27/06/2016 Asia Business Report

Asian markets open mixed. Investors hoping for a rebound after $2

trillion was wiped off global markets in the wake of Britain's

vote to leave the EU. And we take a closer look at what Brexit means for

businesses here in Asia. Hello, and welcome to Asia Business Report. I

am Sharanjit Leyl. The markets are opening in Asia and investors are

keeping a close eye on them and possibly hoping for a rebound after

Friday's massive sell-off on the back of the UK's referendum vote to

leave the EU. Let's take a look at the markets now. Japan and Australia

are currently open and are treating like this. Japan has actually inched

up 1.6%. Australia down about 1%, of course we will be waiting to see

what the Hang Seng does when it opened in about an hour's time. The

yen is up slightly, less welcome. And Shinzo Abe has instructed his

Finance Minister to take steps necessary to intervene to try to

weaken the currency. Our reporter joins us at the Tokyo stock exchange

with all the very latest from there. Mariko. That's right, good morning

from Tokyo where Japan's markets opened higher by about 1.5%. On

Friday we saw a sharp fall of 8%. The fall was actually even bigger

than during the financial crisis or even after the earthquake and

tsunami struck the country in 2011. The yen seems to have stabilised at

about 102 yen versus the US dollar. Of course it flirted with 99 on

Friday which has sent alarm across Japan's authorities. The week yen,

which helps exporters, has been one of the crucial points for the Prime

Minister's economic policies, known as Abenomics. I am joined by a

securities trader. So Japan's Nikkei recovering this Monday. Why is this?

Basically because of stabilising in the exchange market. This has been

very helpful for the Japanese stock market. The Prime Minister has

repeatedly said the government would be willing to intervene. Do you

think that has managed to calm the market as well? of course. But the

government, because of the strong opposition from the US side, is

reluctant to intervene. So the market's stance has been challenged,

whether they can intervene in the market or not. Do you think this

stabilisation in the Japanese yen for now is sustainable? It is seen

as a safe haven currency. People seem to buy it when there is a risk

in the market. the market had already priced in the first drop

from the Brexit, hence the liquidity for the UK banks. But that didn't

happen. So in the short term we would expect the Japanese yen would

stabilise for the moment. Thank you so much for joining us this morning.

So we might see a possible intervention if the yen strengthened

again but for now the market recovering the psychologically

important 15,000 mark. Thank you for that, Mariko Oi in Tokyo. Looking at

the broader effects, over the longer term the transition will be a tricky

one and will likely take more than two years to iron out all of the

details. So what will it mean for Asia and why should you care? Our

Asia business correspondent has been making sense of it all. The pound

tumbled and so did shares on stock markets across Asia. With no clear

strategy ahead for the UK there is more uncertainty around the corner.

A weaker pound is good for some of us here in Asia, especially if you

are looking to go on holiday in the UK or study there. But it has not

been good news for all of Australia's currencies. The Japanese

yen, for instance, soared to 100 yen against the US dollar on Friday as

investors sold the pound and bought safe haven currencies like the yen.

Japan needs the yen to stay weak so it can sell more of its goods

overseas. Many businesses had set up their regional headquarters in

London, to access the rest of the EU. But now, with Brexit, they may

have to decide whether to stay or go. Asia will now have to sign

free-trade agreements directly with the UK, instead of through the EU as

it has been doing for several years. Now, some countries have already

indicated that they are willing to do this. Malaysia, four and that is,

has said it is inclined to begin discussions but it may not be so

easy for others in the neighbourhood. China, for instance,

has been attempting to sign free-trade agreement with the EU for

years and London has been one of biggest backers. But now, because of

Brexit, London may not be at that negotiating table and it is not

clear just how appealing Fasolo trade deal between the UK and China

would be for Beijing. --A solo trade deal. India is one of the biggest

investors in the UK and over the past year Indian countries have been

buying more and more assets in Britain. So what does the UK's

decision to leave the EU mean for them? Our correspondent reports from

Mumbai. A car that in many ways defines the modern relationship

between India and the UK. This is an iconic British brand, but it is

owned by an Indian group. It is among 800 Indian companies that has

investments in the UK. And for them, uncertain times lie ahead. Many of

our companies have been using the UK, really, as the entry point for

the EU. So all of that, even while the UK situation is going to be

worked out with the European Union, some companies will have to work out

in short order how they reset their own operations in the UK and as far

as Europe is concerned. For India's software industry in particular, the

EU is an important market. And to tap into it, many have bought firms

in the UK. A loss of access to Europe and sterling weakening are a

major worries now. At some believe there might be an opportunity in the

turmoil. With the lower pound, if there are some hi-tech assets which

can be acquired in the UK, hi-tech assets which might be financial or

might be technology related, suddenly this makes the UK are much

better shopping more for all of those items, for Indian companies.

That could certainly be a silver lining to the cloud of Brexit. But

firms here might first need to ride out the storm and wait until the new

relationship between the UK and the EU is defined. It wasn't just

currencies and stocks which took a pounding on Friday. Oil prices

tumbled 5% and gold and traditional safe haven investment was up as much

as 8%. So what does today have in store? David Lynn next is a research

analyst, and he gave us his view from Sydney -- Lennox. As we saw on

Friday gold was seen as that safe haven. And it quickly ran up as we

saw the polls coming in and out of Britain suggesting that reason would

leave the euro. And of course that is what happened. -- written would

leave the euro. And while we work through the mechanism of Britain

starting to settle itself down, in view of no longer participating in

the EU, we will see that uncertainty being reflected in safe haven assets

such as gold, and also such as the currency. You have talked about the

yen, the Swiss franc and also the US dollar as markets start to settle

down into a new regime of Britain not inside the EU, and just

continuing to be unsure as to what is going to happen and seeking out

those safe haven assets. So what does this now all mean? For

businesses? Earlier I was joined by two business leaders on the opposite

side of the Brexit debate, Peter Allen from Grant thought and was in

favour, -- Thornton, and our other guests wanted the UK to remain in

the EU. I asked them both what comes next. Both major political parties

in London now have to readjust themselves. My guess would be the

Conservatives would be quicker off the mark there, they have been

quicker off the mark. And I think it is in their interests and the

country's interest is for that process to happen and to finish

relatively quickly so that Article 50 can be triggered and negotiations

can start. And indeed, to the extent possible, finish. And Steve, what

comes next? Is at this uncharted territory? Loom that there is some

uncharted territory but we will have a period of negotiations and

readjustment. I personally think the EU has taken the time to do most

wings and it is going to take longer. It is certainly not going to

be two years that are in the legislation, and are expected. I

think certainly over the next couple or three months we will see some of

the turmoil settled. But it is going to be turmoil for a long time. Now

pluses and minuses for business. You both run businesses in Asia, Peter,

yours is a professional services business. How are your business is

going to be affected? The great majority of our clients are clients

coming into this region from other places. So the United States, Japan,

Australia, England, Germany. To the extent that there is a global

slowdown, as a result of Brexit, that flow may decrease slightly but

I wouldn't expect a major impact. I think this region will continue to

be extremely attractive to international investors. What about

you? Our clients include national oil companies around here, major

investment banks, things like this, and their business is global. Most

of our businesses are global, and the focus is Asia. I don't really

expect to see very much change. The only thing we are going to see is a

slowdown in Europe. And we are going to have some of the impact that we

saw during the global financial crisis, as everything slows down for

a while. And we have heard from the Chinese Finance Minister, even the

credit ratings agencies, all saying there is a period of uncertainty,

this is going to affect UK's economy and the global economy. So surely

this can't be seen to be a good thing, at surely there is some sort

of an upside to this, Peter, you must see it? My personal reasons for

voting leave were always around political reasons, and around

democratic accountability. I mean, one might hope that one of the

impacts of Brexit over the medium to long run would be a loosening in

some of the European Union's policy prescriptions, which have tended to

be very directed towards political integration. And that I would say,

as a Hayekian liberal, would tend to have effects upon the economy. I

agree with the Chinese government, this will take some time to work

through. Let's take a look at the markets now. We saw them at the

start of the programme, and indeed the Nikkei continues to hold onto

its gains, up over 1%. And as you heard our correspondent talk about

earlier, this is partially to do with the fact that Prime Minister

Shinzo Abe has said that he might potentially go in, that the

government is ready to intervene to try to weaken the strength of the

yen. Australia though is just flat at the moment and we are awaiting

the Hang Seng open. That's it for this edition of Asia Business

Report. Thank you for watching. The top stories this hour: Britain's

currency falls further, as Asia's financial markets open

to more warnings about the UK Beijing warns that Brexit

casts a long shadow over