20/03/2014 Asia Business Report

pensions and tax`free savings, as well as moves to boost business. He

also froze duty on petrol, spirits and cider and cut a penny from a

pint of beer ` but put the price of cigarettes is up. Time now for the

latest business news. Scaling back on stimulus. Asian stock markets

react to the reduction of bond purchases by the US Central Bank. A

pulse check on e`commerce in China. Welcome to Asia Business Report.

We begin with the new Fed chief Janet Yellen. She has announced that

there might be an increase in US interest rates sooner than expected.

Janet Yellen said that the Fed would continue to buy bonds, just not as

many. It will reduce its cash injections by $10 billion each

month, starting in April. The US economy is recovering and those

inside here are forecasting that it will grow from 2.8% to 3% this

year. The world 's largest economy will continue to be supported by

local interest rates. We anticipate that conditions will likely warrant

maintaining the current range for the federal funds rate for a

considerable time after the asset purchase programme ends. This is

especially true if projected inflation continues to run below the

committee's 2% goal. If longer term inflation remains well anchored this

will happen. The US Central Bank has downplayed the significance of

inflation is a measure of economic health. In her first press briefing

as Chair, Janet Yellen said that there was far from full employment.

The Fed dropped any specific reference to an unemployment rate as

a trigger that might lead to higher interest rates. The reason that we

felt that the time had come to revise the forward guidance is not

because we think it is not effective. The committee does think

that it has been effective. It has had a very useful impact in helping

markets understand our expectations in helping them to shape their own.

It is becoming, as the unemployment rate gets closer to 6.5%, more clear

that we might breach that threshold. The Fed to cut interest rates to

near 05 years ago. They have remained there since. Judging by the

reaction on Wall Street, investors believe that Janet Yellen is telling

them that the timeframe has shrunk. On the back of that statement, Asian

stock markets at this hour are in negative territory. Earlier I spoke

with an expert on interest rates and Asian markets and I asked him if

Asia is prepared for this new message? Not at all. We have seen

two indications of this. Back in May, and another scare later in the

year last year. In the last few months we have been in a quiet zone

where weakness in US state has caused the dollar too soft and ``

the dollar to soften. When was she raise interest rates? She said that

it might be six months after the taper will stop most people expected

August but she is signalling potentially March next year. That is

much earlier than people are thinking but it could be pushed back

to June. How will this impact monetary policy of Asian central

banks? It causes a problem. As US interest rates rise and especially

given the ongoing issues around China, it will push Asian currencies

down. We will see a quick reaction to Asian currency markets today. As

currencies weaken, we will see the type of reaction that were seen in

other emerging markets which means that interest rates will climb as

well. Which central banks in Asia are vulnerable to this trimming of

bond purchases and rising interest rates? That is a tough question. The

Philippines might move early, but Indonesia could be vulnerable as

well but more on the currency side. In technology, Ten Cent reported a

mixed bag of earnings. They reported a 38% jump in revenues but the

company also saw its lowest quarterly profit growth in nearly

two years for the final three months of last year. That is due to heavy

spending to promote its mobile messaging application. Ten Cent has

transformed that application from a messaging service to a fully fledged

mobile platform for everything from social networking, gaming, personal

finance, and even booking taxis. Although Ten Cent is not as

well`known as some US counterparts, it is the world 's fifth largest

technology company by revenue and fourth largest by market

capitalisation. Earlier I spoke to an analyst and asked him what it

would take for Ten Cent to be better recognised. It needs a bigger

messaging platform. Based on our estimates, it has only 60% of its

users in China. This is mainly within Asia, for that other 40%. I

would expect that Ten Cent would start to invest more in North

America. They have to watch in their rearview mirror as well. What about

getting into mobile payments in China? There was a clampdown due to

security. Could this hurt Ten Cent's strategy? It has dented

confidence but it will not be an issue in the long`term. As the

central bank starts to look at their regular trip policy around banking

infrastructure, it will start to ease some of these restrictions over

time. It is a tremendous opportunity for them to grow. That part of the

business could be valued up to $50 billion if it can get a 12% share of

the total payments market. That is a lot of cash but the e`commerce

business in the mainland, where will it go in the next three to five

years? The study that we did last year estimated that the value of the

e`commerce market in China to be around $65 billion last year. We

project that to be about $300 billion in 2017. To Taiwan now, and

things got heated up in Parliament yesterday. Here is a look at what

happened. Hundreds of protesters were chanting outside the government

building and the crowd then took over a meeting room in an attempt to

block a trade deal the government has signed with China. They fear

that Beijing will exert too much influence over Taiwan. Kyoto has

reached a billions dollar settlement with the US. Creator recalled more

than 10 million vehicles over issues with rakes, accelerator pedals, and

formats. Hitachi is moving its rail business from the UK to Japan. ``

from Japan to the UK. It is building a new factory in County Durham which

will open in 2014. For more on that story and other headlines, visit our

website. Saturday is World Water Daily, and events to highlight water

conservation. We will highlight the problem of global drought from now

to them. One impact is rising food prices. US milk farmers have

benefited as New Zealand recovers from drought. New Zealand is one of

their main competitors. The fields here in the largest dairy

province of New Zealand look dry. That is normal but nothing compared

to last year's drought. Farmers who could not satisfy the Asian dairy

demand, especially China. A highly thirst for milk powder and dairy

products has given a chance for the US to plug shortfalls. Sales soared

by 70% last year to China, meaning that domestic supplies have been

tightened and retail prices in the US have increased by 1.5%. That is

good news for American dairy farmers with milk prices at home rising.

Every drop they produce is profitable and the prices for much

loved dairy products like cheese and ice cream are predicted to climb

3.5% this year. Farmers have something to gain here. Last year

they fear that the drought could cost $2 billion. It with great

weather since then and high milk prices, the industry is rebounding.

That is it for us. Do stay tuned to BBC World News for the latest

developments on MH 370. Australia is saying to objects shown

on satellite image in the southern Indian Ocean could be related to the

missing Malaysian plane. It has sent an aircraft to the area to

investigate.