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Asia Stocks Slide on Recovery Fears

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

Hello to our viewers all over China. Happy Friday everybody.

You're watching Asia Market Daily, co-produced by CCTV Business Channel and CNBC, first in business worldwide.

I am Saijal Patel and here are the top stories across Asia today

Regional markets recorded a second day of losses even as AgBank debuts in Hong Kong.

Profit-taking took hold as investors continue to show jitters over the outlook for the global economic recovery.

William Buiter of Citi thinks the worries may be overdone.

(SOT) Willem Buiter, Global Chief Economist, Citi:

"The nervousness in the markets has been palpable...especially in the equities markets, since for the second quarter going into July. But one has to look at the economic fundamentals, and the economic fundamentals in the US and also in Europe, despite the sovereign debt crisis, despite the nervousness about the banks stress test, it doesn't look like a double dip, it's a risk but not anywhere near the most likely outcome."

Now for the closing numbers across Asia.

In Japan, the benchmark Nikkei 225 saw the biggest slump in almost six weeks closing lower by 2.86 percent, led down by exporters.

Over in South Korea, the KOSPI finished 0.7 percent lower.

Korean auto and tech stocks pulled down the index. Leading the losers - Hyundai, Kia and Samsung Electronics.

In Australia, the S&P ASX 200 also closed lower by about 0.5 percent. Meanwhile in India, the key stock market indexes soared past its two-year highs earlier in the week but have since given back some of those gains.

CNBC-TV 18 reporter, Sonia Shenoy on what to expect the next trading week:

Thanks so much for that. It will indeed be very hectic next week for the Indian markets. lots to watch out for, in terms of both economic data and earnings. Next week will be earnings-heavy, for some of these sectors like auto sector, the banking majors and a couple of big stocks in the IT space. Let me just quickly outline them for you: 19th July, we'll see HDFC bank and Sesa Goa from the metal space outline its numbers as well.

On the 21st, we have a couple of trading favorites from the smaller auto numbers. TVS motors will outline its numbers, Mastek from the IT space will be detailing its earnings on the 21st.

On the 22nd July, Berjaj Auto will come out with its numbers as well. Another heavyweight from the banking space, IDBI Bank will be announcing their numbers on the 22nd July.

Wipro, from the IT majors will be detailing its numbers on the 23rd July, now both Infosys and TCS have already come out with their set of numbers this week, so next week belongs to Wipro. It will come out with its numbers on the 23rd.

On the 24th July, we have Maruti, which is the biggest company in the passenger vehicle space that will be coming out with its numbers, so that number will be keenly watched out for.

Now, lots of economic events as well. On the 19th July, Board for Reconstruction of Public Sector Enterprises Chairman Sengupta to brief media on turnaround in PSUs. 1500 IST, New Delhi. More importantly, on the 20th July, Finance Minister Mukherjee will be meeting with southern India chief ministers and Heads of public sector banks to review flow of credit, and credit growth of these banks.

On the 21st, Finance Minister Mukherjee to meet Empowered Group of State Finance Ministers for the oil price regulation and deregulation, and the fuel price movements as well.

Thank you Sonia.

Over in Hong Kong, AgBank's debut on the Hong Kong's market turned out to be lackluster.

It opened at $3.25 Hong Kong dollars, up ONLY by 1.6% from its IPO price of $3.20. Throughout the day, the market response for the shares remained weak.

Anaylsts say there are still concerns about China's banking system - fears that mounting municipal debt could lead to another wave of bad loans at state banks.

Cheng Lei reports.

Lending to local government was once seen as low-risk and high return -- not anymore. Beijing is ordering banks to stop lending to local governments' funding platforms -- and demanding more oversight of outstanding loans.

[SOT] Dorris Chen, Head of Asia Regional Financial Research, BNP Paribas:

"As the central government is trying to deny the potential responsibility to bail out provincial government, because in this political regime, basically any problems caused by the provincial government, the central government will have to come in and take care of it. With this very intense measure to clam it down, certainly the new investment is put on hold."

Part of the problem - is not knowing how big a problem it is. Thanks to the creative methods local govts have used to raise funds. Numbers from different government ministries -- range from 5 trillion to 11 trillion yuan. one thing is for sure -- debt swelled rapidly in 2009 -- as a result of the 4 trillion yuan stimulus package.

[(SOT)] Lu Chen, Assistant Director, Haitong Securities:

"From 2008-2009, local government debt has gone up by 5 trillion yuan, a staggering number, percentage wise, debt accounts for 100% -- in some cases, 200% of fiscal revenue at local govts, which poses risks."

[SOT] Dorris Chen, Head Of Asia Regional Financial Research, BNP Paribas:

"The near term trigger is the income for local government out of land sales, because we know that the property transaction volume has dramatically fallen by, it's not uncommon to hear 50-70% drop? So that actually has a direct relationship with local government income from land sales, and that is likely to be what we think the pressure will come from."

Local govts' debt default could spell trouble for China state banks -- the biggest lenders to local governments. A state auditors' probe has found irregularities in the lending process -- that would make recovery difficult .

(SOT) Lu Chen, Assistant Director, Haitong Securities:

"The risk is uncontrollable because local governments borrow from many sources, they guarantee many loans, it's hard to know how much they borrowed in total. There's also packaged debt -- attached to no specific project or borrower -- so banks wouldn't know who to recover funds from."

Even though it's still too early to quantify the impact on state banks from municipal debt, stock prices have already taken a dive. While earnings are expected to grow by 20 to 30 percent.

(SOT) Dorris Chen, Head Of Asia Regional Financial Research, BNP Paribas:

"I think all the potential hit from the local government debt and all the other issues all factored in price. So we would think that right now good time to buy Chinese banks."

Municipal debt -- in itself, will not derail the China growth story or cripple Chinese banks, but the weaknesses it highlights -- namely Beijing's lack of control over local governments, inefficient use of fiscal funds -- are the underlying stumbling blocks to sustainable growth.

Cheng Lei, for CNBC.

Apple is set to hold a press conference later today - as it tries to allay concerns about reception problems with its iPhone.

Since the U.S. debut of the iPhone 4 on June 24, there's been a deluge of customer complaints about various product defaults.

The biggest complaint from users: - antenna problems that cause calls to drop out and reports of discolored iPhone 4 screens.

The tech giant's shares are down over 3 percent this week and the company has called a surprise iPhone 4 press conference later today where it's expected to address the serious design flaw in the device.

Meantime, Apple's pain is its competitors' gain. Nokia, LG Electronics, Samsung, HTC, & Research in Motion are all big players in the smartphone market.

With that, we've come to the end of the bulletin.

I'm Saijal Patel from CNBC wrapping up the trading week in Asia.

Have a good evening!

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