30/06/2014 Asia Business Report


30/06/2014

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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to "working for a fair deal with Britain". Now on BBC News all the

:00:00.:00:00.

latest business news live from Singapore.

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Euphoric financial markets are out of step with economic reality, a

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major report warns. And, it should be a time of fasting, but food

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prices in Indonesia are expected to rise during the Muslim holy month of

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Ramadan. Welcome to Asia Business Report. A major rally in global

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financial markets is out of sync with a shaky economic outlook, that

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is the view of the bank of International settlements, that is

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regarded as the central bank of central banks, and focuses on

:00:45.:01:03.

regulation. In its annual report, it warned emerging markets are at risk

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of a run`up in stock and property prices. I asked Michael McCarthy in

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Sydney why that was the case. The current concerns are that they will

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withdraw the stimulus too abruptly, that will knock risk assets around,

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and bring share markets crashing down. The BIS is pointing out that

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the deflation concerned markets are not as large as some would expect,

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and there is a great risk in keeping rates too low for too long, and

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borrowing goes up, and then when the rates go up, we will have an asset

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price crash. We have heard this before, we heard it during the

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financial crisis, the World Bank and others warned that low interest

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rates in the West were sparking inflows that were unsustainable into

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the emerging markets in Asia. It is not new, why aren't they more

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prepared for it? It is not new, you're correct, it is a long way in

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global markets that could break at any time. They are trained to

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balance it, and keeping in mind that systemic risks to banks are a key

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aspect of their function. China was highlighted in the report, as facing

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a possible banking crisis, what is that due to? Is that due to the

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easing of monetary policy as well? China's economy is common to a large

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extent, isolated from international investment, with currency controls

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and inflow controls that authorities keep there, but a buoyant trade

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feeds into the economy in China. Any stomping on the brakes could have an

:02:41.:02:45.

impact. There is concern at BIS that the Chinese banking system is

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opaque, they are concerned about shadow banking taxes, and there are

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concerns that there will be a flow`on effect through the Chinese

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economy. In other business news, BNP Paribas

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are expected to plead guilty to criminal charges of violating

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American sanctions with rogue nations. They are alleged to have

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hid $30 billion of transactions involving blacklisted countries

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including Iran, Sudan and Cuba. According to reports, BNP Paribas

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could pay a record $9 billion penalty.

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France plans to set up a Paris`based pay system that will use their

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system, it signed on Sunday with their counterpart, along to

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participate in the trade. Major European financial centres like

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London and Luxembourg have competed to trade using China's currency,

:03:37.:03:44.

which is gaining international use. Argentina is set to enter a

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technical default for the second time in 15 years today as they

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strike a last`minute deal with creditors. They were ordered by a US

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court to make interest payments on their default in bonds which they

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have been trying to avoid through a lengthy legal battle. They would

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lose access to international markets if it he faults on its payments. ``

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defaults. The World Bank has been making loans to poor countries since

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it was founded in 1945, but the world 's most famous lender is now

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undergoing its first restructuring in nearly two decades. Starting this

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week, it will provide itself between 14 global practices that focus on

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areas like energy and agriculture. Our correspondent spoke to the chief

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financial officer about the move. It is a push to stay relevant. We set

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up this ambition to eradicate poverty, it is amazing. It has

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helped people on Earth since day one, we believe that, within our

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reach, we can eradicate poverty. I am happy that we can consider this

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objective, and I will be happier if we reach it. The World Bank

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president aims for a further $400 million in cost savings, where will

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it come from and will it result in job cuts? In the restructuring,

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within the organisation, you have to address cost issues, that is in any

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private sector organisation, true the government and true for an

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organisation like ours, we want to make the institution more efficient,

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then maybe job impacts, of course, but to minimise this, we have made

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these decisions before which have had no impact. We had to address

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these things regularly and properly, not every 20 years, a key issue is

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that we want an organisation that is, to a certain extent, a little

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bit too bureaucratic, driven by processes, and as rules`based, but

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it needs to be more productively managed. Muslims around the world

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began the holy month of fasting this weekend, in Southeast Asia, and in

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Indonesia, the world 's most populous Muslim nation, that means

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an increased demand for staple goods. Fasting and feasting can

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often see prices jump dramatically in Southeast Asia 's largest

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economy. But, the price of food could be on the minds of voters this

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month. Now we go to our correspondant.

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This weekend, millions of Indonesians began fasting, for the

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Muslim holy month of Ramadan. And, as you see pretty much every year,

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prices of fruits, vegetables, meats, they begin to rise, it is no

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different this time around. This woman has been running this stall in

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this market for the last 15 years. She says that this time around,

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prices have gone up about 20%. Over here, you can see the major staples

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of the Indonesian market, soya beans, that can be fried or boiled,

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they go in soups. Over here, these bright red chilies, an important

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part of Indonesian cuisine, but this year, the price rises are coming

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against the backdrop of a presidential election. Many of the

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street vendors here have been telling me that this time around,

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they have not seen politicians come out to promise them lower prices in

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the way that they normally do in the Muslim holy month of fasting. But

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what they have seen is party members coming out to try to get votes from

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their preferred candidates. The economy is a major issue in this

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election. Whoever becomes Indonesia 's next president will have to

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tackle the challenge of rising prices for this country.

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India's new government will deliver its first budget next month, one

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issue that will be under focus is the gap between what India sells

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abroad and what it buys in for its own needs. It imports more than it

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exports, which makes the economy vulnerable, as businesses try to

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find markets abroad, they are worried. Now we go to our

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correspondant. For the past 30 years, the

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components made here have been sold around the world. Finding their way

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into products like microwave ovens and machines used in hospitals.

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Customers include global giants like Siemens and General Electric.

:08:30.:08:35.

Despite the strong credentials, business is proving difficult. This

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computer charger will be exported to countries like Germany, Canada and

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France. Over the last few years, the cost of manufacturing these products

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in India is often more expensive compared to other Asian countries,

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because of that, the price tends to be higher. Due to these reasons,

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buyers in America and Europe find some Indian made products less

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attractive. The property is not really going down, it is time to

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find a customer, and because of the global competition, costs are

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reducing. The value of goods that they export is a sensitive topic.

:09:17.:09:28.

Every month, it imports more than it sells abroad. Figures change

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monthly, but recently, the gap has been about $10 billion. This has

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been a cause for serious concern. To counter it, the government put curbs

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on imports of gold. The yellow metal is the second biggest item on

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India's import list after oil. It help to narrow the trade deficit.

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Rather than restricting what comes in, the new government wants to

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focus on increasing what goes out by giving a big push to home`grown

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manufacturing. To achieve that, it is pursuing the idea of exporting

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high`value products for military and defence. The Exporters are hoping

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that next month 's budget will give them some temporary reprieve,

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perhaps, with more tax rebates. But, more important, is India's new trade

:10:22.:10:26.

policy due later in the year. The long`term plan is what the countries

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manufacturers need to fill in the crucial trade gap.

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You can get more of our stories and updates on the website, that is it

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for this edition of Asia Business Report. We have Sport Today coming

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up next. Thank you for watching. I'm Adnan Nawaz. The top stories

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this hour. Iraqi government forces are continuing an offensive to

:10:50.:10:52.

recapture the city of Tikrit, which Sunni insurgents seized earlier this

:10:53.:10:54.

month. It's not

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