Saturday November 8, 2008
A gold rush?
By YVONNE TAN
Precious metal a safe haven in times of market fluctuations
GOLD has resurfaced to claim its title as a “safe haven” for investors. Its strongest advocates say it is the best hedge against inflation as stock markets decline.
Still, given the extreme volatility across financial markets, experts are finding it difficult to predict when would be the right time to swoop in on some gold.
However, most agree that if you take a long-term view, now may just be the right time to do so. “When the dust has settled, the fundamentals of gold will once again shine through,” says a dealer.
Gold prices gained over 6% this week to hit a session high of US$768 per oz. It is lower than its two-month high of US$931 per oz hit in October but significantly higher than the 13-month low of $680.80 per oz also achieved in October - a clearly wild month for commodity prices.
In any investment, the ultimate aim is to maximise returns while keeping risks low.
“The value of gold is relatively stable and it is often a safe haven when there is uncertainty and turbulence in the currency or stock markets,” says Malayan Banking Bhd (Maybank), senior executive vice-president, head of consumer banking Lim Hong Tat.
It has, in the current credit crunch remained less volatile against most commodities and precious metals, based on data by the World Gold Council.
In the third quarter , silver, platinum and oil 22-day price volatilities had spiked to 82%, 75% and 63% respectively compared with 39% for gold, the international body said.
In normal economic conditions, gold’s best contribution to an investor’s portfolio is the fact that its price enjoys a relatively low-to-negative correlation with other asset classes like currencies, bonds and Treasury bills.
JP Morgan has raised its price forecast for gold for 2008 and 2009 on expectations investors will buy
World Gold Council head of investment, North America Natalie Dempster said that gold was “unique”, in that it was an asset that bore no credit risk, involved no counter party and was no one else’s liability.
“These are extremely attractive characteristics to investors given the current financial environment,” she said.
Gold is an asset which does not depend upon any government’s or company’s promise to repay. It is not directly affected by the economic policies of any government and cannot be “frozen” as in the case of paper-based assets.
It also is one of the most liquid of global assets as it is readily sold 24 hours a day in multi markets.
Although the price of this precious commodity has not been totally spared from the current financial tsunami, as one investor so aptly put it, “gold is gold”.
“Its price does fluctuate but many investors find it to be more stable compared to other forms of investments,” says Maybank’s Lim.
For investors who like to keep their strategy simple, they can opt to buy traditional jewellery such as chains and bracelets.
Short-term impact on the price of gold, the World Gold Council said, included a rise in the US dollar which has historically weakened investors’ demand for gold as an alternative investment, deleveraging of commodity positions, and sales (of gold) in order to meet margin calls on other assets.
“On the one hand, potential weakening emerging market growth, a rising US dollar and falling inflationary concerns all offer serious headwinds for near-term precious metals prices,’’ Hussein Allidina, an analyst at New York-based Morgan Stanley said in a report quoted by Bloomberg.
“On the other hand, the physical side remains remarkably strong with exchange-traded fund demand remaining resilient globally and bar and coin availability limited while central banks selling has almost evaporated and gold lease rates remain high,’’ she said.
JP Morgan, meanwhile, has raised its price forecast for gold for 2008 and 2009 on expectations investors will buy into bullion as a haven from risk.
It forecasts gold prices at US$904 an ounce in 2008, against a previous forecast of US$884, and at US$875 an ounce next year, up from US$854 previously.
According to Maybank’s Lim, gold investments in Malaysia can be made via the purchase of physical gold bullion in the form of gold coins or by opening a gold savings passbook account which allows account holders to invest without worrying about physical storage.
“The most popular coin is the Kijang Emas that is produced by Bank Negara. In a variety of sizes, their gold content, that is the weight and purity is guaranteed by the Government,” he says.
The purchase and resale price of Kijang Emas is determined by the prevailing international gold market price with daily market prices posted on the central bank’s website.
Via the Maybank Gold Savings Passbook Account, investors are provided with a passbook which will record all their gold trading transactions.
The passbook is also used for deposit and withdrawal purposes.
The purchase of gold here is based on the bank’s prevailing gold selling price while the withdrawal of gold will be converted into ringgit at the prevailing price of the commodity.
Account holders can withdraw their gold in cash or physical gold form.
Similarly, in April this year, Public Bank Bhd launched its Gold Investment Account that allows individual customers to purchase the commodity in 99.99% fineness at daily prices in ringgit per gram.
Alternatively, investors can make their gold investments via gold exchange-traded funds (ETFs) listed overseas.
Asia’s first gold ETF which trades like any other stock, StreetTRACKS Gold Shares was cross-listed on the Singapore Stock Exchange in 2006. It was originally listed on the New York Stock Exchange in November 2004.
The gold shares are backed by physical allocated gold bullion and are traded in US dollars.
Local investors need to open an account with foreign brokerages or certain local brokerages which facilitate overseas trading in order to trade gold ETFs.
Meanwhile, for investors who like to keep their strategy simple, they can opt to buy traditional jewellery such as chains and bracelets.
According to Tomei Consolidated Bhd group managing director Ng Yih Pyng this trend has been especially pronounced over the past year: “This is partly because gold price had been on an uptrend during this period and also because stock investments had become more risky.”
Investors either buy jewellery or pure gold bars for their investments, Ng adds.
”Gold is an option that Malaysian investors can choose as they become more savvy with the understanding of gold investment via education programmes and as access to investment becomes more convenient,” Lim says.
In this regard, the bank is planning to increase awareness on gold investments, he adds.
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Wednesday, November 12, 2008
France calls for financial warning systems
Wednesday November 12, 2008
France calls for financial warning systems
MEXICO CITY (AP) - The world should develop an early-warning system that would alert countries to looming financial threats, France's finance minister said Tuesday after meeting with her Mexican counterpart.
The proposal was among the ideas French Finance Minister Christine Lagarde discussed with Mexican Finance Secretary Agustin Carstens ahead of a summit in Washington on Saturday for leaders from rich and developing nation on the international financial crisis.
She gave no details on how the system would work.
In a joint news conference, Lagarde and Carstens said they agree there should be a globally coordinated response to the financial meltdown that would include stricter government regulation, more supervision of markets, greater transparency, and stimulus packages like that recently adopted by China.
China announced on Monday that it will boost its economy with a near $600 billion package by the end of 2010.
Carstens said the International Monetary Fund needs to be strengthened. He also recommended expanding the Financial Stability Forum, founded in 1999 by the Group of Seven leading industrialized countries with the aim of bolstering the international financial system.
"We fully agree that it's essential that protectionism be avoided and market dynamics be preserved,'' Carstens said.
Lagarde, who arrived to Mexico from meetings in Brazil, said the two Latin American countries should be among the countries invited to join the powerful G-7, which has a large say in global economic policy.
Mexico has been hit hard by the economic downturn, with Fitch Ratings on Monday lowering its sovereign credit rating outlook to "negative'' from "stable.''
A negative outlook means there is a greater chance of the actual credit rating being downgraded.
"Agustin and I hope that the heads of state give us strong indications that support sustainable and shared growth,'' Lagarde said, adding that she expects leaders to make concrete proposals and agree to a timetable to tackle the biggest financial crisis since the Great Depression.
Many G-20 officials have concluded that major bailout packages in the U.S., Europe and elsewhere have so far failed to re-establish the credit lines and confidence needed to ease the crisis, making additional measures necessary.
Latest business news from AP-Wire
France calls for financial warning systems
MEXICO CITY (AP) - The world should develop an early-warning system that would alert countries to looming financial threats, France's finance minister said Tuesday after meeting with her Mexican counterpart.
The proposal was among the ideas French Finance Minister Christine Lagarde discussed with Mexican Finance Secretary Agustin Carstens ahead of a summit in Washington on Saturday for leaders from rich and developing nation on the international financial crisis.
She gave no details on how the system would work.
In a joint news conference, Lagarde and Carstens said they agree there should be a globally coordinated response to the financial meltdown that would include stricter government regulation, more supervision of markets, greater transparency, and stimulus packages like that recently adopted by China.
China announced on Monday that it will boost its economy with a near $600 billion package by the end of 2010.
Carstens said the International Monetary Fund needs to be strengthened. He also recommended expanding the Financial Stability Forum, founded in 1999 by the Group of Seven leading industrialized countries with the aim of bolstering the international financial system.
"We fully agree that it's essential that protectionism be avoided and market dynamics be preserved,'' Carstens said.
Lagarde, who arrived to Mexico from meetings in Brazil, said the two Latin American countries should be among the countries invited to join the powerful G-7, which has a large say in global economic policy.
Mexico has been hit hard by the economic downturn, with Fitch Ratings on Monday lowering its sovereign credit rating outlook to "negative'' from "stable.''
A negative outlook means there is a greater chance of the actual credit rating being downgraded.
"Agustin and I hope that the heads of state give us strong indications that support sustainable and shared growth,'' Lagarde said, adding that she expects leaders to make concrete proposals and agree to a timetable to tackle the biggest financial crisis since the Great Depression.
Many G-20 officials have concluded that major bailout packages in the U.S., Europe and elsewhere have so far failed to re-establish the credit lines and confidence needed to ease the crisis, making additional measures necessary.
Latest business news from AP-Wire
UN chief: Financial summit must focus on poor
Wednesday November 12, 2008
UN chief: Financial summit must focus on poor
UNITED NATIONS (AP) - Secretary-General Ban Ki-moon on Tuesday urged world leaders attending this weekend's financial summit in Washington to do everything they can to alleviate the impact of the current crisis on the world's poorest people.
Ban, who will be attending the summit, said he will also tell the leaders that the billions of dollars being spent to mitigate the financial crisis are already "vastly more'' than the amounts they allocate to international aid.
So "this is clearly a question of will,'' the secretary-general said.
U.S. President George W. Bush has invited leaders of the world's 20 largest industrialized nations and emerging economies to meet Saturday to tackle the financial crisis that has sent economic growth plummeting in many countries and raised fears of a long-term global recession.
"First, we must do everything we can to alleviate the impact of the crisis on the world's poorest and most vulnerable people,'' Ban told reporters at U.N. headquarters.
The secretary-general said this is more important now than reforming international institutions such as the World Bank and International Monetary Fund which will take time.
"I would welcome any measures and initiatives to address this global financial crisis, including the reinvention and reform of the basic structures of financial institutions,'' Ban said.
"But I am more interested, and my focus will be more on how to insulate the interest and well-being of developing countries from the financial crisis impact.''
The secretary-general said the crisis is also an opportunity to address climate change.
"At a time of growing economic hardship, green growth can create millions of jobs,'' he said.
Ban said he also wants the summit to focus on the food crisis and achieving U.N. development goals by 2015, including cutting in half the number of people living in extreme poverty and ensuring that every child has a primary school education.
"This is just a beginning,'' the secretary-general said of Saturday's summit.
"I think this will have to be followed by many subsequent meetings and consultations.''
Ban said he will be making the same appeals at a U.N. development summit in Doha, Qatar, from Nov. 29-Dec. 2.
The U.N. International Conference on Financing for Development will assess progress on the international agreement reached in Monterrey, Mexico in 2002 to alleviate poverty and fuel development.
The U.N. said Tuesday the Doha meeting will focus on trade, aid, investment, debt alleviation, mobilizing national resources and "effective international architecture.''
It will also steer the Monterrey agenda to challenges that have taken on a higher profile since 2002 including climate change, food and agriculture.
Latest business news from AP-Wire
UN chief: Financial summit must focus on poor
UNITED NATIONS (AP) - Secretary-General Ban Ki-moon on Tuesday urged world leaders attending this weekend's financial summit in Washington to do everything they can to alleviate the impact of the current crisis on the world's poorest people.
Ban, who will be attending the summit, said he will also tell the leaders that the billions of dollars being spent to mitigate the financial crisis are already "vastly more'' than the amounts they allocate to international aid.
So "this is clearly a question of will,'' the secretary-general said.
U.S. President George W. Bush has invited leaders of the world's 20 largest industrialized nations and emerging economies to meet Saturday to tackle the financial crisis that has sent economic growth plummeting in many countries and raised fears of a long-term global recession.
"First, we must do everything we can to alleviate the impact of the crisis on the world's poorest and most vulnerable people,'' Ban told reporters at U.N. headquarters.
The secretary-general said this is more important now than reforming international institutions such as the World Bank and International Monetary Fund which will take time.
"I would welcome any measures and initiatives to address this global financial crisis, including the reinvention and reform of the basic structures of financial institutions,'' Ban said.
"But I am more interested, and my focus will be more on how to insulate the interest and well-being of developing countries from the financial crisis impact.''
The secretary-general said the crisis is also an opportunity to address climate change.
"At a time of growing economic hardship, green growth can create millions of jobs,'' he said.
Ban said he also wants the summit to focus on the food crisis and achieving U.N. development goals by 2015, including cutting in half the number of people living in extreme poverty and ensuring that every child has a primary school education.
"This is just a beginning,'' the secretary-general said of Saturday's summit.
"I think this will have to be followed by many subsequent meetings and consultations.''
Ban said he will be making the same appeals at a U.N. development summit in Doha, Qatar, from Nov. 29-Dec. 2.
The U.N. International Conference on Financing for Development will assess progress on the international agreement reached in Monterrey, Mexico in 2002 to alleviate poverty and fuel development.
The U.N. said Tuesday the Doha meeting will focus on trade, aid, investment, debt alleviation, mobilizing national resources and "effective international architecture.''
It will also steer the Monterrey agenda to challenges that have taken on a higher profile since 2002 including climate change, food and agriculture.
Latest business news from AP-Wire
Financial crisis a chance for Islamic banking to shine
Wednesday November 12, 2008
PM: Financial crisis a chance for Islamic banking to shine
KUALA LUMPUR: The global financial meltdown stemming from the US subprime woes actually poses an opportunity for the Islamic finance system to demonstrate its uniqueness, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
He said that, following the crisis, observers were considering the Islamic system with envy and respect as it prohibited speculative excesses.
He said the financial meltdown showed the desperate need for a system like Islamic finance, which is based on the principle of profit-sharing where both parties are subjected to potential losses and returns.
“Thus, it is fair and equitable. Islamic banks do not buy or trade debt; rather they manage concrete assets which are tied to real economic activities,” he said, adding that prohibitions against high levels of debts, unsecured debt and speculation result in high financial prudence.
“These ethical and moral safeguards are missing in the conventional system,” Abdullah pointed out.
He said the financial crisis had its origin in the innovation of buying subprime mortgage loans, where pools of subprime loans were repackaged, and then sold as tradable securities.
“Very soon, financiers were actively trading bundles of subprime loans, most of which had risk profiles that no one truly understood.
“In reality, these repackaged subprime loans were nothing more than artful works of deception that fed the speculative excesses and hubris in the financial markets,” he said in his speech which was read out by Minister in the Prime Minister’s Department Datuk Seri Ahmad Zahid Hamidi at the launch of the International Shari’ah Research Academy (Isra).
Abdullah said that in making itself a competitive industry the Islamic finance sector must continue to clarify and resolve issues.
The issues includes the different interpretation of the syariah which had led to some Islamic banking and finance products being accepted in one Muslim country but deemed dubious in another.
PM: Financial crisis a chance for Islamic banking to shine
KUALA LUMPUR: The global financial meltdown stemming from the US subprime woes actually poses an opportunity for the Islamic finance system to demonstrate its uniqueness, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
He said that, following the crisis, observers were considering the Islamic system with envy and respect as it prohibited speculative excesses.
He said the financial meltdown showed the desperate need for a system like Islamic finance, which is based on the principle of profit-sharing where both parties are subjected to potential losses and returns.
“Thus, it is fair and equitable. Islamic banks do not buy or trade debt; rather they manage concrete assets which are tied to real economic activities,” he said, adding that prohibitions against high levels of debts, unsecured debt and speculation result in high financial prudence.
“These ethical and moral safeguards are missing in the conventional system,” Abdullah pointed out.
He said the financial crisis had its origin in the innovation of buying subprime mortgage loans, where pools of subprime loans were repackaged, and then sold as tradable securities.
“Very soon, financiers were actively trading bundles of subprime loans, most of which had risk profiles that no one truly understood.
“In reality, these repackaged subprime loans were nothing more than artful works of deception that fed the speculative excesses and hubris in the financial markets,” he said in his speech which was read out by Minister in the Prime Minister’s Department Datuk Seri Ahmad Zahid Hamidi at the launch of the International Shari’ah Research Academy (Isra).
Abdullah said that in making itself a competitive industry the Islamic finance sector must continue to clarify and resolve issues.
The issues includes the different interpretation of the syariah which had led to some Islamic banking and finance products being accepted in one Muslim country but deemed dubious in another.
Chance for Islamic Finance to lead: PM
Published: Wednesday November 12, 2008 MYT 1:25:00 PM
Updated: Wednesday November 12, 2008 MYT 3:35:03 PM
Chance for Islamic Finance to lead: PM
By NG CHENG YEE
KUALA LUMPUR: There are tremendous opportunities for Islamic Finance to lead the financial fraternity into a new growth era, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
He said Islamic Finance needs to quickly integrate itself with the international financial system and prove itself as a viable alternative to the conventional financial system practised in most parts of the world.
“Many observers are increasingly considering the Islamic Financial system with renewed respect and admiration.
“As such, Islamic Finance must be prepared to take on a new dimension to meet the changing demands of business in an increasingly globalised environment,” he said Wednesday at the launch of Standard Chartered Saadiq Berhad here.
Abdullah said Malaysia is well poised to lead any attempt to reform the global financial system by infusing concepts and themes borrowed from Islamic Finance.
He said the recent global financial meltdown illustrated the desperate need for a system based on the principle of profit-sharing, where both parties in the contract are subjected to potential losses and returns.
“It is a system that is both fair and equitable as both parties are presented with a win-win situation such that losses would not burden only one party,” he said.
He said by transforming into an essential element of global finance, Islamic Finance would surely end its perceived position as a niche or boutique financial service.
However, he said, for Islamic Finance to be an effective complement to global finance, it is imperative to have a sound legal framework, which would provide the sector with the credibility it requires.
Updated: Wednesday November 12, 2008 MYT 3:35:03 PM
Chance for Islamic Finance to lead: PM
By NG CHENG YEE
KUALA LUMPUR: There are tremendous opportunities for Islamic Finance to lead the financial fraternity into a new growth era, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
He said Islamic Finance needs to quickly integrate itself with the international financial system and prove itself as a viable alternative to the conventional financial system practised in most parts of the world.
“Many observers are increasingly considering the Islamic Financial system with renewed respect and admiration.
“As such, Islamic Finance must be prepared to take on a new dimension to meet the changing demands of business in an increasingly globalised environment,” he said Wednesday at the launch of Standard Chartered Saadiq Berhad here.
Abdullah said Malaysia is well poised to lead any attempt to reform the global financial system by infusing concepts and themes borrowed from Islamic Finance.
He said the recent global financial meltdown illustrated the desperate need for a system based on the principle of profit-sharing, where both parties in the contract are subjected to potential losses and returns.
“It is a system that is both fair and equitable as both parties are presented with a win-win situation such that losses would not burden only one party,” he said.
He said by transforming into an essential element of global finance, Islamic Finance would surely end its perceived position as a niche or boutique financial service.
However, he said, for Islamic Finance to be an effective complement to global finance, it is imperative to have a sound legal framework, which would provide the sector with the credibility it requires.
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