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  • Global forex market

    GEOPOLITICAL risk in the Middle East dominated this week’s proceeding, which saw the general risk-off tone prevailing through in various asset classes and the usual “safe haven” currencies flows.

    The greenback rose against its riskier peers from parts of Europe, Canada, Australia and Asia, but lost ground to the Japanese yen, another safer port sought after during periods of heightened uncertainty as the escalating tensions in Syria might lead to international involvement in the Mediterranean nation’s civil war following the statement by the US Secretary of State John Kerry that there was “undeniable” evidence that the Syrian government recently used chemical weapons on civilians, calling the act a “moral obscenity”.

    The euro didn’t capitalise much from a report that showed German business optimism rose to 16-month highs in August. The pound fell to 15 August’s lows. Canada’s dollar moved toward Friday’s July 9 low against the greenback, while the Aussie buck neared its lowest in three weeks. Dovish jawboning by a topBank of Japan official, who affirmed that the bank would keep policy at an easy setting until it achieved its 2% inflation goal, added to the yen’s cooler tone.

    Adding to the uncertainty market backdrop, investors have grown somewhat less confident that the Fed may be on the verge to pulling back on monetary stimulus, following disappointing data on durable goods and new home sales. US new orders for durable goods fell by 7.3% month-on-month (m-o-m) in July, after slowing to +3.9% in June and from +5.5% in May. This was the first decrease in four months and the biggest since August 2012, as businesses turned cautious and reduced their spending, overshadowing a positive consumer confidence read in the world’s largest economy which increased to 81.5 in August from 81.0 a month earlier.

    The Indian rupee touched all time low with top loss of 6.6% along with the lack of confidence in policy puts pressure on bond markets while the central bank opens forex swap lines for state-owned oil companies effective immediately. This was followed by the baht of 0.68% loss with offshore forward points remain elevated to provide an incentive for offshore to sell existing forex-hedged bond positions.

    North-East Asian currencies were largely unscathed with the Singapore dollar gained 0.28%, Taiwanese dollar of 0.06% and the South Korean won of 0.02% against the US dollar due huge external reserves and stronger export growth. South Korea’s exports reported a strong rise of 15.9% year-on-year in the first 20 days of August.

    The ringgit (MYR) bounced to a high of 3.3346 on Wednesday on equity-related outflows. Bank Negara governor Tan Sri Dr. Zeti Akhtar Aziz told the press that there was no target for the exchange rate and see intervention necessary only if the “market is disruptive and disorderly”. The Malaysian Investment Development Authority reported that Malaysia recorded RM97.4bil in approved investments during the first half, a 30% rise from RM75bil previously.

    UST market 

    US Treasuries (UST) at the long-end rallied in the early part of the week following the release of weaker-than-expected US data and on safe-haven flows over a possible military strike on Syria. However, the gains were marginally reversed on subsiding concerns over the military action and better US GDP data. At the point of writing, the two-year yield was higher by 2bps at 0.39% while the five- and 10-year yields were 1-4 bps lower at 1.61% and 2.77% respectively.

    Malaysian bond market 

    Geopolitical concerns, weak emerging markets’ currencies including the MYR and the sell-off in the equities markets weighted on the local govvies. Despite the turmoil, the week saw the debut of the inaugural 20-year Government Investment Issues with a size of RM2.5bil. The tender attracted a bid-to-cover ratio of 1.622 times with an average yield of 4.582%.

    As of Thursday’s close, benchmarks Malaysian Goverment Securities yields were higher by 4-25 bps from prior week with the exception of the 15-year benchmark which was untraded during the week. Yields on three-, five-, seven-, 10- and 20-year were last dealt at a respective 3.47%, 3.7%, 3.91%, 3.99% and 4.45%. The week saw RM4.9bil worth of trades changing hands with a daily average trading volume of RM1.2bil, from RM1.4bil last week.

    On the local private debt securities market, total trading volume amounted to RM1.8bil versus RM1.7bil previously. Fifty-one per cent of the trading volume was contributed by the GG/AAA segment, 45% by the AA segment and the balance by the A segment. Daily average trade volume was higher at RM460mil versus the RM334mil average previously.

    In the GG/AAA segment, active trading was seen for Prasarana’s bonds maturing 2023-2029 which garnered a collective trading volume of RM215mil with yields mostly flat. Other notable trade includes PLUS bonds maturing 2026-2034 with a collective trading volume of RM160mil.

    In the AA space, trading activities continued to be skewed towards power sector name, including YTL Power ‘09/13 which saw yields notching 2bps higher. Construction names were also actively traded. Notable trade in this sector includes IJM ‘10/13 which was traded at 3.24% with RM140mil changing hands.

    MYR IRS market

    MYR IRS rates moved higher in tandem with regional rates as US quantitative easing expected tapering and regional fund outflow continue to exert upward pressure on rates. The IRS curve ended the week by 5~ 12 bps higher

     

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  • Interest rates may ease after stability in forex market

    The Reserve Bank of India will have greater space to cut policy rates in the coming days if the rupee were to stabilise, a top policymaker has said.

    “I do hope that as stability returns to foreign exchange market, it will be possible for monetary policy to adopt a looser stance,” C. Rangarajan, Chairman to the Prime Minister’s Economic Advisory Council, said at Skoch summit here today.

    AGENDA FOR GROWTH

    Rangarajan said there was a need to bring back stability in the economic situation.

    India had deviated from the basic attributes of stability – price stability, forex stability and stability in fiscal system – in the recent years, he said.

    This needs to be corrected, he said, adding that the main task before Raghuram Rajan – the new RBI Governor – will be to improve the price situation, stimulate growth and ensure financial stability.

    “The RBI policy review is in another 2-3 weeks. We will have to see what happens to the pressure on rupee. The RBI will have a greater space if the rupee gets stabilised in this period,” Rangarajan told reporters here.

    “In some sense, the adjustment to the rupee is called for. The depreciation to the rupee will help contain current account deficit,” he said.

    SUBSIDIES

    Rangarajan said it was important for the country to take a fix on the total subsidies as a percentage of GDP.

    “If providing food security is paramount, please provide it but make sure you act on the other subsidies. So that total subsidies as a proportion of GDP is maintained at a particular level.”

    ECONOMIC GROWTH

    Rangarajan said that there was a need for speedy completion of projects to spur growth. The investment rate of 30 per cent, although lower than the earlier level, is good enough to achieve higher growth rates.

    Even with a minimal intervention, it should still be possible to achieve a higher growth rate, he said.

    REFORM AGENDA

    Rangarajan also said that principle of competition and efficiency should be applied on all sectors.

    India does not need regulators in every sector, he said, adding that it would be contrary to the principle of competition.

    “We need regulators only in those sectors of the economy where public interest is involved. As far as possible, we should let the

    C. Rangarajan, Chairman, PMEAC.
    C. Rangarajan, Chairman, PMEAC.

    prices be determined by the competitive markets,” Rangarajan said.

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  • Obama launches sales pitch for health insurance program

     

    President Barack Obama launched a campaign to promote his signature healthcare program on Friday in the face of harsh criticism from congressional Republicans who say the plan will raise costs and hurt hiring.

    Ahead of the Mothers' Day holiday on Sunday, the president focused his remarks on how the plan could benefit women, who the administration believes will be less stuck on partisan objections to the plan and provide support that will make what has become known as "Obamacare" as success.

    "Mothers are the number one validator for the young and uninsured and will be critical in the effort to encourage their kids to enroll for insurance in the fall," a White House official said.

    Republicans say the law will raise the costs of healthcare for all Americans, spawn a welter of new regulatory burdens on businesses and inhibit hiring.

    "There are many women in their 20s and 30s who will be unable to afford the law's massive premium increases," Senate Minority Leader Mitch McConnell said on Thursday. "And there are many mothers who won't be able to get by if their employers cut their hours due to Obamacare. Or if they lose their jobs because of it," the Kentucky Republican said.

    However Obama aides plan to use the same micro-targeting strategies that helped the president win re-election in November to sign up enough enrollees. Their outreach efforts will be central to the success of Obama's Patient Protection and Affordable Care Act, which aims to bring health insurance at subsidized rates to millions of uninsured Americans.

    Administration officials hope to sign up 7 million people nationwide during an enrollment period that begins October 1 and runs through the end of March. They say they zeroing in on an estimated 2.7 million healthy 18-25 year-olds.

    One out of every three of these people live in three states: California, Florida, and Texas, officials said. The administration plans try to go community by community to identify people who are eligible to try to persuade them to enroll in the insurance plan.

    The White House on Thursday announced a $150 million initiative to fund the hiring and training of thousands of workers who will go through community health centers to help people obtain insurance.

    But political resistance to the plan is high, and public opinion polls still show disapproval outweighing approval of the healthcare law.

    The fate the of health plan is expected to have a major bearing on the 2014 midterm congressional elections. If Americans embrace Obamacare, Democrats could benefit, while rejection could provide an electoral boost to Republicans.

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  • Car insurance prices 'falling at record rate

    Car insurance prices 'falling at record rate'

     
     

    Insurance premiums are far higher than they were in 2007

    Related Stories

    The cost of car insurance is falling at a record rate in the UK, according to the insurance arm of the AA.

    The average annual comprehensive car insurance quote fell to £594.84 this month, it said, down 9.8% from £659.53 last July - the biggest decrease since the AA insurance index began in 1994.

    It said the dip was thanks, in part, to clampdowns on fraud and restrictions on claims management companies.

    Despite the fall, premiums remain much higher than they were six years ago.

    Third party, fire and theft quotes also fell between July 2012 and this month - down 4.8% to £820.58 on average, AA Insurance's research suggested.

    BBC business correspondent Joe Lynam said the 9.8% fall in comprehensive cover quotes follows a 6.4% fall over the course of 2012 - itself a record.

    But he adds that the cost of insuring the average car is still twice as much as it was in 2007.

    Gender equality

    At the start of April, a ban on referral fees was introduced.

    They were paid by lawyers and claims management firms to breakdown firms, brokers and the insurers themselves, in exchange for providing information about accident victims.

    Start Quote

    The news that hundreds of rogue 'no-win no-fee' claims firms have been reined in is welcome and, in part, falling insurance premiums reflect that”

    Simon Douglas, AA

    Also, anyone suing for accident damages with the help of a no-win, no-fee lawyer - known as a conditional fee arrangement - now has to pay their lawyer's success fee from their own funds if they win their case.

    It was previously added to the bill of the losing party.

    This has made claims more expensive to pursue.

    And new gender equality laws have lowered premiums of men by far more than expected while women's premiums have remained static, according to AA Insurance's research.

    Fraudulent claims - especially for whiplash which is often difficult to disprove - are also down.

    AA Insurance director Simon Douglas said insurers previously faced "a fast-widening gap between premium income and claims costs - largely driven by whiplash injury claims and fraud, which saw very sharp premium increases between 2009 and 2011".

    "That gap is closing and premiums are falling again thanks to competition, as well as improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims," he said.

    'Treated unfairly'

    "The news that hundreds of rogue 'no-win no-fee' claims firms have been reined in is welcome and, in part, falling insurance premiums reflect that."

    Graeme Trudgill of the British Insurance Brokers' Association said uninsured driving costs the industry £500m, whiplash claims £2bn and fraud £1bn.

    But these costs were now coming down, he added, because of a concerted effort by the industry, with "discounts now feeding through to policy holders".

     

    Earlier this month, City regulator the Financial Conduct Authority launched an investigation into insurance companies for overcharging customers when they renew their car and house policies.

    The FCA says automatic renewal can lead to customers being treated unfairly.

    BBC Radio 4's Money Box revealed in March that loyal customers often pay much more than new ones for insurance.

    The insurance industry says consumers can shop around for the best prices in a competitive market

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