16/01/2014 Asia Business Report

new plans to limit bankers' bonuses. A new EU law will restrict bonuses

to a maximum of two years' salary. Skyhigh property prices, we look at

whether measures in Hong Kong are working. And, investing in China.

Why business people in China favoured the mainland.

Welcome to Asia Business Report. Property prices in Hong Kong have

skyrocketed since 2009 as Asia was spared the worst of the global

financial crisis, and Chinese buyers have poured in. Art, is Hong Kong in

danger of another property collapse? -- but.

The most expensive properties in the world are found here, on the peak in

Hong Kong. A house sold for a record 17,000 US dollars per square foot.

The street down the road is the most expensive property in the whole of

Hong Kong. Overall prices hit a new high last spring. The capital gains

tax and Chinese money means it is an attractive place to invest.

Foreigners now have to pay a tax equal to the quarter of the

transaction price. The costs involved in purchasing property have

become so high that it has become a less attractive place to invest.

Higher global interest rates and mortgage costs are heralded. It is

hard not to wonder, is the red bubble? Houses are estimated to be

overvalued by 30 or 40%. That is one of the most overvalued markets in

the world. When the last bubble burst during the Asian financial

crisis, house prices fell by 60%, and continued to decline for six

years. The trouble with hobbling markets is that once interest rates

rise, so does the risk of collapse. But, property developers say it is

different this time. I think the interest rate was in excess of 10%.

Now it is only 3%, so the buyers will find it very affordable. House

prices are 13 times the average salary. They are higher than during

the last bubble. I work in professional sales, and I spend

about 50 or 60% of my whole salary to pay for my mortgage. Even if I

spend nothing, I have to save for several years for the deposit.

Adding further pressure, public housing is inadequate. It covers

only 30% of the population. This woman, with her family, lived in a

400 square feet flat, the size of a studio. TRANSLATION: The rent is

really high. It is our biggest expenditure. It takes up half of our

monthly income and we don't earn much money. She is still one of the

lucky ones. Illegal flats built on rooftops have sprung up to cope with

the unaffordable and inadequate housing. This is the dark side of

being in a property hotspot. Earlier, we spoke to a real estate

consultant based here in Singapore, and asked him what has been driving

up the prices. Firstly, low interest rates, and

secondly huge liquidity. Money needs to be pumped outside the banking

system, so in terms of getting returns, it loses about three or 4%.

On top of that, capital... That is a promise in terms of putting money

elsewhere, other than putting it in the bank. Will it ever ease up? We

can look at all the construction taking place behind us, there

appears to be no sign of it letting up. The market has actually seen a

steady rise in prices. Hong Kong prices have risen almost double in

the last four years. Singapore has risen about 60%. In the last four

years we have humorous property measures -- numerous. Introducing

tighter duties... Making it more affordable for people to purchase

properties? It is a two tier system, where 1st-time buyers are

not precluded from getting better loans from the banks. At the same

time, during the last three or four years, the supply has increased in

terms of public housing, subsidised housing. The two factors worked hand

in hand. In Malaysia, the PM has come under criticism on social media

for his comments on the price of water spinach. He says it is not

fair for the government to be blamed for rising prices.

Water spinach is a popular vegetable. It is delicious when

stirfried with chilli and garlic. Its price has recently gone down by

50%, with the PM wondering why he is not getting enough praise for it. If

the PM soundtrack is desperate compliment, there is good reason.

Since it cut back on subsidies, his popularity has dropped in the polls,

despite the fact he has given cash handouts to the poor, and also

announced doors that can sell items below market prices. -- stores. A

lot of Indonesian say they wouldn't have to go through this painful cuts

if the government didn't have to go through these cuts. -- Malaysians.

People who don't appreciate these price hikes are not willing to come

on camera to talk about it. This man tells me Malaysians should be

thankful and not blame the government for everything. He says

people need to learn to save and control their spending. A lot of the

criticism of the PM has come online with some interesting photos. Here

is one, with some interesting photos. Here

popular are easily and cheap. But it is not a staple in the Malaysian

diet. Malaysians feel the PM is disconnected from their everyday

lives. Even here, at this night market, many products have kept

their prices. There are signs that price hikes are to come. This

chilli, for example, has increased by up 50% overnight. Hong Kong

prices may have come down, but this latest comment shows Malaysians that

the PM is disconnected from the hardships Malaysians face.

Global growth is expected to pick up this year, echoing the view made by

the World Bank earlier this week. The head of the IMF added a warning

that we need to watch out for deflation, a situation where prices

keep falling. With inflation running way below Central Bank targets in

most corners, clearly we are seeing rising risk of deflation. It could

prove disastrous for the recovery. If inflation is the Genie, then

deflation is the ogre. It must be fought decisively. Business leaders

in Asia-Pacific are feeling optimistic about prospects of this

year when compared to 2013. That is according to wait survey by an

economic research group. They say 46% say their expectations of Asia

have improved from last year. Asia-Pacific is delivering better

profit margins than the global average, especially in Southeast

Asia. Their priority is China, and Indonesia has overtaken India, now

in second place. I spoke with Justin Wood, the author of the report. If

you look at 2013, it was a bit of a turbulent year for many countries.

In China, which is one of the big engines of growth, there were

concerns around debt, and government attempts to try to slow the debt.

Also, America. In the scaling back of quantitive easing programmes.

Both of those things caused growth in Asia to suffer. Wendy 14 is

looking much better. The rich parts of the world have a synchronised

recovery. Japan, Europe and North America all growing, and the

concerns that have dogged many of these places. Will use, are

receding. Shares are trading higher this morning after a set of robust

earnings from the bank of America. These are also helped by the IMF

announcement that they expect global growth to pick up this year.

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