21/12/2016 Asia Business Report

The bitter feud - between businesses and the ousted chairman might be

headed for the courtroom next. Restrictions on converting yuan is

fuelling more demand for US dollars in China.

Good morning, Asia, hello world, it's a Wednesday. Glad you could

join us for this mid-week edition of Asia Business Report. I'm Rico

Hizon. We start off with India and a very public boardroom battle will be

the top of the agenda at a number of meatings being held this week by

companies belonging to the con gam rat Tata. The meetings were

originally called to remove the director. But he resigned from six

companies on Monday. We have the details from Mumbai.

By resigning in the remaining Six posts, the director no longer holds

any executive position in the Tata group, but Tata firms are still

going ahead with the respective extraordinary general meetings which

were originally called to remove the director. The sons, the main

promoter of the con gom rat, wanted to use the meetings to justify his

decision to sack the chairman in October. The corporate battle has

damaged the group's reputation. It has also raised serious questions

regarding corporate governments, something that the group has always

prided itself on. The firms want to use these Ioms to reassure

shareholders and investors that there are no reasons to worry about.

There have been a series of accusations and counter-accusations

from both sides. But the chairman has announced he'll be lodging legal

action against the Tata Group which means this public spat is far from

over. Moving to other business news making

headlines. European commission has charged Facebook with providing

misleading information which could result in the social networking

company paying a fine that would amount into the hundreds of millions

of dollars. Well, the issue lies with a WhatsApp privacy policy

change in August when it said it would share user phone numbers with

the parent company Facebook. The social networking site has

previously indicated to the commission that it was unable to

match the identity of users who are both Facebook and WhatsApp accounts.

Nike, one of the world's top brands in sports wear apparel has reported

better than expected quarterly earnings thanks to higher demand

from western European, greater China and the emerging markets. Revenues

rising to $8 billion for the three months to November and that is a 6%

jump when compared to the previous period.

The Malaysian rig get is making headlines this week falling to

levels not seen since the 1998 Asian financial crisis, although the

strengthening US dollar has put in Asian currencies under pressure,

Malaysia is particularly hard hit. I spoke to the Asia Pacific economist

for IHS and I asked him what's behind the Ringgit falling so steep.

I think you need to look at the depreciation of the Ringgit against

the broader context the US is strengthening because of the Fed

hike that happened a few days ago and because of the expectation that

the Fed is going to tighten more in 2017. But is the Ringgit's problems

left headlines agitating global left headlines agitating global

of factors for the Rinnggit's of factors for the Rinnggit's

weakness and one of those is that the overall foreign exchange

reserves of Malaysia have come down in the last three years so that's

looking a little bit thinner than it was two or three years ago, and also

because there's a perception in the market that Malaysia's vulnerable to

capital outflows because there's a very high level of foreign ownership

in both the equity market and in the Malaysian government securities

market. But we see now the currency at levels not seen since the 1988

Asian financial crisis, they're at fear that they could reintroduce

capital controls to stem the fall of the currency. I think if you look at

Philippine peso and also the Philippine peso and also the

Ringgit, they're all down to the east Asian crisis levels. The

Ringgit isn't alone. 'S not the right to put in the capital

structural trend of the US dollar structural trend of the US dollar

rising and I think we will see turmoil in Asian currency markets

next year. Because of the additional Fed rate hikes that are expected. So

I think there's many other currencies that will also be seeing

significant depreciation next year. When you say Asian currency turmoil

in 2017, so could we see a repeat of the financial crisis from 1998? I

don't think the fundamentals of Asia are bad. I think the economic

fundamentals are much better. This is really about the dollar. It's

because the dollar was operating under very low interest rates for a

very long time since 2009. So I think we need to see this not as a

crisis in Asia, but more about the normalisation of interest rates in

the US. How will this impact Asian economies next year? I think we will

see probably quite significant appreciation of the dollar still to

come against many Asian currencies. So on the currency side, we will see

somewhat more weakness for many Asian countries, and that may help

their exports. But it also brings with it concerns about capital

outflows because the strong dollar and stronger US growth will attract

capital into the US assets and out of Asian currencies and Asian

assets. So that is a risk that if there is significant capital

outflows, it could create some pressures on some of the currencies

in Asia. So it is one of the downside risks for 2017. Over now to

China where currency weakness is driving up demand for US dollars.

The Chinese yuan has lost 6.6% this year and with the American central

bank, the fed expected to deliver more rate headaches in 2017, that

weakness could continue. To help slow the yuan's appreciation,

Chinese authorities have placed a Chinese authorities have placed a

cap on the amount that can be converted into foreign currencies

and that limit stands at $50,000 US per person. To get around this,

people are putting their Chinese currency into investment products

that are priced in US dollars. Kind of the structure products of

funds provided by the banks or by the asset manager, because in China

we have to quote our QDI, which is the qualified domestic institutional

investors, under this quota for those asset managers, they're

allowed to invest in off-shore marks which is the bond marks or economic

markets. In return, those aseat manager, they can structure the

products to the kinds on the off-shore markets. That will provide

them the access. And domestically it could also be as simple as a US

dollar-timed deposit. Yes. By having these off-shore investment products,

don't the officials from the People's Bank of China see this as a

way to skirt this 50,000 cap rule? That's in the really the case,

actually. In fact, for most of the conversion, you'll still be

operating within this $50,000, US dollar, quota. But for this kind of

products, which will enhance the return for the investors - for the

investors, so that's why we have significant amount for this kind of

-... Are investors in China looking at moving their Chinese yuan into US

dollars off-shore or domestically hedging against the US dollar? I

would say could be both. I mean, for some Chinese individuals they do

have quite a lot overseas business. So that's why I prefer to move the

move out of China to the off-shore accounts, but not all the Chinese

have overseas markets. A lot of people who don't have that kind of

overseas market, they're more looking for hedging purpose. I can

share with you, as you know, as of now we have about 118 billion US

dollar deposit from... And despite the $50,000 cap rule, the head of

can China research at OCB Bank, forecasts a further depreciation of

the Chinese yuan against US dollar in 2017. Before we go, here is a

look at the markets and as you can see in our markets boards, the

Nikkei 225, up about 75 points. The Hang Seng index gaining 42 and the

all ordinaries index in positive territory. Most of the regional

boards are in positive territory. This is after the Dow Jones

industrial average closed yet again at another record high. It's 17th

record since the US election, ending within 25 points off 20,000. So good

day so far for the global markets. Thank you so much for investing your

time with us. I'm Rico Hizon, Sports Today is coming up next.

You're watching BBC News. Let's bring you a reminder of the top

stories this hour. So-called Islamic State says one

of its militants carried out