28/01/2014 Asia Business Report


28/01/2014

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it took during the financial crisis. It has also announced that top

:00:00.:00:00.

management will not get bonuses this year. Now for Asia Business Report.

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Emerging markets and investor concerns. We find out what is

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driving the fall in Asian markets. All eyes on India. What will the

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country's central bank do next to spur on economic growth while

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keeping inflation in check? Welcome to the programme. This is Asia

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Business Report. We begin with a look at the Asian stock markets and

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how they are doing in Tuesday trade. Shares fell overnight after concerns

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about the US Federal Reserve. There has also been trouble in Latin

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America and Argentina, where the country's sliding currency sparked a

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sell-off on Wall Street, which has spread all the way to the region.

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Most of the markets are in positive territory. It feels like those

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concerns have waned somewhat. It's the Australian stock market that

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continues to wallow in negative territory, lower by 45 points. On

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Wall Street... Are emerging markets in real

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trouble? Earlier, I spoke with our guest analyst. 2013 was a great year

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for everyone. Right now, we have a hangover. It was a great party and

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people are feeling some pain. We believe this hangover will soon go

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away and the situation is not dire. Emerging markets have many

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problematic points. But in general, the contagion effect of 1997 and

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1998 - we just don't see that happening in this environment. Let's

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breakdown the factors. Focusing on the current crisis in Argentina, how

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important are the Latin American markets to Asian companies? Certain

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individual companies can have increased exposure but overall, the

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effect of Argentina on the Japanese economy is frankly negligible. How

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China is doing? How the US is doing? Japan's first and second largest

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trading partners are the most important. For south-east Asian

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nations, it's about Japan, China and India. They are the three drivers of

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the emerging economies in the region. Could swings in Latin

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American currencies trickle down to other small economies in the region?

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Some companies can be impacted, yes, but this is part of our overall

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theory that 2014 will be a stock picker's year. Individual stock

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movements up and down will be much more dramatic and we believe there

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is a chance that the indices may potentially reach the low negative

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single digits. Volatility is back. Apple has reported better than

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expected earnings for the October to December quarter. Just over $13

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billion. The company's shares were down in extended trading in the US

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after it failed to reach expectations for sales of its

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iPhone. 51 million units were sold, down from 55 million expected by

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many analysts. The sales outlook is also lower for 2014, concerning

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investors. However, double-digit revenue growth was recorded for the

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period in China and Japan. Where is the investor disappointment coming

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from? This is less about current results as it is about the upcoming

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quarter. Having made announcements about the partnership in China,

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analysts were expecting continued growth in iPhone sales in the

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Chinese market. Apple has indicated slightly lower than expected growth

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in numbers for that coming quarter, and that is what is bothering the

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stock market. But investors should not be bothered about the growth in

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China going forward. These gains are before China Mobile starts selling

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the iPhone in earnest. It is a tremendous opportunity there and it

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will drive iPhone sales over the next quarter. However, in the

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announcement, Tim Cook was cautious about the growth of iPhones in the

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upcoming quarter and that is what has kept analysts worried about the

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future of Apple and growth in the coming quarters.

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And lower iPhone sales will cast a long shadow over the smartphone

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industry because we also have Samsung warning of weak earnings.

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It indicates that they may have reached a plateau. At the top end.

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People are not replacing their smartphones as quickly as the

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analysts and the vendors would like. There is a slowdown in the

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replacement cycle. We have seen that in North America as well. I believe

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the pace of innovation has slowed. We have to accelerate that pase if

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we need to keep the top end of the market. On the one hand, we have not

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done enough in the emerging markets like China and India, where there is

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a large population still yet to be tapped for smartphones. The pricing

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of the phones are way beyond the reach of average citizens in these

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countries. The operators of the virtual currency Bitcoin have been

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arrested in the US. Robert Faiella and Charlie Shrem has been charged

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with money-laundering. Authorities said the pair were engaged in a

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scheme to sell more than $1 million of Bitcoins to users of the Silk

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Road website, which was shut down last year. The charges, while

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serious, should not mean the end of virtual currencies. This is a

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nascent industry and we always have to be concerned if there are

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criminal charges. If the allegations are to be believed, there was some

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serious misconduct that went on. I don't have the details yet. It's

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always of concern but I don't think it should mean that we have to say

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we should never have virtual currencies. We have arrests in the

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banking industry from time to time. It does not mean we will give up on

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the banking industry. There will always be bad apples in an industry.

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The question is, do we have the protections in place to weed out

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those bad apples? The majority of people are doing the right thing and

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want to succeed in their businesses. We don't assume that every banker or

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every person on Wall Street is bad. In fact, they are usually great. We

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believe we will move in the same direction. The Indian economy comes

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into focus today as the central bank decides on the cost of borrowing in

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its battle against rising prices. It will also present its report card on

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how the economy performed in the final three months of last year. We

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look at the challenges to the country's economic prosperity.

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Stitching together the various pieces of the economy, that is the

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basic task of any central bank. It's no different in the case of India

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but unfortunately for the Reserve Bank of India, the pieces it is

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trying to put together have not been cut to the same design. India's

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manufacturing sector is the key driver of the economy. It has slowed

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over the past few years, dragging down overall growth. Among the

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issues that have hit the sector are high interest rates. India's central

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bank has raised interest rates twice since September last year, making it

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more costly for businesses as well as consumers to borrow money.

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Critics argue that the moves have dented domestic demand. For its

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part, the central bank has so far resisted calls to lower rates to try

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to spur on the economy. Its reason is the stubbornly high inflation in

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the country. Rising consumer prices have been a major issue in Asia's

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third-largest economy and the country's key gauge of inflation hit

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a 14-month high in November. A weak Indian currency has only added to

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the central bank's headache as it looks to keep price rises in check.

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Some experts argue that lower borrowing costs may do more harm

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than good. The central bank has a difficult decision to make. Does it

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move to encourage economic growth or does it stand firm to keep price

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rises in check? It will somehow have to fit together a compromise to

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please most of the stakeholders. However, that is easier said than

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done. And the Reserve Bank of India will be releasing those results

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later this afternoon. Thank you for investing your time with us. Goodbye

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for now. The headlines: Ukraine's president Viktor Yanukovych has

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agreed to scrap controversial anti-protest laws. Egypt's top

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