Assalamualaikum w.b.t.,

Hidup di dunia yang sementara ini banyak mengabui mata kita tentang matlamat kehidupan yang sebenarnya. Kita semakin terdesak dengan himpitan kehidupan dan berlumba-lumba untuk mencari kehidupan yang lazimnya lebih menampakkan keduniaa semata-mata.
Apakah ada di antara pelaburan yang semakin hari semakin kurang diberikan tumpuan? Namun, apakah kita menidakkan keperluan yang perlu kita sediakan di dunia bagi persediaan akhirat? Bagaimanakah pula pelaburan di dunia yang wajar dilakukan untuk persediaan akhirat kita? Wajar rasanya kita sama-sama bincangkan dan jadikan maklumat bersama ini sebagai panduan kita merentasi dunia untuk menempah tempat yang selesa di akhirat kelak, insyaallah.

Pandangan serta komen rakan-taulan, pak-pak ustaz, profesionalis, akauntan, hartawan, dermawan, pak/mak wan dan sebagainya boleh dikongsi untuk dijadikan panduan disamping memperkuatkan ukhwah sesama kita. Sila diemailkan pandangan anda ke mryteratak@gmail.com.


Wassalam.
5/11/2009
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Pemberitahuan: Semua maklumat di blog ini adalah pandangan peribadi melainkan dinyatakan sebaliknya. Sila rujuk kepada institusi atau badan yang berkaitan untuk maklumat lebih lanjut. Sebarang rujukan dari blog ini adalah risiko sendiri.Pengarang tidak bertanggungjawab di atas sebarang masalah yang timbul disebabkan oleh bahan diblog ini.

Sunday, October 31, 2010

Blowing lethal bubbles again?

Printing more money put into market or make more debt via bond issuance and force others to pay for, which one better solution? I think both are blood sucker.

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Thestar: Saturday October 30, 2010

By CECILIA KOK
cecilia_kok@thestar.com.my


PRINT more money, inject them into the system and the problems will ease?
Not according to experts.
Many see such course of action – commonly termed as quantitative easing, which the US Federal Reserve will likely announce next week – will only cause more headaches; to other economies first before returning to haunt its own.
Presently, the speculation is still very much over the size and pace of this fresh dose of quantitative easing by the US Federal Reserve. But at the same time, concerns are already rising in some other parts of the world over the impact of further US monetary easing on their economies.
China’s commerce minister Chen Deming, for one, had over the week explicitly voiced his annoyance over the rising challenge of an “imported inflation” that his country now faced. He was quoted by foreign news agencies blaming the way the US government had been printing money as one of the main contributors to China’s rising inflation risks, which had subsequently created further uncertainties and problems to local businesses. Chen said the US dollar issuance had gotten “out of control”.
Indeed, quantitative easing is a risky strategy. The method, which involves the central bank increasing money supply by buying bonds or other form of debts from the market so as to promote private lending and liquidity, will only depress the value of its currency and push the prices of goods and services higher, hence leading to inflationary (or sometimes, hyperinflationary) pressure.
It’s a desperate attempt, economists say.
But for the US right now, inflationary pressure is favoured over the deflationary risk that the country is currently facing. Deflation, which is the opposite of inflation, is deemed to be a bigger problem because the continuous decline in general prices in an economy could potentially create a vicious spiral of declining profits, higher unemployment and, then, depression – certainly a situation they don’t want to be caught in.
Moreover, with its hands tight (as interest rates are already near zero, and fiscal deficits have already exceeded US$1 trillion), the US government has limited option but to embark on quantitative easing to revive its “unusually uncertain” economy.
Seeking higher returns
“The Fed needs to be patient,” John Ryding, chief economist at RDQ Economics LLC in New York, said in a Bloomberg television interview on Thursday. He explained that the slow recovery of the US economy was an inevitable process; throwing more money at a slow recovery would not help it along.
Ryding reckoned that by embarking on quantitative easing, the US economy would once again be running the same policies as it did in 2003-2004, which had then led to the devastating bubbles in the credit and housing markets. The bursting of the bubbles in both these markets in 2008 was the cause of the recent global financial and economic crisis.
“We’ve now pushed the bubbles to emerging markets,” Ryding said.
Rightly so, as we’ve seen the unrelenting spikes of property prices, for instance, since the economic recovery in several emerging markets in Asia, especially China, Hong Kong, Singapore and South Korea. Stock markets in the region are also in a bull run, and Asian currencies have been appreciating as the value of the US dollar becomes depressed.
These are largely a result of a flood of cheap US cash being pumped into emerging economies in search of higher returns.
And it doesn’t stop there. Cheap US money is also chasing after commodities such as crude oil, gold and silver. As volatile as they may be, prices of these commodities have also been on the rise lately. For instance, gold prices have risen 19.5% from around US$1,120 an ounce to more than US$1,340 an ounce yesterday, while crude oil prices have breached the US$80 per barrel mark since the beginning of the month.
Paris-based International Energy Agency on Wednesday raised concern over the risks of further monetary easing by the US government inflating prices of commodities.
Its senior oil demand analyst Eduardo Lopez told a conference in Singapore: “This could bring about inflation and possibly derail the recovery.”
Emerging risks
Fitch Ratings over the week released a report warning that the widely anticipated quantitative easing by the US Federal Reserve could potentially undermine the strong recovery of emerging Asian economies. The international credit rating agency on Wednesday said that strongly performing “Emerging Asia” was facing the risk of importing inappropriately loose monetary conditions from developed markets, which in turn could lead to higher inflation and volatility in local asset markets.
The report, which analysed 11 emerging Asian markets, including Malaysia, China, India, Indonesia, Thailand, South Korea and Taiwan, said those with poorer track records of price stability, already-loose domestic monetary conditions and weaker financial systems would be more vulnerable to the risks of further global monetary easing.
With that, according to Fitch Ratings’ analysis, Vietnam emerged as the most vulnerable country, while Taiwan was the strongest of the 11, thanks to its low and stable inflation as well as well-developed financial markets.
Indonesia was found to be the third-most vulnerable, while China ranked sixth, and India, seventh, in terms of vulnerability to the risks of further global monetary easing.
Malaysia was ranked ninth. So, it’s still among the stronger and more resilient ones in the region. “It’s not easy to generalise the impact of further US monetary easing on Asian economies. Each is unique, with its own characteristics to endure the potential risks,” Citigroup Inc’s Singapore-based senior Asia-Pacific economist Kit Wei Zheng explains to StarBizWeek.
According to Kit, for most emerging Asian markets, the inflow of cheap US dollar will not be reflected directly in the general prices of goods and services; rather, the effects on asset prices will be faster and more obvious.
“While the liquidity story is driving commodity prices, that is only part of the story. Commodities prices are also driven by overall demand and supply, and global growth is not super strong, so further upside could be capped by demand disruptions,” Kit says. As it stands, Malaysia’s inflationary pressure appears to be among the most contained in the region.
“General prices remain in check since we came out of the recession,” says TA Research economist Patricia Oh.
Consumer price index last month surprisingly slowed, registering a growth of 1.8% year-on-year (y-o-y), compared with 2.1% y-o-y in the preceding month. That was partly attributed to a stronger ringgit, which mitigated the effects of rising food prices, according to Maybank Investment Research.
Inflation in the year ahead for Malaysia will most likely remain steady below 3%, economists say.
“One thing to note is that prices of most goods in Malaysia are still controlled by the Government, so in any case, the Government can still play its part in managing the inflationary expectations in the country,” Kenanga Research economist Wan Suhaimie Saidi explains. With a relatively low and stable inflation and sound and well-guarded financial system, economists believe Malaysia will be able to better withstand the risks of hot money inflow compared to most other countries in the region. But that does not mean the country can be complacent.
In a positive note, it is encouraging to know that Bank Negara has been closely monitoring the rising bubble risks in the region, and it looks ready to implement the measures when necessary to curb those negative effects on the country’s economy. We need to be on guard, as economists say, to prevent our growth plans being derailed.

Tuesday, October 26, 2010

Rising concerns over household debt and bankruptcies among young M'sians

Monday October 25, 2010

By YAP LENG KUEN

Household debt to GDP rose to 76% last year from 64% in 2008
PETALING JAYA: Rising concerns over household debt and bankruptcies among the young have prompted several suggestions on how to tackle the problem at source.
Apart from the expected curbs on property loans and possible limits on credit card usage, other steps include the creation of a personal credit scoring system, enhanced education and awareness among consumers as well as the financiers themselves.
RAM Ratings head of financial institution ratings Promod Dass said: “Based on the latest available Bank Negara statistics, household debt to gross domestic product (GDP) has marched upward from about 64% in 2008 to around 76% last year.
(Last year, this amounted to about RM389 bil).
There is rising concern over household debt and bankruptcies among the young in Malaysia
“This level is similar to that in Singapore and far lower than in Japan, the United States and Britain which are well above the 100% threshold.
“It is likely that household debt to GDP would keep escalating beyond a manageable level, if measures are not put in place, given that interest rates are still relatively low in Malaysia and credit for qualified borrowers is easily obtained,’’ said Promod.
According to CIMB Investment Bank Bhd chief economist Lee Heng Guie, property loans make up about 50% of household loans, auto (27%), personal uses (8.9%) and credit cards (6.3%).
The financial assets cover - comprising savings, investments and insurance - remain strong at 2.3 times; nevertheless, rising household debt may constrain consumption especially with any rise in interest rates and debt service costs.
“There should be more awareness on educating households on how to manage their debt,’’ said Lee.
“While authorities and the financial sector could educate potential borrowers through detailed booklets or information on websites, a more effective approach would be to require borrowers to have credit scores before they obtain loans as in some developed markets.
“In this way, borrowers will be aware about changes in their credit profile as they gear up and the impact it will likely have on their borrowing rates,” said Promod.
The Credit Counselling and Debt Management Agency (AKPK) has pointed out that during the past year, almost 50% of the 3,000 individuals who approached the agency for credit counselling each month were aged between 30-40 years.
Another 15% were in their 20s.
According to the agency, problems over car loans and credit card advances were the top two reasons young Malaysians sought credit counselling.
To Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings Anandakumar Jegarasasingam, the rising level of household sector loans is “a definite concern.’’
“In fact, the household sector is the single largest sector exposure for Malaysian banks, accounting for 55% of banking sector loans at end-2009 – a very significant increase from the low 16% of banking-sector loans at end-1998,’’ he said.
Anandakumar believes that the repayment ability of the household sector is overestimated for the following reasons:

  • Considering that the bulk of household sector borrowings is for mortgages and auto financing, the distribution of household sector debt is likely to be more even among the population than the distribution of financial assets.

  • The vulnerability of the household sector’s financial asset holdings to adverse wealth and income shocks as a result of the increased proportion of market price-dependent financial assets.

  • Anecdotal evidence suggests that bankers are focusing more on the underlying collateral, especially for mortgages and auto loans. During a system-wide crisis, when defaults escalate and asset prices are depressed, the recoverable value of such collateral can diminish rather rapidly.
    According to Anandakumar, the proposed reduction of the loan-tovalue (LTV) ratio for the purchase of the third property may not be sufficient to control the level of household sector debt.
    Possible policy measures to curb the rising household sector debt include the imposition of more stringent LTV ratios for multiple home purchases within a particular time band and for properties of certain value; fixing a higher minimum income requirement to be eligible to apply for credit cards and personal loans; limiting the maximum credit limit on credit cards to the equivalent of two months’ salary as well as the number of credit cards that an individual can hold to two or three cards