February 1, 2010 / 12:53 AM / 10 years ago

TAKE A LOOK-Five key Asia political risk themes to watch

 SINGAPORE, Feb 1 (Reuters) - Following are five key political risk themes for markets to watch in Asia in the coming week, and the Reuters stories related to them:
 ARMS SALES TO TAIWAN THE NEXT U.S.-CHINA FLASHPOINT
 Washington’s announcement of arms sales to Taiwan worth $6.4 billion has inflamed tensions with Beijing, which says it will reduce military cooperation and impose unspecified sanctions on companies involved in the deal. The row is another source of tension in a thorny relationship already strained by trade and currency disputes, human rights issues, and Google Inc’s (GOOG.O) threat to leave China over hacking and censorship concerns. The main fear for markets is that disagreements escalate into a trade war or a protracted economic conflict. But analysts say both sides have too much to lose from this scenario to allow disputes to get out of control. Meanwhile, expect Google’s next move in its standoff with the government soon. And a decision is expected from China soon on whether to indict four arrested Rio Tinto (RIO.AX) (RIO.L) staff including an Australian national, potentially sparking more diplomatic wrangling. > For full coverage of China-U.S. issues click on    [ID:nCHINA]
 INFLATION POSES POLICY RISKS IN INDIA
 Food prices are rising at an annual rate of nearly 20 percent in India and the government is struggling to come up with a solution. There have been several mass protests and the opposition has been making the most of the issue, but the ruling Congress Party is not facing any risk of losing power any time soon. Tensions are emerging within the government, however, with Prime Minister Manmohan Singh recently berating his farm minister over food prices. Increasing hardship as prices rise could spark social unrest. And the government and central bank must find a way to contain inflation without curbing growth. > ANALYSIS-Spectre of food prices haunts reform  [ID:nSGE60H07R] > India faces food price discontent, protests    [ID:nSGE60R0CU]
 JAPAN’S GOVERNMENT STRUGGLES WITH FISCAL DILEMMA
 Japan’s vast public debt is stoking rising market concern as the government of Prime Minister Yukio Hatoyama struggles to give the economy the stimulus it needs without compromising the need for fiscal prudence. Standard and Poor’s has downgraded its outlook for Japan’s long-term sovereign debt rating, sending spreads on sovereign credit default swaps to a 10-month high. Hatoyama’s Democrats are also facing a political funding scandal involving their second-in-command, Ichiro Ozawa, which has hit their popularity levels and may affect their prospects in elections for the upper house of parliament in the middle of this year. Failure to secure a majority in the upper house would force Hatoyama to continue playing coalition politics with small but vociferous minor parties, adding to policy confusion. > ANALYSIS-PM in risky fight over scandal        [ID:nTOE60J03B] > SCENARIOS-Japan PM in pinch over Ozawa scandal [ID:nTOE60L015]
 ANWAR TRIAL RAISES POLITICAL RISK IN MALAYSIA
 Opposition leader Anwar Ibrahim goes on trial this week on sodomy charges for the second time. The new trial comes after Anwar’s three-party People’s Alliance won unprecedented gains in national and state elections in 2008, raising the prospect that in years to come it could end decades of unbroken rule by the National Front coalition. Anwar’s supporters say the trial is politically motivated, and it is likely to further inflame political risk in a country already troubled by simmering religious tensions. Controversy has erupted over whether Christians should be able to use the word “Allah” for God, and there has been a spate of attacks on churches. Besides raising the longer-term risk of social unrest, Malaysia’s divisions could threaten the government’s long-promised economic reforms, which would involve removing some of the special privileges of the ethnic Malays upon whose support the ruling coalition depends. > INTERVIEW-Anwar confident ahead of sodomy trial [ID:nSGE60P0F0] > Q+A-Opposition leader Anwar on trial again     [ID:nKLR452770]
 INDONESIA BANK CONTROVERSY THREATENS REFORMISTS
 A political scandal over the bailout of troubled lender Bank Century is the key political risk issue of concern to investors, with the potential to undermine the drive for economic reform. Two key pro-reform members of the cabinet — Vice President Boediono and Finance Minister Sri Mulyani Indrawati — could yet lose their jobs over the incident. Their supporters say a parliamentary inquiry into the bank bail-out has been hijacked by powerful vested interests who want to use the issue to strangle economic reform and the battle against corruption. > ANALYSIS-SBY’s slow start bodes ill for reform [ID:nJAK205282] > Q+A-Indonesian reformers defend bank bailout   [ID:nJAK527883]  (Compiled by Andrew Marshall, Asia Political Risk Correspondent; Editing by Sanjeev Miglani)  

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