Tuesday, July 26, 2011
First home scheme: Making it work for all
Young Malaysians, especially those in the cities, are whining about the unavailability of houses below RM220,000 that they could purchase under the My First Home Scheme.
Back home, their parents and parents-in-law heave a sigh of relief as their children and grandchildren will no longer have to stay in rented houses, apartments or flats.
Besides seeing their children graduate from universities, most parents dream of seeing their children start their own families and have their own homes.
The newly-launched scheme, which comes with 100 per cent financing as the 10 per cent deposit is guaranteed by Cagamas Bhd, is aimed at helping those aged below 35 to own their first house sooner.
Contrary to what some people think, the scheme could prevent a property bubble as it actually dampens speculative activities.
This is because the scheme encourages developers to build residential units costing between RM100,000 and RM220,000.
Given Malaysians aged between 20 and 35 make up about a third of the country's population, and considering the thousands of new job market entrants annually, demand for houses within that range is massive.
So, besides helping first-time house buyers, the scheme also signals developers to build certain types of houses within a certain price range.
In prime areas in the Klang Valley, Penang and Johor, affordable homes may not be available, so the young first-time buyers with a monthly salary of RM3,000 and below have to settle for houses outside the cities.
But think long term. The first homes may be away from urban centres, yet now is the opportunity to buy a house without downpayment, with attractive interest rates and repayment period.
Unless there is severe econo-mic recession or property bubble, the value of houses always goes up.
What one earns now may seem like peanuts. However, five to 10 years down the road, one is likely to move up the career ladder and receive a fatter paycheck.
With a combined income of the spouse and sufficient savings and returns from other investments, one can sell or rent the first home and buy a bigger house in prime areas.
Also remember that the earlier one owns a property, the better it is, as a property is like a hedge against inflation, while the money for rental is channelled for home repayment.
In the meantime, it helps to manage one's finances wisely. Avoid the credit card debt trap and differentiate between "needs" and "wants".
It is perfectly normal if one does not own the latest iPhone or iPad, and the baby need not be dressed in designer clothes.
Statistics from the Credit Counselling and Debt Management Agency (AKPK) shows that majority of Malaysians who are in debt are those between 20 and 40 years old, male, married and those with an annual income of RM24,000.
The government, meanwhile, should do more to improve accessibility as affordable homes are away from the city centres.
The high-income economy may not be fully realised by 2020 if the future generation is stuck servicing home and car loans, spending hours on the road to reach homes situated kilometres away from the workplace, and exhausting their hard-earned money on petrol and car repairs. This is against the backdrop of rising food prices and utility costs.
With efficient and affordable public transportation like train network and feeder buses, the issue of young families staying far from city centres can be addressed.
Property developers can attract more buyers for houses built outside urban centres by incorporating entertainment and recreational facilities targeting young families and Generation Y (Gen Y), those born after 1980.
Developers also need to stop whining about the house price under the scheme as the large group of people aged 35 and below provides a ready market for medium-cost residential units. Besides, developers may have been enjoying handsome margins from high-end residential projects, which are sold like hot cakes to speculative buyers.
In fact, Gen Y, currently the darlings of advertisers, may become developers' blue-eyed buyers.
By : Hamisah Hamid
Source : Business Times
Date Published : 14 March 2011
Property to remain buoyant in 2011
The property market in Malaysia is expected to remain buoyant next year, seeing a moderate uptrend in prices, in line with economic growth and growing interest among foreigners.
Speakers at a press conference on the Fourth Malaysian Property Summit 2011 here today said, no property bubble is expected in the foreseeable future, due to pent up demand for certain upmarket condo launches.
The Malaysian Property Summit is scheduled to be held on Jan 18, 2011 at the Sime Darby Convention Centre in Kuala Lumpur.
More than 200 participants, including developers, property owners, investors, bankers, financial analysts, economists, and property consultants are expected to attend.
Property consultant and valuer, James Wong said, the sharp increase in prices, is only to be seen in certain landed properties in choice locations with a huge demand for it in Kuala Lumpur and Penang.
James Wong is also the managing director of VPC Alliance (Malaysia) Sdn Bhd and regional chairman of VPC Asia Pacific Limited, a regional grouping of property consultants operating in eight countries.
"With escalating prices of property, one of the challenges for the government is to boost income, and move the country towards a high income economy," he said.
"This can be achieved by providing clear guidelines under the Economic Transformation Programme (ETP), especially on Private Finance Initiatives (PFI), as a majority of the funding under it comes from private initiatives," he told a press conference.
The president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS), Choy Yue Kwong said in 2011, property prices would improve but the office market will remain soft.
"The property market currently is still very buoyant. Market prices are at record new highs. Interest rate is still relatively low," Choy said during the same press conference.
Choy emphasised that the high Asian savings will also cushion against a property bubble.
"It is challenging to own a house with a salary of just only RM4,000 a month. In 1975, a house in the Klang Valley was around RM30,000 and graduates earned about RM700 a month.
"Today, a graduate earns about RM2,000 but a house in the Klang Valley could easily cost RM400,000," he elaborated. Thus, Choy said, owning a house is only possible if the government made an effort to uplift income.
Eric Ooi, managing director of Knight Frank Malaysia, a global residential and commercial property consultancy, said this problem is prevalent in Asian countries.
"Funds and investment money is moving into Asia as the United States and the European economies are still struggling to come out of the doldrums.
"There is a lot of interest from buyers from China who are agressively buying into properties in Australia and Singapore. If these buyers start buying into Malaysian properties, then prices will further escalate," he said.
According to Ooi, there is a lot of interest at present from Singaporean and Hong Kong buyers, for Malaysian properties.
He highlighted that foreigners are looking at the yield in making decisions on property purchases.
"Currently, the Kuala Lumpur property market has a positive yield. Investors also like stability in the country and election results will have an impact on their investment mood," he explained.
He also said another factor to affect the property market is any increase in interest rates as it will impact the repayment of loans.
"However, there are expectations that the interest rate will not increase susbstantially," Choy added.
Source : Bernama
Date Published : 17 December 2010
Developers be warned, China's a tough market
KUALA LUMPUR: More developers are venturing into China's property market but their investments may be at risk because of red tape and fears of overheating, analysts say.
A MIDF Research analyst said the China market is a tough one to conquer without good connections with local authorities and partners who can deal with changing rules.
He said this could be the reason why the big boys such as Sunrise Bhd, TA Enterprise Bhd, SP Setia Bhd, Berjaya Land Bhd, Selangor Dredging Bhd, Ireka Corp Bhd and PJ Development Holdings Bhd are investing in Canada, Australia, the UK, Singapore and Japan as risk is less.
LBS Bina Group Bhd recently said it aims to launch its maiden property project in Zhuhai, worth RM7.5 billion, in 2012.
The project was mooted more than five years ago and according to a property industry observer, LBS is still having issues with the government.
"Bureaucracy in China is extremely complex, while expansion in the Chinese market represents a significant investment as foreign developers are required to put a 50 per cent deposit on the value of their project with the government.
"And since developers cannot sell their houses until upon completion, they have to fork out money to settle the high interest rates and for keeping stock in the event of unsold properties," said an analyst at OSK Research who is not authorised to speak to the media.
Developers such as Golden Plus Holding Bhd (GPlus) have lost money in China. GPlus' 3 billion yuan housing project in Shanghai, The Royal Garden, had incurred cost and time overruns in the last few years.
The project, which was slated for completion much earlier, now requires two to three more years.
Some other developers who have yet to launch projects planned few years ago include IJM Land Bhd and Sunway Group.
IJM Land has been in talks with various parties for mixed property developments in China's second-tier cities in the last four to five years.
In 2008, IJM Land managing director Datuk Soam Heng Choon said it was planning a RM500 million mixed property project in Changchun.
When contacted recently, Soam told Business Times that IJM Land is aiming to launch the project in 2012, pending approvals.
As for Sunway, it signed in April 2010 a collaboration agreement with Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd to develop a RM5 billion mixed development in Tianjin. The project has not started.
By : Sharen Kaur
Source : Business Times
Date Published : 25 July 2011
Wednesday, July 20, 2011
Act against illegal banners
Wednesday July 20, 2011
By FAZLEENA AZIZ
fazleena@thestar.com.my
Photos by BRIAN MOH
DEPUTY Federal Territories and Urban Wellbeing Minister Datuk M. Saravanan is urging the Malaysian Communications and Multimedia Commission (MCMC) to form a unit to disconnect the telephone numbers displayed on illegal stickers and banners in the city.
Saravanan said the MCMC’s role was pertinent as it was one of the best ways to curb this problem that was marring the city’s image.
“Last year we had submitted more than 400 numbers to MCMC but there has not been any feedback on the matter.
Hard to remove: Some of the DBKL officers removing illegal stickers posted on a lamp post in Wangsa Maju.
“These illegal stickers and banners block signboards and road names,” he said.
The Kuala Lumpur City Hall (DBKL) workers have to go around the city every other day to remove them,” he said during an operation to remove the illegal banners and stickers by the local authority yesterday.
About 80 DBKL employees took part in the operation in Desa Setapak, Teratai Mewah and Taman Bunga Raya.
Saravanan said they had to discuss with the minister to come up with a better policy or bylaw on the matter.
Ugly sight: Illegal stickers posted on a telephone booth in Wangsa Maju .
“Legal proceedings usually take time and it will be more effective to disconnect the telephone lines displayed on the illegal stickers.
“I would like to urge non-governmental organisations to carry out more campaigns to curb this problem,” he said.
He added that the DBKL would also bring down worn out flags.
Until June this year, 227,985 illegal stickers had been removed in Cheras, Batu and Bandar Tun Razak.
Last year, 458,811 stickers and banners were removed.
The most number of illegal stickers were found in Bandar Tun Razak followed by Bukit Bintang and Wangsa Maju.
Monday, July 18, 2011
World economy to keep strong but risks abound: Reuters poll
By Andy Bruce - Reuter
LONDON (Reuters) - The world economy should expand steadily this year and next thanks mainly to prospering emerging powers, a Reuters poll showed, but fiscal troubles lurking in Europe and potentially the United States risk blowing this view apart.
The quarterly survey of more than 350 economists from all over the world showed a dimmer outlook for most of the rich-world Group of Seven economies since the last survey in April.
Only Germany, booming thanks to buoyant exports, is expected to post growth averaging more than 3 percent this year. Elsewhere, fiscal austerity in Europe and growing debt fears have soured analysts' sentiment.
By contrast, emerging powers like China have enjoyed near double-digit annual growth rates since the global recession -- but they face risks of their own, struggling to contain rampant inflation that has accompanied fervent growth.
Economists pointed to the fiscal crisis raging in the euro zone's peripheral countries and the political deadlock in the United States surrounding an increasingly urgent lift to the country's legal debt ceiling as the biggest risks to global economic growth.
"If the (euro zone) debt crisis is mishandled, it's a major threat. But it's a threat comparable to the mishandling of the U.S. sovereign debt crisis. It's six and two threes," said Willem Buiter, chief economist at Citi.
The poll showed the world economy expanding 4.1 percent this year and 4.3 percent next year, little changed from April's survey.
Buiter said that authorities in emerging markets are largely behind the curve in monetary policy, which could leave open the prospect that their boom could become a bubble and then a bust -- but not for a couple of years.
While economists cut their U.S. economic outlook compared with a poll published last month, they still see the United States performing better this year than struggling European peers like Britain, Italy and France.
They saw the U.S. economy growing an average 2.5 percent this year, before picking up to 3.0 percent next year -- comfortably in excess of the sub-2 percent growth rates seen for this year for Europe's G7 members, excluding Germany.
"It was the surge in oil and gasoline prices that hurt the (U.S.) economy the most in the first half, and now that they're down, that should take the weight off," said Mark Zandi, chief economist of Moody's Analytics.
The dimming U.S. outlook has had a knock-on effect for Canadian growth prospects this year, with economists applying a hefty downgrade to their quarterly growth profiles.
DEFAULT?
Still, the focus over the next few months will be averting sovereign defaults in both the euro zone and the United States. While the euro zone question is one of fundamental solvency, most notably in Greece, the U.S. problem is a political one.
Economists remain confident that U.S. lawmakers will reach a deal to raise the government's debt ceiling. All but two of 40 economists polled said a deal would be reached.
"They will squeak something out, but the odds of failure have increased," said Chris Lowe, chief economist for FTN Financial and one of the economists surveyed.
The poll was conducted from Friday to Wednesday and was completed before House Republican leader Eric Cantor said President Barack Obama walked out of a meeting on Wednesday evening, escalating concerns about the negotiations.
Lawmakers disagree over budget deficit reduction measures that are a condition for extending the legal $14.3 trillion borrowing limit -- needed so the U.S. government can fund its commitments next month.
In Europe, Greek Prime Minister George Papandreou said the euro zone and International Monetary Fund must quickly approve a bailout to avoid a collapse of Greece's economic reform plans.
While Germany has recently topped the European -- and G7 -- growth charts, peripheral strugglers like Greece, Ireland, Spain and Italy will drag hard on the euro zone's economic performance.
The 17-nation bloc's economy will probably grow just 0.4 percent per quarter from here until next April. That would be slower than the 0.8 percent rise seen in the first quarter of this year.
Economists in the poll also left their 2011 and 2012 growth forecasts unchanged at 2.0 and 1.7 percent, respectively. By contrast, the German GDP growth outlook for this year and next was 3.4 percent and 1.9 percent.
"Germany's growth will remain above average, by historic and euro zone standards, so long as the euro zone doesn't totally fall apart and leave just a core group of countries remaining," said Timo Klein, an economist at IHS Global Insight.
Unlike Germany, Britain's economy probably struggled to generate meaningful growth in the second quarter and its prospects ahead look likely to be jaded by fierce fiscal austerity measures and high inflation.
JAPAN RECOVERS
Japan's recovery from the March 11 earthquake and tsunami that killed at least 21,000 people looks likely to proceed at a faster pace than thought even last month, helped by a restoration of factory output.
Although Japan, the world's third-largest economy likely contracted for a third straight quarter in April-June, it is likely to emerge from recession this quarter as it shakes off supply constraints more quickly than expected, according to the poll of around 30 economists.
"Automakers are pushing forward production plans and companies are making efforts to limit the impact of summer power shortages on output," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
"We expect factory output to normalize in July-September."
(Additional reporting by reporters in London, Toronto, Tokyo, New York, Berlin, Paris and Rome, Editing by Ross Finley, Anna Willard and Leslie Adler)
LONDON (Reuters) - The world economy should expand steadily this year and next thanks mainly to prospering emerging powers, a Reuters poll showed, but fiscal troubles lurking in Europe and potentially the United States risk blowing this view apart.
The quarterly survey of more than 350 economists from all over the world showed a dimmer outlook for most of the rich-world Group of Seven economies since the last survey in April.
Only Germany, booming thanks to buoyant exports, is expected to post growth averaging more than 3 percent this year. Elsewhere, fiscal austerity in Europe and growing debt fears have soured analysts' sentiment.
By contrast, emerging powers like China have enjoyed near double-digit annual growth rates since the global recession -- but they face risks of their own, struggling to contain rampant inflation that has accompanied fervent growth.
Economists pointed to the fiscal crisis raging in the euro zone's peripheral countries and the political deadlock in the United States surrounding an increasingly urgent lift to the country's legal debt ceiling as the biggest risks to global economic growth.
"If the (euro zone) debt crisis is mishandled, it's a major threat. But it's a threat comparable to the mishandling of the U.S. sovereign debt crisis. It's six and two threes," said Willem Buiter, chief economist at Citi.
The poll showed the world economy expanding 4.1 percent this year and 4.3 percent next year, little changed from April's survey.
Buiter said that authorities in emerging markets are largely behind the curve in monetary policy, which could leave open the prospect that their boom could become a bubble and then a bust -- but not for a couple of years.
While economists cut their U.S. economic outlook compared with a poll published last month, they still see the United States performing better this year than struggling European peers like Britain, Italy and France.
They saw the U.S. economy growing an average 2.5 percent this year, before picking up to 3.0 percent next year -- comfortably in excess of the sub-2 percent growth rates seen for this year for Europe's G7 members, excluding Germany.
"It was the surge in oil and gasoline prices that hurt the (U.S.) economy the most in the first half, and now that they're down, that should take the weight off," said Mark Zandi, chief economist of Moody's Analytics.
The dimming U.S. outlook has had a knock-on effect for Canadian growth prospects this year, with economists applying a hefty downgrade to their quarterly growth profiles.
DEFAULT?
Still, the focus over the next few months will be averting sovereign defaults in both the euro zone and the United States. While the euro zone question is one of fundamental solvency, most notably in Greece, the U.S. problem is a political one.
Economists remain confident that U.S. lawmakers will reach a deal to raise the government's debt ceiling. All but two of 40 economists polled said a deal would be reached.
"They will squeak something out, but the odds of failure have increased," said Chris Lowe, chief economist for FTN Financial and one of the economists surveyed.
The poll was conducted from Friday to Wednesday and was completed before House Republican leader Eric Cantor said President Barack Obama walked out of a meeting on Wednesday evening, escalating concerns about the negotiations.
Lawmakers disagree over budget deficit reduction measures that are a condition for extending the legal $14.3 trillion borrowing limit -- needed so the U.S. government can fund its commitments next month.
In Europe, Greek Prime Minister George Papandreou said the euro zone and International Monetary Fund must quickly approve a bailout to avoid a collapse of Greece's economic reform plans.
While Germany has recently topped the European -- and G7 -- growth charts, peripheral strugglers like Greece, Ireland, Spain and Italy will drag hard on the euro zone's economic performance.
The 17-nation bloc's economy will probably grow just 0.4 percent per quarter from here until next April. That would be slower than the 0.8 percent rise seen in the first quarter of this year.
Economists in the poll also left their 2011 and 2012 growth forecasts unchanged at 2.0 and 1.7 percent, respectively. By contrast, the German GDP growth outlook for this year and next was 3.4 percent and 1.9 percent.
"Germany's growth will remain above average, by historic and euro zone standards, so long as the euro zone doesn't totally fall apart and leave just a core group of countries remaining," said Timo Klein, an economist at IHS Global Insight.
Unlike Germany, Britain's economy probably struggled to generate meaningful growth in the second quarter and its prospects ahead look likely to be jaded by fierce fiscal austerity measures and high inflation.
JAPAN RECOVERS
Japan's recovery from the March 11 earthquake and tsunami that killed at least 21,000 people looks likely to proceed at a faster pace than thought even last month, helped by a restoration of factory output.
Although Japan, the world's third-largest economy likely contracted for a third straight quarter in April-June, it is likely to emerge from recession this quarter as it shakes off supply constraints more quickly than expected, according to the poll of around 30 economists.
"Automakers are pushing forward production plans and companies are making efforts to limit the impact of summer power shortages on output," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
"We expect factory output to normalize in July-September."
(Additional reporting by reporters in London, Toronto, Tokyo, New York, Berlin, Paris and Rome, Editing by Ross Finley, Anna Willard and Leslie Adler)
Friday, July 15, 2011
Why Wall Street doesn't seem worried about default
Juky 15, 2011
By BERNARD CONDON - AP Business Writers,MATTHEW CRAFT - AP Business Writers | AP – 1 hr 8 mins ago
....NEW YORK (AP) — The CEO of a big bank says a U.S. default could be catastrophic for the economy. The head of the Federal Reserve warns of chaos. And a credit rating agency threatens to take away the country's coveted triple-A status.
The response on Wall Street: So what?
In Washington, the fight over whether to raise the federal debt limit has grown uglier by the day. The White House says the limit must be raised by Aug. 2 or the government won't be able to pay its bills, possibly including U.S. bonds held around the world.
But as the deadline nears, stocks and bonds have barely flinched.
The Dow Jones industrial average fell just 54 points Thursday and stands about where it did at the start of the month. The yield on the 10-year Treasury bond, which usually rises when investors see it as a riskier bet, is considerably lower than earlier this year.
It may seem an odd, even reckless, reaction by investors. But it isn't completely crazy.
Take the ho-hum reaction from the bond market. In theory, investors in U.S. Treasury bonds should demand higher interest payments when there's a greater risk they won't get their money back — in this case, in the event of a default next month.
Instead, the yield on the 10-year Treasury note rose only slightly Thursday, to 2.95 percent. In February, when the U.S. economic recovery seemed stronger and the debt limit was a distant threat, it was 3.74 percent.
But in this market, as in the schoolyard, size wins. The U.S. has $14 trillion in outstanding Treasury bonds. That dwarfs government bonds of any other nation. U.S. debt is held more widely and traded more often than any other government's IOU.
That matters because pensions, private investment funds and central banks the world over want to know that they can buy and sell these holdings fast — what investors call liquidity. During the credit crisis of 2008, investors bought U.S. Treasurys because they were perceived as not only safe but liquid.
"It's very nice that Switzerland is a safe place," says Avi Tiomkin, a hedge fund consultant who holds Treasurys. "But if you're the Russian or Chinese central bank, it's just too small."
Steve Ricchiuto, chief economist at Mizuho Securities, points to another reason the markets are calm: The U.S. may seem a more dangerous place to park your money given its rising debt, but much of the rest of the world isn't faring well, either.
He notes that Europe is trying to contain a debt crisis. Yields on bonds of various countries there have gone up recently. "The U.S. is the best in a bad world," he says, so people have no choice but to invest here.
As for stocks, there's plenty of news — some very good — to distract investors from Washington's problems. U.S. companies are issuing their financial results for the latest quarter, and they're expected to post big profits — up 15 percent, according to a survey by data provider FactSet.
JPMorgan Chase reported profits up 13 percent Thursday, higher than analysts had expected. The stock rose sharply on the news. Earlier in the day, it was that bank's CEO, James Dimon, who warned that a failure by Congress to agree to raise the debt ceiling could mean "catastrophe."
On Wednesday, Moody's Investors Services warned it might take away the United States' top-notch credit rating if it missed even one interest payment on its bonds. In testimony before Congress on Thursday, Federal Reserve Chairman Ben Bernanke said a U.S. default could throw the financial system into "chaos."
The Dow Jones industrial average closed at 12,437, down 0.4 percent. The S&P 500 closed at 1,308, down 0.7 percent.
The United States hit its current $14.3 trillion debt ceiling in May. For a new debt ceiling to last to the end of 2012 would require raising it by about $2.4 trillion.
A default would drive up the cost of government borrowing for years to come. That would translate into higher interest rates for everybody else, making it more expensive for corporations to finance spending projects and for Americans to take out mortgages or other loans.
The bigger fear is that a default could freeze the short-term lending markets that keep money moving throughout the global financial system. Treasurys and other government-backed debt are the most widely used collateral for loans in these markets.
A default and a downgrade of U.S. debt would lower the value of that collateral. Lenders might respond by forcing borrowers to sell other assets to post more collateral. The fallout could resemble what happened when Lehman Brothers collapsed in 2008.
The prospect of such terrible consequences may be exactly the reason investors aren't all that worried.
"There's just too much at stake politically and economically for a deal not to get done," says John Briggs, Treasury strategist at the Royal Bank of Scotland. "It seems hard to believe that any politician would want their name attached to a default of U.S. debt."
Many other investors are assuming the same thing. Tony Crescenzi, market strategist at money manager Pimco, says Wall Street has been expecting a deadline-beating deal since the debt-limit became a subject of debate earlier this year.
No one knows how close Washington can get to the deadline without triggering a sell-off. Sam Yake, a stock analyst at BGB Securities, is confident a deal will be struck. But he says that if enough investors start to worry, the fear could feed on itself.
"In financial markets, you're playing with people's confidence," he says. "If enough people start thinking it's a catastrophe, it could become so."
...
By BERNARD CONDON - AP Business Writers,MATTHEW CRAFT - AP Business Writers | AP – 1 hr 8 mins ago
....NEW YORK (AP) — The CEO of a big bank says a U.S. default could be catastrophic for the economy. The head of the Federal Reserve warns of chaos. And a credit rating agency threatens to take away the country's coveted triple-A status.
The response on Wall Street: So what?
In Washington, the fight over whether to raise the federal debt limit has grown uglier by the day. The White House says the limit must be raised by Aug. 2 or the government won't be able to pay its bills, possibly including U.S. bonds held around the world.
But as the deadline nears, stocks and bonds have barely flinched.
The Dow Jones industrial average fell just 54 points Thursday and stands about where it did at the start of the month. The yield on the 10-year Treasury bond, which usually rises when investors see it as a riskier bet, is considerably lower than earlier this year.
It may seem an odd, even reckless, reaction by investors. But it isn't completely crazy.
Take the ho-hum reaction from the bond market. In theory, investors in U.S. Treasury bonds should demand higher interest payments when there's a greater risk they won't get their money back — in this case, in the event of a default next month.
Instead, the yield on the 10-year Treasury note rose only slightly Thursday, to 2.95 percent. In February, when the U.S. economic recovery seemed stronger and the debt limit was a distant threat, it was 3.74 percent.
But in this market, as in the schoolyard, size wins. The U.S. has $14 trillion in outstanding Treasury bonds. That dwarfs government bonds of any other nation. U.S. debt is held more widely and traded more often than any other government's IOU.
That matters because pensions, private investment funds and central banks the world over want to know that they can buy and sell these holdings fast — what investors call liquidity. During the credit crisis of 2008, investors bought U.S. Treasurys because they were perceived as not only safe but liquid.
"It's very nice that Switzerland is a safe place," says Avi Tiomkin, a hedge fund consultant who holds Treasurys. "But if you're the Russian or Chinese central bank, it's just too small."
Steve Ricchiuto, chief economist at Mizuho Securities, points to another reason the markets are calm: The U.S. may seem a more dangerous place to park your money given its rising debt, but much of the rest of the world isn't faring well, either.
He notes that Europe is trying to contain a debt crisis. Yields on bonds of various countries there have gone up recently. "The U.S. is the best in a bad world," he says, so people have no choice but to invest here.
As for stocks, there's plenty of news — some very good — to distract investors from Washington's problems. U.S. companies are issuing their financial results for the latest quarter, and they're expected to post big profits — up 15 percent, according to a survey by data provider FactSet.
JPMorgan Chase reported profits up 13 percent Thursday, higher than analysts had expected. The stock rose sharply on the news. Earlier in the day, it was that bank's CEO, James Dimon, who warned that a failure by Congress to agree to raise the debt ceiling could mean "catastrophe."
On Wednesday, Moody's Investors Services warned it might take away the United States' top-notch credit rating if it missed even one interest payment on its bonds. In testimony before Congress on Thursday, Federal Reserve Chairman Ben Bernanke said a U.S. default could throw the financial system into "chaos."
The Dow Jones industrial average closed at 12,437, down 0.4 percent. The S&P 500 closed at 1,308, down 0.7 percent.
The United States hit its current $14.3 trillion debt ceiling in May. For a new debt ceiling to last to the end of 2012 would require raising it by about $2.4 trillion.
A default would drive up the cost of government borrowing for years to come. That would translate into higher interest rates for everybody else, making it more expensive for corporations to finance spending projects and for Americans to take out mortgages or other loans.
The bigger fear is that a default could freeze the short-term lending markets that keep money moving throughout the global financial system. Treasurys and other government-backed debt are the most widely used collateral for loans in these markets.
A default and a downgrade of U.S. debt would lower the value of that collateral. Lenders might respond by forcing borrowers to sell other assets to post more collateral. The fallout could resemble what happened when Lehman Brothers collapsed in 2008.
The prospect of such terrible consequences may be exactly the reason investors aren't all that worried.
"There's just too much at stake politically and economically for a deal not to get done," says John Briggs, Treasury strategist at the Royal Bank of Scotland. "It seems hard to believe that any politician would want their name attached to a default of U.S. debt."
Many other investors are assuming the same thing. Tony Crescenzi, market strategist at money manager Pimco, says Wall Street has been expecting a deadline-beating deal since the debt-limit became a subject of debate earlier this year.
No one knows how close Washington can get to the deadline without triggering a sell-off. Sam Yake, a stock analyst at BGB Securities, is confident a deal will be struck. But he says that if enough investors start to worry, the fear could feed on itself.
"In financial markets, you're playing with people's confidence," he says. "If enough people start thinking it's a catastrophe, it could become so."
...
Wednesday, July 13, 2011
Property trends – where are we heading to?
Jul 11, 2011
There have been many speculation (and subsequent refuting by various parties) of a property bubble. Year 2009 marked an economic slowdown due to the global financial crisis, while year 2010’s economic recovery was largely boosted by the government’s economic stimulus package.
Some attributed the astronomical price increases in hot areas to the suppressed demand of year 2009. In that year, it was common for developers to offer 5% downpayment and 0% interest until upon completion of a development. Similarly, banks offered attractive rates, where the interest rates were at approximately the high 3% or low 4%.
Escalating prices
2011 came and property investors had to rethink their investment strategies. Prices of properties have surpassed the levels recorded before the crisis and in the first half of 2010 itself, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30%. Bank Negara Malaysia (BNM), in its “Financial Stability and Payment Systems Report 2010”, stated that house prices in selected locations within and surrounding urban areas had increased to four times higher than the national house price index.
BNM has been staying on the pulse of the market’s movements and implemented a loan to value ratio of 70% for third mortgage borrowers. However, crafty property buyers have resorted to using their spouse or relatives’ names when applying for loans. Some have opted to take the commercial route, as the required downpayment is at an average of 80% (as opposed to 70% if the buyer has more than two residential properties currently). Plus, the capital gains and rental yield are relatively higher than residential properties. Hence, some buyers have changed their strategy by investing in commercial properties.
Proceed with caution
In early May 2011, BNM raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by one percentage point to 3%, and as such, banks have raised their base lending rates (BLR) and base financing rates (BFR) by 30 basis points to 6.60% respectively. Banks that offer BLR minus 2%, means that effective interest rates are still below 5%.
However, property investors should look at the slight rate hike with caution. It is imperative that property buyers make decisions based on repayment capability, and also factor in expected rental yields.
New developments continues to mushroom especially in the Klang Valley and Greater Kuala Lumpur and reports have indicated that investors are still very much active, with investors snapping up units during property launches, despite the price increase. Analysts have indicated that it is still too early to measure the impact of current regulations.
Property Investment Convention 2011 (PIC 2011)
If current property trends and regulations are at the top of your mind, join the Property Investment Convention where current topics of interest will be analysed and shared by various speakers.
The convention will mainly be about movement in the property market, the current and future trends based on the MRT, how to purchase as regulations change, how to tweak your strategies in view of the changing regulations, managing your portfolio, diversifying into REITS, and many more.
The speakers include:
- Best-selling author and property investment coach, Milan Doshi
- Location researcher and map maker, Ho Chin Soon
- The master of lead generator and co-author of the first ‘Lease Options’ book in the UK, Vincent Wong
- International property investment trainer and co-founder of Wealth Dragon in the UK, John Lee
The Property Investment Convention is scheduled to be held on 6 and 7 August 2011 at The Gardens Ballroom, Mid Valley City. Register now at www.wealthmasteryacademy.com/starpic.
There have been many speculation (and subsequent refuting by various parties) of a property bubble. Year 2009 marked an economic slowdown due to the global financial crisis, while year 2010’s economic recovery was largely boosted by the government’s economic stimulus package.
Some attributed the astronomical price increases in hot areas to the suppressed demand of year 2009. In that year, it was common for developers to offer 5% downpayment and 0% interest until upon completion of a development. Similarly, banks offered attractive rates, where the interest rates were at approximately the high 3% or low 4%.
Escalating prices
2011 came and property investors had to rethink their investment strategies. Prices of properties have surpassed the levels recorded before the crisis and in the first half of 2010 itself, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30%. Bank Negara Malaysia (BNM), in its “Financial Stability and Payment Systems Report 2010”, stated that house prices in selected locations within and surrounding urban areas had increased to four times higher than the national house price index.
BNM has been staying on the pulse of the market’s movements and implemented a loan to value ratio of 70% for third mortgage borrowers. However, crafty property buyers have resorted to using their spouse or relatives’ names when applying for loans. Some have opted to take the commercial route, as the required downpayment is at an average of 80% (as opposed to 70% if the buyer has more than two residential properties currently). Plus, the capital gains and rental yield are relatively higher than residential properties. Hence, some buyers have changed their strategy by investing in commercial properties.
Proceed with caution
In early May 2011, BNM raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by one percentage point to 3%, and as such, banks have raised their base lending rates (BLR) and base financing rates (BFR) by 30 basis points to 6.60% respectively. Banks that offer BLR minus 2%, means that effective interest rates are still below 5%.
However, property investors should look at the slight rate hike with caution. It is imperative that property buyers make decisions based on repayment capability, and also factor in expected rental yields.
New developments continues to mushroom especially in the Klang Valley and Greater Kuala Lumpur and reports have indicated that investors are still very much active, with investors snapping up units during property launches, despite the price increase. Analysts have indicated that it is still too early to measure the impact of current regulations.
Property Investment Convention 2011 (PIC 2011)
If current property trends and regulations are at the top of your mind, join the Property Investment Convention where current topics of interest will be analysed and shared by various speakers.
The convention will mainly be about movement in the property market, the current and future trends based on the MRT, how to purchase as regulations change, how to tweak your strategies in view of the changing regulations, managing your portfolio, diversifying into REITS, and many more.
The speakers include:
- Best-selling author and property investment coach, Milan Doshi
- Location researcher and map maker, Ho Chin Soon
- The master of lead generator and co-author of the first ‘Lease Options’ book in the UK, Vincent Wong
- International property investment trainer and co-founder of Wealth Dragon in the UK, John Lee
The Property Investment Convention is scheduled to be held on 6 and 7 August 2011 at The Gardens Ballroom, Mid Valley City. Register now at www.wealthmasteryacademy.com/starpic.
CPO price on downtrend
Wednesday July 13, 2011
By HANIM ADNAN
nem@thestar.com.my
Rising production and high inventory putting pressure on commodity
PETALING JAYA: The downward pressure on crude palm oil (CPO) prices continued yesterday amid rising production and an 18-month-high inventory. This has also triggered market talk that the commodity may slip to below RM3,000 per tonne this week.
The Malaysian Palm Oil Board (MPOB) said in its June statistics released on Monday that CPO production had increased to 1.75 million tonnes while end-stocks surged to 2.05 million tonnes despite higher exports at 1.58 million tonnes.
All CPO futures contract closed on a minus territory yesterday, with the third-month benchmark CPO futures for September contract down RM39 to RM3,034 per tonne.
HwangDBS Vickers Research said in its sectoral report yesterday that palm oil exports in the coming months were expected to rise on stock replenishment, some substitution and stronger demand during Ramadan.
However, CPO output is forecast to seasonally ramp up over the same period, boosted by yield recovery and new tree maturities.
“In our estimation, this should raise palm oil end-stock levels through end-August and keep them above two million tonnes until the end of the year.
“We believe CPO prices owe its current resilience to weak soybean crushing margins and expectations of 2% year-on-year drop in the US soybean harvest, which may tighten near-term soybean oil supplies.
“Therefore, CPO price is expected to resume its downtrend in the fourth quarter of this year,” it added.
Malaysian Estate Owners Association president Boon Weng Siew voiced his concern over the current high level of palm oil stocks. “When palm oil stocks rose to two million tonnes in the fourth quarter of 2008, CPO price went down to about RM1,500 per tonne!”
Boon said the Government's B5 (blending of 5% biodiesel with 95% fossil fuel) programme should help the industry to manage the domestic palm oil stocks level.
The programme, which kicked off officially early last month, will be undertaken in stages. It will start with the central region covering Putrajaya, Malacca, Negri Sembilan, Kuala Lumpur and Selangor.
Malaysian Biodiesel Association vice-president U.R. Unnithan told StarBiz recently that 170,000 to 200,000 tonnes of biodiesel were expected to be used in the B5 programme for the central region.
The Government is targeting some 500,000 tonnes of local palm oil stocks to be used for the entire programme.
Meanwhile, despite palm oil stocks rising above the two million tonne mark in June, OSK Research was not overly concerned as “we believe that most of the contributing factors are already known and may have been factored into the decline in palm oil prices from RM3,963 in February to a low of RM3,016 per tonne last week.”
The research outfit also reckoned that inventory might fall back promptly due to supply disruption in the second half of this year.
“With CPO now trading at a significant US$210 per tonne discount to soybean oil, there is plenty of room for palm oil price to move higher when supply disruption materialises in the months ahead,” it said.
By HANIM ADNAN
nem@thestar.com.my
Rising production and high inventory putting pressure on commodity
PETALING JAYA: The downward pressure on crude palm oil (CPO) prices continued yesterday amid rising production and an 18-month-high inventory. This has also triggered market talk that the commodity may slip to below RM3,000 per tonne this week.
The Malaysian Palm Oil Board (MPOB) said in its June statistics released on Monday that CPO production had increased to 1.75 million tonnes while end-stocks surged to 2.05 million tonnes despite higher exports at 1.58 million tonnes.
All CPO futures contract closed on a minus territory yesterday, with the third-month benchmark CPO futures for September contract down RM39 to RM3,034 per tonne.
HwangDBS Vickers Research said in its sectoral report yesterday that palm oil exports in the coming months were expected to rise on stock replenishment, some substitution and stronger demand during Ramadan.
However, CPO output is forecast to seasonally ramp up over the same period, boosted by yield recovery and new tree maturities.
“In our estimation, this should raise palm oil end-stock levels through end-August and keep them above two million tonnes until the end of the year.
“We believe CPO prices owe its current resilience to weak soybean crushing margins and expectations of 2% year-on-year drop in the US soybean harvest, which may tighten near-term soybean oil supplies.
“Therefore, CPO price is expected to resume its downtrend in the fourth quarter of this year,” it added.
Malaysian Estate Owners Association president Boon Weng Siew voiced his concern over the current high level of palm oil stocks. “When palm oil stocks rose to two million tonnes in the fourth quarter of 2008, CPO price went down to about RM1,500 per tonne!”
Boon said the Government's B5 (blending of 5% biodiesel with 95% fossil fuel) programme should help the industry to manage the domestic palm oil stocks level.
The programme, which kicked off officially early last month, will be undertaken in stages. It will start with the central region covering Putrajaya, Malacca, Negri Sembilan, Kuala Lumpur and Selangor.
Malaysian Biodiesel Association vice-president U.R. Unnithan told StarBiz recently that 170,000 to 200,000 tonnes of biodiesel were expected to be used in the B5 programme for the central region.
The Government is targeting some 500,000 tonnes of local palm oil stocks to be used for the entire programme.
Meanwhile, despite palm oil stocks rising above the two million tonne mark in June, OSK Research was not overly concerned as “we believe that most of the contributing factors are already known and may have been factored into the decline in palm oil prices from RM3,963 in February to a low of RM3,016 per tonne last week.”
The research outfit also reckoned that inventory might fall back promptly due to supply disruption in the second half of this year.
“With CPO now trading at a significant US$210 per tonne discount to soybean oil, there is plenty of room for palm oil price to move higher when supply disruption materialises in the months ahead,” it said.
Lower industrial production in May a strong sign
By FINTAN NG
PETALING JAYA: May's lower factory output as measured through the industrial production index (IPI) more or less confirms that economic growth for the second quarter and for the full year will be slower.
Although not unexpected, with the Government already forecasting year-on-year gross domestic product (GDP) growth to be between 5% and 6% this year against 7.2% growth in 2010, external factors should make things all the more challenging and uncertain.
Three of these factors weigh on global GDP growth: China's inflation, which hit a three-year high of 6.4% in June, the stubbornly high jobless rate in the United States and contagion fears in the eurozone.
HSBC Global Research's co-head Asian Economics Frederic Neumann said in a July 10 report that the persistent US high unemployment rate would mean a weaker summer employment outlook.
Less demand: Malaysia’s industrial production, including steel pipes, which fell 5.1% in May, is likely to remain soft although a recovery is expected in the third quarter.
“Asia will feel the chill mostly through exports. In fact, we've recently highlighted that export order growth has continued to slow across the region in June,” he said.
Neumann said stagnating external demand would persist beyond the end of Japanese supply chain disruptions, which was the main cause of Malaysia's drop in factory output.
He said policymakers in the region would still proceed with a gradual and cautious adjustment to interest rates due to inflationary pressure.
This adjustment would have to be balanced against currency appreciation, which would impact exports growth.
“This, as we have long argued, is not simply a lagged effect of rising food and oil prices earlier this year, but reflects an underlying deterioration in the trade-off between inflation and growth in the region,” Neumann added.
He said there was clearly a need to raise key interest rates further despite slower growth in the second quarter because Asia's inflationary pressure was due to excess capacity not being able to cope with demand.
JPMorgan Chase Bank's Singapore-based economist Ong Sin Beng expects industrial production to remain soft though some stabilisation may be expected in the June data before a recovery in the third quarter.
“The main uncertainty is not so much with the direction of the data but with the strength of the recovery and this requires a somewhat firmer final demand footing in the third quarter,” he said in a report.
Ong said while some of the slowing owed to a moderation in final demand in the developed economies, a large part was due to an inventory adjustment following the sharp expansion in production in the first quarter.
“In that context, the second-quarter softness is somewhat similar to the third quarter 2010 slowing, which took three months to reach the trough from the production peak,” he added.
The Statistics Department on Monday released May's IPI figures, which showed factory output declined 5.1% from a year ago, more than the median expectation of a 2.7% fall in a Bloomberg survey. This was also more than double the 2.2% drop recorded in April.
The Government forecasts GDP to grow 5% to 6% this year with most economists expecting GDP to grow around 5.5%. Last year, growth came in at 7.2% year-on-year.
GDP expanded 4.6% for the first quarter with economists expecting second-quarter growth to be slower on weaker external demand.
Keeping interest rates unchanged sensible, priority is growth
Wednesday July 13, 2011
Keeping interest rates unchanged sensible, priority is growth
Behind the News - By Jagdev Singh Sidhu
THE decision to keep interest rates unchanged last Thursday makes sense after looking at the big decline in industrial production.
The economy has lost quite a bit of momentum and with economists now expecting growth in the second quarter to come in at around 4%, the focus on keeping growth up at the expense of inflation is now the priority of the authorities.
A hint of such intent was spoken of by Bank Negara's monetary policy committee (MPC) when it issued its statement on Thursday.
“The MPC will assess carefully the evolving economic conditions and to the extent that the growth momentum is sustained, further normalisation of monetary conditions will be considered to safeguard price stability,” it said.
The reasoning behind it was, although inflation remained on the upside, the committee felt that while the outlook for growth remained positive, there were heightened uncertainties to economic growth arising from global developments that had created higher downside risks to growth.
Troubles in Greece, the sluggishness of the US economy and the supply chain disruption cause by the earthquake and tsunami in Japan have shaken the external environment growth prospects.
“The OECD composite leading indicators (CLIs) fell 0.23 point to 102.54 points in May (0.14 point drop to 102.78 points in April), marking the second consecutive month-on-month decline and pointing to a possible slowdown in most major economies,” said CIMB Research head of economics Lee Heng Guie in a note.
“The divergent growth rates between advanced and emerging economies remain but are converging.”
Lee noted that a similar slowdown in leading indicators was also seen in Asia where China's CLI declined in May for the fifth month in a row as the monetary tightening measures bit.
The CLI for India, too, was down in May, pointing to a further moderation in economic activity, he said.
While growth is now firmly in Bank Negara's crosshairs, it's not to say tackling inflation has taken a back seat. Bank Negara upped the statutory reserve requirement to 4% to mop up excess liquidity, and possibly relieve inflationary pressure, from the economy.
A higher interest rate would apply more brakes on the economy and even though economists were divided whether the central bank would raise borrowing costs last week, many felt the pause towards normalisation was the right thing to do right now.
The reason for their consternation was the dip in industrial production in May which showed activity at factories, mines and plantation had contracted by 5.1% year-on-year. April's figure was also revised to a contraction of 1.7%.
The culprit for the drop in May was the steep contraction in mining, in particular production of oil and gas which fell by 20.1% year-on-year.
Manufacturing was up marginally but apparently the sector is still feeling the effects of Japan's supply chain disruption.
“The disruption to Japan's industrial activities and global manufacturing supply chain from the natural disaster and nuclear power crisis was short-lived as indicated by the rebound in Japan's PMI (Purchasing Managers Index) to above-50 in May and June after the plunge in March and April,” said Maybank Investment Bank in a note.
“This should lead to improvement in manufacturing activities especially via re-stocking in the E&E (electronics and electrical) and automotive sector. At the same time, for Malaysia, the disruption to the oil and gas activities should be temporary and the consequent rebound in mining activities will add to the expected improvement in manufacturing activities to lift industrial production in the coming months.”
CIMB, too, was positive over the outlook in the second half of the year.
“In our view, growth will sustain but remain uneven given lingering headwinds. The slow and uneven growth in the US, sovereign debt risks in EU and supply chain disruptions in Japan are unlikely to halt global momentum. In particular, Japan's supply chain disruptions will be short-lived,” Lee in the note.
“Although we expect the growth of the global economy to slow somewhat in the first half, it should rebound in the second half.”
With the outlook right now for the economy to rebound in the second half, also aided by a lower base effect from the same period last year, economists expect a rate hike to take place this year over the remaining two meetings once the current growth bumps have been smoothened.
Keeping interest rates unchanged sensible, priority is growth
Behind the News - By Jagdev Singh Sidhu
THE decision to keep interest rates unchanged last Thursday makes sense after looking at the big decline in industrial production.
The economy has lost quite a bit of momentum and with economists now expecting growth in the second quarter to come in at around 4%, the focus on keeping growth up at the expense of inflation is now the priority of the authorities.
A hint of such intent was spoken of by Bank Negara's monetary policy committee (MPC) when it issued its statement on Thursday.
“The MPC will assess carefully the evolving economic conditions and to the extent that the growth momentum is sustained, further normalisation of monetary conditions will be considered to safeguard price stability,” it said.
The reasoning behind it was, although inflation remained on the upside, the committee felt that while the outlook for growth remained positive, there were heightened uncertainties to economic growth arising from global developments that had created higher downside risks to growth.
Troubles in Greece, the sluggishness of the US economy and the supply chain disruption cause by the earthquake and tsunami in Japan have shaken the external environment growth prospects.
“The OECD composite leading indicators (CLIs) fell 0.23 point to 102.54 points in May (0.14 point drop to 102.78 points in April), marking the second consecutive month-on-month decline and pointing to a possible slowdown in most major economies,” said CIMB Research head of economics Lee Heng Guie in a note.
“The divergent growth rates between advanced and emerging economies remain but are converging.”
Lee noted that a similar slowdown in leading indicators was also seen in Asia where China's CLI declined in May for the fifth month in a row as the monetary tightening measures bit.
The CLI for India, too, was down in May, pointing to a further moderation in economic activity, he said.
While growth is now firmly in Bank Negara's crosshairs, it's not to say tackling inflation has taken a back seat. Bank Negara upped the statutory reserve requirement to 4% to mop up excess liquidity, and possibly relieve inflationary pressure, from the economy.
A higher interest rate would apply more brakes on the economy and even though economists were divided whether the central bank would raise borrowing costs last week, many felt the pause towards normalisation was the right thing to do right now.
The reason for their consternation was the dip in industrial production in May which showed activity at factories, mines and plantation had contracted by 5.1% year-on-year. April's figure was also revised to a contraction of 1.7%.
The culprit for the drop in May was the steep contraction in mining, in particular production of oil and gas which fell by 20.1% year-on-year.
Manufacturing was up marginally but apparently the sector is still feeling the effects of Japan's supply chain disruption.
“The disruption to Japan's industrial activities and global manufacturing supply chain from the natural disaster and nuclear power crisis was short-lived as indicated by the rebound in Japan's PMI (Purchasing Managers Index) to above-50 in May and June after the plunge in March and April,” said Maybank Investment Bank in a note.
“This should lead to improvement in manufacturing activities especially via re-stocking in the E&E (electronics and electrical) and automotive sector. At the same time, for Malaysia, the disruption to the oil and gas activities should be temporary and the consequent rebound in mining activities will add to the expected improvement in manufacturing activities to lift industrial production in the coming months.”
CIMB, too, was positive over the outlook in the second half of the year.
“In our view, growth will sustain but remain uneven given lingering headwinds. The slow and uneven growth in the US, sovereign debt risks in EU and supply chain disruptions in Japan are unlikely to halt global momentum. In particular, Japan's supply chain disruptions will be short-lived,” Lee in the note.
“Although we expect the growth of the global economy to slow somewhat in the first half, it should rebound in the second half.”
With the outlook right now for the economy to rebound in the second half, also aided by a lower base effect from the same period last year, economists expect a rate hike to take place this year over the remaining two meetings once the current growth bumps have been smoothened.
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