Dubai under scrutiny after debt payment delay
(Taken from BBC News on the 28th November 2009)Dubai's financial health has come under scrutiny after a major, government-owned investment company asked for a six-month delay on repaying its debts.
Dubai World, which has total debts of $59bn (£35bn), is asking creditors if it can postpone its forthcoming payments until May next year.
Dubai World has also appointed global accountancy group Deloitte to help with its financial restructuring.
The company has been hit hard by the global credit crunch and recession.
It was due to repay $3.5bn of its debts next month.
Put simply, everyone in the markets thought that, in the end, the federal government in Abu Dhabi would stand by all of Dubai's bad bets. Apparently, they won't.
Stephanie Flanders, BBC economics editor
The request for a delay in repayments led to major credit ratings agencies downgrading a number of state-backed companies.
Following six years of rapid growth, the Dubai economy has slumped since the second half of 2008.
This has led to Dubai property prices falling sharply.
The Dubai government said in a statement that the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.
"It's shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations," said analyst Shakeel Sarwar, of SICO Investment Bank.
Dubai is one of the seven self-governing emirates or states that make up the United Arab Emirates.
Analysts say the Dubai government has paid the price for a flamboyant economic model centred on foreign capital and giant construction projects.
Questions are now being raised about Dubai's ability to repay its debts, said the BBC's Middle East correspondent Jeremy Howell.
Some have speculated it is likely to turn to the more economically conservative Abu Dhabi emirate to bail it out.
Global credit rating agency Standard & Poor's, which rules on a company's or government's ability to repay its debts, said the announcement "may be considered a [debt] default".
Our correspondent said: "Standard & Poor's and Moodys immediately downgraded all six state-backed corporations in Dubai, downgrading some to junk status."
Junk is the term commonly used to describe bonds that are rated below investment grade by ratings agencies.
The Dubai World announcement was made on the eve of the Eid al-Adha Muslim festival, which will see many government agencies and companies close in Dubai until 6 December.
Saturday, November 28
Wednesday, November 25
Past banks interest and loan rate
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The above statistics were taken from the website of MAS. It shows the different rates for the past 10 years such as the fixed deposit rate and SIBOR. As compared to the past, the interest rates for fixed deposits were much higher as compared to the present state. With interest rates at such a low level, this should dissuade anyone from putting their money into fixed deposits or savings account. Interestingly, finance companies do offer a slightly higher rate consistently than banks for the past 10 years and there are some finance companies which are covered under the Singapore Deposit Insurance Corporation, which covers your deposits up to $20,000.
The above statistics were taken from the website of MAS. It shows the different rates for the past 10 years such as the fixed deposit rate and SIBOR. As compared to the past, the interest rates for fixed deposits were much higher as compared to the present state. With interest rates at such a low level, this should dissuade anyone from putting their money into fixed deposits or savings account. Interestingly, finance companies do offer a slightly higher rate consistently than banks for the past 10 years and there are some finance companies which are covered under the Singapore Deposit Insurance Corporation, which covers your deposits up to $20,000.
Monday, November 23
Don't expect interest rates to rise
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Don't expect interest rates to rise: Experts
(Taken from the Straits Times on 23rd November 2009)
By Francis ChanSAVINGS accounts have seen miserly interest rates of below 1 per cent per annum since 2001 - and people hoping for better yields ahead will be disappointed.
The rates are unlikely to rise - at least in the next six months, experts say.
Monthly average savings rates have been on a downward trend from January to last month. This means the annual average rate for this year is likely to dip below last year's already paltry 0.22 per cent.
Rubbing salt into savers' wounds - inflation is likely to rise next year.
Based on figures from 10 banks and financial institutions compiled by the Monetary Authority of Singapore (MAS), savings accounts earned an average of 0.22 per cent a year in January, before holding at just 0.16 per cent from July to last month.
This is a far cry from the 1.28 per cent savers used to get in 2000, which was the last time interest rates exceeded 1 per cent.
Such measly rates have caused long-time savers such as Mrs F.S. Sim, 31, to dump conventional deposit accounts for other investments.
'The rates for my DBS Bank savings account fell from 0.25 per cent to 0.125 per cent in July...After deducting fees and taking into consideration inflation, I think I might even lose money,' said the communications manager.
Industry experts agree, saying it does not make sense for people who are looking to grow their money to put their savings in a basic deposit account, because of the meagre interest rates.
'Depositing your money in the bank with such low rates can really be only for safekeeping and perhaps for some regular transactions,' said the president of the Association of Financial Advisers (Singapore), Mr Raymond Ng.
'In fact, if you leave it in there for a year, your savings might just get eaten up by inflation.'
Last week, the Trade and Industry Ministry raised its inflation forecast for next year to 2.5 per cent to 3.5 per cent, from 1 per cent to 2 per cent, in view of the recent revision in the annual values of Housing Board flats announced by the Inland Revenue Authority of Singapore.
The MAS, however, did not revise its underlying inflation forecast of 1 per cent to 2 per cent, as its figures excluded the cost of accommodation and private road transport.
One would have to go as far back as 1997, during the last Asian financial crisis when the annual average was 3.08 per cent, for a decent return.
But Mr Ng believes that interest rates of between 3 per cent and 6 per cent are a thing of the past.
'With the current interest rates, your funds will just remain idle and there are many people out there who still do not realise that,' he added.
Deposit rates typically fall along with the Singapore Interbank Offered Rate (Sibor), which is the rate at which banks lend to one another.
Sibor is the key factor that affects the rate that banks pay depositors. It has been hovering around 0.68 per cent, not far off the all-time low of 0.56 per cent set in June 2003.
Analysts also pointed out that Sibor is influenced by interest rates set by the United States Federal Reserve.
And since December last year, the US Fed has held its key federal funds rate at a record low of zero per cent to 0.25 per cent - to help pull the economy out of the worst downturn since the Great Depression.
All signs point to interest rates staying low for some time.
Kim Eng analyst Pauline Lee told The Straits Times: 'We're looking at interest rates to stay flat in the near term, perhaps until the first half of next year.'
Bankers cited another factor for the low rates. They said local banks are typically well-capitalised and hence do not need to attract deposits, even during the downturn.
The dismal amounts earned from bank interest over the years mean the impact on savers - if there were further reductions in rates - would probably be minimal.
For example, if interest rates for a savings account were cut by half from 0.25 per cent to 0.125 per cent, a deposit of $10,000 would earn only $12.50 less a year in interest.
Those wanting to eke out a better return, however, can turn to other options, such as promotional rates that offer higher interest of up to 1.25 per cent or more if certain conditions are met. These could include maintaining a higher minimum deposit amount for a fixed period of time.
Mr Ng, however, said those seeking higher-yielding alternatives would be better off putting their savings in money market funds.
Saturday, November 21
Saturday, November 14
Record $653,000 for HDB flat
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Record $653,000 for flat
By Jessica Cheam
(Taken from the Straits Times on the 14th November 2009)A FOUR-ROOM Queenstown HDB flat has sold for $653,000, setting a new record for price per sq ft (psf), amid continuing red-hot demand for resale flats.
The buyers, a male Indonesian permanent resident and a Singaporean woman, could have bought a condominium unit in an outlying area for the price.
But they were won over by the location, just five minutes walk from Queenstown MRT station, and on the top, 40th floor of the block, with unblocked views of greenery from all windows.
The four-year-old 969sqft unit at Forfar Heights, Strathmore Avenue, sold for $68,000 above valuation - a level determined by an independent valuer.
This works out to $674 psf, smashing the previous record of $609 psf, achieved in January last year, by about 10per cent.
This may be an unusually high price but resale prices have been moving up.
Tuesday, November 10
Wednesday, November 4
More on swap-based ETFs
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In my earlier post about swap-based ETFs, I talked about how the stocks held by these ETFs may not be the constituent stocks of the underlying index that it is supposed to track.
Below are some of the snapshots from the semi-annual report taken from db x-trackers, which is a series of ETFs by the Deutsche Bank. The semi-annual report tells us about the composition of the stocks which are held by these ETFs.
The picture above shows the composition of the stocks held by the db x-trackers MSCI Japan TRN Index ETF. This appears quite alright to me since it is supposed to track a Japanese stock market index and all these stocks are Japanese companies although it may not be part of the index. How about the next one ?
The picture above shows the composition of the stocks held by the db x-trackers FTSE/Xinhua 25 China ETF. So it's supposed to track a stock market index that consists of China companies. Now take a closer look at the composition of the stocks. Do any of these names of these companies sound like China companies to you ? I'm not sure about you but these companies seem to be Japanese companies. This is what I'm talking about. Swap-based ETFs may be holding stocks that have nothing to do with the index which it is supposed to track.
In fact, the composition of stocks in the above list of ETFs issued under db x-trackers have their composition of stocks that sounds like the previous 2 pictures that I have discussed earlier. And these ETFs are tracking the stock indices of countries such as Russia, Vietnam, US, Europe and so on.
Why am I bringing this up ? That is because these ETFs, as discussed in my earlier post, lacks transparency and carries an additional counterparty risk.
Below are some of the snapshots from the semi-annual report taken from db x-trackers, which is a series of ETFs by the Deutsche Bank. The semi-annual report tells us about the composition of the stocks which are held by these ETFs.
The picture above shows the composition of the stocks held by the db x-trackers MSCI Japan TRN Index ETF. This appears quite alright to me since it is supposed to track a Japanese stock market index and all these stocks are Japanese companies although it may not be part of the index. How about the next one ?
The picture above shows the composition of the stocks held by the db x-trackers FTSE/Xinhua 25 China ETF. So it's supposed to track a stock market index that consists of China companies. Now take a closer look at the composition of the stocks. Do any of these names of these companies sound like China companies to you ? I'm not sure about you but these companies seem to be Japanese companies. This is what I'm talking about. Swap-based ETFs may be holding stocks that have nothing to do with the index which it is supposed to track.
In fact, the composition of stocks in the above list of ETFs issued under db x-trackers have their composition of stocks that sounds like the previous 2 pictures that I have discussed earlier. And these ETFs are tracking the stock indices of countries such as Russia, Vietnam, US, Europe and so on.
Why am I bringing this up ? That is because these ETFs, as discussed in my earlier post, lacks transparency and carries an additional counterparty risk.
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