14/12/2016 Asia Business Report

To hike or not to hike? The spotlight is on the US central bank

and its final meeting of 2016. Efforts to save Nissan from

collapse. Can also save Mitsubishi? Good morning, Asia. Hello, world. It

is Wednesday, glad you could join us. It is the meeting that markets

have all been waiting for. The US central bank has kicked off its

two-day meeting and the Federal Reserve is widely expected to raise

interest rates for the first time this year. Our correspondence in

Singapore and India explained how this decision will affect their

economies. Here in Singapore and around

Southeast Asia, expectations have been rising that the US will hike

interest rates. That led to money flowing out of Asia and into the US

dollar, which has resulted in sharp declines in Asian currencies. One of

the worst affected is Malaysia. It has seen its currency fall to record

lows in recent weeks. This is all coming at a time when many Asian

companies have to start paying back their debts, much of that is in US

dollars and it will be far more expensive to do that now than it has

been in the past. Here in India the stock markets have

been volatile ahead of the Fed's meeting. A rate hike in the US could

lead to a cash floating India, with foreign investors selling off their

stocks and equities. That could weaken the Indian rupee as well. But

compared to other emerging markets, it is expected to be limited.

Earlier I spoke to a market strategist in Sydney who explained

how investors have been preparing for this highly anticipated rate

rise. I think the market since the

election of Donald Trump have moved materially. We've seen big cash

outflows from the region and we've seen the currencies of the region,

under pressure, so 25 basis points tomorrow morning is pretty much

baked into the cake. Now we just wait to see what Janet Yellen says.

What do you think will Janet Yellen and defence a in their statements?

Do you think Donald Trump's election has affected their outlook west I

think it probably has, but only at the margin. Charles Evans, in

Chicago, last week said it was too early to tell what the impact of

Trump would be. What Janet Yellen will do is ignore that the cautious

that we've had in 2016, the Fed that really found an excuse not to hike

every time it could, is still the dead that we will see next year. She

doesn't want to split stock markets on wants the US dollar to materially

strengthen, because that would hurt US trade, but I think she will

signal potentially three or four moves in 2017. And that would lead

to a stronger dollar. Is this good or bad for Asia? At the margin may

think it is bad for Asia, because it means capital flows. The a certain

extent it into the exports from the region are much more competitive, in

a stronger dollar environment, but the problem with that is that in the

meantime we have to deal with investors reallocating their money,

not only away from the cash that they make on the sidelines but from

all the money that's been flowing into Asia over the last couple of

years. I think India is especially vulnerable, given where it is

inflation is and what Narendra Modi's cash crunch will do to the

economy. But I think regionally capital flight in the next few

months will eventually give way to stronger economy is benefiting from

US nominal offshore growth. Over to Japan and it's a big day at

Mitsubishi motors. There will be a new chairman of the company. They

will vote on whether or not to triple the annual pay packages of

Mitsubishi motors at' top executives. Nissan bought a

controlling stake earlier this year, leading to the new post. Can he turn

the struggling automaker a round? I asked that question. The problem is

that Mitsubishi, because of the scandal we have seen, they have an

uphill climb and the other problem is that even before the scandal it

was a bit of an ulcer in Japan. You have Nissan, to Gotye, Mitsubishi

was before or fifth choice. In a way that Brand has been dented. --

Toyota. Perhaps the chairman is the only person at this point you can

rehabilitate it to be she, but it won't be an easy job. -- Mitsubishi.

What should the strategy be to rehabilitate it? He is claimed off

reapplying the Nissan handbook from 1999 to Mitsubishi. There will be

talks today about adjustment in salary caps, but I think one of the

most interesting thing is the way that he is trying to make Mitsubishi

more of... He's trying to do away with the priority system, and look

at executive pay based on performance, which is a novel idea

in Japan. He will create what is calling a performance officer. In

many ways this is what Japan needs more broadly. Abenomics is four

years in and we haven't seen a lot of corporate reform, a lot of change

from the corporate level. Here is you have Carlos Ghosn through

Mitsubishi joined the rest of Japan what they should be doing in many

ways to make Japan more competitive, to make companies more vibrant, and

this is an interesting moment as 3017 approaches. even though

Mitsubishi has been hit by this omission scandal, they still have

their strengths, especially in markets like Southeast Asia, where

Nissan is weak? In many ways they have strength externally.

Domestically not so much, in many ways the Mitsubishi brand has taken

a big hit in the last several months, just as Volkswagen has in

the past year, and the question is whether Carlos Ghosn can shake up

this corporate climate and that's really an open question. We will

see. Singapore is one of the sunniest

places in Asia, but space is hard to find and solar energy has been slow

to catch on. Now the world's largest solar testbed has been set up, doing

something never done before. Right near the equator, it is always

some in Singapore. Yet less than 1% of the power is generated by the

sun. The adoption of solar energy in Asia has been a bit slower than in

Europe, so the market over their has been booming over the last 10- 15

years. Most countries in Southeast Asia have to wait until the global

market builds up the capacity and learns from economies of scale.

Solar energy is cheaper now. China has become Asia's leading user of

solar power. Japan is also a big adopter and India is pushing to be.

Southeast Asia is slowly catching up, led by Thailand. Trouble is, in

places like Singapore, there's not much land for installing solar

panels, so scientists are looking for alternatives. Ten floating solar

panel systems have been set up in this remote part of Singapore,

divided by companies from all over the world. Each is designed

differently. The way they float, for instance, to the type and size of

the panels used, to the way the panels are arranged. The goal is to

find out which one works the best. The more direct sunlight solar panel

gets, the more it heats up. But the more it heats up, the less power it

produces. So floating systems are being tested to see if they are more

efficient. In a building environment like Singapore, which is a

citystate, then you have a lot of heat from the buildings. If you go

out to the waters, for example, that we are trying to test here, how much

is the cooling effect from the water on the solar panels and how much

more electricity can regenerate, compared to a system on the rooftop,

for example? Experts say the region's governments need to stop

subsidising conventional electricity and get incentives -- give

incentives to companies wanting to harness the power of the sun.

Solar power indeed. In other business news making headlines,

Asahi shares are continuing to fall in early Tokyo trade, extending a 5%

drop from yesterday when it announced it is having its biggest

ever overseas deal. Well, Japan's largest grower is paying eight

billion-dollar is for some of the beer brands as part of its expansion

strategy. -- largest brewer. Basically Asahi shares mirrored the

lacklustre mood in the Asian financial markets. Japan is down by

27 points. The Hang Seng opening up 150. The All Ords up 40. People are

waiting for the imported information from the US Federal Reserve, as to

whether they will raise the cost of borrowing. No impact whatsoever on

the Dow Jones industrial average. It was up, together with the NASDAQ, at

a record high. Thanks for joining us. Goodbye for now.

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