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In the current low interest rate environment, investors continue to chase for yields which resulted in strong demand for close-ended bond funds that potentially offers higher return than fixed deposits. Keeping this in mind, Eastspring Investments is launching a new fund. The fund endeavors to provide regular income during the tenure of the fund (3 years), by investing in local and/or foreign debt securities. Investment Strategy A minimum of 70% will be invested in local and/or foreign debt securities, while the remaining of not more than 40% may be invested either in non-rated debt securities and/or debt securities rated below investment grade rating. lower than BBB3 rating by RAM; or below investment grade rating by other rating agencies Although the fund is expected to invest up to 40% in non-rated issuers and/or issuers rated below investment grade, there is a risk that this limit may be exceeded as issuers of investment grade debt securities held within the portfolio m...

Hot from oven. Bank Negara Malaysia (BNM) today announce some measures to address the alarming household debt among Malaysians. As reported, household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over past 5 years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers . What does this mean? This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing!!! Wow... Is it too long the tenure? While this may reduce the monthly repayments, in the long run, this increase the overall debt burden of households. If we don't stop this kind of practice, it will encourage excessive debt accumulation by households and increase the vulnerability of this sector. Hence, BNM has to take actions... The implementation of a set of measures ...

Credit cards have become a part of life in Malaysia. But as much as they make life a lot more convenient; credit cards can also lead to an unmanageable amount of debt. In some cases, credit cards have even led to bankruptcies. If you have a credit card debt that seems to be spiralling of control, it may be the right time to consider debt consolidation. In Malaysia, there are two common debt consolidation methods that are highly workable. 1) Credit Card Balance Transfer Credit Card Balance Transfers involve the transferring of money that you owe on your current credit card account to a new credit card. Balance transfers offer a number of different benefits, including lower interest rate and the ability to simplify your credit card debt payment process.  How Credit Card Balance Transfers Can Work for Debt Consolidation: ●      If you have accumulated a significant amount of credit card debt, there is a good chance you are currently being charged the maximum inte...

In our view, the equity market will likely be stuck in a range-bound trading pattern for now, but will likely trend up as global economic uncertainties clear out towards the later part of the year. Investors’ key worries include : worsening of the euro-debt crisis that remains unresolved fears of China’s and India’s economies crashing down into a hard landing ; and the risk of US falling off the “ fiscal  cliff ”. External Volatility And Impending Election 2 Key Headwinds On the home front, the major event to watch out for is the impending general election that could also create volatility to the local bourse given the uncertain election outcome. Nevertheless, we believe the market will eventually trend higher towards end-2012, premised on: the ECB making a more decisive move to mutualise the debts of Eurozone governments; China policymakers ease policies substantially and its economic growth re-accelerates; US Congressional leaders co...

It's becoming confusing for many people, especially outsiders (non-Malaysian), as to the role of Government to Malaysian corporate. And, it had been more confusing when Government dishes out lots of Goodies to certain groups of people (as long as they are eligible voters) citing to help bring down the burden of Rakyat . Good reason though. However, many of us know that this may short-lived just because of the coming general election. Anyway, this is part of the political gimmick usually played around the world. Nothing's wrong. One end, our Government targeted to bring down the deficit numbers by cutting subsidies like Petrol prices. But on the other end, it dishing our cash just like what announced during Budget 2012, citing Government had made encouraging improvements in collecting taxes. Then, why not bring down the budget deficit of the country first? Does few hundred ringgits really make huge different for people? A BAD example set by JCorp? The latest movements by Governm...

It's the time again for Greece to convince its counterparts that they are serious in cutting budget deficits. By doing so, Greece was to put on the lifeline (bailout) by European Union (EU) once again. The discussion of whether to save or not to save Greece had been dragging for one week time now. Why? In Chinese, we say "we cannot see people die by not lending our hand". That's why China said they will help when the time arrives. The question is when is the right time? Until Greece go bankrupt? Or,  until Greece left EU? Who can save Greece? The answer to this very important question is very obvious. In Christian, they always emphasize on " we should take responsibilities on what we did ", right? So, the solution lies in Greece hands. Not the country, but, the citizen, the people of Greece. It's time for them to come back to reality. Let's take Malaysia as a benchmark, they are working fewer hours than us, yet they are earning much better than us. G...

Well, many people already bored with the on-going Europe debt crisis, and subsequently liquidity crisis. This is like what we have seen in 2008 when Lehman Brothers collapses, which drags down the whole financial systems globally through liquidity crisis. The different is between company and country. Maybe some of us doesn't know how this chain effects rattles the global markets. So, let us start here. The European Organisation chart of Debts The root of the problem plaguing the market right now is Europe debt crisis , where Greece and few other European countries were highly in debts. They just simply cannot generate enough revenue (taxes) to support the economy itself. So, they resorted to seek for funding via borrowing by issuing sovereign bonds to finance their day to day operations. However, the debt is piling up intensively after 2008 global financial crisis until recently. Because the government does not have money, their bonds may go into default. So, they were forced ...

Oh my god. Another disaster has occurred, and this time is Thailand's turn. Finance Malaysia would like to offer condolences to Thailand for its massive damage caused by floods. This is not an ordinary floods, please read the numbers below then you will know. worst floods in 50 -years!!! more than 300 lives gone affecting nearly 9,000,000 people Started weeks ago at upper Thailand, the floods were spreading down to its capital - Bangkok - now. Bangkok has more than 12 million population.  The situation can only get worse from here and everyone is fleeing the city, searching for higher grounds and off to vacation. People are snapping up dry foods, fresh waters and daily products, hoping to brace through the difficult periods. Will Thailand went into recession? With Bangkok being the major engine of the country, many economists are expecting that the strong flooding in Bangkok would severely impact Thailand's GDP growth. Bank of Thailand (BOT) already downgrading their growth f...

During market uncertainties, there are two popular safe assets which is Gold and USD . This explain why the demand for these two assets is great, resulting them to become more valuable while equity market fell. We experienced the said scenario recently and let's see the chart below to gauge the Gold price movements. "Gold prices collapsed from their August highs in September amid a broad commodity sell-off and despite intensifying concerns over sovereign debt issues in Europe. After exhibiting a remarkable correlation to real rates this year, particularly during the swift August rally, the sharp pullback in gold prices occurred with real rates mostly unchanged." "Gold prices have now fallen back in line with our 3-month price target. As we expect gold prices will continue to be driven in large measure by the evolution of US real interest rates and with our US economic outlook pointing for continued low levels of US real rates in 2012, we continue to recommend long t...

Titled " Perilous Crossroads; Challenging Times Ahead " RHB Research painted a not so rosy 4Q2011 outlook for KLCI. Undeniably, our market are in for a turbulent times and we do not know how the year will be ended. Bear or Bull market? Below is the excerpt from the said report: ~ The US economic recovery has slowed to a crawl, while Europe is not just lurching from one crisis to another, it is lurching into a new one before the previous one is solved. There is growing risk that sustained weak confidence could exert downward pressure on demand and business activity worldwide. ~ Nevertheless, " double-dip " recession can still be avoided if political leaders get their acts together fast enough to contain the debt crises and avert a contagion given that global trade has not fallen off the cliff. ~ On the home front, we expect the Government to speed up the implementation of the Economic Transformation Programme, which coupled with resilient consumer spending, will prov...

We cannot deny that we are in for another round of hard times since 2008 global financial crisis. Some experts are saying that we are facing the Great Depression wave coming in the next few months, if no concrete efforts put in by global leaders. Meanwhile, some experts think that opportunities arises again and put off the double-dip recession speculation. The downgrading of US's AAA rating re-ignite the fears over the sustainability of its sovereign debt. However, please be mindful that US rating remains extremely sound and reflecting a very low risk of default in the long term, still. USD remain the preferred and most widely traded currency in the foreseeable future, and there is no reason to worry about. Sovereign Risk scaring investors away? Meanwhile, in Eurozone, the situation remains very complex and greater political will is needed to maintain Euro as regional currency. Between Eurozone breaking up and resolving the situation, which one is easier? Of course, the economic ...

The news that S&P downgrading US credit rating shows that rating agencies are doing their job fairly. Previously, rating agencies were blamed by Greece and Europe countries for downgrading their ratings when Greece facing rising debt issue. Though, US did not spare this round when S&P downgrade US AAA rating to AA+ (one notch lower). What would be the implications? Normally, the downgraded currency will slump, sovereign bonds will become less attractive by carrying higher degree of risk, hence pushing up the yields. Does US follow these theory? NO. Why US is different? USD will not fall much like Euro. First, USD is one of the safest asset, along with gold, during economic uncertainties. That's why USD was chosen as the world's most widely traded currency. During uncertainties (like now), investors are scare and they pull-out from equities around the world. But, where did they put the cash? USD is the answer mainly because it is widely used globally and of high liqu...

Deadline gets closer and closer, yet US have not come out a concrete solution to calm the world. Whether tax increases should be included in a deficit reduction agreement or not, both Democrats and Republicans are standing firm without compromise. Republicans insist that any deal to cut deficits should involve spending cuts only while Democrats have been demanding both spending cuts and tax increases. Although Finance Malaysia reckons that the Congress would pass the bill to increase debt ceiling, let us analyzed and prepare for the unfortunate outcome. What if the debt ceiling limit is not raised by 2nd August? US bondholders will get paid first, while other payments such as social security, military payment, and Medicare services will stall. Downgrading by rating agencies is unavoidable, which will lead to an increase in Treasury's borrowing costs. US will be losing its AAA ratings , damaging the important role of USD as one of the world's preferred currency. USD will slump t...

Time is running out. We still have 3 more days to the very decisive day of 2nd August 2011 for US politicians to reach an agreement to increase the US debt ceiling. Everyday we heard this word " Debt Ceiling " repeating be it via TV, radio, newspaper and social media, but do we exactly know what does it mean? Once again, Finance Malaysia blog strive to provide the knowledge to public regarding the most discussed economic issue now. So, what is debt ceiling? The debt ceiling is a cap set by Congress on the amount of debt that the federal government can legally borrow. The cap applies to debt owed to the public plus debt owed to federal government trust funds such as those for social security and Medicare. Why US need debt ceiling? With debt ceiling, US can only borrow to finance their budget with the limit given. This will put a stop on the amount US can borrow to avoid US from over borrowing, which is very dangerous for the economic health of US. What is the current limit?...

New Measures on Credit Cards had been announced by Bank Negara Malaysia (BNM) to promote prudent financial management and responsible business practices. Summary on the announcement made: For new credit card holders , minimum income eligibility is set at RM24,000 p.a For cardholders earning RM36,000 p.a and less , the following would be applicable: Cardholders can only hold credit cards from a maximum of 2 issuers Affected existing cardholders are given up to the end of 2011 to select their preferred issuers. Cardholders will also be given at least 2 years to service their outstanding credit card debt for the credit cards that have been canceled for the purpose of meeting this requirement. The maximum credit limit extended to a cardholder shall not exceed 2x their monthly income per issuer. For affected existing cardholders, a grace period of 2 years will be given to them to meet with the new requirement. Example of Credit Cards How about credit card issuers? Credit card issuers are ...