INTERNATIONAL HERALD TRIBUNE20 | TUESDAY, DECEMBER 22, 2009.

InsideAsia

ANDREW MARSHALL

SINGAPORE Investors who kept faithin Asia as the world teetered on thebrink of financial meltdown a year agohave been richly rewarded— the re-gion’s markets rode out the storm inspectacular style and posted stunninggains.The economic outlook for 2010 ap-

pears far sunnier. But with frothymar-kets betting on a smooth return to busi-ness as usual, the danger of a suddencorrection hangs over Asia, unless theregion can steer its way past sometreacherous political risks.The twomost important issues for

the world economy in the coming yearare political: the pivotal relationshipbetween the United States and China,and the timing and coordination of exitstrategies from the stimulusmeasuresthat kept disaster at bay.Investors in Asia also need to be

wary of political shocks that could sud-denly overturn the region’s risk profile.Upheaval in North Korea, where

there are persistent doubts about thehealth of the country’s leader, KimJong-il, and where the economy is go-ing from bad to worse, could cause pro-found regional instability. And the riskof a confrontation between nuclear-armed India and Pakistan, perhapssparked by anothermilitant atrocity inIndia, is ticking upward again.‘‘Amultitude of political, security and

operational risks converge in Asia,’’saidMichael Denison, research direc-tor at Control Risks, a consulting firmbased in London. ‘‘The causes of theglobal recession are nowwell under-stood. The contours of the recovery, bycontrast, are far from clear.’’The United States and China are

already by far the twomost importantcountries in terms of political clout.Next year, China is set to overtake Ja-pan as the second-largest economyafter the United States.The G-2 relationship between the

in Japan; India and South Korea couldbe next.As in any year, the best-laid plans in

2010 could be derailed by unexpectedshocks.We have no idea about some ofthe lightning bolts that will hit Asia—the surprises that the author and fundmanager NassimNicholas Taleb calls‘‘black swans’’ and Donald H. Rums-feld, the former U.S. defense secretary,called ‘‘unknown unknowns.’’But there are plenty of known un-

knowns to worry about.Mass social unrest due to economic

hardship was the dog that failed to barkin 2009. That could change in 2010.‘‘A structural rise in unemployment

will represent a keymacro, politicaland security risk in 2010, even in stateslike China where growth has remainedrelatively solid,’’ saidMr. Denison ofControl Risks.The decisive victory of the Congress

Party in India’s elections this year wasanother good-news story for marketsthat could be threatened if militantsbased in Pakistan provoked a confron-tation again.‘‘Anothermajor attackwould all but

force India’s government to take amuchmore hostile approach to Pakistan,’’ saidIanBremmer, president of the politicalrisk consulting firmEurasia Group, ‘‘al-lowing Pakistan’smilitary leadership toset aside attacks on localmilitants andturn their attention to an enemy theyfeel less reluctant to antagonize.’’And finally, two key Asian heads of

state are ailing, with the question ofwho andwhat will come after them farfrom settled. The 82-year-old King Bhu-mibol Adulyadej of Thailand has beenin the hospital since September, anoth-er complication in the long-runningpolitical crisis that has riven the coun-try. Many analysts expect instability toget even worse after his reign ends, giv-ing Thai markets another rough ride.But most say there is little risk of conta-gion in othermarkets.By contrast, when the North Korean

leader, Mr. Kim, dies, the tremors willbe felt in South Korea, Japan and be-yond.Many analysts say his deathwould herald the collapse of the regimein Pyongyang, leading possibly to pro-longed civil war in North Korea, ag-gressivemoves against the South orthe sudden reunification of the KoreanPeninsula. In all of those cases, thelikelymarket reaction would be thesame: panic.

Alan Wheatley will return in January.

United States and China is key to shap-ing destiny not just in the coming yearor coming decade, but through the 21stcentury.Likemost relationships, it is not easy.

Pressure on China to allow the renmin-bi to appreciate will become evermoreintense as economic storm clouds evap-orate.But Beijing will not want to jeopard-

ize economic growth by letting the cur-rency rise too quickly, and it does notlike being told what to do byWashing-ton or anyone else. In the United States,meanwhile, renminbi weakness is re-garded as a protectionist policy thatthreatens the U.S. recovery.Into this volatile mix add the ever-

present threat of import restrictions,like the U.S. imposition of tariffs onChinese tires in September, sparking atit-for-tat trade war.Plus, there is the danger that

Beijing’s backing of regimes thatWash-ington finds unpalatable, fromPyong-yang to Yangon to Tehran and Khar-toum, explodes into a political confron-tation.Most analysts sayWashington and

Beijing are painfully aware of the risksand would step back from the brink be-fore any dispute threatened the globaleconomy. But the two countries have

yet to find a way tocommunicate com-fortably as partners.The risk of amisun-derstanding or sud-den chill in relationsis real.The second key

political risk for Asia— and indeed theworld— is dealing

with the hangover from the stimulusmeasures that helped keep the globaleconomy afloat over the past two years.If governments withdraw the stimu-

lus too soon, they jeopardize growth.But if they keep policy too loose for toolong, they risk not just inflation but alsocatastrophic asset price bubbles. GivenChina’s importance to the global recov-ery, signs of property and equitybubbles there are a particular concern.Another risk for investors is that

countries trying to prevent bubbles andcurb inflows of ‘‘hot money’’ tightencapital controls. Analysts say this couldbe a key issue for India and Indonesiain 2010.Disagreements could also erupt with-

in countries, between governments fo-cused on safeguarding growth and cen-tral banks fearful of inflation andbubbles. That could lead to bad de-cisions andmake policy hard to fore-cast. Policy friction is already an issue

REUTERS BREAKINGVIEWS

Nestlé should keep its pockets lined

A Yelp deal could bring heartburn for Google

deal. The gum business would fit withNestlé’s new emphasis on health and‘‘wellness,’’ but not at any price.There are other logical targets. A

deal with the Swiss chocolate makerLindt & Spruengli would have syner-gies. But its likely price tag of morethan 7 billion francs far exceeds the 2billion to 3 billion francs that Nestlé hasconsistently said is its ceiling for any in-dividual acquisition. The same goes forthe baby-foodmakerMeads Johnson,being spun off by Bristol-Myers Squibb.Nestlé can afford smaller, bolt-on ac-

quisitions in nutrition and emergingmarkets— two areas it has identifiedas needing expansion— as well as en-hanced dividends and share repur-chases.True, the proceeds from the Alcon

stakewould giveNestlé scope for farmore grandiose purchases. But Nestlémust tread carefully. The time for bar-gains has passed, and a big deal wouldmark a strategic U-turn that would hitNestlé’s credibility and probably there-fore its rating. Nestlé should stick towhat it does best: generating cash andpassing it to investors. ALEXANDERSMITH

Nestlé is in a rare position for amajorcorporation: It is handing cash back toshareholders.The world’s biggest food groupmay

land itself a further $28 billion nextmonth by selling its stake in Alcon, aneye care company.With somuchmoney sloshing around, the temptationwill be to go on a buying spree. ButNestlé should avoid big deals and focuson funneling cash to shareholders.At the end of June, Nestlé had almost

doubled operating cash flow to 6.4 bil-lion Swiss francs, or $6.1 billion, whilenet debt fell sharply.Rather than try to snap up busi-

nesses on the cheap, the company re-warded investors by returning about6.5 billion francs in dividends and sharebuybacks during the first half. Nestléincreased its buyback program thisyear, hitting a target of 25 billion francsearly without damaging its credit rat-ing.This conservatism looks wise. Kraft

Foods’ interest in Cadbury shows thatNestlé hasmissed the chance to pick upthe British confectioner’s chewing gumunit on the cheap in an uncontested

gestion. A $500million deal would comein at more than 15 times 2009 sales.Moreover, Yelp relies on users to writereviews. About a third of all reviewswere five stars, or the highest possible.Only 7 percent were one star.It could be that writing negative

posts makes people uncomfortable. Orperhaps business people simply writegood reviews for their own establish-ments. Either way, the distribution ofresults looks too skewed.Google, of course, has plenty of expe-

rience with people trying to game itssystem of search. But schemes are easi-er to find in large sets of data becausetheir distorted wakes aremore visible.It’s harder to figure out if the one glow-ing review of a corner pizza shop is realor a plant. Google’s search dominancecomes from users’ trust that they arebeing served accurate, mathematicallysound, results. The success of localsearch will depend onmaking surewhat’s found is believable. ROBERT CYRAN

Google is dipping its hands further intothemessy business of local search. Thetech giantmay splash outmore than ahalf-billion dollars for Yelp, aWeb site oflocal business reviews submitted by cus-tomers. Google’smobile ambitionsmakethis a natural pairing. Yet Yelp’s untidyhuman elementmay fit awkwardlywithGoogle’s clean algorithmic bent.The biggest growth opportunities in

search are local andmobile. The in-creasing prevalence of smartphones,and the increase in iPhone data trafficin particular, shows that people want tofind things while on the go. It’s a richseam formarketers, too. If Google cancapture this localized search traffic, ad-vertising revenue should follow.Yelp fits the bill in several ways. Its

customer reviews are another valuableset of data that Google can serve upwithits other data and applications to usersin potentially new and useful ways. Itwould, for example, encourage small ad-vertisers to go toGoogle rather than di-rectories or local papers for their adver-tising. And, of course, a deal prevents itsrival Facebook fromgetting a leg up.Yet swallowing Yelp could cause indi-

INTERNATIONAL TRAVELER

NEWTOURANDNEWHOTEL PLANNEDFOROLDMUGHALROAD INKASHMIRIndus Tours introduced a new itinerarythat will take travelers along the OldMughal Road in the Indian portion ofthe contested area of Kashmir, the com-pany saidMonday in a statement.The summer 2010 package from the

Indian tour companywill include a stayat the Vivanta by Taj hotel, which isscheduled to open in April.The OldMughal Road is the route that

theMughal emperors’ caravans andarmies took centuries ago. ‘‘We hope tobring to life to this spectacular roadwhich has remained largely untouchedsinceMughal emperor Shah Jahan trav-elled the route nearly 500 years ago,’’Yasin Zargar, the company’smanagingdirector, said in the statement.

EMIRATES TO FLY SUPERJUMBOTOPARIS EARLIER THANPLANNED

Emirates will begin flights to Paris withits newA380 on Dec. 29, more than amonth earlier than planned, the airlinesaid in a statement releasedMonday.The date wasmoved up from Febru-

ary because of increased demand onthe route, said Emirates, which is basedin Dubai and flies twice a day to Paris.The 480-seat superjumbowill be outfit-ted with 14 private suites and fully flatseats in business class.

‘‘We can provide passengers with theexperience of flying this highly popularaircraft between Dubai and Paris muchsooner than originally anticipated,’’SalemObaidalla, an Emirates seniorvice president, said in the statement.

SYDNEY

QANTAS TOADDMORE FLIGHTSASDOMESTIC DEMANDPICKSUP

The chief executive for Qantas said thatthe airline would addmore flights, asthe Australian carrier announcedMon-day that passenger numbers were pick-ing up after a slump this year.Alan Joyce said that Qantas would

start addingmore flights betweenprominent Australian cities.Passenger numbers on the com-

pany’s two airlines—Qantas and thebudget carrier Jetstar—were 6.9 per-cent higher in November compared to ayear earlier, the company said. (AP)

CARACAS

CHÁVEZWANTS TOCHANGENAMEOFANGEL FALLS IN VENEZUELA

President Hugo Chávez said that theworld’s tallest waterfall, and one ofVenezuela’s top tourist sites, has beencalled Angel Falls too long and shouldrevert to its original indigenous nameinstead of commemorating the U.S. pi-lot who spotted it in 1933.

He called Sunday for renaming itKerepakupai-Merú, saying that the na-tive people had a name for themajesticwaterfall long before the adventurerJimmie Angel flew over it.The waterfall, which is among

Venezuela’s best-known tourist destin-ations, is the world’s tallest at 979me-ters, or 3,212 feet, with an uninterrupteddrop of 807meters. It plunges from oneof the tabletopmountains, Auyantepui,in the CanaimaNational Park in south-ern Venezuela. (AP)

HONG KONG

TAIPEI’SPOPULARITYONTHERISE

Zuji, an online travel agency based inHong Kong, released dataMonday thatshowed that its more than 150,000 sub-scribers stayed close to home in 2009.Taipei was themost searched destina-tion, themost booked destination andthe fastest-growing destination com-pared to last year, Zuji said.

KUALA LUMPUR

MALAYSIANAIRLINESTOADDCAPACITY

Malaysian Airlines said it would in-crease capacity in 2010, The Edge news-paper reported, citing the carrier’schief executive, Tengku Azmil Zahrud-din. It will also acquire 35 Boeing 737-800 planes, starting in the the fourthquarter of next year. (BLOOMBERG)

businessWITH CHINESE BANKS FEELINGPRESSURE TO RAISE CAPITALPAGE 14 | BUSINESS FRONT

Passing crisismay give wayto new ones

ONLINE: INSIDE ASIARead past columns by Alan Wheatley.

global.nytimes.com/business

For more independent commentary andanalysis, visit www.breakingviews.com

‘‘A multitudeof political,security andoperationalrisks con-verge inAsia.’’

STOCK INDEXES

CURRENCIES

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UNITED STATES S&P 500 52-week1,102.47 +6.39 +26.5%

OIL Nymex light sw. crude 52-week$73.36 a barrel +0.71 +85.7%

EUROPE DJ Stoxx 502,886.94 +15.72 +20.4

GOLD New York$1,114.40 a tr. oz. +8.60 +31.4

JAPAN Nikkei 22510,183.47 +41.42 +16.7

CORN Chicago$3.98 a bushel –0.02 +4.4

EURO 52-week€1= $1.43 –0.001 +2.8%

YEN¥100= $1.11 –0.001 –0.3

POUND£1= $1.61 –0.002 +8.6

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Traveler’s forecastHigh/low temperatures, in degrees Celsius anddegrees Fahrenheit, and expected conditions.

C ..................... CloudsF .......................... FogH ........................ HazeI.............................. IcePC.......... Partly cloudyR ......................... Rain

Sh ................. ShowersS .......................... SunSn ...................... SnowSS....... Snow showersT ........ ThunderstormsW ...................... Windy

Abu Dhabi 27/16 81/61 S 30/18 86/64 SAthens 12/10 54/50 PC 18/14 64/57 CBali 30/24 86/75 PC 30/24 86/75 ShBangalore 24/17 75/63 S 24/16 75/61 SBangkok 31/22 88/72 S 32/23 90/73 SBeijing 5/-5 41/23 S 4/-4 39/25 PCBerlin 2/2 36/36 I 2/-2 36/28 SSBrussels 1/-3 34/27 I 4/-3 39/27 CBuenos Aires 28/20 82/68 PC 31/19 88/66 TCalcutta 26/13 79/55 S 24/14 75/57 SChengdu 8/7 46/45 C 8/7 46/45 PCChicago -1/-4 30/25 C 0/-5 32/23 SnDhaka 26/16 79/61 S 24/15 75/59 SFrankfurt 6/2 43/36 R 3/-3 37/27 SSGeneva 12/8 54/46 C 9/3 48/37 RHanoi 19/15 66/59 S 23/16 73/61 CHelsinki -3/-12 27/10 SS -4/-8 25/18 SSHong Kong 18/14 64/57 PC 19/14 66/57 CHyderabad 28/14 82/57 S 27/12 81/54 SIslamabad 23/3 73/37 S 22/3 72/37 SIstanbul 10/8 50/46 PC 14/11 57/52 CJakarta 32/25 90/77 PC 32/25 90/77 PCJohannesburg 28/17 82/63 T 29/16 84/61 SKarachi 29/14 84/57 S 28/13 82/55 SKiev 2/1 36/34 PC 3/2 37/36 CKuala Lumpur 31/24 88/75 C 31/23 88/73 RLagos 33/24 91/75 Sh 33/24 91/75 ShLondon 3/1 37/34 PC 6/5 43/41 PCLos Angeles 18/7 64/45 C 17/7 63/45 SMadrid 11/3 52/37 R 11/10 52/50 PCManila 29/23 84/73 PC 30/23 86/73 CMiami 24/17 75/63 PC 26/18 79/64 SMoscow -7/-8 19/18 C -3/-6 27/21 SSMumbai 32/21 90/70 C 31/20 88/68 S

Nairobi 29/15 84/59 T 28/18 82/64 TNew Delhi 23/7 73/45 H 22/5 72/41 PCNew York 2/-5 36/23 PC 1/-2 34/28 SNice 17/11 63/52 R 18/9 64/48 ROsaka 10/3 50/37 PC 10/4 50/39 ShParis 4/1 39/34 R 5/1 41/34 PCRiyadh 23/12 73/54 PC 23/11 73/52 PCRome 14/14 57/57 R 16/10 61/50 RSan Francisco 12/5 54/41 PC 13/6 55/43 SSeoul 3/0 37/32 PC 4/-2 39/28 PC

Shanghai 9/2 48/36 S 10/4 50/39 PCSingapore 31/24 88/75 T 31/25 88/77 ShSydney 29/19 84/66 C 28/21 82/70 ShTaipei 17/12 63/54 PC 18/12 64/54 PCTel Aviv 18/12 64/54 Sh 18/12 64/54 STokyo 10/3 50/37 S 12/4 54/39 PCVancouver 4/-3 39/27 C 2/-3 36/27 SVienna 9/6 48/43 R 12/5 54/41 RVladivostok -11/-18 12/0 S -11/-23 12/-9 PCWashington 6/-4 43/25 PC 5/-4 41/25 PC

Tuesday Wednesday˚C ˚F ˚C ˚F

Meteorology by AccuWeather.Weather shown as expected

at noon on Tuesday.

HIGH LOWTROPICALSTORM

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COLD WARM STATIONARY COMPLEX

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