20/03/2014 Asia Business Report

well as moves to boost business. Now on BBC News all the latest

business news live from Singapore. Asian markets react to the US

central bank trimming its bond purchases by $10 billion. A pulse

check on e`commerce in China. I'm Rico Hizon. Welcome to Asia

Business Report. We begin with the new Federal

reserve chair in the US and her first press conference following a

meeting. She announced a reduction to the stimulus programme and hinted

about an increase in US interest rates which may come sooner than

expected. The world 's most powerful central banker, Janet Yellen, said

that the Fed will continue to buy bonds but not as many. It will

reduce its cash injections by $10 billion to $55 billion per month

beginning in April. The US economy is recovering. It is expected to

grow from 2.8% to 3% this year. The world 's largest economy will

continue to be supported by ultralow interest rates. The committee

continues to anticipate that conditions were likely warrant

maintaining the current range for the federal funds rate for a

considerable time after the asset purchase programme ends. This is

especially if projected inflation continues to run below the committee

's longer run goal and provided that longer term inflation expectations

remain an anchor. This is faster than expected, but the US central

bank has downplayed its significance as a measure of economic health. In

her first press briefing as Chair, she said that the US economy was far

from full employment. The reason that the committee felt that the

time had come to revise the forward guidance is not because we think

that it has not been effective. We think it has been effective. It has

had a very useful impact in helping markets understand our expectations

and shaping their own. But it is becoming, as the unemployment rate

gets closer to 6.5%, to bridging that threshold, it seems like it

will be breached. Interest rates are near 0%. Janet Yellen would not give

many clues about when they would go up but, judging by the reaction on

Wall Street, investors believe that the timeframe has shrunk.

On the back of Janet Yellen's statement, Asian markets are in

negative territory. I spoke to an analyst and I asked him if the

region is prepared for this latest message. Not at all. We have seen

two indications of this. In May, when they initially started talking

about scaling back, and then another scare later in the year last year.

In the last few months we have been in a quiet zone where weakness in

the US state, driven by the weather, has caused the dollar to Stockton.

That will push money back into this region and raise hopes. When will

she raise interest rates? She said that it would be six months after

the end of the programme, so she's signalling potentially March of next

year. That is earlier than what people were thinking and I think it

will be pushed back to June. How will this impact policy for Asian

central banks? It causes a bit of a problem because as US interest rates

rise, and given the ongoing issues around China, it will push Asian

currencies down. We will see a quick reaction in currency markets in

Asia. As currencies weaken, we will see the type of reaction that we

have seen in other markets which means that interest rates will

climb. Which Asian central banks are vulnerable to this trimming of bond

purchases and rising interest rates, which will move first? You'll

make the Philippines, given that they are concerned about domestic

inflation pressure. Indonesia could be vulnerable on the currency side.

Moving to technology, and we have a mixed bag of data. A Chinese company

reported a 10% rise in revenues but they also saw its lowest quarterly

profit growth in nearly two years. That is due to heavy spending to

promote its mobile messaging application. That application has

gone from a messaging service to a mobile platform for everything from

social networking, gaming, to personal finance. Shares fell by 3%

in the Hong Kong stock exchange. It is now in positive territory again.

A volatile move for shares today. Investors are digesting the profit

results of this company. Yes. It is pretty choppy. That is a reflection

that this is a mixed bag of results. 40% increase in revenue year on

year, a lot to cheer about there. But there is a sense that this is a

slowing profit growth here. 13% for the fourth quarter, pretty tidy.

Analysts suggest that the reason is not as high as it could be is

because they are spending more on advertising and marketing to get

more users onto their mobile messaging service. That is central

to the business model. Something like 350 million users are there.

Some people wonder how much potential for further growth varies?

We have already seen that they are looking overseas to try to build

some of their strength away from China. They want to get into the

mobile payment system in China but authorities have clamps down on this

business because of security and verification concerns. This could

have a medium`term impact on their business strategy. Absolutely. This

is all about the fight for dominance in China's Internet market. One of

the key parts of that will be trying to get into mobile e`commerce

payment systems. They were dealt a blow last week because their efforts

to launch this virtual credit card were blocked. We also saw investors

are little bit troubled by the sense that this will not be as plain

sailing as they may have hoped. Thank you, John.

Saturday is World Water Day, highlighting the need for water

conservation. Between now and then we will be highlighting the problem

of global drought, one consequence of which is rising food prices. US

milk farmers have benefited as one of their main competitors, New

Zealand, recovers from drought. The fields here in New Zealand looks

parched, but this is quite normal this season and it is a compare to

the drought last year, the worst in decades. Farmers could not satisfy

the growing demand for dairy from Asia. The ever increasing thirst for

milk powder and other dairy products has given one of New Zealand's main

competitors, the US, the chance to plug shortfalls. Dairy sales

increased 70% in China last year, meaning that domestic supplies have

been tightened and US sales have gone up by 1.5% this is good ``.

This is good for American dairy farmers and the price for cheese and

ice cream will climb further. Farmers here still have something to

gain. Last year they feared that the drought could cost $2 billion with

good weather since then and a booming milk prices, the industry is

rebounding. On Friday we will have more coverage

ahead of World Water Date. We will hear from correspondence in India

and Egypt. A quick look at the markets before we go.

Those are the Asian markets. Thank you for investing your time with us.

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