SINGAPORE, Dec 20 (Reuters) - Following is the view from Reuters Asia editors on the news that is likely to matter most this week:
KOREA PENINSULA CRISIS
Tension is running high on the Korean peninsula, with North Korea's military reportedly raising an alert for artillery units based along its west coast on Sunday ahead of a planned live-fire drill by the South that Pyongyang has vowed to counter with a strike on its neighbour. The U.N. Security Council met on Sunday in a bid to cool tensions, but the big five powers were split on whether to blame North Korea for the crisis. The South's drill is now scheduled to take place some time before Tuesday, delaying what could be the trigger for a situation that spirals out of control. Still, analysts doubt the North would carry through with its threats to hit the South given that a full-blown conflict would not be in the interest of either side.
DRAKA
China's Xinmao is due to announce by Dec. 20 whether it Will proceed with its 20.5 euros per share cash offer for Dutch cablemaker Draka, with Italy's Prysmian waiting in the wings. Xinmao has said bank financing for its 1 billion euros offer is conditional on it reaching final agreement on a merger protocol with Draka. Latest reports have Draka expressing doubts about Xinmao, and Xinmao expressing its confidence. The proposal is another step in China's aim to move up the value chain, and a sign of the big opportunities in rolling out fibre in the world's most populous nation.
JAPAN-ECONOMY
The Bank of Japan's 2-day policy meeting ends on Tuesday Dec 21. The BOJ is in a wait-and-see mode. The economy has stalled and that lull will extend into the first quarter of 2011. The odds of the BOJ declaring a full-blown quantitative easing program are much longer than that of it assuring markets on yields or even committing to more frequent open market operations. Meanwhile, the deadline for the Democratic Party-led government to draft budget guidelines is fast approaching and all we have so far are a bare bones agreement on raising taxes for the wealthy and lowering the corporate tax rate.
MARKETS
Hopping along to the rabbit year, which begins on Feb. 3. It's highly unlikely that Southeast Asia's equity and rate markets will turn out another banner year in 2011. Monetary authorities will probably have to play catch up with other Asian central banks that are further into a tightening cycle, food prices could get out of hand, foreign participation in domestic markets is already relatively high and higher U.S. Treasury yields could pull money out of places like Indonesia and the Philippines. Political risks loom in Thailand. Is some of the money that had been parked in SE Asia already moving to N Asias more liquid markets? Japanese bank shares are on fire and foreign investors have been persistent buyers for longer than a month. Foreigners also picked up $1 billion of Korean stocks last week and have been net buyers for every day but two in December. Indeed, Standard Chartered thinks the Korean won will be the best performing Asia ex-Japan currency vs the dollar in 2011.
JAPAN POLITICS
Japanese Prime Minister Naoto Kan is expected to meet rival Ichiro Ozawa on Monday, Dec. 20 as a rift in the ruling party over the scandal-plagued powerbroker threatens to widen, distracting politicians from tough policy challenges. Kan, who took office in June as Japan's fifth premier in three years, has been trying to look decisive to avoid becoming the latest of the nation's revolving door leaders. Another change at the top would spell more policy confusion as any new government sorts out its priorities on matters such as social welfare and pension reform and struggles with a divided parliament where opposition help is needed to pass laws.
(Compiled by Richard Pullin) Keywords: WEEKAHEAD/ASIA (richard.pullin@thomsonreuters.com; +612-9373-1811;) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
KOREA PENINSULA CRISIS
Tension is running high on the Korean peninsula, with North Korea's military reportedly raising an alert for artillery units based along its west coast on Sunday ahead of a planned live-fire drill by the South that Pyongyang has vowed to counter with a strike on its neighbour. The U.N. Security Council met on Sunday in a bid to cool tensions, but the big five powers were split on whether to blame North Korea for the crisis. The South's drill is now scheduled to take place some time before Tuesday, delaying what could be the trigger for a situation that spirals out of control. Still, analysts doubt the North would carry through with its threats to hit the South given that a full-blown conflict would not be in the interest of either side.
DRAKA
China's Xinmao is due to announce by Dec. 20 whether it Will proceed with its 20.5 euros per share cash offer for Dutch cablemaker Draka, with Italy's Prysmian waiting in the wings. Xinmao has said bank financing for its 1 billion euros offer is conditional on it reaching final agreement on a merger protocol with Draka. Latest reports have Draka expressing doubts about Xinmao, and Xinmao expressing its confidence. The proposal is another step in China's aim to move up the value chain, and a sign of the big opportunities in rolling out fibre in the world's most populous nation.
JAPAN-ECONOMY
The Bank of Japan's 2-day policy meeting ends on Tuesday Dec 21. The BOJ is in a wait-and-see mode. The economy has stalled and that lull will extend into the first quarter of 2011. The odds of the BOJ declaring a full-blown quantitative easing program are much longer than that of it assuring markets on yields or even committing to more frequent open market operations. Meanwhile, the deadline for the Democratic Party-led government to draft budget guidelines is fast approaching and all we have so far are a bare bones agreement on raising taxes for the wealthy and lowering the corporate tax rate.
MARKETS
Hopping along to the rabbit year, which begins on Feb. 3. It's highly unlikely that Southeast Asia's equity and rate markets will turn out another banner year in 2011. Monetary authorities will probably have to play catch up with other Asian central banks that are further into a tightening cycle, food prices could get out of hand, foreign participation in domestic markets is already relatively high and higher U.S. Treasury yields could pull money out of places like Indonesia and the Philippines. Political risks loom in Thailand. Is some of the money that had been parked in SE Asia already moving to N Asias more liquid markets? Japanese bank shares are on fire and foreign investors have been persistent buyers for longer than a month. Foreigners also picked up $1 billion of Korean stocks last week and have been net buyers for every day but two in December. Indeed, Standard Chartered thinks the Korean won will be the best performing Asia ex-Japan currency vs the dollar in 2011.
JAPAN POLITICS
Japanese Prime Minister Naoto Kan is expected to meet rival Ichiro Ozawa on Monday, Dec. 20 as a rift in the ruling party over the scandal-plagued powerbroker threatens to widen, distracting politicians from tough policy challenges. Kan, who took office in June as Japan's fifth premier in three years, has been trying to look decisive to avoid becoming the latest of the nation's revolving door leaders. Another change at the top would spell more policy confusion as any new government sorts out its priorities on matters such as social welfare and pension reform and struggles with a divided parliament where opposition help is needed to pass laws.
(Compiled by Richard Pullin) Keywords: WEEKAHEAD/ASIA (richard.pullin@thomsonreuters.com; +612-9373-1811;) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.