the perpetrators. Birminghams
commitment to segregation was
notorious. In 1962 the city closed
68 parks, 38 playgrounds and six
swimming pools rather than comply with a federal court order to
desegregate public facilities. After the church bombing, city officials theorized that the four girls
may have accidentally set off the
dynamite in the church basement,
and the officials spread rumors
that the FBI was sitting on evi-

dence that a black janitor was in

fact the real culprit.
Even some in the faith community were cowed, writes Taylor
Branch in Pillar of Fire, his
civil-rights history. In Nashville,
white Baptist leaders drafted a
resolution of sympathy for the
stricken congregation at Sixteenth Streetsaying we join
you in mourning your dead and
encourage our people to contribute toward restoration of your
buildingbut the executive committee of the Southern Baptist
Convention rejected the expression and managed for thirty years
to seal records of its fitful consideration.

Carolina lawmakers to take down

the Confederate flag that waves
on the grounds of the state Capitol. Mr. Roof apparently considered the flag a symbol of white
supremacy.
The Confederate Battle Flag
was the emblem of Jim Crow defiance to the civil-rights movement, of the Dixiecrat opposition
to integration, and of the domestic terrorism of the Ku Klux Klan
and the White Citizens Councils
of our all too recent, all too awful
history, Mr. Moore, a descendant
of Confederate veterans, wrote in
a blog post Friday. White Christians ought to think about what
that flag says to our AfricanAmerican brothers and sisters in
Christ, especially in the aftermath
of yet another act of white supremacist terrorism against
them.
The reaction to the carnage in
Charleston represents racial progress of the type todays liberals
have no interest in acknowledging. The post-1960s left derives
political power, in the form of
voter fealty, from encouraging
blacks to view themselves primarily as helpless victims of white
racism. The struggles of blacks
are the fault of whites, in other
words, and until the Dylann Roofs
are no more, nothing has really
changed.
But the shooting victims
deserve to be remembered as individuals, not politicized symbols
of black struggle.
Mr. Roof may have his sympathizers, but they are largely rele-

A liberal standby says

nothings really changed.
But compare last weeks
shooting to a 1960s church
bombing in the U.S. South.
Dylann Roof, the suspect in
the Charleston shooting, was captured the next day. He could face
the death penalty and in any case
is unlikely to see the outside of a
prison again. The mass shooting
has been loudly and roundly condemned by everyone from President Obama down, including
Southern religious leaders. Russell Moore, president of the
Southern Baptist Conventions
Ethics and Religious Liberty
Commission, also called on South

CARLO ALLEGRI/REUTERS

What Charleston Says About U.S. Race Relations

PROGRESS A recent gathering on the Arthur Ravenel Jr. Bridge in Charleston, S.C.
gated to the anonymous fever
swamps of the Internet. Racism
still exists, alas, and no one reading this is likely to see the day
when it doesnt. But antiblack animus doesnt explain racial gaps
in employment, crime, income,
learning and single-parent homes.
Furthermore, attitudes and behaviors in the U.S. have evolved
to a point where a twice-elected
black president has asked the second black attorney general to investigate a shooting in a Deep
South state with a black senator
and Indian-American governor.
The black left guards its victim
status fiercely. Witness the Black
Lives Matter brigades that reject
replacing the slogans adjective
with All. Or the fury directed at
Rachel Dolezal, the NAACP leader

who recently resigned her position after being caught out as a

white person pretending to be
black. In the 1990s, Chris Rock
used to tell a joke about racial
hardship. Do you know how hard
it is to be black in America? he
would ask the audience. Ill tell
you how hard. Theres not a single white person in the audience
who would trade places with me.
And Im rich!
Perhaps Ms. Dolezal is another
sign of racial progress.

Mr. Riley, a Manhattan Institute

senior fellow and Journal contributor, is the author of Please
Stop Helping Us: How Liberals
Make It Harder for Blacks to
Succeed (Encounter Books,
2014).

[ Politics & Ideas ]

BY WILLIAM A. GALSTON
While the rise
of violent Islamism
has transfixed the
world, another,
graver threat21stcentury autocracyis gathering strength. In the
long run, it is sophisticated autocrats, not bearded zealots, who
pose the greater menace to democracy. This is the message of two
outstanding new essays.

Democracy has lost

its confidence, giving way
to a new high-tech and
savvy totalitarianism.
In a piece for the U.K.s Henry
Jackson Society, David Clark argues
that the great wave of global democratic change that began in the
mid-1970sdoubling the number of
electoral democracies in the space
of three decadeshas come to an
end. Instead, we are now confronted with a powerful
authoritarian backlash that is
reversing some of these gains and
encouraging a resurgence of antidemocratic ideas.
Although the new authoritarianism often draws on national sentiments, it is anything but back-

ward-looking. It takes into account

globalization, rising prosperity and
digital communications, says Mr.
Clark, and it has developed new
techniques of control and new justifications for monopolizing power
that enable autocratic leaders to
resist pressure for democratic
change.
Unlike 20th-century totalitarians,
the new autocrats suppress political
and civil rights only to the extent
needed to maintain control. They
adeptly manipulate the facade of
democratic procedures. Contrary to
the optimistic predictions of modernization theories, they co-opt
their countries rising middle
classes. They draw on cultural
exceptionalismsuch as with the
Asian values debate in the
1990sto resist the universal
claims of democracy and human
rights. And increasingly, they are
forming leagues of mutual support.
The rise of the new authoritarianism, Mr. Clark concludes, shows
that democracy is not the inevitable
outgrowth of modernization and
economic development. Instead, the
case for it has to be made and won
at a political level. This is sobering.
The war on terror divided the democratic world, and the aftermath of
the Great Recession has left it drifting.
The result, says Mr. Clark: a
loss of self-confidence that has undermined the democracys appeal.
Middle classes and elites from the
global South are looking to China
and Singapore as models. Even in
Europe, populism and nativism are

GETTY IMAGES

Modern Autocrats Are on the March

challenging long-established democratic norms.

In short, democracy is not the
default setting for governance, and
history does not inexorably produce it. When democratic governments fail to meet public aspirations, nondemocratic alternatives
gain support. We saw this movie in
the 1930s. It did not end well.
Writing in the forthcoming issue of the Journal of Democracy,
Columbia Universitys Alexander
Cooley traces the ways in which
the new authoritarians have reshaped domestic and international
institutions to their advantage.
They have used post-9/11 counterterrorism norms to suppress domestic dissent. They have cracked
down on nongovernmental organizations, which they portray as

agents of foreign influence. In their

place, they are creating a network
of pseudo-NGOs, including fake
election monitors. Appealing to
anti-imperialist resentment, they
have turned regional alliances to
antidemocratic purposes.
They have formed new organizations such as the Shanghai
Cooperation Organization, which
brings together China, Russia and
the autocracies of Central Asia.
Wealthier autocracies, especially
China and the Gulf States, are using
international development lending
to build networks of nondemocratic
regimes that are happy to receive
funds without pro-democratic
strings attached. And as Western
countries have retreated from international newsgathering and
broadcasting, China, Qatar and

Russia have surged forward.

If the West were to reduce its
support for liberal norms and a
rule-based international order for
the sake of political expediency,
says Mr. Cooley, it would only
hasten the erosion of its own
normative standing. Translation:
So-called realism cedes the field to
the enemies of democracy.
How best to put democracy
back on the offensive? Mr. Clarks
formula: Intensify their cooperation. This means working together
to meet the economic and social
aspirations of their citizens. It
means seeing one another as their
most important partnersfor
trade, diplomacy and collective security.
Above all, it means that the
worlds democracies must band together in a new institutiona Concert of Democraciesthat takes
democratic internationalism as its
guiding principle. During the past
decade, proposals for such an organization have been put forward
in the U.S. by liberal Democrats
and conservative Republicans. Its
time to build on efforts such as the
Community of Democracies established in Warsaw in 2000 to give
democratic internationalism a
powerful new focus.
Understandably, the American
people are preoccupied with
domestic concerns. It is the task of
aspirants for national office to remind the people that, in the 21st
century, no nation is an island. Will
the candidates of both parties rise
to the challenge?

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 11

OPINION

How China Could Become More Competitive

BY MATTHEW KROENIG

democracies); and are more likely

to win the wars they fight.
Taking these arguments further,
it is not much of a leap to argue
that states that excel in important
economic and political-military dimensions should also do better in
long-run geopolitical competitions.
It seems intuitive that states that
grow at rapid rates, enjoy easy
credit, forge strong alliances and
avoid conflict while winning the
wars they do fight will do better
than states that do the opposite.
Democracies enjoy a built-in advantage in the struggle for global
mastery.
It is no accident that the most
dominant states of the past several centuries, the United Kingdom and the U.S., were also
among the most democratic, or
that their autocratic challengers,
Imperial (and then Nazi) Germany
and the Soviet Union, eventually
imploded. Similarly, Americas institutions are its key competitive
advantage in the coming contest
with China.
Chinas sclerotic institutions
are already impinging upon Beijings attempts to enhance its international standing, and things
may only get worse as President Xi
Jinping tightens his hold on power.
Economically, China must undertake tough reforms to sustain
high rates of economic growth and
to become a true global financial
powerhouse, but the Chinese Communist Party is unwilling to take
the necessary steps because it
fears it might undermine its own
rule.
Chinas autocratic politics introduces indoctrination and corruption into military matters, under-

Chinas enormous population

and rapid economic growth mean
that Beijing could one day dislodge
Washington from its standing as
the worlds dominant power. The
Economist predicts that China
could overtake the U.S. as the
worlds largest economy in 2021,
and military might tends to follow
economic heft. Beijings military
buildup is already constraining
America in the Asia-Pacific region
and decades from now could usurp
global supremacy from Washington.

Or will it?
The place to look for an answer
is not in the economic or military
realm, but in Chinas domestic political institutions. The fact is that
democracies perform better in
long-run geopolitical competitions.
The notion that states with representative forms of government
can accumulate power more effectively than authoritarian regimes
is an enduring one.
Polybius, Montesquieu and Machiavelli all suggested the possible
benefits of republican forms of
government. As Machiavelli wrote,
it is seen through experience that
cities have never expanded either
in dominion or in riches if they
have not been in freedom. . . . The
reason is easy to understand, for it
is not the particular good but the

GETTY IMAGES

A move toward democracy

by Beijing would be a real
challenge to U.S. primacy.

POWER ADVANTAGE The Goddess of Democracy statue erected during the 1989
Tiananmen Square protests.
common good that makes cities
great. And without doubt this common good is not observed if not in
republics.
Social scientists such as Daron
Acemoglu, James Robinson, Kenneth Schultz, Barry Weingast and
others have recently shown that,

compared to autocracies, democracies enjoy higher long-run rates of

economic growth; are better able
to access international capital markets when times get tough; form
larger, more durable and more reliable alliances; are less likely to
fight wars (at least against other

mining the professionalism of the

Peoples Liberation Army. Beijings
need to stoke nationalist sentiment
to maintain legitimacy antagonizes
the potential allies and partners it
will need to become a true global
player. It is hard to imagine that
the free nations of the world will
ever be willing to submit to the
leadership of an autocratic state
like communist China.
Far from China emerging supreme, there is every reason to believe that the American era will endureat least as long as China
remains authoritarian.
For decades Washington has
encouraged the peaceful evolution of Chinese politics toward
more democratic forms of government, and there is little doubt that
a democratic China would provide
a better life for its citizens and be
more cooperative internationally.
But a liberal-democratic China may
be even better positioned to eventually seize the keys of global mastery from Washington.
The Chinese Communist Party
can continue to reign, though it will
be consigned to ruling over a dysfunctional state destined for second-tier status. Or China can
emerge as a true world leaderbut
only if the party relinquishes power
and creates the kind of democratic
political system that has proved
over the centuries to be a prerequisite for lasting powers.

Mr. Kroenig is an associate professor and International Relations

chair in the Department of Government at Georgetown University. This article is adapted from
an essay in the current issue of
The National Interest.

Working Toward Sustainable Global Fisheries

The ocean is a frontier for sustainable growth. It offers increased food security, economic
growth and value-added investment opportunities to nations willing to develop maritime resources
without using them up. Yet there
is an urgent need to deal directly
with declines in the value and harvest of wild-capture fisheries
around the world.
Globally, marine fisheries support 260 million jobs, add more
than $270 billion to global gross
domestic product and provide 3

Paul Beckett, Asia Editor

Miguel Gonzalez Jr., Senior Editor
David Holland, News Editor
Hugo Restall, Editorial Page Editor
Tomasz Rustowski, Institutional Sales
Anjali Kapoor, Marketing
Simon Wan, IT
Mark Rogers, Advertising Sales
Jacky Lo, Circulation Sales
Stuart Wood, Operations
Mark Pope, Publisher
Published since 1889 by

Dow Jones and Company

2015 Dow Jones & Company. All Rights Reserved

billion people with nutritious

sources of protein. But half of
these fisheries produce less seafood, jobs, value and biodiversity
than they could otherwise. This is
primarily due to perverse incentives, weak laws, poor enforcement, unreported harvests and
widespread poaching.
Specific political and economic
measures and investments are required to deal with these challenges. Governments need to reduce overfishing, enforce
regulations of illegal fishing and
enable those with the legal right
to manage these resources. There
is growing evidence that the benefits of such incremental investments far outweigh the costs.
Countries that understand this are
taking action.
In Indonesia, overfishing is
rampant. Illegal, unregulated and
unreported fishing costs the economy more than $20 billion each
year. The government has responded with a series of important
measures, including a prohibition
on the use of all trawl and seine
nets, size limits and restrictions
on important species that are in
decline, a moratorium on new fishing licenses for foreign built vessels, and the destruction of illegal
vessels that threaten Indonesias
sovereignty and prosperity.
Underscoring the demand for
seafood, during the first quarter of
2015 Indonesias fisheries industry

grew at twice the national rate.

Catches for certain fish are also
up, with Indonesias tuna yield increasing 80% from April to May of
this year. Now the challenge is to
ensure that these fisheries are sustainable, otherwise such benefits
will quickly erode.

If the world only fished

smarternot harderthe
dividends could immense.
There are examples to suggest
that this goal can be achieved.
Over the past 14 years, the U.S.
has accomplished a dramatic reversal in the state of fisheries in
its federal waters by improving
governance, empowering responsible domestic fishermen, discouraging poachers and increasing transparency. It has slashed the number
of overexploited stocks to 37 from
92, while increasing the number of
rebuilt populations. The number of
fishing jobs in recent years has increased 23% while revenues are up
30%.
Theres every reason to believe
that other countries can bring
about similar transformations in
their waters, and there are compelling incentives to do so. New
research shows we can increase
profits in the global fishing sector
by $74 billion a year if fisheries

GETTY IMAGES

BY SUSI PUDJIASTUTI AND JANE

LUBCHENCO

are managed sustainably. Even

though fisheries are currently being heavily harvested in most
countries, global fish production
could rise by 14% if we fished
smarter, not harder. This transition to ocean prosperity could also
come fast, unfolding on average
within a decade. While it isnt free,
the benefits from transitioning
from business-as-usual far outweigh the costs, on the order of 10
to one.
The same research, however,
suggests that the alternative scenario of continuing with business
as usual is a dark onea dramatic
fall in fish production and a steady
erosion in profits until the sector
becomes a net money loser, unable

to survive without substantial subsidies from the government.

There is no reason to passively
accept this narrative. What is required are for more leaders to
work with fishers and privatesector partners to achieve investment opportunities that implement reforms and unlock the value
fisheries hold for those that rely
on them.

Ms. Pudjiastuti is Indonesias minister of marine affairs and fisheries. Ms. Lubchenco is on the faculty at Oregon State University
and was from 2009 to 2013 the
administrator of NOAA and under
secretary of commerce for oceans
and atmosphere.

12 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

DUSTIN CHAMBERS FOR THE WALL STREET JOURNAL

IN DEPTH

Shirley Jones sits on the porch of her turn-of-the-century home in Lithonia, Ga. A bank valued it at $325,000 when she borrowed against it in 2005, but its value has plummeted since then.

U.S. Housing Rally Leaves

Poor Neighborhoods Behind
BY JOE LIGHT

he housing rebound may have lifted

home prices across much of the nation.
But cities like Lithonia, Ga., are still
waiting for the bounce.
Along with other communities in the Atlanta area, the small working-class suburb
saw prices run up during the housing boom a
decade ago, followed by an epic bust. While
nearby wealthier areas are now rising, or
even fully recovered, poorer towns such as Lithonia are stuck with a housing crisis that
drags on.
Roughly 10,000 homeowners in Lithoniaor 54% of all families with a mortgageowe more than their homes are
worth, according to the online real-estate
tracker Zillow. That is a stark difference
from wealthy Atlanta neighborhoods like
Buckhead, where about 12% of homes are
underwater. House values in Lithonia at the
end of the first quarter were still almost
35% off their peak, while in Buckhead they
were off by only 12%.
Signs of a disproportionate housing recovery appear across the U.S. Nationwide, about
15% of homes worth less than $200,000 were
underwater as of the end of March, according
to CoreLogic, a real-estate information firm.
Meanwhile, just 6% of homes worth more
than $200,000 were underwater during the
same period.
To be sure, homes across the price spectrum
are still below their boom-time peaks. Between
January 2006 and May of 2015, the median
value of homes in the bottom third of the market has dropped 13% to $101,900, according to
Zillow. The median in the middle third is down
6% to $172,600, while in the top third it is off
4.5% to $325,800.
And yet many middle-class and high-income communities are now seeing home values that are close to those before the crash.
Robust activity in some markets has spurred
the return of bidding wars for hot properties.
Lithonia illustrates the growing divide in

the recovery in the U.S., where large swaths of

the housing marketfrom Trenton, New Jersey to Memphis, Tenn. remain bleak.
Places like Lithonia were hit with foreclosure first, the longest and the hardest, says
John OCallaghan, chief executive of Atlanta
Neighborhood Development Partnership Inc., a
nonprofit that buys and rehabilitates foreclosed homes. Residents there dont have
good access to mortgage credit, he says.
They dont have wage growth. Everything is
going wrong.
Today in Lithonia, boarded-up homes with
overgrown yards dot the streets surrounding
Shirley Jones, who bought her early-1900s
home in 1996 for about $80,000. Ms. Jones
cashed out some of her homes equity to do
repairs in 2005, when her lender said her
house was worth $325,000. Now, she owes
about $172,000.
Needing to make more repairs, Ms. Jones a
few years ago asked a real-estate agent to assess what the home might be worth. The
agent, who is also her friend, said the home
wouldnt sell for more than $50,000.
Oh my gosh, I almost fainted, recalls Ms.
Jones. Her four-bedroom home, which has a
neat brick path to the front entrance, is a few
doors down from homes with plywood over
their windows and overgrown lots.
It breaks your heart, says Ms. Jones.
Even though I love my home. I look across the
street at abandoned properties. Youre passing
empty homes. It makes the community look
dead, like a ghetto.
Economists say lower-income communities
have been hit by a confluence of events and
factors that have left their communities stuck
in a vicious cycle. It starts with falling home
values, which trigger foreclosures as homeowners cant sell their property for a price
that would cover the outstanding mortgage
debt
Banks are reluctant to lend to the lowerwealth borrowers with shakier credit histories
who would normally buy homes in those
neighborhoods. That reduces demand, leading

to more foreclosures and a higher supply of

vacant and decaying homesleading to further price drops.
The cycle has been hard to break in large
part because low-wage workers have seen little, if any, income growth during the recoveryputting them in weak position to qualify
for mortgages.

Looking for relief

Such woes are putting pressure on the

Obama administration and federal agencies to
do something to break the cycle. One, albeit
controversial possibility: Cut the mortgage
balances of some underwater homeowners
with loans backed by Fannie Mae and Freddie
Mac. The companies regulator, the Federal
Housing Finance Agency, has said such a move
could be ironed out later this year. Housing
advocates and some lawmakers argue that
while cutting loan balances could cost taxpayers money in the short-term, it saves money in
the long-run if it keeps more homeowners current on their loans.
To turn something like this around, it
takes a lot of resources and focus, says Julia
Gordon, a senior director at the left-leaning
Center for American Progress in Washington.
Without help, these neighborhoods might
take years and years to come back.
Mel Watt, a former Congressman from
North Carolina who took the helm of FHFA
last year, has been more cautious on the issue
than advocates expected. He is warning that
such a program, if it happens, will be limited.
It could only be open to homeowners already
in defaultto constrict its size and not incentivize others to deliberately fall behind. It
could also target low-balance loans more
prevalent in hard-hit communities.
Some skeptics of such plans say any
amount of debt forgiveness is too much. This
is a slippery slope, says Mark Calabria, director of financial regulation studies at the libertarian Cato Institute.
Whats clear is that many of the economic
forces that helped trigger recovery in affluent

and middle-class communities arent working

in lower-income communities.
Negative equity preys on the less affluent, says Zillow chief economist Stan
Humphries. He said that even underwater
homeowners still current on their mortgages
suffer, because they often face trouble refinancing to capture a lower interest rate. Its
a double-whammy for them, because theyre
paying higher than they should on their mortgage costs and they owe more than they
would if they could re-buy their home now,
he says.
Investor purchases helped arrest falling
prices in the communities stretching east of
Memphis by reducing inventory of homes on
the market. But some investors have been reluctant to invest in Memphiss poor communities. Those that do tend to turn the homes
into rentals.
Memphis Invest GP, a real-estate investment firm, has purchased nearly 400 homes in
the Memphis area in the past 12 months. Since
late 2011, the value of homes in Collierville has
risen 10% to $267,000, according to Zillow. But
in Frayser, where average home values have
risen only 5% to $40,000, Memphis Invest GP is
absent.
We did invest in them [during the housing
boom] but lost a lot of money on that area,
says Chris Clothier, a partner with the firm.
We went through the market and realized
that with a lack of good jobs, a lack of access
to grocery stores and restaurants, it was a bad
bet.
Poorer communities are more likely to see
involvement from nonprofit groups, but their
constituents also face constraints. Frayser
Community Development Corp., a nonprofit
that buys and rehabilitates vacant homes, says
it is tough for many would-be buyers to secure
financingeven when the economics seem to
make sense.
We just scramble to get folks who are paying $650 per month rent and cant get a mortgage that would cost $480 per month, says
Frayser executive director Steve Lockwood.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 13

IN DEPTH

Percentage of homes worth less than

their mortgage balances, 1Q 2015, by city
Wash.

0
Mont.

Ore.

10 20 30 40

73% N/A

Circle size equals number of

homes underwater by city

N.D.

100,000 1,000

Minn.

Idaho

Maine

Wis.

S.D.

Vt.
N.H.

N.Y.

Mich.

Nev.

Pa.

Iowa

Neb.
Calif.

Ind.

Utah

Ohio

Ill.
Kan.

Mo.

N.C.

Tenn.

N.M.

Ark.

S.C.

Miss.
Ala.

Alaska

Texas

Del.

Va.

Ky.

Okla.

N.J.

Md.
W.Va.

Colo.

Ariz.

Mass.

Conn. R.I.

Wyo.

Ga.

La.
Fla.

Hawaii

Percentage of homes
underwater by ZIP code

Atlanta
An estimated 244,509 homes, or 23%, in
the Atlanta metro are underwater.

Memphis, Tenn.
An estimated 54,620 homes, or 23%, in
the Memphis area are underwater.

Tenn.

75

40

Ark.

95

385

85

51

2
1

2
20

40
240

1
95

20

285

Pa.

2
195

55

Trenton, N.J.
An estimated 12,370 homes, or 19%, in
the Trenton area are underwater.

295
276

Miss.

pik

N.J.

75

85

55

1
2
3

ZIP code
38128
38134
38017

Percentage
of homes
underwater
41%
26%
9%

Median
household
income
$35,053
47,529
99,256

ZIP code

1 30058
2 30039
3 30075

Note: Percentage of homes underwater includes only homes with a mortgage

Sources: Zillow (negative equity); U.S. Census Bureau (income)

Percentage
of homes
underwater
54%
26%
8%

Median
household
income
$45,792
60,819
102,305

1
2
3

ZIP code
08638
08619
08540

Percentage
of homes
underwater
32%
19%
5%

Median
household
income
$58,371
72,330
125,439

Martin Burch and Brian McGill/THE WALL STREET JOURNAL.

DUSTIN CHAMBERS FOR THE WALL STREET JOURNAL

Even in relatively wealthy counties, the

lowest-priced communities are suffering. In
the town of Ewing, N.J. in Mercer County, the
median home value is $176,000 and about
29% of homes are underwater, according to
Zillow. In tony Princeton, which is about a 20minute drive away, the median value is
$788,000 and roughly 5% of homes are underwater.
For residents of Ewing, the problems are
taking a toll. High-school teacher Adrienne
Stanley and her husband moved into a
$279,000 Ewing townhouse in 2007, making a
20% down payment, with the idea of starting a
family. Soon after buying, prices started to
drop but the couple assumed that prices would
soon recover as the economy picked up
strength.
Now, eight years later, prices still arent
even close to prerecession levels. Some
nearby townhomes recently sold for between
$150,000 and $190,000. Ms. Stanley would like
to move to Princeton to get stronger schools
for her daughter, but her family is stuck.
I lose sleep every night thinking that my
lack of foresight is the reason that she will
not get the education I so desperately want
for her, says Ms. Stanley.
But few places have the difficulties of Lithonia, which calls itself City of Granite, and
sits fewer than 10 miles southeast of the
dome of Stone Mountain.
A decade ago, Lithonia seemed like a city
on the rise. A new shopping mall opened in
2001. In 2006, a home builder started construction on the first new subdivision in the
town in years. An Atlanta-based developer
proposed constructing an amusement park a
short drive away.
When home prices started to drop, however,
most of those plans were canceled or put on
hold. The homes that did get built, originally
priced between $170,000 and $220,000, are
now worth $150,000 at most, according to Zillow estimates. Construction on a hotel at the
mall was stopped after the crash; now trees
sprout through the base of the buildings shell.
Many underwater homeowners have
stopped investing in their homes, says Dan
Immergluck, a Georgia Tech professor who
has studied the issue. That has also contributed to the cycle of falling home prices and
deteriorating housing stock.
The downward spiral, in sum, is also bad
for local business. Home remodeling contractor Raymond Nintiwe in April moved his firm
from Lithonia to the more affluent city of
Snellville about a 20-minute drive away. Mr.
Nintiwe says most of his jobs, which include
bathroom and kitchen remodelings, have
lately been in northern Atlanta suburbs such
as Buckhead.
He says that many homes in Lithonia are
falling apart, and could use the work, but residents have been loath to invest the $20,000
or so needed for a major remodeling. Kitchen
renovations are not a good investment in that
part of metro Atlanta, says Mr. Nintiwe.
Lithonias main street has many vacant
storefronts and the stores that did survive are
often only open for part of the day.
Lower revenue from property taxes
prompted the city to bring in reserve police
officers, who dont get paid and work 16 hours
a month, rather than full-time police officers,
says Lithonia Mayor Deborah Jackson.
Ms. Jackson says that a developer recently
began to construct homes in the half-built
subdivision after years of the lots remaining
dormant. But she is still troubled that Fannie
Mae and Freddie Mac will allow homes to be
sold to third parties at a price below the
mortgage balanceknown as a short sale
but wont shoulder the same losses on behalf
of the current homeowner.
Recently, she raised the issue at a panel on
the underwater problem that included FHFA
Special Adviser Megan Moore.
Were just trying to figure out if theres a
way where we can do a targeted principal reduction program that doesnt put taxpayers at
risk and helps borrowers, Ms. Moore had
said.
Meanwhile, Ms. Jackson is underwhelmed.
Regarding government foreclosure programs,
she says, I dont think enough is being done
to help.

While the overall U.S. housing market has seen a rebound, home prices in many working-class communities are still
behind the curve, leaving many owners stuck with properties worth less than their mortgage balances.

Tur
n

Uneven market

Housing Gap

NJ

Our demographic still cant qualify for mortgages, he says, citing relatively low credit
scores and a lack of down-payment funds.

Builders have halted projects in Lithonia, where home prices remain depressed. The city wants to see more government programs to assist homeowners.

14 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

WORLD NEWS

Popular Dish: Supercute With Side of Spam

BY ADAM THOMPSON
INGLEWOOD, Calif.Soon after
the doors of the Forum opened to
Hello Kittys Supercute Friendship
Festival on a recent Friday afternoon, Cassandra and Ramiro
Trevio headed straight for the
Spam booth on the arena floor.
They had unfinished business to
attend to.
The Fresno, Calif., couple had
failed to procure one of the limited-edition Hello Kitty Spam
musubi kits before they sold out in
the fall at Hello Kitty Con 2014. But
they happily handed over $20 for a
bright yellow box with two plastic
rice molds and a can of Spam, part
of the $4,000 they say they spent
on travel, tickets and merchandise
for the event weekend.
Ms. Trevio, a graphic artist,
described herself as a mediumlevel Hello Kitty enthusiast: I
dont have the Hello Kitty car. I do
have a Hello Kitty engagement
ring, but thats where it ends. I
didnt have the Hello Kitty pink
wedding dress.
The Forum was an early proving
ground to see whether the marriage of Spam and Hello Kitty will
last. More than eight billion cans of
the potted meat product have been
produced since its 1937 debut. The
cartoon figure with nearly 14 million Facebook fansshes not a cat,
as any die-hard knows, but a catlike girl who stands five apples
tallhas driven a four-decade merchandising march by Japan-based
Sanrio Co. Ltd.
The match began in 2014. Employees for Sanrio Inc., the U.S.
subsidiary, had noticed YouTube
videos popping up of Hello Kitty
devotees preparing Spam musubi
shaped like their favorite charac-

ter. Spam musubi, born in Japan

and huge in Hawaii, is a variation
on sushi, with cooked Spam replacing fish. Spam sits on a rectangular bed of rice and is
wrapped with dried seaweed, or
nori, to form the body. A large
ball of rice forms the head. Nori
serves as whiskers and eyes, a bell
pepper for the nose.
Katie Chin, a Los Angelesbased chef and Sanrio consultant,
likes to add a flower-shaped
boiled carrot for Hawaiian flair
to her culinary Hello Kitty. Ahead
of her presentation at Hormel
Foods Corp., Ms. Chin prepared
Hello Kitty musubi at her sisters
home in Edina, Minn., then rode
nearly two hours south to
Hormels Austin, Minn., headquarters with the edible cat on her lap.
With an overlapping fan base,
especially in Asia, Hormel proved
an easy sell. Executives from both
companies say their cultures
blend well: They understand the
power of camp value. Anyone can
buy Hello Kitty-themed electric
guitars or a canjo: a stringed instrument with an empty Spam can
at the base.
Hormel ordered 2,400 Spam
musubi kits for the Los Angeles
convention. Jackie Bumgardner, a
manager at Austin-based Games
People Play, which handles licensing for Hormel, recalled lines as
long as a city block at KittyCon.
Sanrio Inc. President Janet Hsu
said, It was our fastest-selling
item. We couldnt keep it in
stock. The kits showed up on
eBay for as much as $100.
Sales of the kits were strong
enough for Hormel to commit to
sponsoring this years Supercute
tour, which next stops at Sleep
Train Arena in Sacramento, Calif.,

STEFANIE KEENAN/GETTY IMAGES FOR SANRIO

A traveling festival visiting cities across North America features kits to make Hello Kitty with canned meat

At a Hello Kitty festival, fans scooped up kits to make shapes using Spam.
starting Friday. Less a traditional
family-themed show like Disney
On Ice than what Sanrio Inc.
marketing executive David Marchi
called an exploratory festival environment, the event is anchored
by upbeat musical numbers both
original (including Small Gift, Big
Smile, which is also Hello Kittys
motto) and recycled (Don Hos
Tiny Bubbles). The arena floor
is dotted with a selfie station, a
temporary tattoo parlor and
mountains of souvenirs.
Games People Play deputized
Bryant Olsen to keep the Spam
moving on more than 35 North
American stops. Born and raised
in Austin, the 40-year-old guesses
he got the gig because he was single, childless and willing to leave
home for over a year. A friend

calls him an accidental carny.

He was charged with convincing Forum attendees who paid
prices approaching $300 for VIP
tickets to buy the kit. Mr. Olsen
has also become immersed in
kawaii, a Japanese term translating roughly to extreme cuteness.
Before the tour began in May, he
knew nothing about Hello Kitty.
Now he has started memorizing
the songs and recognizing secondary characters like the mischievous penguin Badtz-Maru.
During one of six Forum shows,
Mr. Olsen and Ms. Bumgardner
ran the Spam booth while Ms.
Chin prepared to lead a series of
demonstrations. She said many
Hello Kitty lovers refuse to eat
their creations: Most people
want to keep it, show it to your

friends, put it in your freezer, so

you can check on it from time to
time. She has two in her freezer.
She drove to the show in a convertible Hello Kitty Smart Car
with large Hello Kitty decals on
each door.
Usually wordless, Hello Kitty
does have lines in the Supercute
numbers. She appeals so widely,
Ms. Chin said, because she
speaks from her heart. And because she has this Zen exterior,
any girl, whether shes a blingedout girl, a punk girl, a preppy girl,
projects what shes feeling onto
Hello Kitty. Ms. Chin, 50, says she
didnt fall for Hello Kitty until she
went through a divorce in her 30s.
The Trevios, who attended
one of Ms. Chins musubi workshops, both got hooked as children.
You put your money where
your priorities are, whatever
makes you happy, Ms. Trevio
said on her way to spending $700
on souvenirs. I was raised around
it. You dont feel embarrassed until somebody says, Whats wrong
with you?
Not all of Hello Kittys superfans were ready to buy absolutely
everything she was selling. Maria
Fleischman is an L.A.-based designer who founded the blog Hello
Kitty Junkie. She adores the character so much she once competed
on a game show in Tokyo for foreigners steeped in Japanese culture. She uses a Hello Kitty-inspired emoticon =^_^= when
emailing.
But she couldnt make a case
for buying the musubi kit. I live
in a 600-square-foot apartment
with my boyfriend, she said. If I
bring in too many things, hell
throw them away or hide them.

U.K. Tightens Border Security in French Port City

LONDONThe U.K. government
said it had increased border-security
measures in the French port of Calais on Wednesday, a day after scores
of migrants tried to board trucks
headed to Britain during a strike
there.
The U.K. on Wednesday said it had
added border-control staff, sniffer
dogs and screening checks for tourists and freight vehicles. The government said it is also considering other
measures, including additional fencing around the port in Calais, as well
as the entrance to the Eurostar and
Channel Tunnel rail services, which
cross the English Channel to the U.K.
A strike by shipping workers on
Tuesday caused traffic jams at the
port, making it easier for migrants
to stow away in trucks and other vehicles in an attempt to make their
way to the U.K.
Train and ferry services were operating normally Wednesday, but a
backlog of truckswhich were unable to cross the previous dayremained, causing a jam in Calais.
British Prime Minister David
Cameron, speaking in Parliament on
Wednesday, said the scenes of migrants swarming around vehicles
stuck in traffic in Calais, forcing
open the doors of trucks to climb
aboard, were totally unacceptable.
Part of the draw for migrants to
cross the Channel is that while

ASSOCIATED PRESS

BY NICHOLAS WINNING

Migrants jumped from a truck in Calais Wednesday after French officers found them trying to cross the English Channel.
Frances economy is stagnant, the
U.K. is witnessing relatively strong
growth, meaning jobs are easier to
find. Another factor is language, as
many of those seeking to get to the
U.K. from countries including Somalia, Eritrea, Ethiopia and Syria speak
at least some English.

The U.K. in September committed

12 million ($18.9 million) to help install new security fences around the
port and increase joint intelligence
work with France to target the organized-crime groups behind people
smuggling. But officials and police in
Calais say it isnt nearly enough.

In Parliament on Wednesday, Mr.

Cameron said the scenes in Tuesday
highlighted the issue of mass migration to Europe from North Africa
and nations in the Middle East, an
issue that is likely to be a key topic
of discussion when European Union
leaders meet for a two-day summit

in Brussels starting Thursday. Mr.

Cameron said it was necessary to
tackle the situation further upstream, including better documentation of migrants when they enter the
EU in Italy.
We have got to work with European partners to stop this problem
at [the] source, to break the link between getting in a boat and getting
settlement in Europe, he told Parliament.
The number of illegal migrants
trying to reach the U.K. through
Europe has risen over the past
year, according to a report published Tuesday by Britains National Crime Agency. The report
said the route from North Africa
via Italy was a key area of concern,
which had seen flows surge during
2014. It added that the flow of illegal migrants was being fueled by
the involvement of organized-crime
networks.
The U.K. government has refused
to be part of any EU quota system
for resettling migrants who have
made their way to Europe via the
Mediterranean. The U.K. has offered
to set up a 90-person law-enforcement team to help work on migration.
Thousands of people have
drowned in the Mediterranean in recent months trying to reach the
coast of Italy.
Alexis Flynn
contributed to this article.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 15

16 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

INNOV

BY LUKAS MESSMER
AND MENGLIN HUANG

Gabriel Fong spent 20 years in

investment banking and private
equity before jumping into the
world of startups in 2013. The
Singapore-born Mr. Fong is the
chief executive and co-founder of
Jaarvis Technology, a company
incubator based in Hong Kong. Before that, he was the executive
chairman of GoGoVan, an Uberlike company based in Hong Kong
that pairs people with delivery vehicles. The Wall Street Journal
met with the 46-year-old Mr. Fong
recently to ask why he decided to
leave a senior job at Och-Ziff Capital for the uncertainty of a
startup company. Below are excerpts of our interview.
How did you become an entrepreneur?
I grew up in a modest environment. I was raised by my mom, a
shipping clerk and single parent. I
constantly had to scrape for whatever I wanted. In school, I had to
do really well because the three
best students in class would get
free tuition. I guess that just de-

fines who you are. I did venturecapital investing for about 20

years. Looking back, it was all
about finding businesses with the
right management team and scaling them up. Only when you scale
up the business, the venture capitalist makes money.
What made you move from investment banking to entrepreneurship?
I really enjoyed my time in investment banking in the various
investment shops. They all taught
me various things along the way.
Risk-taking has always been a part
of me. I remember maxing out
seven credit cards to pay off a
loan, which was $150,000 to
$200,000, back when I was 21
years old. Thinking about it today,
that was a bit crazy. I could have
been fired the next day and ended
up massively in debt. But along
the way, you have to take risks,
especially when you are investing
in yourself, right?
What attracted you to GoGoVan? What made you think this
could work?
When I looked out of my office
in Kwun Tong, I could see all

Sharp Pursues Help on Costs

Price Pressure

Smartphone shipments are increasing,

but panel makers face shrinking
margins.
Cost and sales price of a 5-inch full
high-denition panel
$50
40
Projection

30
20
10

Average
sales price
Cost

Prot

0
1Q
2013

1Q
14

1Q
15

Source: IHS

THE WALL STREET JOURNAL.

the squeeze and asking suppliers for

price cuts, according to people familiar with the situation, but they
might have more of a financial cushion than Sharp. Leading providers
include Samsung Electronics Co.
and LG Display Co. of South Korea,
as well as Japan Display Inc.
Mr. Takahashi says Sharp will
beef up its sales force and promote
technological innovation, in an effort to sell more premium panels,
which command higher margins. But
some suppliers are worried about
the viability of the companys plan,
given its current travails.

BLOOMBERG NEWS

Continued from first page

suppliers, according to people familiar with the situation.
Executives are saying these are
all important for the company to
survive, a Sharp official said.
The companys share price has
fallen nearly 50% over the past year,
and declined 0.6% to 162 on
Wednesday.
Sharp executives are also looking
for Chinese providers for important
display parts, such as glass substrates, which the company has until
now sourced from Japan, according
to people familiar with the situation.
While often substantially lower in
price, Chinese-made parts can also
be spotty in quality, analysts say.
That can cause manufacturers to
discard faulty products, lifting costs
in other ways. The problem was
highlighted recently when Apple
limited availability of its new smartwatch because a component from a
Chinese supplier was defective, according to people familiar with the
matter. Apple turned to another
supplier of the part, Nidec Corp. of
Japan, for nearly all of its production, but it took time for Nidec to
ramp up production.
From the first quarter of 2013
through the second quarter of this
year, the average selling price of a 5inch full high-definition smartphone
panel fell from nearly $50 to about
$20, while the cost of production
declined only slightly, according to
research firm IHS.
Other panel makers are feeling

Sharp has been hit by a slide in the price of LCD panels for smartphones.

GABRIEL FONG

A Risk Taker Recalls His Path to Startups

Jaarvis Technology Chief Executive Gabriel Fong, right, with his wife, Vena, and
Robert Lethbridge, a former master of Fitzwilliam College, Cambridge.
these vans sitting idle. And yet,
when I called the booking centers,
they couldnt give me a van.
GoGoVan then came up with the
idea of connecting users and van
drivers to an app. All the van drivers already carried a smartphone
themselves, which gave us the
ability to connect all these van

drivers on a nationwide basis.

What made you think that
this is a scalable idea, especially
in Asia?
When we first started out, the
low-hanging fruit was going after
the individual households. People
who needed to move bulky furniture from one place to another.

But we quickly realized that 90%

of the transactions actually sit
within the corporate sector. Early
morning, whether in Central or
Kowloon, you see all these vans
replenishing supplies of restaurants, retail stores and all that. So
we went after the logistics companies, after the big retail merchants. End users continue to be
important, but we are focusing on
corporates right now.
How would you say that Asia
is evolving in the innovation
space?
All throughout Asia, the activity levels for startups are rising.
Before, the younger generation
would want a good school, a good
degree and a very safe government job. This is slowly changing.
Now, people are saying: Im an
entrepreneur. I will do what I
want to do. Never mind if I cant
get married and my girlfriends
parents think Im a bad potential
husband. Weve been very, very
pleasantly surprised by that. All
the governments throughout Asia
are starting to realize that innovation plays a major role in improving the quality of GDP growth.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 17

VASIA

Borders Mean Less as E-Commerce Grows

E-commerce made it a breeze for
a shopper to buy something from
the other side of the country. Now,
retailers and delivery companies are
making it just as easy for shoppers
to buy something on the other side
of the world.
Blogger Shannyn Allan recently
saw a $70-plus faux stone necklace
in a boutique near her home in Chicago. She snapped a photo, ran it
through Google Image and found a
website where she could get the
same one for $16 with approximately $7 added for shipping. It arrived on her doorstep about three
weeks laterthree weeks, because it
was coming from China.
FedEx Corp., United Parcel Service Inc. and other global delivery
companies are banking on cross-border shoppers like Ms. Allan, who believe geography is no object when it
comes to finding what they want.
Late last year, UPS bought i-parcel LLC and FedEx bought Bongo International. Both acquisitions are
designed to allow foreign shoppers
to easily purchase goods on a retailers site, automatically changing

TAYLOR GLASCOCK FOR THE WALL STREET JOURNAL

BY LAURA STEVENS

Shannyn Allan bought a necklace directly from China for a much cheaper price than available at a boutique in Chicago.
options to reflect the country from
which a consumer is shopping. The
sites adjust the currencies and shipping methods depending on where a

shopper is based, and calculate shipping costs, taxes and duties. FedEx
said in April it would buy Europebased TNT Express for nearly $5

billion to expand in Europe, while

UPS is doubling investment in Europe to nearly $2 billion over five
years.
Cross-border online shopping has
taken off as access to the Internet
and mobile shopping spread and
shipping options get cheaper and
faster. Companies like Amazon.com
Inc. and Alibaba Group Holding Ltd.
have fueled the trend through letting smaller retailers sell their
goods internationally via online
marketplaces.
Now, a stronger dollar has encouraged more U.S. consumers to
play the game, and that has accelerated the trend.
While cross-border shopping is
still a fraction of total global e-commerce spending, it is the piece
growing most quickly, at a rate of
more than 25% annually, according
to delivery company executives. By
2018, about 130 million people are
expected to buy online from a country other than their own, spending
an estimated $307 billionnearly
triple the amount spent in 2013, according to a Nielsen Co. research
study commissioned by PayPal. Already, about a quarter of all e-commerce purchases are made with a
foreign retailer, according to a survey of nearly 20,000 global shoppers
by comScore and UPS released in
March.
Busy trade lanes, which the 2013
PayPal study calls the modern spice
routes, have been developing between the U.S., the U.K., Australia,
Germany, Brazil and China. The primary online shopping destinations
are the U.S., China and the U.K., according to a Forrester Consulting
study for FedEx released in December. Australian cosmetics brand
Mirenesse is shipping big envelopes
of lip gloss to U.S. shoppers. Chinese consumers are buying powdered baby formulas online from
Germany. Amazon marketplace fulfilled orders to customers in 185 different countries last year from sellers in more than 100 different
countries.
All of a sudden, e-commerce
puts the consumer into the drivers
seat, says Thomas Kipp, CEO of
DHL eCommerce, a unit of Deutsche
Post AG. The consumer has the
choice of when he buys, where he
buys, how he wants to pay.
The process has become so simple, consumers often dont know
they are ordering from a foreign retailer. When they do, the No. 1
driver is that they cant find that
item in their country, says Carl As-

mus, FedExs vice president of international marketing.

Global e-commerce presents myriad logistical complexities for retailers and manufacturers. Each country
has its own customs policies, duties
and taxes. Consumers want to know
the full cost of a purchase at the
outset. If the retailer gets the math
wrong, a customer may have to pay
unanticipated duties or an order
might get stuck at the border.
DHLs Mr. Kipp was charged an
extra $33 in duties when a pair of
$120 sunglasses were delivered to
his home in Germany from Australia
last month. He wasnt surprised but
a consumer not in the shipping business might have been.
Claire Bauling, who lives in
northern Italy, buys everything from
art supplies to greeting cards from
her native U.K. Usually it is worth
the extra she pays on shipping, she
says. But not always. Her personal
low was an order of tea bags from
Amazon. I wont tell you how much
I spent on shipping, she says. It
was quite embarrassing.
Online merchants can find themselves in a logistical quagmire of
language barriers, currency differences and return hassles. Returns
now a key part of the online purchase
decisioncan
be
unpredictable if not impossible.
FedEx, UPS and DHL are racing
to re-engineer their service offerings
to make cross-border shopping
seamless. As a retailer, I can try to
build all that expertise myself, or I
partner with some other organization that makes it easier for me to
do that, said Steve Brill, UPS vice
president of global business-to-consumer strategy.

Amazon fulfilled orders

to customers in 185
different countries last
year from sellers in more
than 100 countries.
The delivery companies are hoping global e-commerce will fuel not
just more business but more premium-priced express business
from eager shoppers like Frances
Salvador, who ordered her wedding
dress through the crafts marketplace Etsy Inc. in January for her
nuptials in July.
The custom-made white lace
dress with the sweetheart neckline
and circle train was ready in April.
Because she had gotten such a
deala $2,000 dress for about
$400Ms. Salvador splurged on
the $40 express delivery, from
China. The dress arrived in a vacuum pack on her sisters doorstep
in Ohio in just about four days.
With a bit of tailoring, the dress is
ready to gowhich is lucky, because returns arent yet a part of
the equation with most cross-border purchases.
Global shipments dont always go
so smoothly, which is part of the
reason some analysts arent as optimistic that international e-commerce will be as hot a growth market as delivery companies hope.
Sitejabber.com, which allows
consumers to review online businesses, lists lousy stuff from overseas as its No. 2 top consumer
complaint of 2014. Consumers worry
about long delivery times and fake
or inferior products, according to
the study of 9,000 global online
shoppers by Forrester.

18 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

FROM PAGE ONE

Continued from first page

quantities, forcing garment producers there to continue to rely on Chinese fabrics. Vietnam isnt going to
get much duty-free access to the
U.S. under current rules, Ms. Hughes
said.
The U.S. garment industry argues that free trade will help the
sector, which employs three million
people, including designers and retail workers. In Congress, though,
the debate over whether free trade
imperils manufacturing employment
has made the Pacific trade pact a
contentious issue.
U.S. negotiators defend their position. Trevor Kincaid, a deputy assistant U.S. trade representative,
said the deal will deliver new opportunities for American-based
businesses, including opportunities
related to textiles and apparel in
Vietnam. The administration, he
said, has a single-minded focus on
getting [the] best possible deal for
American workers and exports.
Vietnam has its own ideas. The
country is working quickly to develop a homegrown textile industry,
which would help get around the restrictions. Vietnam is seeking to reduce its reliance on imports from
China for its garment industry to
better benefit from TPP, said Phan
Chi Dung, a senior official with Vietnams Ministry of Industry and
Trade. However, he sees little
chance of U.S. producers filling the
void.
Companies from Hong Kong,
South Korea and Taiwan recently

have poured hundreds of millions of

dollars into textile factories in Vietnam, hoping to later obtain tarifffree entry to the U.S. market.
TAL Apparel Ltd., a Hong Kongbased company that says it makes
one in six dress shirts sold in the
U.S., is building a $240 million textile plant in Vietnam, which it hopes
to complete by 2017, to feed its two
garment factories there.
Roger Lee, chief executive of TAL
Apparel, thinks it will take five
years for Vietnams textile industry
to be self-sufficient. U.S. textile suppliers, he said, are too costly and far
away from Asia to be competitive.
Chinese companies, too, are
moving factories to Vietnam as
wages rise at home and in anticipation of the Pacific trade zone.
Youngor Group, a Chinese apparel maker that runs a factory in
Vietnams northern Nam Dinh province, is looking to source more textiles from Vietnam, rather than from
its own factories in China, with an
eye on exporting duty-free to the
U.S. Our major competitor moved
to Vietnam. Many companies are
moving, said Yu Jian, deputy general manager of Youngors Vietnam
operations.
Ou Kui, manager of Yanian Garment Co., a Chinese apparel company based in Hanoi, is looking at
producing zippers, buttons and
other accessories to help investors
from China meet local-content requirements.
A recent congressional report
noted that Vietnams textile indus-

BLOOMBERG NEWS

Hanoi Hits Snag

In Textile Trade

Vietnam is a major apparel and

footwear exporter to the U.S. Above,
a garment factory in Thuan An.
try, if it expands rapidly enough,
could even compete with U.S. textile
exports to Mexico, which is also
part of the Pacific trade discussions.
Under pressure from U.S. brands,
the trade agreement would allow
Vietnam to continue to source from
any country textiles and yarns on a
short-supply listinputs that
arent produced in sufficient quantities inside the proposed trade zone.
Ms. Hughes, of the fashion industry association, said the list is too
restrictive, and cant be changed in
the future, which will hamper U.S.
brands operations.
Vu Trong Khanh
contributed to this article.

Limbo Time for Ex-Im Bank

BY NICK TIMIRAOS
AND KRISTINA PETERSON

WASHINGTONThe U.S. ExportImport Bank appears to have missed

its last chance to avoid falling into
limbo as supporters shifted their focus
to trying to salvage the agency in July.
A handful of Senate Democrats
who had pushed to keep the bank
alive voted to advance trade legislation Tuesday without any assurances the bank would win reauthorization before its charter lapses
Tuesday. The move extinguished the
possibility that a renewal might ride
on the back of the trade bill.
The 81-year-old agency, which finances U.S. exports, would still service some $112 billion in financing
already committed but would be
prevented from authorizing new
loans or guarantees.
Supporters of the bank and many
of its critics believe it will win back
full powers in July, when Congress
must vote to replenish highway
funding that runs out at the end of
next month. Its pretty obvious that
would be a place for this vote to occur, Senate Majority Leader Mitch
McConnell (R., Ky.) said Tuesday.
I see the expiration as an accident of the calendar, said Rep. Mick
Mulvaney (R., S.C.), who opposes the
bank. We all know a reauthorization
bill is coming to the House floor.
But supporters worry that even a
brief lapse might damage the banks
reputation and crimp U.S. business
activities abroad. It better be revisited in July, said Sen. Heidi Heitkamp (D., N.D.), one of 13 Democrats
who backed the trade bill Tuesday.

We know we have the votes in both

bodies to continue the Ex-Im Bank.
This month, 65 senators backed
the bank in a symbolic vote. In the
House, nearly all Democrats and dozens of Republicans support some type
of renewal. But key Republican leaders in both chambers oppose the
bank, and by doing nothing the bank
will lose its ability to make new loans.
Conservative groups cheered the
prospects of even a temporary shutdown, the culmination of a yearslong campaign by conservative lawmakers and free-market political
organizations to curb the growth of
government-backed credit supports.

Bank supporters and

many critics believe it
will win back full powers.
The bank, which finances less
than 2% of U.S. exports, became a
target in part because of its low profile. For the year ended in October,
it sent $675 million to the U.S. Treasury earned in interest and fees.
There is absolutely no doubt:
Come July 1, its a historic victory for
those of us who are trying to wind
down the governments involvement
in the economy one little bit at a
time, said Dan Holler, a spokesman
for Heritage Action for America, the
lobbying arm of a think tank that has
championed the Republican Partys
most conservative lawmakers.
Big businesses say even a shortterm charter lapse would dent

American credibility in developing

nations, where U.S. companies compete with China and Europe for major infrastructure contracts.
Were fighting an economic war
for exports, not a debate club, Jeffrey Immelt, chief executive of General Electric Co., said in a speech
last week. Think tanks in Washington will send out alerts that theyve
won. In Beijing and Berlin, theyll
have real cause to celebrate. Mr. Immelt said if the Ex-Im Bank shutdown
is prolonged, GE would have to move
production overseas to make sure
that it secures competitive financing
for major infrastructure deals.
Another risk for the banks supporters: The fallout from any lapse
may not show up immediately, undercutting doomsday scenarios painted
by exporters and emboldening the
banks critics to let it die. Once it
closes shop, I think it becomes increasingly difficult to revive it, said
Sen. Dick Durbin of Illinois, a member of Senate Democratic leadership.
Members of the Senate Environment and Public Works Committee
unveiled a six-year reauthorization
of the highway bill on Tuesday. The
legislation would increase funding
for roads and transit systems and
expand funding for a freight program. Lawmakers expect to approve
the bill in committee this week and
hope it will come to the floor in July.
If the Ex-Im Bank doesnt accompany the transportation bill, supporters could attach a renewal to spending bills that must pass before the
start of the new fiscal year on Oct. 1.
Isaac Stanley-Becker
contributed to this article.

Caught in
the Middle
Vietnams garment
and footwear
exports to the
U.S. have boomed
Garments
Footwear

$10 billion
8
6
4
2
0
2011

12

13

14

but the countrys reliance on Chinese raw materials could limit

benets under a new U.S.-backed trade pact.
Vietnamese imports of fabrics, 2014, in billions
$4.66

From China

Other

$4.76

Imports of other materials and accessories for garments/footwear industry

$1.54

$3.15

Source: General Department of Vietnam Customs

THE WALL STREET JOURNAL.

After Delay, Australia Says

It Will Join China-Led Bank
BY RHIANNON HOYLE

SYDNEYAfter months of hesitation, Australia confirmed it would

join the Asian Infrastructure Investment Bank, saying intense negotiations with China and other partners
had eased its concerns over how the
US$100 billion fund will be run.
Despite pressure from Washington not to join the China-led organization, Australia will become a
member along with other U.S. allies
such as the U.K. and Germany, after
assurances it would be a true, multilateral institution, according to
Treasurer Joe Hockey, rather than a
geopolitical tool of China, as some
critics fear.
Australias commitment will
make it the sixth-largest shareholder of the AIIB, which has been
seen as a potential rival to the U.S.led World Bank. It will pay roughly
930 million Australian dollars
(US$719 million) into the fund over
five years, although its total commitment is for as much as A$3.7 billion. China, India and Russia will be
the largest shareholders.
In March, Mr. Hockey and Prime
Minister Tony Abbott signaled their
intention to participate, but said
they wanted assurances that no one
country would control the bank.
Chinas offer to forgo outright
veto power in day-to-day operations
helped win over Australia, although
as the largest shareholder China will
have enough votes to block decisions involving capital increases and
some other significant issues. That

is similar to the power the U.S.

wields over the International Monetary Fund, economists said.
There were reasonable concerns
raised about whether the AIIB
would be truly a genuine international bank and have similar accountability and processes to that of
the World Bank or the IMF, Mr.
Hockey said Wednesday. We are
absolutely satisfied that the governance arrangements now in place
will ensure that there is appropriate
transparency and accountability in
the bank.
Mr. Hockey said the government
cabinet unanimously supported the
decision.
Washington has raised concerns
the AIIB, if not governed properly,
could contribute to corruption and
indebtedness in the region. It also
expressed unease that it may supplant institutions such as the World
Bank and the Asian Development
Bank.
Some countries worry the institution could be used to assert
Chinas regional ambitions, particularly against Japan and Taiwan.
Mr. Hockey said he had spoken
with U.S. Treasury Secretary Jacob
Lew this week, and reached out to
representatives of the Japanese government to address their concerns.
Estimates point to a US$8 trillion shortfall in funding for infrastructure in Asia over the next decade, the Australian government
said. The AIIB will have US$20 billion paid-in and total authorized
capital of US$100 billion.

As of 12 p.m. ET

Euro 1.1174 0.05%

Yen/US$ 124.24 0.23%

Yen/A$ 95.54 g 0.34%

Oil 60.29 g 1.18%

Gold 1172.20 g 0.34%

Macau Is Ready for Action,

But Gamblers Arent Showing Up

3-month Libor 0.28075

Check Point Battles

To Keep Up With Hackers

HEARD ON THE STREET 32

Thursday, June 25, 2015

10-year Treasury 2/32 yield 2.401%

CORPORATE NEWS 23

THE WA L L STR E ET JOU RNAL.

asia.WSJ.com

U.S. CEO Pay for Best, Worst Performers

Explore>>

Compare CEOs pay versus

performance, and search a rankings
database at WSJ.com/Business.

The Performers

CEOs delivered a range of returns for their shareholders last year, including stock price moves and dividends. Their pay on
average is largely geared toward performance, but there are exceptions.
CEO NAME

BEST PERFOMERS

A substantial part of American

CEOs pay is now tied to performance. But that doesnt mean their
compensation follows their results
in lock step.
The Wall Street Journals annual
pay survey looked at compensation
for 300 CEOs and the returns the
chiefs delivered to their shareholders. Broadly speaking, CEOs did well
when their investors did. All 10 of
the CEOs posting the best shareholder returns were paid more than
they had been a year earlier, and all
but two of the 10 worst performers
got pay cuts.
The results come as pressure
from investors has prompted companies to tie a greater percentage of
their top executives pay to measurable results.
But there were anomalous results, too, highlighting the fact that
some boards ideas of success dont
always line up with what pays off
for investors. In addition, long-term

commitments like pensions and

multiyear stock grants can drive pay
higher even if annual performance
falters.
Only one of the 10 highest paid
CEOs ranked among the top 10% by
investor performance in the survey,
conducted by the consultancy Hay
Group. That was Brent Saunders,
chief of Actavis PLC, which has
since renamed itself Allergan PLC.
Meanwhile two of the 10 best
paid CEOsViacom Inc.s Philippe
Dauman and General Electric Co.s
Jeff Immeltgot higher compensation even though the value of their
shareholders investments in the
company fell.
Compensation for Mr. Dauman, a
regular in the Top 10, rose 19% to
$44.3 million, putting him at No. 7
Please turn to page 21

WORST PERFOMERS

BY JOANN S. LUBLIN

COMPANY

John T. Standley

Rite Aid

D. Mark Durcan

Micron Technology

Gary C. Kelly

Southwest Airlines

W. Douglas Parker

American Airlines

Richard H. Anderson

Delta Air Lines

G. Steven Farris

Apache

Richard C. Adkerson

Freeport-McMoRan

ONE-YEAR SHAREHOLDER RETURN

2014 TOTAL PAY,

IN MILLIONS

292%
142%
126%
114%
81%

26%
36%

$8.3

+6.5%

$11.5

+66.1%

$5.0

+23.9%

$12.3

n.a.

$17.6

+22.4%

$10.2

9.0%

$10.1

81.7%

Thomas J. McInerney Genworth Financial

45%

$2.7

77.5%

Philip K. Asherman

Chicago Bridge & Iron

49%

$14.3

2.9%

Steven L. Newman

Transocean

$14.2

+2.2%

60%

Source: The Hay Group

THE WALL STREET JOURNAL.

Reserves Dwindle
At Central Banks

BY CAROLYN CUI

Central banks in emerging markets are running down their foreigncurrency reserves at the fastest
pace since the financial crisis, reducing some countries capacity to
weather potential shocks, such as a
rate increase in the U.S.
Total foreign-exchange reserves
in emerging countries are estimated
to have dropped $222 billion to $7.5
trillion during the first quarter, according to a Wall Street Journal
analysis of International Monetary
Fund data. The 3% decline in reserves would be the biggest percentage loss for a quarter since the
first three months of 2009.
Despite the drop, total foreign
reserves still are hovering around
record highs for emerging countries,
giving observers confidence that
they are, overall, in a relatively
strong position to withstand external shocks in periods of stress.
Some countries, such as Russia,
have been rebuilding their reserves
after significant declines. Total foreign reserves are able to cover
about 11 months of import needs for
these countries, according to IMF
data, while a rule of thumb for adequacy is six months.
We are not that worried about
some of the drop in foreign-exchange reserves, said Joyce Chang,
global head of research at J.P. Morgan Chase & Co., noting that the decline has been limited to a handful
of countries that hold the largest
amounts of reserves.
Still, the risk is rising in a number of countries that are grappling

with sluggish growth, lower reserves and weaker currencies. The

concern is that when the U.S. Federal Reserve raises ratesprobably
later this yearthe subsequent increase in yields will lure to the U.S.
cash that had been invested in
emerging countries, where rates are
high already. In those countries
whose reserves are too meager to
absorb the shocks, currencies
many of which already have fallen in
valuecould face more downward
pressure.
Turkey, South Africa, Malaysia
and Indonesia are among vulnerable
countries whose reserves have
fallen below their short-term external financing needs, according to
the Institute of International Finance. Early this month, the Turkish
lira hit a record low against the dollar after the countrys ruling party
failed to secure a majority in elections, while Malaysias ringgit,
South Africas rand and the Indonesian rupiah all sank to multiyear
lows.
Its a source of concern, said
Andy Keirle, portfolio manager of
the T. Rowe Price Emerging Markets
Local Currency Bond Fund. Were
nervous about South Africa and
Turkey, as there have not been a lot
of policy moves to reduce their external imbalances.
The concern is evident in investment patterns. This year, foreign investors have yanked $23.9 billion
out of emerging-market equities, according to J.P. Morgan. Meanwhile,
nearly $200 million has been withdrawn from emerging-market localPlease turn to page 27

PCT. CHG.
IN PAY

the emma stone age

with the wall street journal
tomorrow.

2015 Dow Jones & Company, Inc. All rights reserved. 3DJ3499

20 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

BUSINESS & FINANCE

Boeing to Stay the Course With New CEO

Boeing Co. said Chief Executive

Jim McNerney will step aside next
week after a tumultuous decade at
the aerospace giant and hand over
the top job to one of his lieutenants.
Mr. McNerney, 65 years old, is
retiring at the end of February 2016
after a transition period, but will
continue on in his role as chairman.
He said in an interview he will remain on the board for the foreseeable future. Until such time that I
start getting in the way.
His successor, Dennis Muilenburg, said Tuesday that Boeings
strategy was unchanged as it
headed into its second century.
Tackling the challenge of delivering
a half-trillion order backlog, sharply
reducing 787 Dreamliner costs, and
adjusting its defense and space
business to rapidly changing domestic and international spending, are
the main challenges as he prepares
to take over after the 10-year tenure
of Mr. McNerney.
Mr. McNerney reached Boeings
mandatory retirement age in 2014
but had stayed on as CEO. Under his
watch, Boeings defense business
shrank and airlines binged on their
largest-ever jet buying spree.
Mr. Muilenburg, 51, had been
widely expected by analysts and

company insiders to be the next

CEO after being promoted to president and chief operating officer in
December 2013. The latter position
didnt exist before his elevation. He
previously headed Boeings defense
and space business. Tuesdays appointment, however, came sooner
than many analysts had expected.
The 30-year Boeing veteran assumes the CEO job as the company implements plans to boost
production of its best-selling commercial jets and refresh its product lineup with revamped planes,
while Pentagon budget pressures
could also force it to further reshape its defense business.
I dont see this as a generational shift, Mr. Muilenburg said in
an interview. Were confident in
the strategy that we have in place
and were going to continue to drive
that strategy with pace.
Mr. Muilenburgs appointment
universally supported by the
board, which met Monday, said a
spokesman.
Boeing shares more than doubled
during Mr. McNerneys tenure as
CEO, though the former 3M Co. boss
and General Electric Co. executive
was at the helm during the erosion
of its single-aisle jet market share
to rival Airbus Group SE and a series of crises, including cost over-

1,300 deliveries. In the programs

wake, Mr. McNerney last year said it
would steer clear of moonshot
new programs in favor of incremental improvements to its commercial
jets, though it has started exploring
a possible successor to its 757 workhorse.
Mr. Muilenburgs tasks include
executing planned increases in production of its workhorse 737 Max
jet and the revamp of its popular
777 long-range jetlinerall while
maintaining record output of both
heavy cash-generating programs.
Ray Conner will remain head of
Boeings commercial jet business
and becomes the sole vice chairman.
Mr. Muilenberg took over the defense unit in 2009, and oversaw acquisitions that have helped make
Boeing the worlds second-largest
defense contractor by sales after
Lockheed Martin Corp. But it is facing the potential closure of its
fighter-jet line in St. Louis unless it
can secure more orders. Boeing is
bidding with Lockheed for a $80 billion contract to build a new bomber
for the U.S. Air Force in competition
with Northrop Grumman Corp.
Mr. Muilenburgs appointment
also returns an engineer to the companys top management position.
Mr. Muilenburg holds a bachelors

MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES

BY JON OSTROWER

Dennis Muilenburg will step up soon.

runs, a three-year delay in delivering its marque Dreamliner jet and
the planes subsequent three-month
grounding after two lithium-ion batteries overheated.
The company was bruised by the
Dreamliners problems and still
faces significant cost pressures,
with combined production losses,
known as deferred production costs,
climbing to $27 billion. The program is considered profitable by
Boeings accounting which allows it
to spread the high early costs over

degree in aerospace engineering

from Iowa State University and a
masters degree in aeronautics and
astronautics from the University of
Washington. The outgoing Mr. McNerney was often criticized for not
having a classical technical background when running the aerospace
giant. Mr. McNerney holds a bachelors degree from Yale and a masters of business administration
from Harvard University.
Mr. McNerneys exit on July 1
will be 10 years to the day since he
assumed the position. An often divisive figure among the companys
workforce and its supply base, Mr.
McNerney made significant strides
in bringing together both the commercial and defense sides of the
companys business to win new
business and solve problems. Mr.
McNerney cultivated deep ties
within Washington, D.C., having
served as the chairman of President
Obamas Export Council.
My legacy is for others to conclude, said Mr. McNerney.
Boeing shares fell 0.4% at
$143.88 in after-hours trading, and
are up 11% so far this year. The
shares were down 0.9% to $144.43
at 4 p.m. Tuesday.
Doug Cameron
and Angela Chen
contributed to this article.

BY JULIE STEINBERG

Citigroup Inc. plans to double

the number of wealth-management
clients in Asia in the next five years
to one million, as the bank seeks to
capitalize on growing affluence in
the region.
The bank is hoping to take advantage of an emerging middle class
to expand this business, said Jonathan Larsen, the banks global head
of retail banking and head of consumer banking for Asia Pacific.
Our people want to save and become more affluent, the Hong
Kong-based Mr. Larsen said in an interview, referring to the banks
wealth-management
operations,
which cater to clients below the private-banking bracket. Asia will
grow disproportionately to the rest
of the world.
Consumer banking, of which
wealth management is a part, is already big business in the region for
the Wall Street bank.
In the first quarter of this year,

the Asian consumer bank accounted

for 21% of global consumer-banking
revenue.
Last year, Citis Asia revenue
from consumer banking reached $7.5
billion, or 51% of total Asia revenue.
Mr. Larsen said Citi is hoping to
add customers in two segments:
those with investable assets between $100,000 and $1 million and
those with assets between $1 million and $10 million. The bank will
focus on Singapore, Hong Kong, Taiwan, India, China and South Korea,
among others, he said. Citis consumer bank in Asia spreads across
12 markets, or half of the consumerbanking markets in which it operates.
Citi and other multinational
banks are jostling to provide services for customers who might be attracted to automated services that
help with online portfolio planning,
a service known as robo advising.
If clients are working across
multiple currencies and are investing in real estate, for example,

youre going to need more than a

robo adviser, Mr. Larsen said, highlighting the importance of wealth
managers at the bank.
The push to increase the number
of clients comes as banks around
the world are increasingly relying
on wealth management as a stable
generator of fees that could offset
potentially volatile businesses such
as trading.
Citi also plans to hire more relationship managers as it expands,
though the rate of hiring wont be in
lock step with the number of clients,
Mr. Larsen said.
The bank, which has $255 billion
of clients assets under management
in Asia, has been growing that pool
between 5% and 10% a year, which it
expects to continue, a spokesman
said.
Given the opportunities ahead,
the bank expects double-digit
growth, he said, though he cautioned that much would depend on
the environment, he said.
In the past year, Citi has un-

REUTERS

Citi Has Big Plans for Wealth Management in Asia

Citis Jonathan Larsen is looking toward Asias growing middle class.

veiled what it calls wealth reviews
for certain clients in Singapore and
Hong Kong, in which employees
stress test a clients portfolio and
examine what would happen should

another financial crisis occur, for

example. The bank plans to roll out
that initiative to mainland China,
Taiwan, India and South Korea in
the next year.

INDEX TO BUSINESSES AND PEOPLE

Businesses

This index of businesses

mentioned in todays
issue of The Wall Street
Journal is intended to
include all significant
reference to companies.
First reference to the
companies appears in
bold face type in all
articles except those
on page one and the
editorial pages.

Alibaba Group...............17
Allergan.........................19
Altice.............................22
Amazon.com ............ 17,23
Apple.......................1,7,23
BlackBerry.....................32
Boeing...........................20
Bongo International.....17

Bouygues ...................... 22
Bouygues Telecom........22
Charter
Communications........27
Check Point Software
Technologies..............23
China Merchants
Securities...................24
China Vanke..................24
Citigroup ....................... 20
Costco Wholesale.........22
Delhaize Group.............22
Deutsche Post .............. 17
Discovery
Communications........21
Etsy...............................17
Federal Trade
Commission...............22
FedEx.............................17
Galaxy Entertainment
Group..........................32
General Electric.......18,19
Genting..........................24

Genting Plantations.....24
Glenview Capital
Management..............27
GoGoVan........................16
Goldman Sachs Group..24
Hayman Capital
Management..............27
Humana.........................27
Iliad ............................... 22
Jaarvis Technology.......16
Japan Display ............... 16
Lennar...........................25
LG Display.....................16
Lombard Odier Asset
Management..............27
Monsanto......................25
Nidec ............................. 16
Och-Ziff Capital
Management..............16
1Malaysia
Development ............. 24
Orange...........................22
Paulson & Co. ............... 27

Penghua Fund
Management..............24
Pentwater Capital
Management..............27
Performance Food
Group..........................22
Rite Aid.........................21
Royal Ahold...................22
Salix Pharmaceuticals..27
Samsung Electronics....16
Sharp...............................1
SkyBridge Capital.........27
Southwest Airlines ...... 21
Tesco ............................. 22
Time Warner Cable ...... 27
TNT Express ................. 17
United Parcel Service...17
US Foods.......................22
Valeant Pharmaceuticals
International..............27
Wal-Mart Stores .......... 22
Walt Disney..................23
Weatherford
International..............21

Whole Foods Market....22

Yanian Garment............18
Youngor Group..............18

People

This index lists the

names of businesspeople and government
regulators who receive
significant mention in
Todays Journal.
Asmus, Carl .................. 17
Bass, Kyle.....................27
Boer, Dick......................22
Bouygues, Martin.........22
Bulko, Steve ................. 27
Carlier, Emmanuel........22
Chang, Joyce.................19
Collyns, Charles............27
Conner, Ray...................20
Dauman, Philippe ......... 19

David-Green, Karen......21
Desbarres, Olivier.........27
Duroc-Danner, Bernard.21
Feinstein, Debbie..........22
Fong, Gabriel.................16
Fortner, Kris..................21
Fries, Michael...............21
Gayeski, Troy................27
Halbower, Matthew ..... 27
Hammergren, John.......21
Immelt, Jeff..................19
Keirle, Andy..................19
Kelly, Gary.....................21
Kramer, Shlomo............23
Larsen, Jonathan..........20
McCormack, James.......27
McNerney, Jim..............20
Mehta, Amit.................22
Muilenburg, Dennis......20
Paulson, John ............... 27
Robbins, Larry .............. 27
Rometty, Virginia.........21

Saunders, Brent............19
Shwed, Gil.....................23
Singh, Dinakar..............27
Standley, John..............21
Tepper, David................27

Um, Maynard................32
Vestager, Margrethe....23
Wong, Alvin..................24
Yucel, Alex....................23
Zaslav, David................21

Corrections Amplifications
The Australian financial-technology industry may gain from a type of visa that
from next month will allow foreigners to
stay permanently if they divert at least
500,000 Australian dollars (US$388,600)
from a total A$5 million investment in
Australian companies into venture-capital or private-equity funds supporting
growth startups in the country. A Markets article Tuesday about the challenge
startups pose to banks omitted the total
investment amount.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 21

BUSINESS & FINANCE

Viacom CEO Philippe Dauman, left, and GEs Jeff Immelt got higher
compensation even though the value of their shareholders investments fell.
ees overall last year, according to
the Labor Department. But shareholders did even better, with a median return including share-price
appreciation and dividends for companies in the survey of 16.6%.
Liberty Global PLCs Michael
Fries topped the best-paid list with
compensation of about $112.2 million. That was up 139.4% from a year
earlier. Shareholders booked a solid
return of 13.3%.
Our compensation plans are
structured to heavily weight longterm equity performance, which has
averaged 35% a year over the last
five years, a Liberty Global spokesman said.
The survey covers CEOs at 300
large companies with at least $9.1
billion in revenue and a proxy statement filed by April 30. Those parameters left out Discovery Communications
Inc.with
2014
revenue of $6.3 billionwhere CEO
David Zaslav got more than $156
million, much of it for signing a new
employment agreement.
The Journals survey measures
pay granted in the most recent fiscal year. That includes salary and
annual cash bonus, but also equity
and other performance awards,
some of which will pay off only if
future performance targets are met.
The numbers have continued to
grow.
Say on pay really hasnt impacted the absolute size of CEO
pay, said Irv Becker, U.S. leader of
board solutions for Hay Group. But
it has impacted the design to be
more performance based. So when
corporate performance weakens, he

said, we should see an appropriate

downturn in CEO pay.
That doesnt always happen.
Among the worst performers in this
years survey was Weatherford International PLC. The oil-services
company, struggling to navigate the
collapse in the price of crude, delivered a negative 26.1% total shareholder return last year and has announced plans to lay off about 15%
of its workforce by the end of June.
Weatherfords average annual shareholder return over the past three
years was a negative 7.9%, compared
with a positive 20.4% for the S&P
500.

GE returned $11 billion

through dividends and
stock buybacks.
Meanwhile, compensation for
CEO Bernard Duroc-Danner rose
13.4% to about $14.9 million, in part
due to higher cash incentive pay for
2014.
Karen David-Green, Weatherfords vice president of investor relations, explained the payout, saying
the companys share price outperformed industry peers like Schlumberger Ltd. and Halliburton Co.
through late July, when the oil-price
downturn began. She also said the
company met most of its performance objectives last year, including
reductions in costs and rates of preventable vehicle injuries.
The company missed its targets

for free cash flow, however, Ms. David-Green said. Also between late
July and the end of the year, Weatherfords stock fell 52%, compared
with 23% for Schlumberger and 46%
for Halliburton.
Ms. David-Green said Weatherfords board views performance over
the long term, which is not always
captured through one-year [total
shareholder return] in a cyclical
market.
General Electrics shareholder return was a negative 6.7%. Yet Mr.
Immelts pay rose 88% to $37.2 million.
The package reflects GE directors view that Mr. Immelt exhibited
strong leadership and performance,
such as double-digit profit growth
for GEs industrial segment and $11
billion returned to shareholders
through dividends and stock buybacks, GE spokesman Seth Martin
said.
Mr. Martin also said Mr. Immelts
pay would have fallen 2% if not for
an $18.4 million increase in the
value of his pension.
Some of the pension gain reflected the way accounting rules
turn lower interest rates and longer
lifespans into higher pension values.
But about $8.8 million reflected a
gain of nearly $490,000 a year in
pension checks Mr. Immelt can expect to pocket as his pay has risen
and he approaches 60 years old, the
age when top GE executives may
collect full pensions.
International Business Machines
Corp. boosted CEO Virginia Romettys compensation 38.5% to about
$19.3 million, even as the computing
giant posted shareholder return of
negative 12.4% along with lower
profit and revenue last year.
A year ago, all the senior management team members skipped
their annual bonuses following
IBMs disappointing performance in
2013. Ms. Rometty did get a $3.6
million bonus for her 2014 performance, representing 90% of her target payout.
This takes into account the
shortfall in financial results relative
to expectations balanced against the
substantial strategic actions taken
to reposition the company, IBM
said in its proxy statement. Her
overall package reflects the boards
strong confidence in Ms. Romettys
ongoing leadership.
IBM declined further comment.
Theo Francis
contributed to this article.

Performance Pay

Executive compensation is increasingly geared toward nancial and operating results, but a lot of CEOs still get big paydays
even when their investors dont do so well.
COMPANY PERFORMANCE (1-YEAR SHAREHOLDER RETURN)
NEGATIVE RETURN POSITIVE RETURN
-80%
-60%
-40%
-20%
+0%
+20% HIGHEST PAID +60%
Michael T. Fries
$100 million
Liberty Global
$112.2 million
Philippe P. Dauman
s13.3% return
$80
Viacom
Leslie Moonves
Satya Nadella
$44.3
million
CBS
Microsoft
t6.6% return
$60
$57.2 million
$84.3 million
t12.4% return
s24.3% return
Jeffrey R. Immelt
$40
General Electric
$37.3 million
$20
t6.7% return

+80%

+100% MARKET
VALUE*
$500 billion
Greater than 100% return

Monsanto Co.s top executive

said Wednesday the company remained committed to acquiring rival
pesticide-and-seed maker Syngenta
AG, but the window for a deal is
measured in months, not years.
Monsanto Chief Executive Hugh
Grant said discussions this month
with shareholders of Syngenta,
which has repeatedly rebuffed Monsantos roughly $45 billion bid, have
been encouraging.
He implored investors to appeal
to Syngentas board of directors to
engage in deal talks.
This vision is simply too important to delay, Mr. Grant said on
Monsantos fiscal third-quarter
earnings call. We remain committed to unlocking this opportunity.
Syngenta, based in Basel, Switzerland, said again this week that
Monsantos proposal undervalued
its business and underestimated
regulatory hurdles facing any combination of Monsantos industryleading seeds business and Syngentas top position in global
pesticide sales.
Taking an offer for Syngenta directly to the companys shareholders is always a potential, Mr.
Grant said in response to an analysts question on the conference
call. But he said there are miles in
the journey before we get to that.
Monsanto prefers a friendly deal, he
said.
Monsanto has heard extraordinary interest from potential buyers
of Syngentas seed business and
some overlapping chemical operations, Mr. Grant said. He added that
Monsanto has committed to divesting itself of those operations as part
of any deal, making the company
confident it could secure an attractive price for the assets. Monsantos
divestiture plans provide significant regulatory certainty, he said.
The crop-biotechnology company, based in St. Louis, said revenue rose 7.7% in its latest quarter,
with the herbicide division posting
a strong performance amid Monsantos move in May to expand how
Scotts Miracle-Gro Co. can sell
Monsantos Roundup weedkiller.
Earnings increased 32%.
Still, the worlds largest seed
maker by sales said it expects fiscal
fourth-quarter earnings to be breakeven.
Monsanto is grappling with a
slump in the agricultural economy
as farmers in North and South
America tighten spending after two
consecutive bumper harvests increased global supplies and weighed
on corn and soybean prices. Weakening currencies in emerging markets, particularly in Latin America,
also have cut into profits for seed
and pesticide companies.
Theres no doubt its been a
tough year, said Brett Begemann,
Monsantos president, on the earnings conference call. We expect
many of these headwinds to continue into fiscal 2016.
Monsanto said profit for the latest quarter totaled $1.14 billion, or
$2.39 a share, up from $858 million,
or $1.62 a share, a year earlier.
Revenue increased to $4.58 billion from $4.25 billion.
Angela Chen
contributed to this article.

Continued from page 19

on the list. Total shareholder return
at the media giant, meanwhile, came
in at a negative 6.6%, ranking Viacom 263. His compensation, like
that of most CEOs, includes a mix of
near-term and longer-term rewards.
Last year, his salary rose by
$371,000 to $3.9 million, his bonus
for the year rose by $3.1 million to
$20 million, and his annual stockoption award rose by about $1.5
million to $7.5 million.
Viacom owns cable channels
such as Nickelodeon, MTV and Comedy Central. Its net income slipped
0.2% in 2014, and it has faced ratings troubles at its biggest networks. The companys directors
praised Mr. Dauman in the proxy,
however, for delivering record pershare earnings and for more qualitative accomplishments including directing significant investment in
content creation.
The company also pointed to a
record of strong performance since
Mr. Dauman took command in 2006.
Viacom has delivered average annual shareholder returns of 18.9%
over the past three years.
CEO pay and investor returns
can diverge for a number of reasons.
Performance metrics could be linked
to company-specific goals like subscriber additions or industrial revenue instead of share-price appreciation, for example. Or share-price
targets could be benchmarked
against peers in the industry, which
in theory can highlight better leadership when outside forces weigh on
an entire sector.
Companies face heightened risks
of conflict with their investors these
days when pay gets out of line with
performance.
The 2010 Dodd-Frank financial
law mandates regular nonbinding
shareholder votes on pay practices,
and activist investors are paying
closer attention to compensation. A
pending SEC rule will require companies to disclose how well pay for
top executives tracks investor return.
Some companies appear to be
doing well on that score. Rite Aid
Corp. CEO John Standley delivered
the highest shareholder return in
this years survey, at 292%. His pay
rose by 6.5% to $8.3 million.
Gary Kelly, CEO of Southwest
Airlines, delivered a 126% shareholder return and was paid just $5
million, up 23.9% from a year earlier.
Compensation for executives at
the top of the investor-return rankings generally rose. One exception
was John Hammergren, head of
medical-products company McKesson Corp., whose pay slumped 49.9%
to $25.9 million, while investors
reaped a return of 64.6%.
The decline mainly reflected a
drop in the value of Mr. Hammergrens pension. Heeding complaints
from investors, the CEO agreed last
year to cut his record-setting $159
million pension benefit by $45 million, and McKesson revamped its incentive compensation program for
top executives.
Since last year, we have continued to enhance our executive-compensation program in response to
shareholder feedback, said Kris
Fortner, a McKesson spokesman.
Overall, total compensation for
the CEOs in the Journals survey
climbed by a median of 13.5% to
about $13.6 million, nearly twothirds of which was linked to performance. That is well above the
2.2% average rise in wages and salaries for U.S. private-sector employ-

ASSOCIATED PRESS/AGENCE FRANCE-PRESSE/GETTY IMAGES (2)

BY JACOB BUNGE

CEO Pay for Best, Worst Performers

HIGHER CEO PAY

Monsanto
Stays Firm
In Pursuit
Of Syngenta

$100
$10

$0
Steven L. Newman
Transocean
$14.2 million
t59.9% return
WORST RETURN

Virginia M. Rometty
IBM
$19.3 million
t12.4% return

*As of Dec. 31, 2014

Sources: The Hay Group; FactSet (market value)

Timothy Cook
Apple
$9.2 million
s49.4% return

Gary C. Kelly
Southwest Airlines
$5.0 million
s126.3% return

John T. Standley
Rite Aid
$8.3 million
s292.3% return
BEST RETURN

THE WALL STREET JOURNAL.

22 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

CORPORATE NEWS

Ahold, Delhaize Forge a Merger

BY IAN WALKER
AND ARCHIE VAN RIEMSDIJK

European grocery chains Ahold

NV and Delhaize Group have agreed
to a merger, creating one of the
largest supermarket operators in
the U.S.
The combined company would be
valued at 26.07 billion ($29.11 billion) based on their closing share
prices Tuesday.
Despite being based in Europe,
both companies generate about 60%
of their sales in the U.S., primarily
along the East Coast. Netherlandsbased Ahold operates the Stop &
Shop and Giant chains, as well as
online grocery store Peapod, while
Belgiums Delhaize owns the Food
Lion and Hannaford banners.
Under the deal, Delhaize shareholders will receive 4.75 Ahold ordinary shares for each share held. Ahold
shareholders will own 61% of the combined companys equity and Delhaize
shareholders will own the rest.
Having surged Tuesday on Dutch
media reports that the companies
were close to a deal, Delhaize shares
fell back more than 7% on Wednesday. Ahold shares dropped 3.7%.
Ahold said it would discontinue

its share-buyback program and return 1 billion to shareholders via a

capital return and a reverse stock
split before completion of the transaction.
The combined board will be led
by Mats Jansson, the current chairman of Delhaize, with current Ahold
Chief Executive Dick Boer as CEO.
The new firm, Ahold Delhaize,
will have more than 6,500 stores
with 375,000 workers able to serve
over 50 million customers a week in
the U.S. and Europe.

The grocery-chain
holding company will
have over 6,500 stores.
The merger is expected to generate annual savings of 500 million
to be realized in the third year after
completion, the companies said.
The deal comes at a time of upheaval in the retail industry on both
sides of the Atlantic. Consumers
used to shopping in discount stores
during the recession havent
switched back to more traditional

and the U.S., with around 54 billion

in annual sales. Based on recent estimates by Morgan Stanley, a combination would have a market share of
around 4.2% in the U.S., making it the
countrys fifth-largest food retailer.
On June 10, Dutch investor union
VEB, on behalf of a group of small
shareholders, formally requested a
meeting with Aholds board to address investors concerns about the
possible leaking of sensitive information which may have affected the
companys share price.
Rumors of preliminary merger
talks between the Dutch and Belgian
companies appeared in local media
on Saturday, May 9. This left the
companies two days to confirm the
matter before markets opened the
following Monday, VEB said at the
time.
However, Ahold and Delhaize
waited until Tuesday, May 12, to confirm the talks, after Aholds share
price went up 5.5%. After the confirmation, Ahold shares moved up a
further 3%.
Shareholders may have been disadvantaged by this late disclosure,
for instance those who sold their
Ahold shares on Monday, VEB
spokesman Eroll Keyner said.

retailers, while many are choosing

to buy groceries online.
The impact of the shift in habits
has been substantial. In the U.S.,
companies such as Costco Wholesale
Corp.as well as a surge in shopping
at dollar storeshave eaten away at
the market share of Wal-Mart Stores
Inc., the worlds biggest retailer. In
Europe, similar forces have battered
Tesco PLC, the U.K. market leader
that last month reported a full-year
loss of 6.38 billion ($9.95 billion), by
far the steepest in its history.
Ahold and Delhaize, like midmarket retailers world-wide, find themselves caught in a squeeze between
discounters such as Costco and
high-end grocers like Whole Foods
Market Inc. The two European companies have been thinking about a
combination for years, reportedly
having held talks in 2006, as they
seek greater scale and cost savings
to take on the competition.
Analysts have said a combination
of Ahold and Delhaize could help resist the discounter threat in the U.S.
and Europe, while also creating cost
savings and a much wider spread of
stores on both continents.
The combination will create one
of the largest food retailers in Europe

U.S. Judge Blocks Sysco-US Foods Deal

A U.S. judge on Tuesday issued a
preliminary injunction blocking
Sysco Corp.s planned acquisition of
US Foods Inc., a ruling that could
kill a deal to combine the nations
two largest food distributors.
The decision handed a high-profile victory to the Federal Trade
Commission, which filed a lawsuit
in February challenging the transaction on antitrust grounds. The win is
the latest in a string of merger-enforcement matters in which antitrust officials appointed to the FTC
and the Justice Department by President Barack Obama have flexed
their muscles to block or pare back
mergers they believed would harm
competition.
The Sysco-US Foods deal, announced in December 2013, sought
to combine the food distributors
that lead the pack in providing ingredients and a range of other supplies to restaurants, hotels, schools
and other food-service operations.
The FTC argued the merger would
leave customers large and small vulnerable to higher prices and reduced
levels of service. The companies argued their tie-up would help them
improve service and become more
efficient, while cutting hundreds of
millions of dollars in costs.
U.S. District Judge Amit Mehta in
Washington said the FTC had shown
that putting the brakes on the merger
was in the public interest.
The FTC has shown that there is
a reasonable probability that the
proposed merger will substantially
impair competition in the national
customer and local broadline markets and that the equities weigh in
favor of injunctive relief, the judge
wrote in a two-page order.
Details of the judges ruling
werent immediately available. The
opinion was released under seal because it contains confidential business information. A redacted public
version of the ruling will be released
on Friday.
Shares of Sysco dropped 1.9% in
after-hours trading Tuesday but

LUKE SHARRETT/BLOOMBERG NEWS

BY BRENT KENDALL
AND ANNIE GASPARRO

The decision pressures Sysco to find another way to improve profitability.

were up 3% midday on Wednesday.
The judges announcement left
some restaurants and other food
service businesses breathing a sigh
of relief.
This is great news. There was
some serious panic in the industry,
said the director of purchasing for a
national Mexican restaurant chain.
The Texas-based chain had switched
to US Foods from Sysco several
years ago because of Syscos pricing.
If the merger had gone through, the
director said he would have been
left using a patchwork of different
distributors and would have had to
hire more people to reallocate the
restaurant chains food purchasing.
It would have been brutal, he said.
Others wished the companies
would have prevailed. It would have
made the little guys step up their
game, just like US Foods did, said
Phil Pace, the owner of San-Diego
chain Phils BBQ. He added that he
believed a merged company would
have more buying power and been
able to offer lower prices.
Judge Mehta, appointed to the
bench by President Obama last year,
held nearly two weeks of legal proceedings on the merger in May, which
included testimony from top company
executives and customers served by
Sysco and US Foods. The proceedings
didnt appear a slam dunk for either

side. During closing arguments, the

judge asked tough questions of both
the companies and the FTC.
The FTC had asked the judge to
block the merger preliminarily while
it holds a full trial on the deal in its
own in-house administrative court,
beginning in July. The companies,
however, said Judge Mehtas ruling
would be crucial to whether the
merger survived.
Sysco Chief Executive Bill DeLaneyin a written statement said the
company was profoundly disappointed in the outcome, but he
didnt lay out the companys next
steps.
We will take a few days to
closely review the courts ruling and
assess our legal and contractual obligations, including the merits of terminating the merger agreement,
Mr. DeLaney said.
Sysco has a lot to lose financially
if the deal dies. It would have to pay
US Foods $300 million and had already invested $355 million in integration planning, hiring top antitrust lawyers and other related
costs, as of the end of March.
The decision also puts pressure
on Sysco to come up with another
way to improve its lagging profitability and fend off rising competition that is threatening Syscos traditional business model. More

restaurant chains and other customers want to negotiate prices directly

with manufacturers, have access to
new technology that helps them run
their kitchens more efficiently, and
they are turning to alternatives like
Costco Wholesale Corp., eating away
at Syscos earnings.
In the nine months ended March
28, its operating profit fell to 3%
from 3.4% the prior-year period.
A US Foods executive said during
court proceedings that the company
would walk away from the deal if
Judge Mehta ruled for the FTC.
US Foods Chief Executive John
Lederer, in a statement, said, We
are ready for whatever comes next.
We have the talent, passion and financial foundation to take this company to the next level for our customers and for our employees.
Debbie Feinstein, director of the
FTCs bureau of competition, said
the ruling will preserve competition in both local and national
broadline foodservice distribution
markets. We look forward to proving
at trial that this deal would lead to
higher prices and diminished service
for customers.
Tuesdays ruling also was a blow
to the industrys third-largest company, Performance Food Group
Inc., which stood to expand its business significantly by picking up 11
distribution centers that would have
been divested from the merging
companies. Those operations generated $4.6 billion in annual revenue.
Sysco and US Foods agreed to
sell the assets to PFG in a bid to address the FTCs antitrust concerns.
The companies and the government,
however, disagreed over whether
PFG would be able to replace the
competition provided previously by
US Foods.
PFG declined to comment on the
ruling.
The case was the FTCs most notable merger challenge in eight
years, since the agency sued to prevent Whole Foods Market Inc. from
acquiring a competitor. After a series of up-and-down court proceedings, the two sides eventually settled
that case.

Bouyguess
Rejection of
Drahi Offer
Chills Sector
BY RUTH BENDER

AND INTI LANDAURO

PARISBouygues SAs rejection

of Patrick Drahis offer for its telecom unit sent chills through the
French telecom sector Wednesday as
the prospect of the French market
slimming to three mobile rivals from
four became less likely.
On Tuesday, Bouyguess board of
directors unanimously decided not to
pursue the proposal from Mr. Drahis
firm, Altice SA, which, according to
people familiar with the matter, offered to pay around 10 billion ($11.3
billion) for rival Bouygues Telecom.
The decision put the brakes on
consolidation in the French market
that key rivals, including Bouygues,
Orange SA and Iliad SA, have long
clamored for, and it raised broader
questions about the likely pace of
deal-making activity in Europe. While
Altice, which already owns the No. 2
mobile operator in France, would
have benefited from creating more
cost savings in a merger, a deal
would have rippled further, too.
Low-cost operator Iliad would
have been able to acquire some of
Bouyguess spectrum to build out its
network faster, while market leader
Orange would have benefited from
less competition.
Bouyguess reasons for not pursuing the offerincluding high execution risks, job losses and the potential for Bouygues to boost profits
on its ownfell short for investors.
We believe these arguments aren't
very convincing, said ING analyst
Emmanuel Carlier.
Chairman and Chief Executive
Officer Martin Bouygues defended
his boards decision. Not everything is a question of money, he
told French radio, alluding to his
personal attachment to the telecoms
company he set up in 1994 after taking over the industrial conglomerate
from his father.
Mr. Bouygues said regulators
would have imposed heavy remedies
in a merger, which would have made
the deal unviable. I dont see how
Mr. Drahi could set up serious financing and at the same time assume all the remedies, he said. The
financing wasnt sorted out at all.
Altice hasnt officially responded
to the collapse of the deal, but a
person familiar with the matter said
the offer was fully financed through
a syndication of banks.
The decision is a setback for Mr.
Drahi, who has been on a deal-making blitz on both sides of the Atlantic. Having snapped up cable assets
in France over the years, he burst
onto the mobile scene in a big way
last year with his purchase of SFR
from Vivendi SA. He beat Mr.
Bouygues in the bidding and began
cutting costs drastically, quickly lifting profit margins.
This appears to have played a
role in Mr. Bouyguess decision. People familiar with the matter said the
executive didnt want to sell to Mr.
Drahi. Other people say Mr.
Bouygues was concerned about the
risk of his telecom unit suffering
during a lengthy antitrust review,
the cost of which he would have
carried if the operation was blocked.
European regulators have allowed mergers in recent years that
have lowered the amount of telecom
rivals in countries such as Germany
and Ireland.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 23

CORPORATE NEWS

BY TOM FAIRLESS

BRUSSELSEuropes antitrust
regulator has asked a broad swath
of Internet commerce firms to hand
over sensitive business information
and copies of contracts as part of a
sweeping investigation into possible
abuses in the sector.
The investigation, announced in
March, aims to establish whether
some firms are raising contractual or
other barriers to limit how consumers can shop online across national
borders inside the European Union.
The probe could lead to formal antitrust cases against individual companies that are suspected of abusing
their dominant market position to
restrict trade, in violation of EU law.
The European Commission, the
blocs top antitrust regulator, sent
out the first batch of questionnaires
last week to businesses in all 28 EU
countries. More than 2,000 businesses are expected to be questioned as part of the probe, including online marketplaces; Internet
streaming services; content producers; manufacturers that sell goods
online; as well as broadcasters.
The questionnaires, which are
more than 150 pages, aim to give regulators a better understanding of ecommerce-related business practices
as they affect providers of digital
content, according to one copy reviewed by The Wall Street Journal.
The sets of questions drill down
into the competitive landscape in
markets for digital content, including online films, news and music
asking companies to provide copies
of contracts with their 30 main suppliers.
While the probe isnt aimed specifically at U.S. companies, the activities of some U.S. online giants are expected to come under scrutiny given
their strong presence in Europes online economy. When EU antitrust
chief Margrethe Vestager announced
the probe earlier this year, she said
that U.S. companies dominate parts
of Europes e-commerce sector.
The European Commission confirmed it had sent out the questionnaires last week but declined to
comment further.
Companies are asked to provide
their sales figures globally and by
EU country, in some cases dating
back to 2010. They are asked to list
their top 30 suppliers of various
types of digital content, from films
to music; how much each was paid;
and about possible clauses that
could restrict how the content is
sold across national borders.
The deadline for responses is
July 31. A second questionnaire covering online sales of physical goods
is expected to be sent out next
week.
The EU plans to publish a preliminary report on its findings in
mid-2016, and a final report in early
2017, after carrying out a public
consultation.
The investigation is the latest in
a flurry of separate probes and legislative initiatives in Europe that
could end up curbing the businesses
of U.S. Internet companies.
Internet giants like Google Inc.,
Amazon.com Inc., Apple Inc. and
Facebook Inc. are being scrutinized
over issues ranging from possible
data-privacy violations to anticompetitive behavior to tax payments.

Firewall Pioneer on Defensive

BY ORR HIRSCHAUGE

TEL AVIVCheck Point Software Technologies Ltd. pioneered

the firewall. Now, it is scrambling to
keep it at the front line of todays
war against hackers.
Since its founding just over two
decades ago, the Israeli firm has
grown to dominate the $6-billion-ayear business of selling enterprise
network firewallsdigital perimeters aimed at keeping out viruses,
thieves and hackers.
But now Check Point is on the
defensive itself, as clients look for
more innovative ways to protect
themselves against todays frequent
and more sophisticated cyberattacks.
Five years ago, chief information security officers kept spending
money on the same security productsnetwork firewalls and antivirus products, said Shlomo Kramer,
a Check Point co-founder, who was
an early investor in one Check Point
competitor and the chairman of another IT security company. But
now budgets are also going to new
things.
Firewalls remain an important
defense against cyberattacks, but
todays hackers are finding increasingly sophisticated ways to go
around them, or through them. The
explosion of mobile devices has also
opened up new vulnerabilities.
New players in the network-security industry are turning to more
novel approachesmany of them
based on the assumption that a clients systems will eventually be
breached. Some of these new defenses are aimed at preventing
hackers from leaving a system with
data, or at least leaving with an
electronic trail. Another strategy:
tricking a cyber thief into believing
it is leaving a network with valuable
information when in fact it is exiting empty-handed.
Check Point Chief Executive Gil
Shwed acknowledges the companys
challenges, and said hes beefing up
his sales and marketing team to
help catch up with rivals quicker
growth. Messrs. Shwed and
Kramerboth veterans of the Israeli
armys Unit 8200, the equivalent of
the U.S. National Security Agency
started the company with another
co-founder in 1993.
We need to be more aggressive
in the market and try to grow

JONATHAN BLOOM/THE WALL STREET JOURNAL

EUSends
Questionsto
E-Commerce
Companies

Check Point Chief Executive Gil Shwed says, We need to be more aggressive in the market and try to grow faster.
faster, he said in an interview.
Check Points big break came a
year after it was founded when it
signed an agreement with Sun Microsystems Inc. to sell Check Points
products under Suns label. Check
Point listed on the Nasdaq in 1996.
Over the years, the company
helped design and sell special hardware and software to big clients
such as banks, oil companies and
government agencies. It was the
first company to bring to the market an off-the-shelf commercial firewall product, when only a few hundred organizations were connected
to the Internet.
Back then, the biggest challenge
was to convince potential distributors that theres such a thing as the
Internet market, said Mr. Shwed.
Today, the company says the
firewall will remain at the center
of its business. But it is buying
smaller companies that have expertise, for example, in mobile security. At the same time, it is trying
to defend its slipping market share
in its bedrock network firewall
equipment market.
Gartner says it held 22.7% of that

market by sales in 2014, down from

24% in 2013. Its closest competitor,
Cisco Systems Inc., was a distant
second at 15.9% last year. But several of Check Points competitors in
the market are growing more
quickly.
The company has recently geared
up its offerings. Last year, it started
selling its first mobile-focused security product, a system that separates business data from personal
data on mobile phones, and prevents access to malicious files and
websites.
It is also embarked on a series of
small but strategic deals. This year, it
bought Lacoon Security Ltd., an Israeli mobile-security startup, and Hyperwise Security Ltd., a startup
whose technology identifies files
with previously unknown malicious
software. Check Point didnt disclose
the purchase price for either deal.
Were going to be greatly
changing our messaging, talking
more about preventing next-generation threats and about consolidation, how companies are tempted to
go for many products that solve
only a small part of the problem but

have difficulties creating a comprehensive defense strategy, Mr.

Shwed said.
Analysts have raised concerns
that sales growth could slow in the
network-security business amid the
fast-changing marketplace. Check
Points stock price has recently underperformed some competitors,
like Palo Alto Networks Inc. and
Fortinet Inc., two California-based
firewall vendors.
In May, Morgan Stanley downgraded Check Points stock from its
previous equalweight rating, to
underweight.
While Check Point is stepping
up investment to sustain growth,
we fear it may be too late to the
party, wrote Morgan Stanley analysts Keith Weiss and Melissa Gorham.
Shaul Eyal, an analyst at Oppenheimer & Co., remains bullish, saying the small deals are a sign Check
Point has identified a promising
market.
Check Point likes to dip its toes
in the water before diving in, he
said. When the company invests it
means the opportunity is real.

Blackshades Head Gets Prison Term

BY NICOLE HONG

The leader of the Blackshades operation, which sold computer-hacking software to thousands of buyers
around the world, was sentenced to
four years and nine months in prison
by a U.S. federal judge on Tuesday.
Alex Yucel, a 25-year-old Swedish national who had been living in
Moldova, pleaded guilty in February
to computer-hacking charges related
to his ownership and operation of
Blackshades. The site sold a software called a remote access tool, or
RAT, which allowed cybercriminals to secretly control other peoples computers from a distance
for just $40 per license.
In handing Mr. Yucel his sentence in Manhattan federal court on
Tuesday, U.S. District Judge P. Kevin
Castel said Mr. Yucel created a tool
that spread misery to the lives of
thousands.
The message must go forth that

this is a serious crime worthy of a

serious punishment, Judge Castel
said, also requiring Mr. Yucel to forfeit $200,000.
The judge said cybercriminals
deserve stiffer punishments because
crimes committed on the Internet
are especially difficult to detect and
root out.
Roughly 100 people have been
arrested around the world as part of
the Blackshades investigation, which
has drawn a global law-enforcement
effort. After federal agents seized
and searched the Blackshades
server, they found more than 6,000
customer accounts in more than 100
countries. The business, which operated from 2010 to 2013, generated
at least $350,000 in sales revenue,
according to court documents.
Sites such as Blackshades have
allowed people with little technical
expertise to hack computers at a
relatively low cost, posing an increasingly difficult threat for law

enforcement. These cases have also

raised challenging questions about
what punishment to give the individuals who do get caught, many of
whom are young and well-educated
men with no prior criminal history.
Blackshades customers were able
to access and steal a wide variety of
the victims personal information, including photographs, passwords and
credit-card numbers. The victims
Web cameras could even be activated
to obtain a live feed without their
knowledge. The computers were infected by tricking victims into clicking an email link or hiring someone
to install the RAT on the computer,
according to court documents.
Mr. Yucel and his lawyer, Bradley
Henry of the Blanch Law Firm, had
asked the judge to hand down a sentence of 2 years, arguing that the
original purpose of the site was to
provide a training platform for computer science students.
Prosecutors say Mr. Yucel cre-

ated the malware to profit from it

and was the main beneficiary of the
operations sales.
I deeply regret starting this
whole project, which obviously went
out of control, Mr. Yucel told the
judge on Tuesday.
Mr. Yucel was arrested in Moldova in 2013, a few days after he
was indicted in the U.S. on five
criminal counts. He was extradited
to the U.S. last May, the first time
the U.S. had ever extradited a defendant from Moldova, according to
federal agents.
The Manhattan U.S. attorneys
office has prosecuted several individuals connected to Blackshades,
including users of the software. One
Blackshades customer, 42-year-old
Marlen Rappa, was accused of using
the RAT to steal photos from mostly
young female victims and spying on
them through their webcams; he
pleaded guilty and was sentenced to
one year in prison.

24 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

MARKETS

Mainland Broker Seeks

Up to $5 Billion in IPO
BY YVONNE LEE

HONG KONGChina Merchants

Securities Co. plans to raise up to
US$5 billion in a Hong Kong initial
public offering in the fourth quarter,
in what could be one of the years
top listings globally.
Fueled by investors buying
stocks on margin, with loans from
brokerages such as China Merchants, Chinese stock markets have
been among the worlds best performers this year, even after coming
off recent multiyear highs. China
Merchants, Chinas sixth-largest
brokerage by assets, joins a number
of other Chinese securities firms using the boom as an opportunity to
raise funds this year. Like the others, it is raising money partly to
fund its margin-financing program.
Shares in brokerage firms, seen
by investors as proxies for the
broader market, have risen particularly sharply. The Shanghai Composite Index is up 134% in the past 12
months, but China Merchants
Shanghai shares beat that with a
193% gain.
The gains for Chinese brokerage
stocks have mostly occurred since
the fourth quarter.
China Merchants, based in Shenzhen, is trying to move quickly for a
listing. It called in bankers to pitch
its planned Hong Kong float just a
few weeks ago and is looking to list
before the end of the year. The listing process in Hong Kong typically

Go for Broke

Chinese brokerages account for three of the world's top-ve listings this year.
Company

Country

Huatai Securities

China

U.S. $5.0 billion

Guotai Junan Securities

China

4.9

Aena

Spain

GF Securities

China

Sunrise Communications

Switzerland

Source: Dealogic

takes between six months and several years.

The brokerage has picked its own
investment-banking unit, China
Merchants Securities (HK) Co., as
well as J.P. Morgan Chase & Co. and
Morgan Stanley to handle its IPO,
which is expected to raise between
US$4 billion and US$5 billion, people with knowledge of the matter
said.
A US$5 billion IPO would be
marginally bigger than this years
current No. 1 listing world-wide,
also by a Chinese brokerage. Huatai
Securities Co. raised US$4.99 billion
in a May IPO in Hong Kong, according to Dealogic.
Five securities firmsincluding
Huatai Securities, Guotai Junan Securities Co. and GF Securities Co.
Ltdhave raised a combined
US$16.4 billion this year, taking ad-

Listing value

4.8
4.1
2.5
THE WALL STREET JOURNAL.

vantage of interest in stocks that

has resulted from Chinas increasingly volatile market boom.
Other Chinese brokerages in the
IPO queue include Guolian Securities Co., the joint venture partner of
Royal Bank of Scotland Group PLC
in China. Guolian, which is taking
orders from investors for an IPO
seeking to raise up to US$471 million, is scheduled to list in Hong
Kong on July 6.
China Merchants disclosed plans
to go public in Hong Kong in May in
a filing to the Shanghai Stock Exchange. It said it planned to issue
up to 1.2 billion shares, but gave no
other details.
Last year, China Merchants
posted a net profit of 3.9 billion
yuan ($628.3 million), up 73%,
buoyed by gains in commission income and wealth management.

Chinas First REIT

To List in Shenzhen
BY ESTHER FUNG

the REIT proposed by China Vanke

and Penghua wont give ownership of
the underlying assets to the trustee.
Its underlying assets include rentalincome rights of an office complex in
Qianhai, a special economic zone in
Shenzhen.
While the Penghua-Qianhai-Vanke
REITand other similar quasi-REITs
based in Chinadiffer from conventional REITs in this way, they still
seem to offer some innovative
mechanisms, including a simpler tax
structure, said Alvin Wong, an analyst at Barclays Research.
The Penghua-Qianhai-Vanke REIT
would provide an alternative way
for small investors to invest in the
real-estate market and lower barriers
to entry for investors, Penghua said.
Dividends would be paid out at least
once a year.
A cap of 50% of the IPO proceeds
would be paid to Vanke for an equity
stake in the property-management
company it runs, and at least half of
the proceeds would be invested in
other financial products, such as
stocks, bonds and money-market
tools, as part of efforts to secure stable returns, the fund-management
firm said.
China has been experimenting
with financial liberalization in Qianhai as part of efforts to make its
economy more market-oriented.
A slumping property market has
driven builders to look for alternative ways to make money from investments in commercial property,
after rampant overbuilding squeezed
profit margins, analysts said.

Chinas first real-estate investment trust is set to go public on Friday after a long-awaited channel for
property firms to raise funds received regulatory approval this
month.
Shenzhen-based property developer China Vanke Co. has teamed up
with Penghua Fund Management
Co. on a REIT to be listed on the
Shenzhen exchange, Penghua said
Wednesday. The firms aim to raise
up to 3 billion yuan ($483 million)
from the listing.
This month, Chinese regulators
approved the mainlands first REIT
investment structure open to individual investors. Previously, funds that
offered products similar to REITs restricted access to institutional investors.
Talk of introducing REITs in
China started years ago, with major
cities such as Shanghai and Tianjin
drafting proposals in 2010 to the
central bank and the State Council,
Chinas cabinet, to seek approvals.
But legal and procedural hurdles
have prevented the investment structure from taking off. In its place,
quasi-REITs popped up, which were
structured similarly, but had more
restrictions than traditional REITs.
Some properties in China were packaged into REITs listed elsewhere, including in Hong Kong and Singapore.
In a traditional REIT, which is a
publicly tradable product, a trustee
holds underlying assets on behalf of
investors. Some analysts note that

BY TOM WRIGHT

Debt-laden state investment

fund 1Malaysia Development Bhd.
defended the price it paid for a
power company in 2012, saying it
had received independent valuation advice during the transaction.
A person familiar with the
transaction said the valuation was
done by Goldman Sachs Group
Inc., which advised the fund on the
deal and therefore wasnt considered independent, because it would
benefit financially if the transaction was completed.

1Malaysia Development
said the price was based
on advice received from
independent valuation
advisers.
The 1MDB fund was formed by
Prime Minister Najib Razak in 2009
to help develop Malaysias economy. It also indirectly supported
his partys re-election campaign
two years ago. The fund has
amassed more than $11 billion in
debt that it now is struggling to repay and is the subject of four government investigations.
The Wall Street Journal reported last week that the fund paid
what appeared to be an inflated
price for a power plant owned by
Malaysian conglomerate Genting
Group. The conglomerate subsequently contributed to a Najib-led
charity that announced projects

that Mr. Najib was able to tout as

he campaigned.
The statement about the independent valuation on its powerplant purchase came in response to
the Journal article. We only acquire assets when we are convinced
that they represent long-term
value, and to suggest that any of
our acquisitions were driven by political considerations is simply
false, 1MDB said in the statement,
which was released on Tuesday and
expanded on its comments in the
original article.
In the statement, 1MDB defended the 2.3 billion Malaysian
ringgit (about $740 million at the
time) it paid for the Genting unit.
The fund said the price was based
on advice received from independent valuation advisers.
The person familiar with the
matter said Goldman Sachs, which
was 1MDBs financial adviser on
the purchase, was also the only
party to conduct a valuation of the
power unit on behalf of 1MDB.
Goldman had a long relationship
with 1MDB, underwriting bonds
and advising it on other transactions.
To help them assess the value
of assets in a deal or justify the
transaction to investors, lenders or
regulators, companies often seek
independent valuations from investment banks, accounting firms
or consultants that arent involved
in it. A firm advising on the deal
could benefit financially if the
transaction is completed, potentially creating a conflict of interest.
A 1MDB spokesman said its advisers opinion wasnt biased, adding: Any valuation produced by

REUTERS

1MDB Defends Price Paid for Genting Power Plant

The state investment fund is struggling to repay more than $11 billion in debt.
1MDBs financial adviser is by definition independent as it is independently produced by that third party
for 1MDBs consideration.
The spokesman said 1MDB had
appointed a number of third-party
advisers including lawyers and accountants to look into different areas of the purchase, such as the
power assets technical specifications. All of these parties contributed to the valuation, according to
the spokesman.
The 1MDB spokesman declined
to make any valuation available. It
is not a policy of 1MDB to share
such information, the spokesman
said.
The 1MDB fund acquired the
Genting unitwhich owned a 75%
stake in a 720-megawatt coal-fired
power plant near Kuala Lumpurin
October 2012. Genting later reported a 1.9 billion-ringgit extraordinary gain on this sale, implying a

value for its stake of just 400 million ringgit, or less than one-fifth
what 1MDB paid for it.
In a second sign that 1MDB paid
a high price, the funds financial
statement for the fiscal year ended
in March 2013 said the power
units property, plant and equipment were worth a little less than
500 million ringgit at the time of
acquisition.
The fund cited 1.7 billion ringgit
in intangible assetsthat is, the
plants agreement to sell power to
a state-owned entity. But this valuation appeared to be contingent on
Gentings obtaining a renewal of its
power-sale agreement, which
would run out in 2016.
Genting announced the terms of
the sale to 1MDB in August 2012.
Equity analysts at the time called
the price positive for Genting,
given that its contract to sell
power was set to end within a few

years. In early October, Malaysias

Energy Commission, an independent body that regulates the energy sector, announced Genting
had won a 10-year extension, giving it the right to sell power
through 2026. A few days later,
Genting and 1MDB completed the
sale.
Soon after the purchase, 1MDB
appeared to recognize that it had
overpaid for the power assets. In
its financial accounts for fiscal
2013, the fund took an impairment
charge of 1.2 billion ringgit, writing
down part of the premium it had
paid for power assets from Genting
and another Malaysian company.
A few months after the sale, a
unit of Genting called Genting
Plantations Bhd. donated about
$10 million to a Najib-linked charity, according to a spokesman for
Genting Plantations. The charity,
Yayasan Rakyat 1Malaysia, lists Mr.
Najib as chairman on its website.
Though set up to help underprivileged Malaysians through education and sport, this charity soon
got involved in spending that appeared designed to help Mr. Najib
retain power in a May 2013 election. It and other charities linked
to the government spent millions
of dollars before the voting in Penang, a northern state that was an
important election battleground.
Mr. Najib visited Penang during the
campaign and announced that
Yayasan Rakyat 1Malaysia would
donate two million ringgit (about
$660,000 at the time) to two local
schools. These schools serve Chinese communities that arent poor,
but whose support would be crucial to win voting in the area.

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 25

INTERNATIONAL INVESTOR

Stocks Sink as Greek

Talks Stay Snagged

BY SAUMYA VAISHAMPAYAN

International Monetary Fund, which

would fuel concerns about the countrys potential exit from the eurozone.
Home builder Lennar said profit
rose 33% in its latest quarter, beating expectations. Shares gained 4%.
Monsanto reported earnings for
its third quarter that topped analysts expectations. But the seed
company said it expects to break
even in the fourth quarter, while analysts most recently expected earnings of 31 cents. Shares fell 4.3%.
The U.S. economic slowdown in
the first quarter was less severe
than previously estimated, according to data released Wednesday.
Gross domestic product contracted
at a 0.2% annual rate in the first
quarter, the Commerce Department
said, versus a previously estimated
0.7% contraction. Economists surveyed by The Wall Street Journal
had expected a 0.2% contraction.
Many stock investors say the
pace of economic growth is critical
for a pickup in corporate revenue
and earnings. Corporate profits
were soft in the first quarter, hamstrung by a strong dollar and
weaker oil prices.
To have a surprisingly good
earnings quarter is going to require
revenue growth, said David
Bahnsen, a managing director at
HighTower in Newport Beach, Calif.
To have good revenue growth,
youre probably going to need a
stronger economic tailwind, meaning good GDP growth, he said.
U.S. crude-oil futures were down
89 cents a barrel at $60.12.

U.S. stocks fell Wednesday as recent optimism about a bailout deal

for Greece faded.
The Dow Jones Industrial Average was down 88 points, or 0.5%, to
18057 at midday.
ABREAST OF The S&P 500 lost
THE MARKET seven points, or
0.3%, to 2117, and
the Nasdaq Composite slipped 16
points, or 0.3%, to 5144.
Nine of the 10 S&P 500 sectors
were in negative territory, led by a
0.9% decline in materials stocks.
European stocks also weakened.
Germanys DAX lost 0.6%, and
Greeces Athex Composite fell 1.8%.
The Stoxx Europe 600 slipped 0.4%
to 397.32, snapping a three-day
rally.
Greek Prime Minister Alexis
Tsipras attacked the countrys international creditors after they rejected a list of economic measures
Greece said it was willing to undertake in exchange for financial aid.
Also Wednesday, a German finance
ministry spokesman said work
needs to be done to reach a deal between Greece and its creditors and
now it is up to Athens to compromise.
Recently, its been Greece driving the market, said Larry Weiss,
head of trading at brokerage firm
Instinet. We move around with the
hope of a settlement or fear of an
exit, he added.
Without an agreement before the
end of the month, Greece is set to
default on a June 30 payment to the

Data as shown is for information purposes only. No offer is being made by

Morningstar, Ltd. or this publication. Funds shown arent registered with the
U.S. Securities and Exchange Commission and arent available for sale to United
States citizens and/or residents except as noted. Prices are in local currencies.
All performance figures are calculated using the most recent prices available.

FUND NAME

NAV
GF AT LB DATE CR

n AHW CAPITAL MANAGEMENT

Tel (+49) 1805 - 23 82 82
www.ahw-capital.com
AHW Top-Div.Int.

GL

EQ LUX 07/29 EUR

NAV

46.59

%RETURN
YTD 12-MO 2-YR

-8.9

-8.2

-2.7

n ALLIANZ GLOBAL INVESTORS KAPITALANLAGEGESELLSCHAFT

Concentra AE
Industria AE
InternRent AE

EU EQ DEU 06/23 EUR

EU EQ DEU 06/23 EUR
EU BD DEU 06/23 EUR

112.45
111.50
45.67

20.5
18.0
4.4

20.2
17.0
11.8

20.2
19.1
6.7

n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866

Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited

OT

OT MUS 06/19 USD 316796.21

-6.8

-6.9

-4.4

FUND NAME

NAV
GF AT LB DATE CR

American Growth Fund AA

American Growth Fund AA (HKD)
Asia Total Return Fund AA Inc
Asia Total Return Fund AA
Asia Total Return Fund AA (HKD) Inc
Asia Value Dividend Equity Fund AA
Asia Value Dividend Equity Fund AA Inc
Asian Equity Fund A
Asian Equity Fund AA
Asian Sm Cap Equity Fund AA
Asian Small Cap Equity Fund AA (HKD)
China Value Fund A
China Value Fund AA
Dragon Growth Fund A
Dragon Growth Fund AA (HKD)
Emg Eastrn Europe Fund A
Emg Eastrn Europe Fund AA
European Growth Fund A
European Growth Fund AA
Global Contrarain Fund AA
Global Property Fund AA
Global Property Fund AA (HKD)
Global Resources Fund AA
Greater China Opportunities Fund AA
Healthcare Fund AA
India Equity Fund AA
International Growth Fund A
International Growth Fund AA
Japanese Growth Fund A
Japanese Growth Fund AA
Latin America Equity Fund AA
Russia Equity Fund AA
Strategic Income Fund AA
Taiwan Equity Fund AA
Turkey Equity Fund AA
U.S. Bond Fund AA
U.S. Bond Fund AA (HKD)
U.S. Bond Fund AA (HKD) Inc
U.S. Bond Fund AA Inc
U.S. Sm Cap Equity Fund AA
U.S. Special Opportunities Fund AA
U.S. Special Opportunities Fund AA (HKD)
U.S. Special Opportunities Fund AA Inc
U.S. Tsy Inf-ProtSec Fund AA

US
US
AS
AS
AS
OT
OT
OT
OT
AS
AS
AS
AS
AS
AS
EU
EU
EU
EU
GL
OT
OT
GL
AS
OT
EA
GL
GL
JP
JP
GL
EE
OT
AS
OT
US
US
US
US
US
US
US
US
OT

EQ
EQ
BD
BD
BD
OT
OT
OT
OT
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
OT
EQ
OT
BD
BD
BD
BD
EQ
BD
BD
BD
OT

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

Nikkei Ends
At Highest
Since 1996

n CP CAPITAL ASSET MANAGEMENT LIMITED

www.cpgbl.com
CP Global Alpha Fund
OT
CP Multi-Strategy Currency Fund OT
CPS-Master Priv Fund
GL

OT WSM 06/24 USD

OT CYM 06/11 USD
OT WSM 06/24 USD

n HSBC Trinkaus Investment Managers SA

E-Mail: funds@hsbctrinkaus.lu
Telephone: 352 - 47 18471
Prosperity Return Fund A
Prosperity Return Fund B
Prosperity Return Fund C
Prosperity Return Fund D
Renaissance Hgh Grade Bd A
Renaissance Hgh Grade Bd B
Renaissance Hgh Grade Bd C
Renaissance Hgh Grade Bd D

JP
EU
EU
EU
EU
EU
EU
EU

BD
BA
BA
BA
BA
BA
BA
BA

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

12/06
12/06
12/06
12/06
12/06
12/06
12/06
12/06

JPY
JPY
USD
EUR
JPY
JPY
USD
EUR

126.44
115.90
154.28

US

EQ LUX 06/22 USD

17.7
30.8
18.9

NS
11.0
12.5

Advertisement
FUND NAME

8577.68
9032.12
79.01
121.37
10807.34
11130.39
96.94
102.83

n MANULIFE GLOBAL FUND TEL:(852)2108 1110

Internet:http://www.manulifefunds.com.hk
American Growth Fund A

13.5
NS
6.3

30.68

-9.3
4.6
-12.2
-9.0
3.5
17.9
-0.9
-4.6

-8.4
11.0
-11.1
-8.8
5.1
25.6
0.7
-4.1

0.3
13.2
-1.0
8.1
11.3
23.9
8.4
6.9

GL

NAV
1.74
10.85
0.95
1.00
9.96
1.85
1.13
3.49
1.12
2.50
10.12
9.92
3.11
2.33
11.29
3.41
1.47
11.50
0.83
0.98
1.03
9.68
0.80
1.15
2.05
1.40
4.94
1.13
3.55
0.91
0.89
0.46
1.08
1.72
0.80
1.21
9.88
9.83
0.99
1.21
0.92
9.60
0.92
1.28

143.47

10.2

15.9

Leading 10 Performers
FUND FUND
RATING * NAME

%RETURN
YTD 12-MO 2-YR
5.6
4.7
0.1
0.1
NS
12.2
13.2
12.7
12.5
18.5
18.4
16.5
16.4
18.9
18.7
6.8
6.7
10.2
10.1
4.6
1.4
NS
-1.2
15.2
9.7
3.4
6.6
6.5
16.3
16.1
-7.1
25.6
0.2
14.1
-15.1
0.4
NS
0.3
0.4
7.5
1.8
2.4
1.8
-0.2

9.9
NS
-0.4
NS
NS
16.3
NS
8.9
8.6
6.1
NS
28.1
27.8
25.2
24.8
-27.8
-27.9
-3.7
-4.0
0.1
6.1
NS
-26.0
16.2
21.5
13.5
5.8
5.5
7.2
6.9
-23.7
-24.5
-0.9
8.5
-15.8
1.2
NS
NS
NS
5.8
-5.0
NS
NS
-2.0

15.6
NS
2.0
NS
NS
15.1
NS
13.7
13.4
11.3
NS
20.7
20.4
23.6
23.2
-10.1
-10.2
9.9
9.6
10.2
11.1
NS
-5.9
NS
22.1
21.7
14.3
14.0
6.8
6.6
-5.6
-9.6
2.0
14.6
-7.4
3.0
NS
NS
NS
12.0
2.9
NS
NS
-0.1

-15.2

-15.9

-10.9

FUND NAME

5
4
4
4
3
2
4
3
2

NAV
GF AT LB DATE CR

NAV

n ALEXANDRA INVESTMENT MANAGEMENT

Tel: +1 212 301 1800 Fax: +1 212 301 1810
AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 08/31 USD

2155.22

%RETURN
YTD 12-MO 2-YR

NS

NS

NS

NOTE: Changes in currency rates will affect performance and rankings.

KEY: ** 2YR and 5YR performance is annualized
NA-not available due to incomplete data;
NS-fund not in existence for entire period

cally.
China Mengniu Dairy was down
5.8% in Hong Kong on news of a
milk-powder recall.
Chinas Food and Drug Administration asked three local milk producersShaanxi Guanshan Dairy,
Xian Guanshan Dairy and Shengtang Industry to recall their milkpowder products after finding excessive levels of chemicals in some
batches.
Australias equities market eked

NAV

%RETURN
YTD 12-MO 2-YR

n THE NATIONAL INVESTOR

TNI Tower | Zayed 1st Street Khalidia| Web:www.tni.ae
OT BMU 05/31 USD
OT IRL 06/22 USD
OT ARE 06/23 AED

1007.72
1359.04
11.51

4.3
3.2
11.2

-11.5
-7.0
4.4

-5.9
8.8
24.8

OT OT CYM 05/31 USD

OT OT USA 10/31 USD
OT OT CYM 01/31 USD

NS
129.92
102.66

4.5
2.4
11.3

5.6
3.2
11.3

5.6
3.8
0.7

% Return in $US **
1-YR 2-YR 5-YR

6.34

11.71 18.07 12.59

5.51

9.51 17.02 14.78

4.85

9.44 15.63 14.98

3.14

6.32 13.00 12.69

0.72

5.53 15.07 14.47

3.87

5.39 15.02 13.15

1.15

4.86 15.13 12.96

1.20

4.54 14.66 14.20

3.16

4.34 13.00 12.51

4.94

4.25 13.44 11.99

Source: Morningstar, Ltd

1 Olivers Yard, 55-71 City Road
London EC1Y 1HQ United Kingdom
www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001

out a slight gain Wednesday as

shares largely treaded water following a sharp rise the day before.
The S&P/ASX 200 finished 2.50
points higher at 5686.80, a fourth
straight rise for the index but off
the days highs, above the 5700
mark for the first time since June 2.
The index had risen 74.1 points, or
1.3%, on Tuesday, driven in part by
gains in bank stocks.
Bradford Frischkorn
contributed to this article.

NAV
GF AT LB DATE CR

FUND NAME
GC Hi Yield Inc-Cls P USD MDIs sh
GC Hi Yield Inc-ClsA MDIs EUR H
Hi-Div Stk Cls A1
Hi-Div Stk Cls A2 MDIs
Hi-Div Stk Cls A2 MDIs AUD H
Hi-Div Stk Cls A2 MDIs CAD H
Hi-Div Stk Cls A2 MDIs GBP H
Hi-Div Stk Cls A2 MDIs HKD
Hi-Div Stk Cls A2 MDIs NZD H
Intel-China Converg Fund-A Units
Intel-Chinese Mainland Foc Fund
VP Classic-A Units
VP Classic-B Units
VP Classic-C Units
VP Classic-C Units AUD H
VP Classic-C Units CAD H
VP Classic-C Units NZD H
VP Taiwan Fund

OT
OT
OT
OT
OT
OT
OT
OT
OT
AS
AS
AS
AS
AS
AS
AS
AS
AS

OT
OT
OT
OT
OT
OT
OT
OT
OT
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ

CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM

06/23 USD
06/23 EUR
06/23 USD
06/23 USD
06/23 AUD
06/23 CAD
06/23 GBP
06/23 HKD
06/23 NZD
06/23 USD
06/23 USD
06/23 USD
06/23 USD
06/23 USD
06/23 AUD
06/23 CAD
06/23 NZD
06/23 USD

NAV
9.33
10.43
84.47
12.82
11.74
11.76
11.16
11.72
11.82
189.42
52.15
325.41
147.57
18.75
15.41
15.18
15.42
16.04

%RETURN
YTD 12-MO 2-YR
8.4
NS
13.2
13.2
14.4
13.5
NS
13.3
15.1
29.0
28.4
21.9
21.6
22.5
24.1
24.0
25.6
4.0

5.8
NS
21.0
21.1
23.9
22.0
NS
21.1
24.7
59.6
55.4
46.7
45.9
47.5
53.3
51.5
53.6
-3.3

7.2
NS
16.2
16.6
NS
NS
NS
NS
NS
30.8
29.3
27.9
27.2
28.0
NS
NS
NS
10.3

n WEBSITE: WWW.VALUEPARTNERS.COM.HK, TEL: (852) 2880 9263

China A-Share Fund Cls A AUD H
China A-Share Fund Cls A AUD UnH
China A-Share Fund Cls A CAD H
China A-Share Fund Cls A EUR H
China A-Share Fund Cls A GBP H
China A-Share Fund Cls A GBP UnH
China A-Share Fund Cls A HKD H
China A-Share Fund Cls A HKD UnH
China A-Share Fund Cls A NZD H
China A-Share Fund Cls A NZD UnH
China A-Share Fund Cls A RMB (CNH)
China A-Share Fund Cls A USD
China A-Share Fund Cls A USD H
China Greenchip-A Units
China Greenchip-A Units AUD H
China Greenchip-A Units CAD H
China Greenchip-A Units NZD H
China Greenchip-A Units USD
China Greenchip-A2 QDIs Units
GC Hi Yield Inc - Cls A MDIs GBP H
GC Hi Yield Inc-Cls A MDIs AUD H
GC Hi Yield Inc-Cls A MDIs CAD H
GC Hi Yield Inc-Cls A MDIs NZD H
GC Hi Yield Inc-Cls P HKD Acc sh
GC Hi Yield Inc-Cls P HKD MDIs sh
GC Hi Yield Inc-Cls P MDIs SGD H
GC Hi Yield Inc-Cls P USD Acc sh

OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
AS
AS
AS
AS
AS
AS
OT
OT
OT
OT
OT
OT
OT
OT

OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
EQ
EQ
EQ
EQ
EQ
EQ
OT
OT
OT
OT
OT
OT
OT
OT

HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
HKG
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM
CYM

06/23 AUD
06/23 AUD
06/23 CAD
06/23 EUR
06/23 GBP
06/23 GBP
06/23 HKD
06/23 HKD
06/23 NZD
06/23 NZD
06/23 CNH
06/23 USD
06/23 USD
06/23 HKD
06/23 AUD
06/23 CAD
06/23 NZD
06/23 USD
06/23 HKD
06/23 GBP
06/23 AUD
06/23 CAD
06/23 NZD
06/23 HKD
06/23 HKD
06/23 SGD
06/23 USD

14.47
13.63
13.70
14.41
14.00
13.88
14.49
14.72
14.17
13.33
14.89
14.65
14.39
69.40
11.81
11.67
11.97
11.64
12.82
10.01
9.53
9.55
9.71
12.41
9.27
10.00
12.51

FUND NAME

NAV
GF AT LB DATE CR

Platinm-Emancipation
Platinm-Equity Plus
Platinm-Gbl Dividend
Platinm-Nordic
Platinm-Premier
Platinm-Turnberry

OT
OT
GL
OT
OT
OT

EQ
OT
EQ
OT
OT
BD

CYM
USA
CYM
CYM
CYM
USA

05/31
05/29
05/31
10/31
12/31
02/28

USD
USD
USD
SEK
USD
USD

NAV
105.47
35.02
NS
NS
NS
60.14

n WINTON CAPITAL MANAGEMENT LTD

Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301

Platinm-All Star
Platinm-All Weather
Platinm-Dynasty

YTD

UBS (Lux) ES
UBS Fund
USDLUX
US Opp $ P Acc Management (Luxembourg) S.A.
Robeco US
Robeco Luxembourg USDLUX
Premium Equities D USD S.A.
Robeco US
Robeco Luxembourg EURLUX
LargeCapEquitiesDEURAcc S.A.
MFS
MFS Meridian Funds USDLUX
Meridian US Value B1 USD
T. Rowe
T. Rowe Price
USDLUX
PriceUSLargeCapValEqIUSD (Luxembourg) Mgmt S.ar.L
BGF US Basic
BlackRock
USDLUX
Value A2
(Luxembourg) S.A.
Eastspring
Eastspring
USDLUX
InvNorthAmericanValueA Investments (Singapore) Ltd
Deutsche Asset
DB Platinum
USDLUX
IV CROCI US R1C Wealth Management Inves
EdR US Value
Edmond de
EURFRA
Yield C
Rothschild Asset Management
Franklin
Franklin Templeton
USDLUX
Mutual Beacon A Acc $ Investment Funds

NAV
GF AT LB DATE CR

TNI MENA Special Sits Fund OT

TNI MENA UCITS Fund
OT
TNI UAE Blue Chip Fund
OT

LEGAL
CURR. BASE

FUND MGM'T CO.

25.0
NS
25.2
25.4
21.4
30.6
24.5
27.6
22.9
NS
26.1
27.7
24.2
13.9
13.9
12.8
15.2
13.5
14.0
NS
9.4
8.5
10.4
8.3
8.2
8.6
8.3

NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
17.8
18.2
16.8
20.3
16.6
18.0
NS
8.0
6.3
9.7
5.9
5.8
NS
5.8

NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
NS
17.2
NS
NS
NS
NS
NS
NS
NS
NS
NS
7.2
7.2
NS
7.2

[ALTERNATIVE INVESTMENT FUNDS www.WSJ.com] Advertisement

n PLATINUM CAPITAL MANAGEMENT

Tel: +44 207 024 9840, www.platinumfunds.net
5.7

Funds that invest in stocks of less expensive/slower-growing U.S. large-caps. At least 75% of total assets
are invested in U.S. large-cap equities. Ranked on % total return (dividends reinvested) in U.S. dollars for
one year ending June 24, 2015

Japans stock market rose to its

highest level in more than 18 years
Wednesday, buoyed by optimism
during Asian trading that Greece is
moving closer to a bailout deal with
creditors. China shares continued to
gain their footing following a volatile streak.
ASIA-PACIFIC
The Nikkei Stock
STOCKS
Average ended up
0.3% at 20868.03, its
highest close since Dec. 5, 1996. The
Shanghai Composite Index was up
2.5% and the Hang Seng Index gained
0.3%.
Japan shares have had a steady
run since October. Support has come
from buying by the governments
huge pension fund, a weaker Japanese yen and buying by foreigners.
The Nikkei last broke through the
20000 level in late April.
In China, the Shanghai benchmark built on Tuesdays 2% gain.
Analysts said capital that had been
locked up to potentially subscribe
for coming initial public offerings
flowed back into existing shares,
helping improve liquidity.
The market was recovering after
a volatile session Tuesday in which
analysts said margin callswhen
brokerages ask investors to add
more money to cover loans to buy
stockscaused the benchmark to
plunge nearly 5% intraday. In the
event that investors dont add more
collateral and the market falls further, the brokerage can sell down investors existing holdings automati-

06/22 USD
06/22 HKD
06/22 USD
06/22 USD
06/22 HKD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 HKD
06/22 USD
06/22 USD
06/22 USD
06/22 HKD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 HKD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/22 USD
06/17 HKD
06/22 HKD
06/22 USD
06/22 USD
06/22 USD
04/09 HKD
06/22 USD
06/22 USD

EQ BMU 06/17 USD

US Large-Cap Value Equity

BY CHAO DENG

n PT CIPTADANA ASSET MANAGEMENT

Tel: +62 21 25574 883 Fax: +62 21 25574 893 Website: www.ciptadana.com
Indonesian Grth Fund

Fund Scorecard

Winton Evolution EUR Cls H

Winton Evolution GBP Cls G
Winton Evolution USD Cls F
Winton Futures EUR Cls C
Winton Futures GBP Cls D
Winton Futures JPY Cls E
Winton Futures USD Cls B

GL
GL
GL
GL
GL
GL
GL

OT
OT
OT
OT
OT
OT
OT

CYM
CYM
CYM
VGB
VGB
VGB
VGB

05/29
05/29
05/29
05/29
05/29
05/29
05/29

EUR 1403.67
GBP 1425.77
USD 1780.07
EUR
291.04
GBP
318.08
JPY 20324.17
USD 1035.07

For information about listing your funds, please contact: Freda Fung tel: +852 2831 2504; email: freda.fung@wsj.com

%RETURN
YTD 12-MO 2-YR
0.2
-18.2
3.4
2.6
-55.9
-1.2

-8.5
-63.7
-3.1
4.7
-66.0
-3.0

5.7
-45.6
0.3
1.2
-44.3
NS

1.7
1.7
1.3
1.6
1.6
1.1
1.2

17.2
17.6
16.7
13.6
14.0
13.4
13.2

12.0
12.3
11.9
9.0
9.3
9.0
8.9

LIST YOUR
FUNDS

In print & online. Contact:

wsja.advertising@dowjones.com

26 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

MARKETS

SEC Targets Investor

Agency freezes assets of man who bought Qihoo options before deal
BY JACKY WONG
AND WEI GU
HONG KONGThe U.S. Securities
and Exchange Commission obtained
a court order Tuesday to freeze the
assets of a China-based trader over
what it called suspicious activity
ahead of a $9 billion buyout offer
for a U.S.-listed Chinese Internet
company last week.
Haijian Luo, chief executive of a
Chinese online company, 4399 Co.,
bought about $700,000 of out-ofthe-money call options, or bets that
the stock price of a company will go
up, before last weeks announcement of a buyout offer for Qihoo
360 Technology Co., according to a
statement from the SEC.
A person at Mr. Luos company
said she didnt know how to reach
him.
Mr. Luo made more than $1 million from the bets and requested his
brokerage firm transfer more than
half of the proceeds to a foreign
bank account, the regulator said.
The suspicious timing and size

of Luos trades spurred us to move

swiftly to freeze his proceeds and
ensure that potentially illegal profits cannot be siphoned out of this
account beyond a U.S. courts jurisdiction while our investigation continues, said Andrew M. Calamari,
regional director of the SECs New
York office.

U.S. regulator cites

suspicious timing and
size of the trades.
The SEC said Mr. Luo hadnt
traded Qihoo securities before in his
recently opened U.S. brokerage account.
Qihoo said June 17 that it received a buyout offer from a group
that includes its chairman at $77
per American depositary receipt.
The offer came at a 17% premium to
the closing price on June 16, and Qihoo shares jumped 6.2% on June 17.

This isnt the first time the SEC

has looked into trading of U.S.-listed
Chinese stocks by Chinese residents
this year.
In April, the SEC charged two
Beijing residents with insider trading, alleging they purchased stock
options on Chinese e-commerce
company 58.com ahead of its purchase of a $1.6 billion minority stake
in rival Ganji.com.
The Qihoo investigation came
amid a wave of buyout offers for
U.S.-listed Chinese companies as existing management and other investors seek to relist those businesses
at higher valuations in China. In
June alone, more than a dozen Chinese companies trading in the U.S.
have received offers to be taken private.
At least three of those companies jumped more than 30% in the
month before the offers, even
though their peers shares were flat
or slightly up in the same period.
Shares of iDreamSky Technology
Ltd., a Chinese mobile-gaming publishing platform, surged 76% in the

Good Timing

Shares of U.S.-listed Chinese companies jumped before buyout offers.

Deal
announced

Target

June 15

iDreamSky
Technology

June 10

Renren

June 12

Bona Film
Group

June 17

Share-price performance in
Index of 30 U.S.-listed
month leading to announcement Chinese stocks

Qihoo 360
Technology

76%

1400

41%

1350

37%

May

shares rise 37% in the month before

the disclosure.
Now the major players of the
U.S.-listed Chinese companies tend
to be rich people who are close to
the technology industry, said Cong
Li, fund manager of Zenas Capital, a
startup Asian hedge fund, and the
former Hong Kong chief investment
officer of Mirae Asset Global Investment.
Institutional investors in the
secondary market are often at an information disadvantage, added Mr.
Li, saying he has stayed away from
those companies recently.

SCANNING THE HORIZON

for the next Top Travel Business Leader.

Find out more about the CNBC Travel Business Leader Award 2015.

KNOWLEDGE PARTNER

RESEARCH PARTNER

PRESENTED AT

June

THE WALL STREET JOURNAL.

Sources: Dealogic, Wind Info (share price); Xueqiu (index)

tbla.cnbc.com

Tuesday:
1387.52

1300

14%

month before its June 15 announcement that it had a $527 million buyout offer from Chairman and Chief
Executive Michael Xiangyu Chen, according to data provider Dealogic.
Renren Inc., a Chinese social-networking site, saw its stock rise 41%
in the month before its June 10 announcement of a $1 billion offer
from existing management to take it
private.
Bona Film Group Ltd., which said
on June 12 that it got a $444 million
proposal from Chairman and Chief
Executive Yu Dong, Sequoia Capital
and Fosun International Ltd., saw its

1450

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 27

BUSINESS & FINANCE

BY ROB COPELAND

Some of Wall Streets biggest investors are outrunning markets for

the first time in years, riding gains
from bets on instability in Europe
and a wave of mergers.
Markets the world over have
been muddled in recent months by
political tensions surrounding
Greece and reservations about the
Federal Reserves expected interestrate increase. The uncertainty has
crimped results for investors large
and small who piled en masse in recent years into exchange-traded
funds that hug closely to now-languishing stock and bond indexes.
For hedge-fund managers including John Paulson, Dinakar Singh and
David Tepper, however, the mixed
signals in the market this year are
proving profitable fodder and come
after years of lackluster performance for the industry. They are up
double-digit percentages, representing billions of dollars in trading
gains and their largest lead over
benchmarks in years.
To be sure, the momentum hedge
funds have built over the first half
of the year could easily reverse if,
for example, deal making slows or
stocks take a quick dive.
This years gains have been
fueled in part by a booming market
for mergers, particularly in the
health-care sector, that is paying off

for traders who predicted potential

targets and acquirers well in advance of any deal announcements.
Money managers also said they
are finding stock prices are moving
increasingly out of sync after years
in lock step, giving them more opportunity to make money zipping in
and out of particular companies.
Stock-focused hedge funds on average are up 5% this year through
the end of May, researcher HFR Inc.
said, compared with a 3.2% rise for
the S&P 500, including dividends.
That is the widest lead such hedgefund managers have had over the
S&P to start a year since 2009,
when they beat the index by about
nine percentage points through May.
Stock pickers havent beaten the
S&P 500 in a full year since 2008.
Theres no doubt theres been a
market change, said hedge-fund
manager Steve Bulko of Lombard
Odier Asset Management (USA)
Corp. Mr. Bulkos $1.1 billion fund is
up more than 8% this year through
mid-June, a person familiar with the
matter said.
Hedge-fund managers earn some
of the highest paychecks on Wall
Street for their ability to navigate
rising and falling markets worldwide. In recent years, however,
many have struggled to keep up
with stocks and other assets as they
surged back from crisis-era lows.
Few have twisted more than Mr.

BLOOMBERG NEWS

Money Managers Are Raking in Profits

John Paulson
Paulson, famed for his well-timed
wager against subprime housing
ahead of the 2008 financial crisis.
After some of his funds posted
their second-worst year ever in
2014, the billionaire has come back,
helped by stakes in companies such
as Salix Pharmaceuticals Ltd. and
Time Warner Cable Inc. in the rapidly consolidating pharmaceutical
and telecommunications industries,
respectively.
Valeant Pharmaceuticals International Inc. acquired drug maker
Salix after a bidding war this past
spring, while Time Warner Cable

agreed to be bought by Charter

Communications Inc. last month in
a deal expected to close by the end
of the year.
The more than $19 billion Paulson & Co.s flagship fund is up 9%,
while a related fund that uses borrowed money, or leverage, has
gained 19%, a person familiar with
the matter said.
Others benefiting from the
merger mania include Larry Robbinss Glenview Capital Management LLC, which made nearly $200
million in paper gains in a single
day from its stake in Humana Inc.
when the health insurers stock shot
up on news last month that it was
exploring a possible sale, according
to a securities filing and a person
familiar with the matter.
Also getting a boost from merger
activity in the health-care sector
was Pentwater Capital Management LP, an M&A-focused firm
founded by electrical engineer Matthew Halbower that is up about 12%
in its main fund, a person familiar
with the matter said.
So far this year, it could not
have played out any better, said
Troy Gayeski, partner at SkyBridge
Capital LLC, which invests $13 billion into hedge funds.
In boom times for stocks, hedgefund managers often explain their
muted performance by pointing out
they hold offsetting positions,

known as a long-short investing

style.
That has the dual effect of
shielding investors from the full impact of any market downturn and
acting as a drag on performance in
sustained bull-market environments.
Money has continued to flow
into the hedge-fund industry, increasingly from institutional investors looking for protection from future turmoil.
Not everyone has had a smooth
ride in 2015. Many macro managers,
who try to predict global trends, already have given back many of their
gains from earlier this year due to
potholes in the path of appreciation
for the U.S. dollar and unexpectedly
weak economic data.
Some managers who have taken
more atypical bets also have been
left on the sidelines.
Kyle Basss Hayman Capital
Management LP is suffering early,
if shallow, losses as it embarks on a
new strategy of filing patent challenges against pharmaceutical companies while betting against their
shares. Haymans main fund is down
about 2% through the end of May,
according to an investor update reviewed by The Wall Street Journal.
Still, this years turn has provided relief to some managers who
had been experiencing steady
shrinkage of assets under management.

Foreign-Exchange Reserves Dwindle at Central Banks

Continued from page 19

currency bonds.
Foreign reserves are regarded as
a gauge of a countrys ability to
withstand currency swings. Many
emerging countries have allowed
their currencies to float since the
1990s Asian financial crisis, but
their central banks still engage in
periodic interventions to prevent
excessive volatility in exchange
rates. During the first quarter, volatility in the worlds currency market
reached a fever pitch, leading many
to spend billions of reserve dollars
to defend their currencies.
The IMF is scheduled to release
its official count on foreign reserves
June 30 through a quarterly report
titled the Currency Composition of
Official Foreign Exchange Reserves,
or Cofer. Previous Cofer reports
showed reserves already had dwindled for two quarters, to $7.7 trillion
by the end of 2014; the latest decline would bring the total reserve
losses to $542 billion, a 6.7% drop
from mid-2014.
Part of the recent reserve decline

was due to a broad dollar rally.

A surging dollar leads to lower
values for reserves held by emerging countries in euro, yen and other
hard currencies. Morgan Stanley Investment Management estimated
that about 40% of the reserve drop
was due to currency-valuation
changes.
But Olivier Desbarres, an independent emerging-market strategist,
estimated the entirety of this fall
was due to currency fluctuations.
Estimates vary widely because
China doesnt disclose the currency
composition of its reserves.
The decline represents a reversal
from a decadeslong trend of rapid
reserve accumulation in developing
countries amid strong capital inflows and trade surpluses. According to the IMF, total emerging-market foreign reserves rose from
$610.6 billion in 1999 to peak at $8.1
trillion last June.
The buildup lately has reversed,
as these countries face slower
global trade and weaker growth.
More recently, the dollars surge,

World Turns

Foreign-exchange reserves have slumped following a long runup, raising concerns

about the stability of some emerging-market economies.
Total foreign-exchange reserves in
emerging countries, quarterly
$8 trillion

Currency performances against U.S.

dollar this year
20%

Russia
0

20

40

60

China
South Africa
Turkey
Ukraine

1999 2000

10

Note: 1Q 2015 is an estimate

Sources: International Monetary Fund (reserves); Tullett Prebon

M A

M J

THE WALL STREET JOURNAL.

falling commodity prices and some

country-specific problems have
come into play, exacerbating the
drain in reserves.
Nearly half of the decline$113
billionwas in China, which faces
shrinking trade surpluses and growing capital outflows. Its central bank
was also seen to have propped up
the value of its currency by selling
dollars, driving its foreign reserves
down to $3.7 trillion.
Russias reserves also fell last
quarter, as the central bank attempted to bolster its currency amid
lower oil prices and sanctions. But
Moscow managed to arrest the reserves decline, and it resumed purchasing dollars recently. Saudi Arabia, Nigeria and Malaysia also
suffered steep reserve losses due to
reduced revenues from commodity
exports.
The reserve drain is a confirmation of all the potential stresses that
are facing emerging markets right
now and probably going forward,
said James McCormack, global head
of sovereign ratings at Fitch Ratings.
The IMF publishes the total official reserve assets in its International Financial Statistics data set,
which include countries reserves
held in foreign currencies, gold,
Special Drawing Rights and positions with the IMF. (The SDR is an
international reserve asset created
by the IMF to supplement its financing efforts.)
What happened over the past
year was very striking, said Charles
Collyns, chief economist at the Institute of International Finance. It
indicates that a number of emerging
countries have greater external vulnerabilityin some cases raising
concerns about the possibility of an
external crisis.
Venezuela is making every effort
to avoid such a crisis. Its reserves
fell to a 12-year low of $17.9 billion
in May as the economy struggled.

The government has been desperate

to shore up its reserves by borrowing from China and selling some assets. Yet its currency, the bolivar,
has collapsed in the unofficial market. Officially, the bolivar is pegged
to the dollar at a fixed rate of 6.3,
but lately a dollar has been buying
about 465 bolivars.
The environment has turned

less supportive for flows into

emerging markets, said Jens Nystedt, a portfolio manager for emerging-market debt at Morgan Stanley
Investment Management. Those
countries that are adjusting properlyhave a lot more degrees of
freedom to deal with any shock.
James Ramage
contributed to this article.

ADVERTISEMENT

The Mart
BUSINESS OPPORTUNITIES

4+)&%56+-9,%(,+B *0)0)5
>;;>62/)02B
*.?8"# ("7#:$' *4

1**W!A& F D6O*< (@< FA Z#- F.<* 8<F.8 @( UFA, RG +G) B!U* (<@A8F&* FU@A&
3*F<U 2!4*< RG :!&A!(!.FA8 :FA,J &<F4*U T .UFO <*:*<4*:H 2@F,:J +I?$F:*
?@R*<J :.FU*: FA, :.FU* $@6:* !A ?UF.*J FUU@R!A& (@< !BB*,!F8* !A:8FUUF8!@A
@( R*8 B!A!A& ?UFA8H 3<@?H !A.U6,*: + (6UUO (6<A!:$*, <*:!,*A8!FU ,R*UU!A&:H

3$V Z%%IX%XI///' Q % ! 59*FUU=S>6!8O3F<8A*<:NPH.@B

9O @<,*< @( 8$* 01 9FAW<6?8.O 7@6<8C 7F:* " %V/'IDWI'E#9*!A& @((*<*, !A .@AY6A.8!@A R!8$ LFQ ;6.8!@A**<:J
K1 9<@W*< " /'/E%

BUSINESS OPPORTUNITIES

TRAVEL

2>>, +)& &09

;69(040>)
*+(30)9 43>;

*'"& ($ )% !+#

27!A1"' *4
)' O*F< @U, ?<*.!:!@A BF.$!A*
:$@? (@< :FU*H 7<*F8* ?<*.!:!@A
,!*: FA, 8@@U!A&J ,*:!&A FA, D6!U,
?<@8@8O?* ?F<8: FA, <*4*<:*
*A&!A**<!A& @( ?F<8:H --JEEE :>H(8H
?UFA8 A*F< 8$* A*R MI-- .@<<!,@<H
' 8@A D<!,&* .<FA* (@< UF<&*<
?<@Y*.8:H 7@A8F.8V

3A?8:.=A 9@78:$ ;.?:#A?<

3$V Z%%IX%XI///' Q%
,D*FUU=*>6!8O?F<8A*<:$&H.@B

&)0.B 9 (=.)>3..
%#?'!#*?%"#*$

72,)& $-&+-*5%. ")&(' 4&2#5+

65#5& 8+! ")20/ $12-*3
77726;;CB0<:3A2>3B
81445 -@/+1,,D

Businesses For Sale.

Call (852) 2831-2553,
(65) 6415-4279
or (813) 6269-2701

28 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

BLUE CHIPS & BONDS

Dow Jones Asia Titans: Wednesday's best and worst...

Major players &

benchmarks

At right, a look at the Asia Titans, the biggest and best known
companies in Asia. Below, some of the Dow Jones Titans indexes
of biggest and most liquid stocks in individual countries and regions

Giants around the world

Dow Jones Country Titans
Previous session

Italy
China 88

INDEX PERFORMANCE
Year-to-date

52-week

22.6%

-0.62%
1.60

22.5

7.3%
107.9

France

-0.33

18.1

12.6

Netherlands

-0.98

18.0

25.3

Germany

-0.76

14.0

12.5

Hong Kong

-0.54

13.4

12.6

Spain

-0.84

11.3

4.8

Sweden

-0.61

10.7

15.9

U.K.

0.34

Switzerland

4.2

-0.62

Singapore

0.18

South Korea

0.26

-0.6%

Turkey

1.20

-2.6

Brazil

-0.12

Country

Industry

Volume
in millions

Tencent Holdings

Hong Kong

Internet

$21.82

163.70

PetroChina

Hong Kong

Integrated Oil Gas

158.21

9.10

Itochu

Japan

Industrial Suppliers

12.03

1,716

CNOOC

Hong Kong

Exploration Production

64.78

11.46

Hyundai Motor

Korea

Automobiles

0.68

133,000

10.7%

11.9

9.8

15.6

Asian 50

-0.08

9.4

1.9

Constructn Mat

-0.79

8.2

-5.7

Retail

-0.33

8.1

18.1

Auto & Parts

-0.57

7.3

-0.2

Telecomm

-0.46

6.4

2.7

Pers H'hold Gds

-0.04

6.3

5.5

Fincl Svcs

-0.39

6.2

15.2

Media

-0.26

5.8

13.0

5.7

-1.6

Chemicals

-1.03

Global 50

-0.14

2.3

0.2

Technology

-0.02

1.3

8.1

Arab 50

0.15

9.8

1.53

-41.8

-21.3

14.9

15.2
-1.9

4,061

0.20

1,302,000

-1.44

-1.4

China Mobile

Hong Kong

Mobile Telecommunications

17.91

103.20

-1.43

38.5

13.8

Rio Tinto

Australia

General Mining

1.93

55.67

-1.19

-5.8

-4.0

AIA Group

Hong Kong

Life Insurance

19.03

52.30

-0.85

35.3

21.6

-2.31%

...And the rest of Asia's blue chips

Company/Country (Industry)

Volume
in millions

Industrial Commercial Bank of China 230.81

Hong Kong (Banks)
Nomura Holdings
33.37
Japan (Investment Services)
SoftBank
10.28
Japan (Mobile Telecommunications)
Japan Tobacco
4.23
Japan (Tobacco)
Nissan Motor
14.71
Japan (Automobiles)
Mitsui Co.
9.39
Japan (Industrial Suppliers)
Nippon Telegraph Telephone
2.19
Japan (Fixed Line Telecommunications)
Bank of China
379.59
Hong Kong (Banks)
Sumitomo Mitsui Financial Group
7.80
Japan (Banks)
Mitsubishi UFJ Financial Group
76.67
Japan (Banks)
Australia New Zeald Bkg
5.37
Australia (Banks)
Seven I Holdings
2.63
Japan (Broadline Retailers)
Hon Hai Precision Industry
23.04
Taiwan (Electrical Components Equipment)
Commonwealth Bk Australia
2.95
Australia (Banks)
Mizuho Financial Group
318.42
Japan (Banks)
Hitachi
19.82
Japan (Electronic Equipment)
Nippon Steel Sumitomo Metal
29.35
Japan (Iron Steel)
National Australia Bank
4.99
Australia (Banks)
Taiwan Semiconductor Manufacturing 21.13
Taiwan (Semiconductors)
KDDI
5.30
Japan (Mobile Telecommunications)

-6.1

-4.3%

32.8

$6.74

Dow Jones Regional Sector Titans

-0.01

31.7
-15.0

2.69

Automobiles

-30.1

-0.23

6.1

Semiconductors

4.7

Tiger 50*

-5.1

Japan

1.1

Health Care

45.5%

2.71

2.14

YTD

42.1%

Korea

-10.8

-8.9

52-week

3.54%

Honda Motor

4.3

0.2

STOCK PERFORMANCE
Previous session

Samsung Electronics

-0.2

1.6

Previous
close, in
local currency

Company

*Asia excluding Japan

Source: SIX Financial Information

Latest,
in local
currency

STOCK PERFORMANCE
Latest 52-week
YTD

1.36%

39.4%

18.7%

842.00

6.72

1.27

15.0

22.0

7,518

1.25

-0.3

4.3

4,581

1.16

23.9

37.6

1,278

1.11

31.7

20.9

1,710

0.91

4.9

5.4

8,953

0.74

42.9

44.1

5.44

0.74

58.6

24.5

5,522

0.64

28.7

26.2

912.20

0.63

46.7

37.3

33.64

0.63

0.7

4.8

5,275

0.61

24.0

21.0

97.60

0.51

13.3

11.0

87.19

0.50

7.6

1.8

271.80

0.48

31.9

34.2

843.40

0.43

15.1

-6.4

330.80

0.39

1.8

9.9

34.52

0.35

5.2

2.7

145.00

0.35

17.4

2.8

2,967

0.25

48.1

16.5

Latest,
in local
currency

Volume
in millions

Company/Country (Industry)

Woodside Petroleum
2.02
Australia (Exploration Production)
NTT DoCoMo
4.90
Japan (Mobile Telecommunications)
Reliance Industries GDR
0.23
United Kingdom (Exploration Production)
Takeda Pharmaceutical
2.53
Japan (Pharmaceuticals)
Sun Hung Kai Properties
2.33
Hong Kong (Real Estate Holding Development)
Mitsubishi
5.47
Japan (Industrial Suppliers)
Wesfarmers
3.06
Australia (Home Improvement Retailers)
Shin-Etsu Chemical
1.67
Japan (Specialty Chemicals)
Westpac Banking
5.05
Australia (Banks)
BHP Billiton
7.75
Australia (General Mining)
Fanuc
0.85
Japan (Industrial Machinery)
China Life Insurance
28.62
Hong Kong (Life Insurance)
Toyota Motor
7.25
Japan (Automobiles)
Tokio Marine Holdings
2.36
Japan (Property Casualty Insurance)
East Japan Railway
0.84
Japan (Travel Tourism)
China Construction Bank
296.41
Hong Kong (Banks)
Komatsu
3.33
Japan (Commercial Vehicles Trucks)
Canon
5.67
Japan (Electronic Office Equipment)
POSCO
0.22
Korea (Iron Steel)
Woolworths
4.22
Australia (Food Retailers Wholesalers)

STOCK PERFORMANCE
Latest 52-week
YTD

36.03

0.22%

-12.9%

-5.2%

2,350

0.21

36.2

32.9

31.00

0.16

-11.7

9.9

6,067

0.08

28.9

21.4

129.30

0.08

22.9

9.3

2,799

-0.05

31.1

26.2

40.45

-0.07

-3.5

-3.0

7,610

-0.08

23.0

-3.3

33.67

-0.09

-0.5

1.5

28.55

-0.21

-15.6

4.0

26,365

-0.23

48.4

32.2

35.00

-0.28

71.6

15.5

8,449

-0.31

41.8

11.8

5,140

-0.37

51.0

30.7

11,305

-0.40

42.2

23.9

7.37

-0.41

28.2

16.1

2,567

-0.41

10.9

-4.4

4,201

-0.43

22.9

9.4

230,000

-0.43

-22.6

-16.5

26.70

-0.56

-25.3

-13.0

Sources: SIX Financial Information; WSJ Market Data Group

Tracking
credit
markets &
dealmakers

Credit derivatives

At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and
how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a
sense which way the market was moving yesterday.

Markit iTraxx Indexes

Showing the biggest improvement...

Index: series/version

Mid-spread,
in pct. pts.
Mid-price

Europe: 23/1
Eur. High Volatility: 20/1
Europe Crossover: 23/1
Asia ex-Japan IG: 23/1
Japan: 23/1

Coupon

SPREAD RANGE, in pct. pts.

since most recent roll
Maximum Minimum
Average

Spreads on
ve-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.

CHANGE, in basis points

101.66%

0.01%

0.76

0.53

0.62

0.52

101.66

0.01

0.66

0.48

0.54

Korea Dep Ins

47

Komatsu

25

2.87

109.49

0.05

3.35

2.43

2.79

Mitsui Chems

81

Asahi Group Hldgs

33

Yesterday Yesterday Five-day 28-day

Yesterday Yesterday Five-day 28-day

1.07

99.70

0.01

1.15

1.04

1.08

Expt Import Bk of China

96

10

Nissan Mtr

27

0.56

102.19

0.01

0.62

0.48

0.54

Japan Tob

27

JX Hldgs

58

Nippon Yusen Kabushiki

Kaisha

55

Bridgestone

21

...

Sumitomo Rlty Dev

58

12

Mitsui

40

107

KDDI

23

...

Nomura Secs

58

Cen Japan Rwy

26

...

Mitsui Fudosan

36

Mazda Mtr

49

...

Tohoku Elec Pwr

37

182

In percentage points

Index roll

2.00

Asia ex-Japan IG
t

1.50
1.00

Spreads

And the most deterioration

CHANGE, in basis points

0.66

Note: Data as of June 23

NOTICE TO READERS
All statistics published in
The Wall Street Journal
Asia from markets outside
the Asian-Pacific region
reflect preliminary data.

Credit-default swaps: Asian companies

Spreads on credit derivatives are one way the market rates

creditworthiness. Regions that are treading in rough waters
can see spreads swing toward the maximumand vice versa.
Indexes below are for five-year swaps.

Australia

Bk of China

Wan Hai Lines

Source: Markit Group

0.50
0

Jan. Feb. Mar. April May June

2015
Source: Markit Group

Behind Asia's deals: Bank revenue rankings, Australia

Behind every IPO, bond offering, merger deal or syndicated loan is one or more investment banks. Here are
investment banks ranked by year-to-date revenues from recent deals.

Macquarie Group

WSJ.com>>

Follow the markets throughout the day, with updated

stock quotes, news and commentary at WSJ.com/Email.
Also, receive emails that summarize the days trading in
Europe and Asia. To sign up, go to WSJ.com.

Revenue,
in millions

share

Equity
capital markets

$104

12.9%

46%

PERCENTAGE OF TOTAL REVENUE

Debt
Mergers &
capital markets
acquisitions

4%

49%

Loans

...

JPMorgan

74

9.0

12

71

11

6%

UBS

68

8.4

59

20

22

...
9

Bank of America Merrill Lynch

55

6.8

56

13

22

Morgan Stanley

42

5.2

70

11

14

Goldman Sachs

40

4.9

26

15

53

ANZ

38

4.7

...

58

...

42

Deutsche Bank

35

4.4

44

34

21

Citi

35

4.3

25

36

36

3
Source: Dealogic

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 29

GLOBAL MARKETS LINEUP

Commodities

Currencies

Prices of futures contracts with the most open interest

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; NYBOT: New York Board of Trade; MDEX: Bursa Malaysia
Derivatives Berhad; MATIF: Marche a Terme International de France; LME: London Metal Exchange; NYMEX: New York Mercantile Exchange;
ICE: IntercontinentalExchange. *Data as of 6/23/2015.
Year
ONE-DAY CHANGE
Commodity
Exchange
Last price
Net
Percentage
high

Corn (cents/bu.)
Soybeans (cents/bu.)
Wheat (cents/bu.)
Live cattle (cents/lb.)
Cocoa ($/ton)
Coffee (cents/lb.)
Sugar (cents/lb.)
Cotton (cents/lb.)
Rapeseed (euro/ton)
Cocoa (pounds/ton)
Robusta coffee ($/ton)

CBOT
CBOT
CBOT
CME
ICE-US
ICE-US
ICE-US
ICE-US
MATIF
ICE-EU
ICE-EU

Copper ($/lb.)
Gold ($/troy oz.)
Silver ($/troy oz.)
Aluminum ($/ton)*
Tin ($/ton)*
Copper ($/ton)*
Lead ($/ton)*
Zinc ($/ton)*
Nickel ($/ton)*

COMEX
COMEX
COMEX
LME
LME
LME
LME
LME
LME

Crude oil ($/bbl.)

Heating oil ($/gal.)
RBOB gasoline ($/gal.)
Natural gas ($/mmBtu)
Brent crude ($/bbl.)
Gas oil ($/ton)

373.50
960.00
529.00
150.450
3,284
134.80
12.03
64.33
387.25
2165.00
1819.00

1.50
-0.75
2.00
-1.375
33
5.10
0.26
-0.22
1.50
22.00
64.00

2.6135
1172.80
15.855
1,723.00
15,210.00
5,734.00
1,785.00
2,040.00
12,700

-0.0015
-3.80
0.083
30.50
10.00
64.00
4.00
3.50
75

60.25
1.8828
2.0278
2.757
64.10
578.75

-0.76
-0.0360
-0.0155
0.011
-1.03
-7.25

NYMEX
NYMEX
NYMEX
NYMEX
ICE-EU
ICE-EU

426.50
1,031.50
613.00
156.300
3,299
191.40
16.70
66.99
388
2,167
2,116

0.40%
-0.08%
0.38
-0.91
1.02
3.93
2.21
-0.34
0.39
1.03
3.65

Year
low

351.75
895.75
469.25
137.950
2,667
126.30
11.52
61.28
330
1,844
1,592

0.53
1.80
0.07
1.13
0.22
0.17
0.59

64.12
2.0684
2.1371
3.1880
71.37
630.75

-1.25
-1.88
-0.76
0.40
-1.58
-1.24

PREVIOUS SESSION

Index

Close

ASIA-PACIFIC

DJ Asia-Pacific TSM

1556.01

-1.72

Australia

SPX/ASX 200

5686.80

2.50

Shanghai Composite
Hang Seng

India

S&P BSE Sensex

Net change

4690.15

113.66

27404.97

71.51

27729.67

Indonesia

Jakarta Composite

Japan

Nikkei Stock Average

In
U.S. dollars

Argentina peso-a

10.1319

0.0987

9.0678

0.1103

Brazil real

3.4505

0.2898

3.0881

0.3238

Canada dollar

1.3868

0.7211

1.2413

0.8056

632.60

0.001581

706.84

0.001415

2873.00

0.0003481

1.1174

0.8950

17.2657

0.0579

15.4525

0.0647

3.5493

0.2817

3.1765

0.3148

Uruguay peso-e

29.979

0.0334

26.830

0.0373

1.1174

0.8950

7.04

0.142029

6.30

0.158696

Venezuela bolivar

EUROPE

ASIA-PACIFIC
Australia dollar

1.4531

0.6881

1.3004

China yuan

6.9393

0.1441

6.2045

0.1612

Hong Kong dollar

8.6620

0.1154

7.7528

0.1290

70.9870

0.0141

63.5629

0.0157

14878 0.0000672

13315

0.0000751

India rupee
Indonesia rupiah

0.7690

Japan yen

138.80

0.007204

124.24

0.008049

Kazakhstan tenge

208.87

0.004789

186.27

0.005369

Macau pataca

9.0512

0.1105

8.1006

0.1234

Malaysia ringgit-c

4.2065

0.2377

3.7700

0.2653

New Zealand dollar

1.6269

0.6147

1.4560

0.6868

Pakistan rupee

113.802

0.0088

101.850

0.0098

Philippines peso

50.394

0.0198

45.121

0.0222

Singapore dollar

1.5028

0.6654

1.3450

0.7435

South Korea won

1242.11 0.0008051

1111.66 0.0008996

Sri Lanka rupee

150.08 0.0066630

134.32 0.0074449

Taiwan dollar

34.620

0.02889

30.984

0.03227

Thailand baht

37.800

0.02646

33.800

0.02959

Per
In
U.S. dollar
U.S. dollars
Per
In
In euros
U.S. dollar
U.S. dollars

In euros

Per euro

Bulgaria lev

1.956

0.5113

1.7506

0.5712

Croatia kuna

7.591

0.1317

6.794

0.1472

Euro zone euro

2570.88 0.0003890

Peru sol
U.S. dollar

Per euro

0.8950

1.1174

Czech Rep. koruna-b

27.257

0.0367

24.395

0.0410

Denmark krone

7.4597

0.1341

6.6767

0.1498

Hungary forint

310.89

0.003216

278.25

0.003594

Iceland krona

147.76

0.006768

132.24

0.007562

Norway krone

8.8064

0.1136

7.8825

0.1269

Poland zloty

4.1731

0.2396

3.7350

0.2677

Russia ruble-d

60.913

0.01642

54.514

0.01834

Sweden krona

9.2356

0.1083

8.2665

0.1210

Switzerland franc

1.0469

0.9552

0.9370

1.0672

Turkey lira

2.9914

0.3343

2.6775

0.3735

23.7491

0.0421

21.1790

0.0472

0.7129

1.4032

0.6379

1.5676

Bahrain dinar

0.4212

2.3744

0.3769

2.6529

Egypt pound-a

8.5310

0.1172

7.6350

0.1310

Israel shekel

4.1905

0.2386

3.7504

0.2666

Kuwait dinar

0.3380

2.9586

0.3025

3.3059

Oman sul rial

0.4302

2.3244

0.3850

2.5972

4.068

0.2458

3.641

0.2747

Ukraine hryvnia
U.K. pound

MIDDLE EAST/AFRICA

Qatar rial
Saudi Arabia riyal

4.1907

0.2386

3.7506

0.2666

South Africa rand

13.5723

0.0737

12.1480

0.0823

United Arab dirham

4.1040

0.2437

3.6730

0.2723

a-floating rate b-commercial rate c-government rate c-commercial rate d-Russian Central Bank rate.
Source: Tullett Prebon

Stock indexes from around the world, grouped by region. Shown in local-currency terms.

Region/Country

Hong Kong

Per
U.S. dollar

Ecuador US dollar-f

WSJ.com>>

China

In euros

Mexico peso-a

Sources: SIX Financial Information; WSJ Market Data Group

Major stock market indexes

Per euro

Chile peso

48.71
1.6136
1.5242
2.5690
53.19
481.00

Follow the markets throughout the day with updated stock quotes, news and commentary at at
WSJ.com. Also, receive email alerts that summarize the days trading in Europe and Asia. To sign
up, go to WSJ.com/Email

AMERICAS

Colombia peso

2.9545
2.4290
1,309.00 1,143.80
18.445
15.350
1,937.50 1,690.50
19,750.00 14,425.00
6,445.00 5,369.00
2,137.00 1,698.00
2,377.00 2,005.00
15,540
12,320

-0.06
-0.32

London close on June 24

-74.70

PERFORMANCE
Percentage change
Yr.-to-date
-0.11%
0.04%
2.48
0.26

9.1%

4.0%

5.1

5.3

Region/Country

Index

Close

Euro Zone

Euro Stoxx
Euro Stoxx 50
OMX Copenhagen

PERFORMANCE
Percentage change
Yr.-to-date

PREVIOUS SESSION

Net change

371.72

-1.81

-0.48%

3610.95

-15.02

-0.41

861.50

-2.18

52-wk.

16.3%

12.3%

14.8

9.9

-0.25

27.6

28.2

-0.26

10.7

11.6

-0.24

18.1

11.7
15.4

45.0

131.6

Denmark

16.1

19.8

Finland

OMX Helsinki

8586.58

-22.01

9.5

France

CAC-40

5045.35

-12.33

Germany

DAX

11471.26

-71.28

-0.62

17.0

23443.07

-124.18

-0.53

23.3

8.3

492.62

-1.83

16.1

18.5

20.3

-33.0

0.8

-0.27

52-wk.

4953.52

15.87

0.32

-5.2

2.4

20868.03

58.61

0.28

19.6

36.7

Italy

FTSE MIB
AEX

Topix

1679.89

3.49

0.21

19.4

33.2

Netherlands

Malaysia

Kuala Lumpur Composite

1731.68

4.82

0.28

-1.7

-8.4

Russia

RTSI

951.45

-12.87

New Zealand

NZSX-50

5775.49

3.36

3.7

13.1

Spain

IBEX 35

11321.9

-80.60

-0.71

10.1

1.9

Pakistan

KSE 100

34331.94

198.11

6.8

18.5

Switzerland

SMI

9081.81

-55.52

-0.61

1.1

4.7

Philippines

PSEi

7643.33

91.77

Singapore

Straits Times

3351.33

11.55

South Korea

Kospi

2085.53

4.33

Taiwan

Weighted

9397.31

6.17

Thailand

SET

1518.26

15.03

EUROPE

Stoxx Europe 600

397.32

-1.51

Stoxx Europe 50

3437.43

-5.97

S&P Dow Jones Indices

Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

2.90% 21.25
2.67 19.39
2.86 16.93
2.21 17.30
2.17 17.95
2.99 22.08
4.54 16.44
2.99 12.97
9.77 13.09
2.07 14.41
2.38 12.58
1.13 25.97

Net
change

Last

Global TSM
Global DOW
Global Titans 50
Asia/Pacific TSM
S&P BMI Asia Pac Emg Mkts
Dev Europe TSM
S&P BMI Emg Markets
Asian Titans 50
BRIC 50
S&P BMI China
China Offshore 50
Shanghai -c

3471.45
2601.40
244.14
1557.78
183.43
3355.50
261.05
155.76
543.45
552.90
5099.18
645.17

-3.73
-2.87
-0.29
0.05
-0.16
-7.44
0.78
0.05
3.10
3.05
24.45
14.48

Daily

0.06
0.58

11.8

Turkey

BIST 100

84140.65

1072.19

2.8

U.K.

FTSE 100

6844.80

9.93

0.21

8.9

5.2

AMERICAS

DJ Americas

0.07

1.0

1.7

Brazil

Bovespa

0.35

1.00
-0.38
-0.17

PERFORMANCE
YearThree-yr.,
to-date
52-wk. annualized

-0.11%
5.3%
2.6%
-0.11
4.0
0.0
-0.12
2.3
0.1
0.00
9.2
4.4
-0.09
9.9
2.2
-0.22
7.6
-4.3
0.30
4.7
-2.4
0.04
9.5
2.1
0.57
10.2
3.7
0.55
19.3
28.3
0.48
13.2
24.9
2.30
50.0 145.5

5.7
-0.4

1.22

13.3%
13.2
10.6
10.1
9.8
13.5
4.0
8.7
5.3
15.6
13.9
31.3

1.4

3.4

16.0

15.0

14.4

12.3

Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

0.60%53.06
1.93 23.23
6.00 16.12
6.80 14.19

2.03 21.66
2.38 18.95
2.07 12.89
3.76 30.31

U.S.
Australia
Britain
Canada
China
Euro
Hong Kong
India
Indonesia
Japan
New Zealand
South Korea
Malaysia
Philippines
Singapore
Switzerland
Taiwan
Thailand

US$

Argentina

Merval

11611.92

84.19

IPC

45415.91

-38.24

0.769
1.568
0.806
0.1612
1.117
0.129
0.0157
0.0001
0.008
0.687
0.0009
0.265
0.022
0.743
1.067
0.032
0.030

2.039
1.048
0.209
1.453
0.168
0.0205
0.0001
0.010
0.893
0.0012
0.345
0.029
0.967
1.388
0.042
0.038

0.638
0.490
0.514
0.103
0.713
0.082
0.0100
0.00005
0.005
0.438
0.0006
0.169
0.014
0.474
0.681
0.021
0.019

C$
1.241
0.954
1.946
0.200
1.387
0.160
0.0195
0.0001
0.010
0.853
0.0011
0.329
0.028
0.923
1.325
0.040
0.037

YUAN
6.205
4.775
9.736
5.004
6.939
0.801
0.0977
0.0005
0.050
4.262
0.0056
1.650
0.138
4.618
6.622
0.200
0.184

EURO
0.895
0.688
1.403
0.721
0.144
0.115
0.0141
0.0001
0.007
0.615
0.0008
0.238
0.020
0.665
0.955
0.029
0.026

HK$
7.753
5.962
12.153
6.246
1.248
8.662
0.1220
0.0006
0.062
5.325
0.0070
2.059
0.172
5.764
8.275
0.250
0.229

RUPEE
63.563
48.874
99.592
51.213
10.235
70.987
8.195
0.0048
0.511
43.655
0.0572
16.884
1.409
47.235
67.810
2.052
1.881

RUPIAH
13315.00
10239.24
20872.59
10727.09
2143.95
14877.52
1717.48
209.48
107.17
9144.70
11.98
3531.83
295.10
9899.63
14210.25
438.10
393.59

YEN
124.237
95.540
194.770
100.091
20.005
138.800
16.025
1.9546
0.0093

Last

Shenzhen -c
788.02
U.S. TSM
22254.32
Global Select Div
239.16
Asia/Pacific Select Div 304.41
Hong Kong Select Div -c 197.59
U.S. Select Dividend -d 1407.20
Islamic Market
2998.46
Islamic Market 100
3310.04
Islamic China/HK Titans 30 2005.88
Sustainability Korea -c 1420.93
Brookfield Infrastructure 3502.91
DJ Commodity
560.55

85.330
0.1118
33.001
2.755
92.371
132.600
4.010
3.672

NZ$
1.456
1.120
2.283
1.173
0.235
1.627
0.188
0.0229
0.0001
0.012
0.0013
0.386
0.032
1.083
1.554
0.047
0.043

WON
1111.66
854.76
1742.75
895.67
179.00
1242.11
143.39
17.49
0.08
8.95
763.49
295.29
24.65
826.51
1186.53
35.88
32.89

-1.33

1.29%
0.15
-0.25

-1.8

6.5

4.2

0.9

2.7

5.8

8.1

-0.4

35.4

46.8

5.3

5.9

0.55
0.73
-0.08

European and Americas index data are as of 12:00 p.m. ET. Sources: SIX Financial Information; WSJ Market Data Group

Net
change

16.42
-33.46
-0.58
-0.94
-0.04
-3.29
-2.66
-1.94
12.60
7.04
-7.17
0.64

Daily

PERFORMANCE
YearThree-yr.,
to-date
52-wk. annualized

2.13% 80.7% 150.9%

-0.15
3.9
8.4
-0.24
-0.1 -10.6
-0.31
-1.7 -15.5
-0.02
1.3
2.2
-0.23
-1.5
3.9
-0.09
4.7
3.5
-0.06
4.0
4.2
0.63
15.8
17.1
0.50
3.2
-2.3
-0.20
-2.1
-2.8
0.12
0.0 -22.4

34.6%
17.3
6.5
1.2
3.9
15.9
12.7
13.3
11.3
0.4
11.6
-5.8

Source: S&P Dow Jones Indices

U.S.-dollar and euro foreign-exchange rates in global trading

A$
1.300

-1.32
294.53

Mexico

*Fundamentals are based on data in U.S. dollar. Footnotes: c-in local currency. d-dividends reinvested. p-previous day. Note: All data as of 11:30 a.m. ET.

Cross rates

520.81
54066.96

-0.37

RINGGIT PH. PESO

3.770
45.121
2.895
34.694
5.902
70.705
3.037
36.354
0.606
7.262
4.207
50.394
0.486
5.818
0.0592
0.7099
0.0003
0.0034
0.030
0.363
2.589
30.994
0.0034
0.0406
11.980
0.083
2.799
33.532
4.023
48.160
0.122
1.456
0.111
1.334

S$ S FRANC
1.345
0.937
1.034
0.721
2.109
1.469
1.084
0.755
0.217
0.151
1.503
1.047
0.174
0.121
0.0212
0.0147
0.0001
0.0001
0.011
0.0075
0.924
0.644
0.0012
0.0008
0.357
0.249
0.030
0.021
0.697
1.436
0.043
0.030
0.040
0.028

TW$
30.984
23.824
48.574
24.964
4.989
34.620
3.997
0.4875
0.0023
0.249
21.280
0.0279
8.230
0.687
23.036
33.071
0.917

BAHT
33.800
26.015
52.988
27.233
5.442
37.800
4.364
0.5318
0.0025
0.272
23.234
0.0304
8.978
0.750
25.152
36.076
1.091

Source: Tullett Prebon

MSCI indexes
Developed and emerging-market regional and country indexes
from MSCI as of June. 24, 2015
Price-toDividend earnings
yield
ratio MSCI Index

2.40% 19

MSCI ACWI

LOCAL-CURRENCY
Last

PERFORMANCE

Daily

437.53 -0.03%

YTD

52-wk.

4.9%

3.8%
4.7

2.40

19

World (Developed Markets) 1,795.98

0.01

5.0

1.80

27

World Small Cap

347.02

-0.11

8.3

7.1

2.40

19

Kokusai (World ex-Japan) 1,804.97

0.12

4.2

3.9

2.90

18

EAFE

1,919.64

0.16

8.2

-1.9

2.50

14

Emerging Markets (EM)

990.66

-0.34

3.6

-3.6

2.80

14

AC ASIA PACIFIC EX-JAPAN 489.81

-0.73

4.8

0.5

2.40

13

AC Far East ex-Japan

567.95

-0.75

7.3

5.8

1.70

19

Japan

1,026.93

1.73

18.5

38.9

2.50

12

China

77.70

1.69

17.6

28.7

1.10

25

China A (China Domestic)

4,858.90

2.57

43.8

126.5

2.50

12

Hong Kong

15,568.39

0.47

14.1

13.8

1.40

19

India

1,034.63

0.13

1.8

13.7

1.40

12

Korea

550.31

1.40

2.6

-5.6

3.20

16

Malaysia

602.47

-0.36

-2.3

-8.9

3.50

14

Singapore

1,747.22

0.41

-1.3

0.4

2.70

14

Taiwan

351.93

0.58

2.5

8.7

2.90

17

Thailand

522.66

-0.17

0.1

6.9

1,158.85

1.34

4.8

3.0

109.69

-0.31

-3.3

-2.8

4.50

15

Australia

4.40

20

New Zealand

1.90

21

US BROAD MARKET

3.20

19

EUROPE

2,422.93 -0.09
135.29

1.14

4.1

11.1

15.9

15.2

Source: MSCI

30 | Thursday, June 25, 2015

THE WALL STREET JOURNAL.

SCANNING THE GLOBE

Dow Jones Industrial Average
LAST: 18085.05
YEAR TO DATE:
OVER 52 WEEKS

Nasdaq Composite Index

P/E: 16

t 59.02, or 0.33%
s 261.98, or 1.5%
s 1,217.54, or 7.2%

High
Close
Low

S&P 500 Index

P/E: 23*

LAST: 5141.06
YEAR TO DATE:
OVER 52 WEEKS

t 19.03, or 0.37%

P/E: 22

LAST: 2115.72
YEAR TO DATE:
OVER 52 WEEKS

s 405.01, or 8.6%
s 761.30, or 17.4%

t 8.48, or 0.40%
s 56.82, or 2.8%
s 156.19, or 8.0%

19000

5450

2400

18500

5300

2300

18000

5150

2200

17500

5000

2100

17000

4850

2000

50day
moving average

16500
27

2
10
Apr.

17

24

1
8
May

15

22 29
5
June

12

4700

19

27

2
10
Apr.

17

24

1
8
May

15

22 29
5
June

12

1900

19

27

2
10
Apr.

17

24

1
8
May

*Price-to-earnings ratio for the Nasdaq 100 Note: Price-to-earnings ratios are for trailing 12 months

Stock

Volume,
in millions

Symbol

Latest

CHANGE
Points
Percentage

AmExpress
Apple
Boeing
Caterpillar
Chevron
CiscoSys
CocaCola
Disney
DuPont
ExxonMobil
GenElec
GoldmanSachs
HomeDpt
Intel
IBM
JPMorgChas
JohnsJohns
McDonalds
Merck
Microsoft
Nike B
Pfizer
ProctGamb
3M
TravelersCos
UnitedTech
UtdHlthGp
Verizon
VISA ClA

AXP
AAPL
BA
CAT
CVX
CSCO
KO
DIS
DD
XOM
GE
GS
HD
INTC
IBM
JPM
JNJ
MCD
MRK
MSFT
NKE
PFE
PG
MMM
TRV
UTX
UNH
VZ
V

2.6
34.1
1.8
1.3
2.7
7.4
3.4
2.7
4.6
3.4
10.8
1.7
1.3
9.0
1.6
5.6
2.4
1.6
3.3
11.8
1.2
7.4
2.8
1.1
0.6
1.9
2.1
5.4
1.9

$81.05
129.23
143.71
88.65
100.15
28.61
40.30
114.08
66.59
84.87
27.41
214.30
113.03
31.99
167.10
69.25
99.21
97.02
58.55
45.96
106.60
34.31
79.69
158.63
99.26
114.10
120.13
47.63
69.01

0.31
2.20
0.72
0.20
0.06
0.18
0.08
0.33
1.91
0.20
0.14
4.10
0.15
0.10
1.52
0.50
0.57
0.16
0.48
0.05
0.60
0.19
0.10
1.21
0.74
1.13
2.61
0.14
0.41

0.38%
1.73
0.50
0.23
0.06
0.61
0.20
0.29
2.79
0.24
0.49
1.88
0.13
0.30
0.90
0.72
0.57
0.16
0.81
0.11
0.56
0.54
0.13
0.76
0.74
0.98
2.13
0.29
0.59

WalMart

WMT

2.2

72.43

0.14

0.19

22 29
5
June

12

19

Sources: WSJ Market Data Group; Birinyi Associates

U.S. stocks: most active...

DJIA component stocks

15

ADRs of Asian companies*

Stock

Volume,
Symbol in millions

Latest

CHANGE
Points
Percentage

VelocityShares3x
SPDR S&P 500
Apple
BankAm
FacebookClA
BrcliPathVIX ShFut
CelatorPharm
FordMotor
iShMSCIEmgMarkets
NtlBkGrc ADS
OfficeDepot
VelocityShares3xLg
AT&T
PeabodyEnergy
Freeport-McMoRan

UWTI
SPY
AAPL
BAC
FB
VXX
CPXX
F
EEM
NBG
ODP
UGAZ
T
BTU
FCX

36.1
35.7
34.1
30.5
25.8
22.5
20.4
19.7
19.4
16.1
16.0
15.6
15.2
14.9
14.5

$3.39
211.18
129.23
17.52
88.61
17.17
2.70
15.57
40.90
1.33
8.89
2.03
35.74
2.49
20.93

0.18
0.86
2.20
0.16
0.73
0.16
0.46
0.28
0.14
0.07
0.22
0.02
0.17
0.23
0.82

4.94%
0.41
1.73
0.88
0.83
0.94
20.54
1.80
0.34
5.00
2.41
1.00
0.47
8.46
4.08

PTNT
300.3
HEAR
392.7
EVOK
171.9
CPXX 20,366.9
RCKY
94.3

$3.05
2.52
5.90
2.70
20.25

0.58
0.44
1.04
0.46
2.32

23.48%
21.36
21.34
20.54
12.94

$2.39
3.62
7.05
8.52
8.70

6.70
0.89
1.34
0.87
0.88

73.71%
19.73
15.97
9.27
9.19

52-WEEK
High
Low

$13.24 $9.26
25.77
19.39
69.26 40.22
51.41 33.96
251.99 176.69
6.03
3.77
37.27 26.27
7.62
5.13
87.62 40.74
11.88
3.51
8.12
5.68
18.43
11.49
16.49
2.44
63.97 45.48
2.58
1.94
36.44
28.61
32.95
16.43
9.17
6.30
154.88 73.59
6.12
4.07
75.52 47.97
37.12
18.16
19.88
12.93
31.84 23.84
1.58
0.95
9.29
4.88
26.29 13.02
23.12 18.04
9.50
1.51
150.80 101.64

Biggest gainers...
InternetPatents
TurtleBeach
EvokePharma
CelatorPharm
RockyBrands

...Biggest losers
TranstnThera
DSHealthcareGroup
Alcobra
AntheraPhrm
Energous

TTHI 3,390.3
DSKX 1,201.2
ADHD 1,996.0
ANTH 1,337.6
WATT 1,158.0

Volume,
Symbol in OOOs

Stock

ICICI Bk ADS
TaiwanSemi
BHPBillitonADS
TataMtrs ADS
Baidu ADS
AUOptronicsADS
InfosysADS
MitsuUFJ ADS
CtripInt ADS
ChinaFinOnADS
AdvSemiEnggADS
LGDisplayADS
VimicroIntlADS
HDFCBankADS
UtdMicro ADS
HondaMotorADS
SonyADS
SiliconwareADS
NeteaseADS
SemiMfgInt ADS
ChinaMobile
SiliconMotionADS
ChinaUnicomADS
SKTelecomADS
ChinaTch ADS
KongzhongADS
ChinaLifeInsADS
KoreaElecPwr
Novogen ADS
PtroChna ADS

IBN
TSM
BHP
TTM
BIDU
AUO
INFY
MTU
CTRP
JRJC
ASX
LPL
VIMC
HDB
UMC
HMC
SNE
SPIL
NTES
SMI
CHL
SIMO
CHU
SKM
CNTF
KZ
LFC
KEP
NVGN
PTR

CHANGE
Latest Points Percentage

7,445.5 $10.41 0.02

4,130.8 23.90 0.03
1,409.3 44.54 0.07
1,036.4 34.87 0.36
1,000.0 209.82 2.16
935.4
4.43 0.22
882.4 31.89 0.33
620.6
7.33 0.08
592.7 72.76 1.19
577.2
5.87 0.08
496.0
6.71 0.10
379.9
11.57 0.04
367.3
11.87 0.07
308.9 59.81 0.06
306.1
2.07 0.05
304.9 32.61 0.90
285.4 30.49 0.52
285.3
7.73 0.02
220.9 148.23 2.16
217.1
6.08 0.32
181.2 66.33 0.92
162.2 36.22 0.21
143.8
16.21 0.05
134.4 25.56 0.15
119.7
1.30 0.04
117.8
7.77 0.11
112.3 22.55 0.12
104.4 20.35 0.35
102.7
4.66 0.09
96.5 116.93 1.85

0.19%
0.13
0.16
1.02
1.02
4.73
1.02
1.08
1.61
1.38
1.47
0.35
0.59
0.11
2.36
2.69
1.68
0.26
1.44
5.56
1.37
0.58
0.33
0.58
2.99
1.40
0.53
1.69
1.91
1.61

*Most active American depositary receipts tracked by Dow Jones

Source: WSJ Market Data Group

Country/
Maturity, in years

Yield

4.250

Australia 2

2.038

133.9

137.6

139.6

207.3

3.250

10

3.061

66.6

66.6

71.7

107.2

Coupon

SPREAD OVER TREASURYS, in basis points

Latest
Previous
Month Ago
Year ago

YIELD
Month ago

Year ago

2.052

2.014

2.573

3.075

2.928

3.651

Previous

3.500

Belgium 2

-0.120

-82.0

-80.1

-78.7

-39.6

-0.126

-0.169

0.104

0.800

10

1.249

-114.6

-115.2

-130.5

-80.9

1.257

0.906

1.771

France 2

-0.146

-84.5

-80.7

-77.9

-41.3

-0.131

-0.161

0.087

10

1.224

-117.0

-118.1

-131.7

-91.7

1.228

0.894

1.663

0.500

Germany 2

-0.197

-89.7

-85.8

-83.4

-45.4

-0.182

-0.216

0.046

0.500

10

0.849

-154.5

-153.3

-160.3

-125.6

0.876

0.608

1.323

4.750

Italy 2

0.296

-40.3

-40.8

-50.1

8.6

0.268

0.117

0.586

1.500

10

2.126

-26.8

-27.5

-36.0

18.5

2.134

1.851

2.764

0.100

Japan 2

0.005

-69.4

-67.3

-62.3

-41.7

0.003

-0.005

0.083

0.400

10

0.460

-193.4

-194.1

-179.8

-199.9

0.468

0.413

0.580

0.500

Netherlands 2

-0.170

-87.0

-84.6

-80.7

-42.1

-0.170

-0.188

0.079

0.250

10

1.085

-130.9

-130.9

-141.9

-101.9

1.100

0.792

1.561

4.200

Portugal 2

-0.009

-70.9

-63.7

-60.0

33.1

0.039

0.018

0.831

5%
4
3
2
1

Tuesday
1

month(s)

3.750
0.500

U.S. Treasury yield curve

The curve shows the yield to maturity of current bills, notes and bonds; all data as of 3 p.m. ET.

Global government bonds

Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
and 10-year government bonds around the world. Data as of 12 p.m. ET

One year ago

2 3 5 710

years
maturity

30

Ryan Index

Yield to
maturity

Modified
duration

30-year Treasury
10-year Treasury
7 Year Treasury
Five-year Treasury
Ryan Index
3 Year Treasury
Two-year Treasury
1 Year Treasury
Six-month Treasury
Ryan Cash Index-a
Three-month bill

3.196%
2.409
2.131
1.692
1.866
1.064
0.704
0.298
0.086
0.099
0.010

19.35
8.83
6.46
4.73
7.38
2.92
1.98
0.99
0.50
0.45
0.25

One-month bill

..

0.08

Month
to-date

TOTAL RETURN

Quarter
to-date

6.38 % 12.08 %
2.59
3.73
1.71
2.29
0.96
1.13
1.95
3.21
0.10
0.28
0.10
0.01
0.02
0.11
0.02
0.12
0.01
0.06
...
0.02
...

0.01

a-Performance of a cash investment

Year
to-date 12-month

7.53 %
1.18
0.03
0.68
0.98
1.32
0.54
0.28
0.19
0.13
0.05
0.01

7.59 %
4.28
3.40
2.42
3.57
2.12
0.94
0.42
0.28
0.20
0.06
0.02

Source: Ryan ALM

Key money rates

Latest

Latest

52 wks ago

Prime rates

Euro Libor
One month

52 wks ago

U.S.

3.25%

3.25%

-0.07286%

0.08286%

2.85

3.00

Three month

-0.01571

0.17786

Offer
Eurodollars
One month

Bid

0.2500%

0.1500%

Three month

0.3300

0.2300

2.875

10

2.734

34.0

32.8

21.2

85.9

2.736

2.423

3.438

Canada

5.500

Spain 2

0.305

-39.5

-41.0

-61.0

4.1

0.266

0.009

0.541

Japan

1.475

1.475

Six month

0.05571

0.27357

Six month

0.4500

0.3500

Britain

0.50

0.50

One year

0.16929

0.44171

One year

0.7200

0.6200

1.600

10

2.096

-29.9

-31.4

-43.7

7.0

2.095

1.774

2.649

ECB

0.05

0.15

3.750

Sweden 2

-0.271

-97.0

-96.2

-87.9

-8.7

-0.287

-0.261

0.413

Switzerland

0.50

0.50

Euribor
One month

-0.06600%

0.10400%

Australia

2.00

2.50

Three month

-0.01400

0.21100

U.S. discount

0.75%

0.75%

2.500

10

1.021

-137.3

-134.9

-142.6

-78.4

1.060

0.785

1.795

Hong Kong

5.00

5.00

Six month

0.04800

0.30600

Fed-funds target

0.00

0.00

1.000

U.K. 2

0.802

10.3

9.5

7.0

36.9

0.771

0.688

0.869

One year

0.16300

0.48900

Call money

2.00

2.00

0.15150%

Hibor
One month

Overnight repurchase rates

U.S.
0.10%

2.750

10

2.143

-25.1

-28.4

-27.1

15.7

2.125

1.940

2.737

0.625

U.S. 2

0.699

...

...

...

...

0.676

0.618

0.500

2.125

10

2.394

...

...

...

...

2.409

2.211

2.579

Libor
One month

0.23971%

0.21090%

Three month

0.28075

0.23360

Three month

0.39015

0.37357

Six month

0.44380

0.32630

Six month

0.54214

0.54857

One year

0.76875

0.54710

One year

0.84257

0.86286

0.18700%

Latest

Euro zone

n.a.

52 wks ago

0.12%
n.a.

Sources: WSJ Market Data Group, SIX Financial Information, Tullett

THE WALL STREET JOURNAL.

Thursday, June 25, 2015 | 31

MARKETS LINEUP

Moving the
markets

Asian index movers

At right, Japans benchmark stock index

and the biggest movers among the
larger Asian stocks indexes and stocks
Wednesday. Below each index are its
most actively traded stocks. The charts
show the percentage change in each
indexs or stocks value, rather than the
point change, for purposes of comparison. The index level or stock price is
indicated on each axis. All indexes and
stocks are shown in local currency terms.

Nikkei Stock Average

Japan

20868.03
0.28% or 58.61

The benchmark closed at a morethan-18-year high as a stronger dollar

pushed up heavily weighted shares and
exporters. Fast Retailing rose nearly 1%.

Follow the markets throughout the

day, with updated stock quotes, news
and commentary at WSJ.com.
Also, receive emails that summarize
the days trading in Europe and Asia.
To sign up, go to WSJ.com/Email.

Stock

Volume
in millions

Close

318.42

272

Mizuho Fin

China

4690.15
2.48% or 113.66

Chinese shares jumped, boosted by a

return of funds previously locked up for
purchases of IPOs as well as by Tuesdays manufacturing data.

S&P BSE Sensex

India

27729.67
0.27% or 74.70

News that Greeces creditors rejected

its new proposal for a bailout deal sent
the market lower for an eighth consecutive session, erasing earlier gains.

ASX 200
Australia

5686.80
0.04% or 2.50

The index managed to eke out gains,

helped by a steady recovery in financial
shares. Flight Centre slid further following Tuesdays profit warning.

24000

5400

36000

7500

20000

4500

30000

6250

16000

3600

24000

5000

12000

2700

18000

3750

8000

J A S O N D J F M A M J
2015
2014

WSJ.com>>

Shanghai Composite

Change
Net

Volume
in millions

Close

0.48

GDPowerDevelopment 2098.16

7.53

Stock

J A S O N D J F M A M J
2015
2014
Change
Net

1800
J A S O N D J F M A M J
2015
2014
%

Stock

0.60

8.66

ICICIBank

12000

Volume
in millions

Close

Change
Net

13.62

317.75

4.25

1.36

J A S O N D J F M A M J
2015
2014
Volume
in millions

Close

Alumina

21.48

1.62

Telstra

16.78

6.33

0.05

0.80

MirvacGroup

13.52

1.95

-0.01

0.51

Stock

MitsuUFJFin

76.67

912

0.63

HainanAirlinesA 1164.99

6.87

0.55

8.70

StateBankofIndia

8.36

265.17

2.58

0.96

Sojitz

72.43

306

12

4.08

ChinaMinshengBkA 858.64

9.81

0.49

5.26

BharatHeavyElec

7.32

252.81

9.01

3.70

Tokyo Electric

56.82

696

...

ChnPetro&Chem

651.39

7.29

0.27

3.85

TataMotors

7.08

433.59

2.41

0.55

Sharp

42.57

162

-1

0.61

ChinaUtdNtwkComms 600.21

8.21

0.43

5.53

AxisBank

5.43

571.50

0.20

0.04

Change
Net

2500

0.02

1.25

Arrium

12.41

0.14

-0.01

6.90

TranspacificInds

10.14

0.78

-0.01

0.64

Asian stocks in the news

PetroChina Co. Ltd.

Itochu Corp.

Japan

1,715.50 Hong Kong

s 2.7% or 45

HK$9.10

s 2.7% or HK$0.24

The trading house closed at a more-than

four-week high.

Caixin reported the company may post

profits for the first half sharply above
analysts' estimates.

In yen

In Hong Kong dollars

2500

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield
-0.3%
2.7%

6.32 ringgit Thailand

s 3.6% or 0.22 ringgit

28.50 baht

s 4.6% or 1.25 baht

The shares continued to rise a day after

the firm agreed to take a stake in
Mascotte Holdings.

The company said a fire that broke out

Tuesday evening at one of its silos is now
under control.

The shares have jumped 41% so far this

year.

In Hong Kong dollars

In ringgit

In baht

250

10

50

40

1500

12

150

30

1000

100

20

500

4.2%
32.3%

HK$23.40
t 0.1% or HK$0.01

The bank retreated after gaining

Tuesday on news of its first employee
stock-incentive plan.
In Hong Kong dollars

Malaysia

200

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

17
N.A.
N.A.

30

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Oil & Gas

PetroChina Co. Ltd.

0.4%
2.7%

2.7%
5.5%

-19.1%
-5.4%

China Merchants Bank Co. Ltd. HKT Trust

Hong Kong

HK$163.70

s 3.5% or HK$5.60

16

9
N.A.
2.9
1.8%
1.4%

Hong Kong

Petronas Chemicals Group Bhd Indorama Ventures PCL

2000

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Industrials
Itochu Corp.

20

Tencent Holdings Ltd.

Hong Kong

HK$9.12
t 1.6% or HK$0.15

50

51
N.A.
0.2

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Technology
Tencent Holdings Ltd.

-0.1%
3.5%

2.1%
6.1%

1.7%
42.5%

Li & Fung Ltd.

Hong Kong

HK$6.50
t 1.8% or HK$0.12

22
N.A.
2.5

Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Basic Materials
Petronas Chemicals Group Bhd

-0.6%
3.6%

1.8%
4.1%

-6.5%
-6.8%

136
N.A.
1.3

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Basic Materials
Indorama Ventures PCL

-0.6%
4.6%

1.8%
6.5%

SK C&C Co. Ltd.

Newcrest Mining Ltd.

Korea

10

J A S O N D J F M A M J
2015
2014

269,000 won Australia

t 2.0% or 5,500 won

-6.5%
25.0%

A$13.20
t 3.3% or A$0.45

The company's shares ended lower for a

fourth consecutive trading day.

The shares fell further after a CLSA

downgrade Tuesday to underperform
and a target price cut.

South Korea's National Pension Service

said it would vote against a planned
merger with SK Holdings.

The gold miner slipped on a drop in the

price of the yellow metal.

In Hong Kong dollars

In Hong Kong dollars

In won

In Australian dollars

20

24

14

16

18

375000

12
10

12

20

300000

16

225000

12

150000

8
12

8
6

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

8
N.A.
3.6

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Financials
China Merchants Bank Co. Ltd.

-0.3%
-3.5%

2.6%
-1.3%

8.2%
52.9%

22
N.A.
5.1

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Telecommunications
HKT Trust

-0.6% 2.2%
-1.6% -4.3%

5.4%
4.5%

16
N.A.
6.5

J A S O N D J F M A M J
2015
2014
Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Consumer Goods
Li & Fung Ltd.

-0.5%
-1.8%

2.0%
0.2%

7.6%
-41.2%

75000

56
N.A.
0.7

Price-to-earnings ratio
Earnings per share, past four quarters
Dividend yield

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Technology
SK C&C Co. Ltd.

-0.1%
-2.0%

2.1%
-1.3%

1.7%
56.9%

J A S O N D J F M A M J
2015
2014
N.A.
N.A.
1.8

PERCENTAGE CHANGE
Daily
1 wk. 52 wks

Basic Materials
Newcrest Mining Ltd.

-0.6% 1.8%
-3.3% -0.9%

-6.5%
22.1%

THE WALL STREET JOURNAL.

HEARD ON THE STREET

Email: heard@wsj.com

FINANCIAL ANALYSIS & COMMENTARY

Macau Builds, but

Gamblers Stay Away

Macaus new casinos are opening

their doors, but Chinas gamblers
are still refusing to show up.
Since the middle of last year,
Chinas semiautonomous gambling
mecca has fallen on hard times.
Chinas slowing economy, combined
with a corruption crackdown, has
kept high rollers away from casinos.
Total monthly gambling revenue
is now running at just over half of
the level of April 2014, dragging
shares of the six major casino operators down with it.
Daring investors looking for a
bottom in Macau casino stocks are
betting that a wave of new casino
openings will bring back gamblers.
Build it and they will come has
been their mantra.
Galaxy Entertainment became
the first to test this theory when it
opened a new arm of its megacasino
on May 27. Its five competitors are
all due to launch their own new facilities over the next two years.
Initial signs arent encouraging.
According to weekly estimates cited
by analysts, there was a slight increase in gambling revenue coinciding with Galaxys widely marketed
grand opening, but the downward
trend has resumed in the weeks
since. For the full month of June,
gambling revenue in Macau is now
on track to decline 19% from the
previous month and 39% from a
year earlier, Citigroup forecasts.
Galaxys new casino has helped it
steal business from rivals, at least.
For June so far, its market share has
shot up to 23.9%, from 18.7% in May,
according to Barclays. But that has
done little good for Galaxys shares,
which are off 13% since the opening.
The idea that new casinos can

Unlucky

Macau's monthly gambling

revenue
40 billion patacas

30

20

10

0
2009 10

11

12

13

14

15

One pataca = 12.4 U.S. cents

Source: CEIC

THE WALL STREET JOURNAL.

expand the overall marketthat

supply creates demand, as industry jargon puts itis not being
borne out. That is unwelcome news
for all six casino operators, as it
suggests they could be competing
ever more fiercely for a dwindling
pile of gambling proceeds.
Early signs of stabilization are
emerging in the Chinese economy. If
these green shoots bloom into a
full-blown recovery, Macau could
benefit. If there is a letup in the intensity of the anticorruption campaign, Macau could also rebound,
but there is no sign of this yet.
Otherwise, analysts who assumed handsome payoffs from casino openings will have to further
write down their estimates, which
means Macaus casino stocks have
further to fall.
Aaron Back

Cracking BlackBerrys Software

BLOOMBERG NEWS

It is crucial for BlackBerry to

achieve its goal of $500 million in
software revenue this year. But how
the company gets there seems at
least as important.
That is the issue for investors
following BlackBerrys fiscal firstquarter report Tuesday. The company missed Wall Streets targets in
every area except for that key software category. This came in at $137
million for the quarter; analysts
were expecting about $83 million.
Beating the Street by 65% is normally cause for cheer. But any joy

BlackBerrys headquarters in Canada

was short-lived and the stock fell.

An unexpected boost to software
revenue came from newly signed
patent-licensing deals with Cisco
Systems and another company that
BlackBerry declined to name, citing
confidentiality agreements.
The contribution those deals
made to BlackBerrys software line
was described as significant on
the companys earnings call. But further details were lacking.
That BlackBerry is generating
revenue from its huge base of patents is a good thing. The deals,
though, mask how the core software
business is doing. Maynard Um of
Wells Fargo estimates software revenue would have been $74 million
for the quarter without those
dealsfalling short of expectations.
BlackBerry has staked its future
on software. Hitting its $500 million
target for software revenue this fiscal year looks more achievable in
light of Tuesdays results.
In this case, though, winning
isnt enough if that entails the company buying its way across the finish line with acquisitions or by
cashing in some of its patent chips.
For BlackBerry, it really does come
down to how it plays the game.
Dan Gallagher

WSJ.com/Heard

Testing the Emerging-Market Consensus

U.S. interest rates rising? Sell

emerging markets. Eurozone standoff with Greece? Sell emerging markets. Problems in a couple of emerging-market countries? Really sell
emerging markets.
The received wisdom is that
emerging markets are risky and volatileand therefore are first in the
firing line when risk aversion rises.
The latest jitters over U.S. interest
rates and Greece have proved no
different. Investors exposure to
emerging markets stood at a 15month low in June, with a big reduction since May, a Bank of America Merrill Lynch global survey of
fund managers showed.
That looks increasingly like outdated thinking, however. The story
since the global financial crisis
broke out has been one of belated
realization that risks in developed
markets have been underpriced.
Vast swaths of apparently low-risk
or risk-free instruments, from U.S.
mortgage-backed securities to eurozone government bonds, turned out
to be anything but.
Developed-market investors have
had to cope with concepts such as
sovereign credit risk that are bread
and butter for their emerging-market counterparts. The latest manifestation of this is the lower liquidity and higher volatility being seen

in advanced markets, traits more associated with the emerging world.

The temptation with emerging
markets always seems to be to take
the view that the glass is half
empty. Consider the latest worries
about lower growthsome of
which, at least, is due to reforms
that could make economic expansion more sustainable. Emerging
countries are still growing faster in
aggregate than their developed

That developing-world
assets are riskier seems
to be outdated thinking.
peers. They will account for more
than 70% of global growth this year,
the International Monetary Fund
thinks, and already account for
more than half of world gross domestic product on a purchasingpower-parity basis.
The bigger puzzle, surely, is the
lackluster growth in developed
economies given the scale of stimulus thrown at them since the crisis.
Meanwhile, emerging-market crises have been loudly proclaimed as
imminent several times in the past
few years, but have failed to live up

to that billing. The buffers of

cleaner government balance sheets,
more flexible exchange-rate regimes
and high reserves are proving powerful. Russia, while undoubtedly suffering as an economy, has managed
to withstand an almost total loss of
access to international financial
marketssomething that in the past
could have had a far bigger impact.
Indeed, with the power of extraordinary monetary policy potentially waning, the fact that emerging
markets have been unloved may be
to their advantage. Developed-market valuations for both bonds and
stocks look rich. Emerging-market
stocks and bonds seem much more
attractive in terms of future returns,
given their starting point. Pictet Asset Management strategists forecast
double-digit annualized returns for
shares over the remainder of this
decade. Emerging markets are
riskybut at least investors get
paid for taking that risk.
A rise in U.S. interest rates is
likely to prove testing for all markets, after so many years of loose
policy. And knee-jerk selling of
emerging stocks and bonds at the
first sign of trouble may still be
hard-wired into market behavior.
But it is time for investors to question more carefully its validity.
Richard Barley

Published by Dow Jones Publishing Company (Asia). Printed in Hong Kong by Euron Limited, 2/F., Block 1, Tai Ping Industrial Centre, 57 Ting Kok Road, Tai Po, Hong Kong. Printed in Indonesia by PT Gramedia Printing Group, Jalan Palmerah Selatan 22-28, Jakarta 10270. Printed in Japan by The Mainichi Newspapers Co., Ltd., 1-1-1 Hitotsubashi, Chiyoda-ku, Tokyo, 100-8051. Printed in Korea by JoongAng Ilbo. 7, Soonwha-Dong, Chung-Ku, Seoul 100-130. 1997 June 04 Registration no.: SeoulKA00020 (Daily Newspaper), Publisher/Editor/Printer: Song, Pil-Ho.
Printed in Malaysia by KHL Printing Co. Sdn. Bhd. (ROC No: 235060-A) Lot 10 & 12, Jalan Modal 23/2, Seksyen 23 Kawasan Miel Phase 8, 40000 Shah Alam, Selangor, Malaysia. Printed in Philippines by FEP Printing Corporation, 3817 Mascardo St., Corner Metropolitan Ave., Pasong Tamo, Makati City. Printed in Singapore by Singapore Press Holdings Limited, 82 Genting Lane Media Centre Singapore 349567. Printed and distributed in Taiwan by The China Post, 8 Fu Shun Street, Taipei 104. Printed in Thailand by Nation Multimedia Group Public Co., Ltd.,
1854 Bangna-Trad Road, (K.M. 4.5), Prakanong, Bangkok 10260. Published and printed on behalf of the Wall Street Journal India Publishing Pvt Ltd, 9th Flr, Tower 2, Maker Maxity, Bandra Kurla Complex, Bandra (E), Mumbai400051 by Mr Suman Dubey at PLOT No.EL208, TTC Industrial Area, Mahape, Navi Mumbai - 400710 (Maharashtra), India, Editor: Suman Dubey, phone: +91-22-61456100. ACP no. F.2 (T/3) Press / 2009 FACSIMILE EDITION.

32 | Thursday, June 25, 2015