09/02/2017 Asia Business Report


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09/02/2017

Live from Singapore, the essential business news as it breaks and a look ahead to the news that will shape the business day.


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Press rewind. The US and Japan. And flying high, Indian carriers are

:00:00.:00:08.

expanding their reach in aviation. Good morning, Asia. Hello, world.

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I'm Rico Hizon. Thank you for investing your time in Asia Business

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Report. It's a Thursday. We start off with Japan's Prime Minister,

:00:17.:00:22.

Shinzo Abe. He has his work cut out for him when he meets with US

:00:23.:00:26.

President Donald Trump tomorrow. This is important symbolically.

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Shinzo Abe is the first Asian leader to meet the new US president. The

:00:31.:00:36.

stakes are high. President Trump has had direct criticism of Japanese

:00:37.:00:42.

companies and Japan. It has put them on again. Last month he criticised

:00:43.:00:50.

Toyota Motors. They said they would invest more in America. The fall in

:00:51.:01:00.

the yen is a reflection of the relationship between the US and

:01:01.:01:04.

Japan in the 1980s. Are we in for deja vu? There is a huge difference

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between what happened in the 1980s and is now. At the time, the

:01:11.:01:13.

deficit, how much Japan was selling to the US in comparison to how much

:01:14.:01:18.

the US was selling to Japan was a really wide gap. That situation is

:01:19.:01:24.

not the same today. If anyone can be accused of dumping products into the

:01:25.:01:27.

US it would be the other favourite sort of villain in the story that

:01:28.:01:32.

President Trump likes to bring up, that is China. The deficit between

:01:33.:01:38.

Japan and the US has really shrunk comparative to the US GDP over the

:01:39.:01:42.

last three decades. And Japan is going to try to point out that there

:01:43.:01:47.

are massive differences between what was going on then and what is

:01:48.:01:51.

happening now. So, with this fear of a protectionist policy from the

:01:52.:01:57.

Trump administration, it seems like the Japanese are trying to be more

:01:58.:02:06.

aggressive in, basically, building a relationship with the Donald Trump

:02:07.:02:08.

administration. Well, they don't have much of a joint. Back in the

:02:09.:02:13.

1980s, one of the major considerations for Tokyo to give in

:02:14.:02:17.

to concessions was the political factor. Basically, Japan needs

:02:18.:02:23.

Washington as a major US ally in its backyard. The Seine is today. The

:02:24.:02:27.

situation on that front has not changed. -- autor. Things like

:02:28.:02:35.

autos, trade, that is what will be on the agenda. And for analysis of

:02:36.:02:40.

the meeting with Donald Trump in Washington, DC with Shinzo Abe, you

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can read more on her blog topic that is on the website, BBC .com. Japan

:02:45.:02:49.

is not the only country nervous about a trade war under the

:02:50.:02:58.

administration. I asked which Asian economies will be affected the most.

:02:59.:03:02.

I think the US border adjustment task will hit Vietnam the hardest,

:03:03.:03:09.

along with Korea, Taiwan, and Malaysia. These are the economies

:03:10.:03:13.

which export a lot to the US. The nature of their products,

:03:14.:03:17.

electronics, durable goods, they are highly responsive to price changes.

:03:18.:03:22.

If there is a price hike in the US they will be impacted the most. If

:03:23.:03:27.

that is true, by how much could this impact Gross Domestic Product and

:03:28.:03:34.

economic growth? By adulation, even with the direct impact, it could be

:03:35.:03:42.

in the tune of 0.6 - 0.9% of the GDP. That is significant already.

:03:43.:03:46.

That could have knock-on impacts with domestic investment as well.

:03:47.:03:50.

So, in countries like Vietnam, it could be bigger than 1% GDP. A

:03:51.:03:55.

knock-on effect on the direct investment and a lot of lost jobs in

:03:56.:04:01.

these countries. Yes. Potentially, it will not just be investment. It

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will have an impact on employment which would also impact consumption.

:04:06.:04:11.

So we are really thinking about the potential scaling down of some of

:04:12.:04:14.

these trade related impacts which could really impact the economy. So,

:04:15.:04:20.

how can many of these Asian economies which could be impacted by

:04:21.:04:25.

the trade pacts basically skirt the reduction in growth? Is it through

:04:26.:04:33.

bilateral agreements with the United States? I think that is probably one

:04:34.:04:39.

channel. At a company level, there will be a great incentive to invest

:04:40.:04:43.

and have domestic presence in the United States. Of course, that will

:04:44.:04:47.

be viable for some industries, but not be labour intensive industry,

:04:48.:04:52.

for example. It is not the easiest thing to do. It depends on the

:04:53.:04:57.

industries, what you can do. The second thing is they will probably

:04:58.:05:00.

look to each other more, increasing trade within the region. I think

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China, ASEAN, there will be a great amount more of Chinese regional

:05:06.:05:12.

investment to counter this. In other business news, we have what looks

:05:13.:05:18.

like a case of mistaken identity. Snapchat announced its plans last

:05:19.:05:24.

week. That seems to have gotten some investors slightly ahead of

:05:25.:05:27.

themselves. Shares of the completely unrelated company called Snap

:05:28.:05:36.

Interactives has since soared by more than 160%. Shares of the actual

:05:37.:05:42.

Snapchat company, Snap Inc, will start trading only a week from now.

:05:43.:05:52.

There was an announcement that all restrictions on cash withdrawals

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will be removed from next month in Mumbai. The decision not to cut

:05:56.:06:01.

rates may have come at a huge surprise for the markets and

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investors. The decision to remove all curbs on cash withdrawals has,

:06:07.:06:09.

the huge relief for people all across the country. In 2016, there

:06:10.:06:16.

were restrictions regarding how much money people could withdraw from

:06:17.:06:22.

banks and ATMs. It was a surprise move to withdraw two high-value

:06:23.:06:28.

rupee notes from the system. The head of the Reserve Bank said that

:06:29.:06:32.

it is reasonably confident that by next month, the situation will be

:06:33.:06:36.

under control. There will be enough liquidity in the system. It is why

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it is confident banks will be in a position to provide the new currency

:06:41.:06:44.

notes without any problems. BBC News, Mumbai. Staying with India,

:06:45.:06:50.

their airlines are flying high, with the middle-class flying at even

:06:51.:06:56.

greater volumes. They are rushing to expand their fleet to take advantage

:06:57.:07:02.

of the growth. This one is one of them. They are paying for a new

:07:03.:07:06.

Boeing aircraft. They had to close operations a few years ago due to

:07:07.:07:11.

financial difficulties We have the details. For airlines, India has

:07:12.:07:17.

always been a land of opportunity. A growing population, rising

:07:18.:07:20.

disposable incomes, and an increasing thirst for travel, these

:07:21.:07:25.

are helping the aviation sector in the country finally take off. When

:07:26.:07:29.

Indians have extra money on hand, they usually buy things like cars

:07:30.:07:34.

and gadgets. But now more than before, they are choosing to travel,

:07:35.:07:37.

with many opting to fly overseas. Last year, air passenger traffic

:07:38.:07:44.

grew by 23% but overall, only 100 million people flew, a fraction of

:07:45.:07:51.

the 1.2 billion people in India. I am thankful for the confidence in...

:07:52.:07:56.

Low-cost airlines are rushing to expand their fleets and take

:07:57.:08:06.

advantage. Spicejet, the fourth biggest in India, is buying more

:08:07.:08:10.

Boeing aeroplanes. It helps reduce the cost of maintenance and flights

:08:11.:08:18.

and the fuel burn, because this is a far more modern aircraft. It flies

:08:19.:08:24.

off to many more destinations than we do today. That is quite a

:08:25.:08:27.

turnaround for an airline that was forced to close operations in 2014

:08:28.:08:34.

after running out of cash. Spicejet is not alone in expanding quickly.

:08:35.:08:41.

GoAir has more planes on order, and so is Indigo, with 400 plant. While

:08:42.:08:49.

that means more travellers can take to the skies, handling them on the

:08:50.:08:52.

ground remains a key challenge. -- planes. It now becomes a question of

:08:53.:08:58.

can the infrastructure keep up with that kind of growth? As Indian

:08:59.:09:02.

airlines continue to expand, that gives a boost to aviation design and

:09:03.:09:09.

many factoring and in that sector in India, since many plant products are

:09:10.:09:12.

made in India already. With the recent large aeroplane orders,

:09:13.:09:19.

India's skies are about to get more crowded. BBC News, Mumbai. Before we

:09:20.:09:24.

go, a quick look at the markets. So far, as you can see on the market

:09:25.:09:28.

boards, it is a mixed day for the stock markets. Japan is down by 76

:09:29.:09:34.

and a quarter points. A stronger yen is impacting the exports sector.

:09:35.:09:38.

There is concern about Mr Abe's meeting with Donald Trump in America

:09:39.:09:43.

and what comes out of that bilateral meeting in the White House. That is

:09:44.:09:47.

Wall Street. The NASDAQ edged up to another record. There is weakness in

:09:48.:09:53.

banking stocks pressuring the Dow Jones industrial average. And with

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that, we end this edition of Asia Business Report. Thank you very much

:09:58.:10:04.

for investing your time in us. I am Rico Hizon. Have a productive

:10:05.:10:07.

Thursday. That is it for now. The US Senate has confirmed

:10:08.:10:13.

President Trump's controversial choice for Attorney General,

:10:14.:10:19.

right-wing senator, Jeff Sessions. President Trump has criticised

:10:20.:10:21.

the clothing retailer, Nordstrom, for dropping his daughter

:10:22.:10:23.

Ivanka's clothing line.

:10:24.:10:26.