19/07/2016 Asia Business Report

ageing Trident system -- top story in the UK. The Labour Party was

deeply divided on the vote which won by 135. Now the latest business news

from Singapore. Drama at Netflix. Shares are down

sharply as it reveals fewer people are subscribing.

And China's banking industry, it is huge but is it solid? We'll look at

the challenges facing the world's biggest banks.

Good morning, Asia and hello, world! It's Tuesday and glad you could join

us for this for this edition of Asia Business Report, I Rico Hizon. We

start with a big day for the technology sector in America with

Netflix and Yahoo releasing their earnings. The big surprise was from

Netflix, which has seen fewer subscribers joining the video

streaming service than forecast. At Yahoo!, the prospect of the sale of

its core search business is still just a prospect. No concrete

announcement on that as of yet. I asked our North American technology

correspondent David Lee what went wrong at Netflix.

They're saying they didn't attract as many new users as hoped, they

wanted to add 2.5 million over the last quarter, they only managed

growth of 1.7 million and much of that is due to people leaving the

site. Reed Hastings, the CEO of Netflix, came out and he said he was

blaming media coverage of a price hike that was coming on Netflix for

users that had been on the service for quite a long time. Focusing on

Yahoo, everyone wanting to find out not only about their earnings

numbers but what will happen to their search business. The sale of

Yahoo has been in the offing for quite some time and the earnings

reports Yahoo put out today are most likely probably its last ever as the

company is today. Some investors would have been hoping for Marissa

Meyer, the CEO, to say that a sale had been agreed upon, and perhaps

who made the Internet side of Yahoo's Internet business. But that

didn't happen and she said there would be no announcement and even

worse there will be no announcement about when the announcement could

be, she said she would update investors at the right time. Some of

those investors would be frustrated, they had hoped to hear more from

Marissa Mayer about that but nonetheless, Yahoo's shares have

gone up on the back of the earnings in anticipation of that eventual

deal despite the fact Yahoo itself is performing continually quite

badly. Dave Lee in Silicon Valley. Staying

with the technology space, the Japanese market has reopened

following one of the biggest deals of the year, which was reached on a

public holiday on Monday. Japan's telecommunications giant Softbank

will be buying British tech firm ARM Holdings. But shares in Softbank are

down more than 10% in Tokyo trade this morning. Our business editor

Simon Jack reports. It might be the most important UK

company you've never heard of. Last year alone 15 billion microchips

designed by ARM found their way into devices around the world. Based in

Cambridge, it's the crown jewel of the UK tech industry and soon it

will belong to this man's private company. I'm very excited to make

this announcement. This is the company that I have admired for the

last ten years. I want to ask you why suddenly this deal has been done

and whether Brexit and the devaluation of sterling had anything

to do with the timing. I would have made this decision at this time

regardless of wrecks it happening or not happening. -- Brexit. It's the

biggest ever investment by an Asian company in the UK and that is music

to the new Chancellor's the years. ARM is a great success story and the

fact a Japanese country three years after the referendums and decision

is prepared to make this commitment to the UK and commit to grow that

business in the UK is a resounding endorsement of the resilience of the

British economy -- referendum decision. And the attractiveness of

Britain for a international companies. The company's founder had

little cause for celebration. ARM is the proudest achievement of my life

and this is a sad day for me and a sad day for high-technology in

Britain because ARM has been such a phenomenal global success.

Cambridge's old-fashioned charm belies its high-tech prowess, but it

only has one arm. And while still strong, that has lost control of its

own destiny. Simon Jack, BBC News. For more on this deal we are joined

in our studios by our Asia business correspondent. Looking at the Nikkei

225 in positive territory but Softbank is down 10%, what's

happening? Investors in Japan have had their first chance to react to

this deal and this is a deal that has been lauded by counterparts in

the UK, politicians in the UK saying this is a real vote of confidence in

the British economy after the Brexit decision. This reaction is very

specific to what is going on in Softbank in Japan, this company has

debt to the tune of $100 billion! Investors were hoping the asset

sales we have seen in recent times at Softbank, selling off its private

stake in Alibaba, would be used to pay down some of that debt. Now it

looks like the CEO is going to use some of this money to pay for this

major acquisition in the UK, the biggest ever come of a British firm

by an Asian company. You don't want your boss to play down the debts

only, you won the dividends. What he has been saying and yesterday at the

conference call, he believes in the future of what ARM Holdings can

bring to Softbank, he's a big believer in the Internet of things

and the chips that ARM Holdings designs, the technology behind it,

is what he is paying the premium for. It's no small amount, 43%, a

premium of that much, on every ARM Holdings share. That's why you're

seeing the nervousness in regards to Softbank shares in Japan today.

Karishma Vaswani, thank you for joining us. I'm sure everyone will

want to know how this impacts the dynamics of the Asian technology

space going forward. To China and the latest world figures have

indicated that its massive economy is likely stabilising but there are

concerns about the health of parts of the country's banking sector,

which is the largest in the world. Many of China's giant banks are

government owned, putting a huge burden on the state. Robin Brant

reports from Shanghai. Big buildings and big banks, very

big banks in fact. They dominate here in the heart of China's

commercial capital. Let's start this little circuit in the city with some

staggering statistics. The biggest bank in the world is Chinese. ICBC

has just over 3.5 trillion US dollars in assets. It has around

half a billion customers. And four of the five biggest banks in the

world are Chinese. This is an industry with huge reserves and

global ambitions. But China has a debt problem, a big debt problem. In

the years following the global financial crisis there's been

interest rate cuts and a boom in credit, all aimed at boosting the

economy and all on the orders of the government which owns or controls

most of the banks. The International Monetary Fund estimates there is 1.3

trillion in US loans at risk of default. Most of that has been

channelled into state-owned enterprises, mostly unprofitable, or

into local government and bad loans are on the up, they are at an 11

year high. What next? Maybe some of the banks will topple over, the

government will bail them out at great cost and maybe the country's

currency will devalue further. Or do the banks restructure their debt and

survived while a select few go to the wall? Through all of this the

government will be remaining focused on their number one priority,

remaining -- retaining harmony and stability even that if that means a

few don't survive. Goldman require a controlling stake

a cosmetics maker and an investment arm in LVMH will take a stake in

Clio later this week. It was up 20% from the previous year. Why are

Korean companies more attractive than western or Japanese rivals? I

put that question to an industry analyst.

With Korean companies, a lot are very strategic in their price

positioning. They are in between mass and premium. A lot of Western

brands and Japanese brands are priced pretty high. Korean cosmetic

brands went into a segment which is a segment which is not exactly

saturated yet. Joanna Chan. A quick look at the

markets and currently in positive territory after the holiday break,

the Nikkei 225 up 0.2%. Flat elsewhere. Thanks for investing your

time with us. The bye for now.