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G-20 Nations Pledge to Slash Budget Deficits

CNBC Asia Pacific
Monday, 28 Jun 2010 | 7:10 AM ET

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hello and a very warm welcome to our China viewers on CCTV Business Channel.

I am Saijal Patel and you are watching "Asia Market Daily" co-produced by CCTV and CNBC, first in business worldwide.

First up, market action in Asia.

It's a mixed day of trading for markets across the region.

Traders say investors have stayed on sidelines, waiting for cues from U.S., The. ISM manufacturing and employment data are due later this week. For some markets, Group of 20 nations' pledge to cut government budget deficit brought some cheer, easing concerns of sovereign debt defaults.

Peter Lai, Director of DBS Vickers Securities on the positive impact for Asian markets.

(SOT) Peter Lai, Director, DBS Vickers Securities:

“For the announcement on the G8 and G20, apparently it seems that the revival in Asia seems to be a much more stronger than that in the US or Europe. I feel that lots of funds are coming into Hong Kong and China, so I do believe that though there may be lots of IPO in this third quarter this year, I do believe that this kind of fund flow definitely for this kind of IPO, so in the third quarter, the market may be a bit higher, and moreover, I do believe that the Shanghai composite should reach the bottom at 2400, and move towards the 2900 for the Shanghai Composite in the third quarter, so this is definitely good to Hong Kong.”

We will have more on the G20 meeting further down the bulletin.

Meantime, Korea markets moved marginally higher, supported by flat-screen maker LG. Display on hopes of an earnings rebound in the third-quarter. But construction issues were battered after regulators announced a debt-restructuring plan for 65 troubled contractors and shipbuilders last week.

Japanese investors also kept to the sidelines ahead of key economic data - Industrial production, unemployment, and the Bank of Japan's "tannin" survey of business sentiment all out later this week.

The Nikkei extended falls after slipping below a key support level last session.

Last week it booked its biggest loss in a month and market players are expecting the Nikkei to falter further, saying it may even hit near six-month lows Leading the decliners today — Mizuho Financial — slumping to a 7-month low after saying it will boost a planned share offer to raise as much as $9.6 billion dollars.

A stronger yen also weighing down on exporters with Toyota in reverse gear, sliding to its lowest level this year, on news it is recalling and temporarily halting sales of its 2010 Lexus hybrid due to a potential fuel leak problem.

Over in Australia, the market is in negative territory, although a brief spike due to a contributor error, sent the index to a two-month high at one point.

We go down to Australia now for the top story of the day.

Australia's first female prime-minister has announced a cabinet re-shuffle.

Our correspondent, Oriel Morrison has the details:

Thanks Saijal. While former Prime Minister Kevin Rudd has been left on the bench in the cabinet reshuffle, new Prime Minister Julia Gillard said that he would be welcomed into the cabinet after the next election. And given recent polls — its likely that election will be called sooner rather than later — although Julia Gillard acknowledged, that the election would still be difficult to win.

And there were only minor changes — Julia Gillard appointed former trade minister Simon Crean to take over her former portfolios of education, employment and workplace relations — and Foreign minister Stephen Smith keeps his job, but also takes on Simon Crean's former portfolio of Trade

(SOT) Julia Gillard, Australia Prime Minister:

“In considering the question of a reshuffle, I have determined that it is best to have as limited reshuffle as possible. To keep the maximum stability amongst the team and to keep our focus on the work that Australians need the government to be doing.”

The key Treasury and Resources portfolios have been left unchanged, with new Deputy Prime Minister Wayne Swan and Martin Ferguson set to continue their roles to negotiate with miners on a proposed 40 percent mining tax.

We're getting mixed reports as to how soon we will get the details on a reworked version of the tax, which some say could come as early as the next few days. One final point to make Finance Minister Lindsay Tanner who resigned from his role last week will remain in his job until the election.

Not much reaction in the markets as most of the detail of today's announcement was already priced in. Saijal, back to you.

The wealthiest of the Group of 20 countries have pledged their commitment to halve their deficits by 2013 and reduce government debt-to-GDP ratios by 2016.

The G20 Toronto Summit Declaration which issued a statement at the end of the summit also made a call to debt-laden economies to boost national savings.

The main debate at the weekend summit centered around how soon governments are able to reduce the stimulus spending in an uncertain global economy.

There are concerns that if stimulus measures are removed too quickly and private demand doesn't pick up, it may give rise to another global recession.

On the other hand, moving too slowly could produce unsustainable debt loads and even threaten sovereign debt defaults.

Stephen Halmarick, Head of Investment Market Research of Colonial First State Global Asset Management with his view:

(SOT) Stephen Halmarick, Head of Investment Market Research, Colonial First State Global Asset Management:

“And I think it's very important to remember what the world needs right now is probably a bit more private sector liquidity, a bit more bank lending to profitable commercial organizations to get the economy growing again. you don't want to pick now as the time to really cut back on lending activities.”

During the weekend summit, the Group of 20 countries also made the call for banks to raise capital "significantly higher" to avoid a repeat of the global financial crisis.

As part of the reforms, banks will be required to increase common equity as a percentage of their "so-called" Tier 1 capital.

This is to allow them to withstand another crisis without significant government support.

The G20 countries are expected to adopt the new standards by the end of 2012, and banks will be allowed to phase in capital increases during a transition period.

Jim Antos a Bank Analyst with Mizuho Securities Asia spells out the impact on the Asian banking sector.

(SOT) Jim Antos, Bank Analyst, Mizuho Securities Asia:

“I think you know, direct impact may be pretty minimal, but 093615 I think the future is global regulations of banks - one standard. It actually doesn't make any sense to have more than one standard, so I think it's going to be a matter of time what I see, as far as I’m concerned is, the US regulation is pretty weak, from what people had wanted,, but I think this is just the first wave of tighter regulation that we're going to see over the next two years.”

The G20 leaders said they will seek final agreement at the next summit in Seoul later in November.

Well, that wraps up today's business highlights.

I'm Saijal Patel from CNBC.

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