27/04/2017 Asia Business Report

US markets deliver a cool reception to President Trump's plan to slash

corporate tax rates. And living a Samsung life. Why South Korea's

corporate giants are so big you'd struggle to live without them.

Good morning, Asia. Hello, world. Glad you could join us for this

Thursday edition of Asia Business Report, I'm Rico Hizon. Donald Trump

is hours away from completing his first 100 days in office, a

milestone where the chief executive is graded on his progress in office

and before the clock ticks down, following through on a major

campaign promise with a proposal to drastically cut the business tax

from 35% to 15%. Well, it is now clear how the White House plans to

pay for the cuts which could add some $2 trillion to the national

deficit over the next decade. But the US Treasury Secretary says

economic growth is both the goal and the solution. We believe we can get

back to 3% or higher GDP that is sustainable in this country.

The overall economic plan consists of massive tax cuts and tax reform,

regulatory relief and renegotiating trade deals, and with that we will

unlock the economic growth that's been held back for too long in this

country. Earlier I spoke with Samira Hussain my colleague in New York and

asked her if the plan will be approved by Congress. The way the

plan is put out as is it won't get through Congress exactly the way it

has been penned. But this offers a framework from which Congress can

start to debate and it will take a very long time to actually get tax

reform through Congress in a way that can actually get past. So there

are some parts of it that are going to appeal to Republicans. Of course

first and foremost the reduction of the corporate tax rate from 35% to

15%. But on the flip side, you know, Democrats are going to come after

this plan, saying that it really only benefits America's corporate

rich, of which Donald Trump belongs to that grouping and because we

haven't seen a copy of his taxes, we don't know how he will actually

personally benefit from these tax cuts. We could see a watered-down

version of Trump's tax plan when indeed it becomes law. Is this why

we are seeing the markets negatively reacting to this plan? Or is it by

on the rumour, sell on the news. If you look at markets and take a step

back, in general they have been very optimistic about the plans from

President Trump. The Trump bump as we've been calling it, the more than

5% increase we've seen on US markets since Donald Trump has been elected,

has really been on optimism, on the optimism that he will be able to get

an infrastructure spending bill passed, that he will be able to get

tax reform put in. That optimism was waning a little bit when markets saw

some of the details, but it's hard to differentiate that and some of

the corporate earnings we are seeing as well. So it could be a little bit

of jitteriness but overall I would suggest markets are looking a little

bit more confident. Samira Hussain in New York and in

other business news, shares suspended in Tokyo trade for Honda.

They are looking at filing for bankruptcy protection with a plan to

sell all its operations to an American company, that's according

to the Nikkei newspaper. Samsung Electronics posting a 48% jump in

operating profits to nearly 9 billion US dollars for the three

months until March, that is the best quarterly result in more than three

years. The boost comes from the conglomerate's memory chip unit.

That South Korean economy expanded by 2.7% in the first quarter from

January to March compared to last year, much of that growth was driven

by a jump in capital investment. All this week we have been looking at

the state of South Korea's giant family run businesses also known as

chebols, staggeringly the five largest account for more than half

of the country's GDP. These chebols don't only dominate the economy,

they are also highly visceral in the everyday life in South Korea.

South Korea's acid conglomerates or chebols as they are known here help

to build this economy -- massive. They've also been criticised for

being far too powerful. Samsung is the largest, making up around a

fifth of GDP here. You probably already know it for its mobile

phones and laptops but it also has interests in insurance, healthcare,

financial services, even an amusement park. To show you how

sprawling its influence is, I'm going to try to get through a

typical working day here using Samsung related products and

services. Samsung makes pretty much every appliance you might need in

your home. If I wanted to I could fill my entire house full of Samsung

products. Off to work now. They don't really make cars any more but

they do have a stake in this. You wouldn't think it but Samsung is

even involved in the food business. The Samsung life in South Korea.

Over to China now and investors have been banking on the mainland stock

carriers for the last couple of years on rising travel demand and

today we will be hearing the latest financial numbers from China Eastern

and Air China, but will it all be good news? Here's a preview from

industry watcher Matt Driscoll. It's a mixed bag. China Eastern is

looking to beat expectations, analysts are talking about a 31%

increase in net profit, China Southern above market expectations

according to the analysts, although profit is likely to be down as much

as 40% compared to Q1 of last year. Air China is likely to be in line

with expectations but profits still down. So much expectation from these

mainland carriers and they have really expanded on the international

routes. What is giving them better yields, Matt? Is it the

international business or the domestic business? Part of the

problem is last year they turned in their best year since 2012, the

combined profits for the top three were $2.7 billion. International

yields are down a little bit, that's where they are having a problem. But

I looked at it, markets go up and down, stocks go up and down, you

need to look at the big picture when it comes to China. According to

Boeing, they are going to buy $1 trillion worth of aeroplanes over

the last 20 years -- next. Chinese carriers are overdoing it and buying

so many planes, but over, on the other hand the outlook for global

aviation looks quite dim because you have the Middle Eastern carriers and

the major legacy carriers in the region. The outlook, long-term

outlook... Short-term is a different story but the long-term outlook for

China is very impressive, it will overtake, according to the

International Air Transport Association, overtake the US

probably in the next two years as the top passenger market in the

world. By 2035 you're looking at 1.3 billion passengers in China coming

to an travelling within and leaving China. So that's a huge number.

Good prospects for the Chinese carriers but a different picture in

Europe, Alitalia is holding a shareholders meeting on Thursday to

discuss putting the Italian airline into administration. This follows a

union vote rejecting a cost-cutting plan. Here's a look at Alitalia's

struggles. Alitalia is the sick man of the

skies. It loses hundreds of millions of dollars a year. In 2015,

desperate for cash, it sold 49% of its shares to Etihad airways Abu

Dhabi. Etihad offered to inject $2.2 billion to fund Alitalia's recovery

but a key condition was poor Alitalia to cut its costs. The

airline plan was lay off 1700 staff. Cut wages by 8%. And cut its fleet

size. But union members voted to reject

these measures, so Etihad has taken its money off the table. Now

Alitalia is planning to appoint an administrator who would decide

whether the airline can be saved or whether it should be wound up. The

Italian government says it will give Alitalia a bridging loan to continue

to operate for the next few months. Problems at the Italian carrier

Alitalia. Let's have a quick look at the Asian stock markets, currently

mixed, the Nikkei down by 66 points but the all ordinary is flat to hire

at this hour. This is after Donald Trump's dramatic tax cut proposal

failed to lift US stocks overnight. On Wall Street the Dow fell 21, the

NASDAQ was unchanged. Thank you so much for investing your time with

us, I'm Rico Hizon, by bye for now. The Trump administration says it

aims to force North Korea into dismantling its nuclear

and missile programmes through diplomatic pressure

and economic sanctions.