Budget 2014: Property Sector Hit Hard by RPGT and DIBS ruling

As widely expected, property sector would be one of the hardest hit sector in view of the proposed cooling measures to be imposed. Out of the 3 tightening rules forecast by Finance Malaysia, 2 already Bingo! (Read our previous articles regarding property sector "3 Tighter Rules for Property Sector?" and "3 Critical Factors to watch out by Year End")

These cooling measures announced highlighting that government will not hesitate to curb property speculations and to ensure a affordable property prices. Of course, property developers will be the one screaming painfully.

The 3 Key Measures:

1. Higher Real Property Gains Tax (RPGT)
   This was the 3rd consecutive year government raised RPGT. Even said so, it was just reinstated back to its original rates since 2007. The different this time compared to previous rounds was different set of rates to be imposed on different categories of buyers as shown below:
   
   
   
   
   
   
   
2. Banning DIBS
   As predicted by us previously, DIBS was deemed to be one of the key motivating factor for speculators, thus pushing up property prices to current level. By banning DIBS, it will effectively diminished the speculative interest as the cost of investment increase with interest payment during construction period. It's good to genuine and first-time house buyers.
   
   
3. Higher minimum Purchased Price for Foreigners
   To minimized influx of hot money shoring up local property prices, government raised the minimum purchased price to above RM1mil from RM500k per unit. However, this doesn't impact the market much because most properties purchased by foreigners are above RM1mil. Nevertheless, foreigners' favorite investment hotspot, such as Iskandar or KLCC or Mont Kiara area would be affected.

Would this be the end of property up-cycle?

Budget 2014: Good to have GST ?

Definitely, one of the hottest debate in Budget 2014 would be the implementation of 6% Goods and Services Tax (GST) starting April 2015. Although it was opposed strongly by opposition parties, government pushed ahead with its implementation emphasizing GST as a "fair and comprehensive" tax as the current tax system has many weaknesses.

Why GST is a MUST ?

Without you realizing, our current tax system has many loopholes whereby many people do not fulfill their responsibilities as a taxpayer. They tends to under-stated their real income, paying less tax than they should, or even worse... none. However, under the GST system, everyone will be taxed every time you spend.

And, if you're paying tax now, you should be happier. Why? Simply because government have a wider tax revenue now with GST because everyone is paying tax. Wouldn't it better?

Why April 2015 ?

Instead of Jan 2015 (expected date), government now has more time to explain and educate the public on GST. In other words, government is playing it safe, "buying time" to minimize the misunderstanding among Malaysians.

Is it okay ?

Implementation is very vital. It's best to implement GST and lowering down the personal income tax rate simultaneously. And, this time government did consider this well. As long as it was implemented properly, this should bode well for our nation to broaden the tax revenue, thus reducing the budget deficit and maintaining the credit rating of our country's obligations.

Why MyEG ?

Strange question over here? Yes. As we knew, MyEG already successfully completed its trial version for GST computation in business premises. Do you know why MyEG shoot up to all-time high to closed at RM2.25 today?

Money Management Concept of 70s, 80s, 90s

When come to money matters, different generations have their own thinking. Before reading on, please listen to your heart deep down inside, what is your thinking? Hahaaa.... Bingo? Let's see...

70s: Saving

Generally, this generation not only hardworking in job, but also hardworking in saving. They usually save their money in banks or placed it in fixed deposit, cultivating a very good saving habit. Pre-retirement: Wealth Accumulation and investing in their children's education. Post-retirement: Wealth Enjoyment and depending the financial support from children. That's a great trade off (at least for that generation)!!!

80s: Self-Sustainable

Due to higher inflation, this materials emphasis generation feeling the pinch of not enough money every month. Credit card, car loan, housing loan, insurance premium... !!! No wonder many of them financially critical when come to month ends. Parents for 80s will be more than happy, if their 80s children doesn't need their financial support anymore. God bless!

90s: Consuming
For them, money is meant to be spent. In other words, this would be a great loss to them if they don't enjoy life now. Very often, they learnt how to spend first before saving money. Anyway, parents were their ATM (Automatic Tomorrow's Money), continuing financial support for their beloved children. Hence, financial management and saving concept for 90s usually is poorer.

So, is this true?

UnTold EPF RM2500 Death Benefit?

Lately, there is a chain email spreading across social media regarding EPF Death Benefit as below:

" ATTENTION to everyone who has an EPF account !!! No matter how old are you, no matter how long you have held your EPF account, no matter how much money you have in you EPF account, and matter how long you have paid for your EPF, according to Government Law, EPF will need to pay RM 2500 to an EPF account holder's family when he/she died (family members need to claim the RM 2500 within 2 months). EPF never inform us about this, I reckon very few people's family did actually receive this RM 2500 when his/her family member died because not many people know about this. Where did this RM 2500 goes when the died's family did not claim for RM 2500? Someone's pocket ??? We don't know! So please bombarded this info to all your families, relatives, colleagues and friends, let them know about this info and remember to claim RM 2500 when his/her family die. Don't let this RM 2500 goes to someone's pocket !!! "

Is this true? Below is the respond from EPF:

The above email contained untruthful accusation. The EPF would like to inform its members that a Death Benefit payment of RM2,500 will be presented to the dependents of the deceased members as a gesture of compassion and to ease their financial burden. However, this benefit will only be given once and subject to the following conditions:

• Malaysian citizen;
• Member has not reached the age of 55 at time of death;
• Application for Death Withdrawal is made within 6 months from the date of the demise of the member.

The Death Benefit is payable to the members’ dependent or next-of-kin when the application for Death Withdrawal is made. 

The EPF would also like to emphasis that the money for Death Benefit comes from EPF’s investment earnings and not from the members’ savings. If the dependent does not qualify under the conditions for Death Benefit, the money will still remain with the EPF to be distributed to all members as annual dividend.

Source: EPF

ATM Hacking and the Art of Hole-in-the-Wall Detournment

COME TO ME MY LOVELY

The Automatic Teller Machine is one the primary interfaces we have with the banking system. It's a machine of convenience, replicating what a human bank teller used to do. They're often placed next to physical bank branches, reinforcing the widespread notion that the money coming out of the wall somehow came from 'inside' the bank. Given that the majority of our money is in fact electronic, and stored in a bank's datacentre-based IT system, nowhere remotely close to the ATM, this is something of an illusion. Indeed, the ATM  can echo and reinforce much of the disconnection implicit in the broader banking system.

That said, the fact that people are constantly using ATMs makes them great venues for symbolic pranking. Maybe one could call it, like the situationists did, detournment - the art of throwing people's minds into an unexpected detour whilst they trudge through otherwise unthinking everyday practice. The hope of such a situationist prankster is to make someone reflect about the deeper meaning of economic life. Alternatively, it may be simply to have fun. What follows are some ideas and examples from the cutting edge of ATM artistry and activism (horray!).

Difficulty level 1: ATM as billboard

Plastering an ATM with stickers is a straightforward tactic for the social justice prankster. Here's an example from Rainforest Action Network activists who designed a sticker replicating the Bank of America ATM screen to protest BoAs funding of coal power. Options offered include 'Bankroll Climate Change' and 'Fund Executive Bonuses', forcing the user to reflect on the implications of the bank's continued support for a high carbon future (albeit it's possible that it also drove them into a rage at their inability to use the machine).

Difficulty level 2: ATM as street art

ATMs are economic installations, so why not use them as sites for further installation artworks? Here's one example from Jason Eppinks: He designed a magic spigot that gushes forth with whatever is inside the thing the spigot is attached to. In this case it gushes forth dollar bills (which admittedly are attached to a string).

Difficulty level 3: ATM for homemade money

If you make your own DIY money, you need your own DIY ATM. The Dutch money-artist Dadara uses Exchanghibition Bank, an outlet to dispense his hand-designed bills to members of the public. Ok, it's not quite an ATM, but it's only a matter of time before he automates it. (Dadara also lent his designs for a limited edition version of my book - check here)




Difficulty level 4: ATM as musical instrument

To do this you just get an ATM and attach it to a medium-sized pipe organ, or perhaps a synthesiser. I'm not entirely sure what the point is, but perhaps it's to give a person a audible sense of the consequences of their banking decisions. If you'd like to hear it in action, check out the video here.





Difficulty level 5: ATM as games arcade

Now we get a little bit more complex. Certain ATM designs have technical glitches that enable you to override their normal functionality. With a bit of practice you can play Angry Birds on your local Russian ATM whilst listening to Zero Day by the long-forgotten 90s hard rock band without a Wikipedia page, Nevada Beach. For more info on this, see here.

Difficulty level 6: Build your own ATM
My greatest ever Lego creation was a Landrover I designed from scratch, equipped with a winch, engine and moving propshaft. These guys though, have used Lego to make an ATM, a technically challenging task even for Lego obsessives. The beautiful thing about this is that by it's very nature Lego is deconstructable: thus, unlike your traditional ATM which exudes a lack of trust from under its armoured exterior, this machine relies on trust, and believes in the best in people. Only a complete arsehole would try to break up another's Lego creation.

Difficulty level 7: The ATM as Robin Hood

At the 2010 Black Hat hacker conference the late great Barnaby Jack demonstrated how to 'jackspot' an ATM, using some technical wizardry to get it to spit out money in a manner reminiscent to the Doctor Who episode 'The Runaway Bride'. This is of course illegal, so if you're going to do this, please make sure the proceeds go to a worthwhile cause.

The Next Step: Alternative Currency ATMs
The potential to subvert ATMs goes beyond immediate jamming of conventional finance. There is also the opportunity to promote alternative versions of finance. For example, Bitcoin ATMs have already been designed, and I've previously suggested that I'd like to see Brixton Pound ATMs. I'm going to start working on some schematics for that (and download some DIY engineering courses at the same time). If you have any ideas for other cool ATM artworks, pranks, and (legal) hacks, please do share.

FISCUS '13

FISCUS 2013 : India and China – The New Torch Bearers of World Economy

5^th October 2013 is a date that all SIMSREE students will remember for a long time. Through FISCUS ’13 – the annual financial summit of the institute - it was an honor and a privilege to have with us the stalwarts of finance in the corporate world. The theme for this year’s FISCUS was ‘India and China: The new Torch Bearers of World Economy’.

Mr. Seshagiri Rao – the joint Managing Director and group CFO for JSW Steel – was the Chief Guest. Mr. Atul Joshi – the Managing Director and CEO at India Rating and Research (a Fitch Group Company) – was the Key Note speaker for the event. The eminent panelists for the discussing the topic were Mr. Pramod Kasat – head of investment banking team at Investacorp and an alumnus of SIMSREE (batch of 1993); Mr. Tarun Sharma – Assistant General Manager at EXIM Bank of India and Mr. Nilay Rathi – General Manager (Commercial) at Century Textiles and Industries Limited.  The moderator for the discussion was Mr. Prashant Shetty – Director IDFC Capital and an alumnus of the Institute (batch of 1988).

The event, organized by the SIMSREE Finance Forum, was inaugurated by the traditional lighting of the lamp and the national anthem following which the Director of the Institute, Dr. Sandhya Dhabe, welcomed the esteemed guests to the Institute.

The Chief Guest for the event, Mr. Seshagiri Rao, then addressed the batch. He touched upon the challenges that the developed nations, namely USA and Europe, faced of late and what led to the various financial crises in these economies. In the backdrop of the current turbulent scenario, he also spoke about the opportunities that lie in emerging economies and outlined the path that could be followed. With a rich experience spanning three decades in the steel industry and in the corporate finance and banking sector, he also shared with the students the challenges that India faces with regards to Steel manufacturing and how the future is full of fruitful opportunities waiting to be tapped in to.

Mr. Atul Joshi, the Key Note speaker, brought to the event an insight to the economies of India and China from a Rating Company’s perspective. He first explained the students the ratings models followed for banks, corporate and the local governments. He also cited the disparities in the national and international ratings awarded to the institutions in India and its effect. Finally, he requested the students to have an optimistic attitude towards the future of the nation.

The stage was then opened for the panel discussion moderated by Mr. Prashant Shetty. All the panelists first spoke briefly on the subject. Mr Nilay Rathi shared with the students the challenges and opportunities that the Indian and Chinese economies face sighting the example of the textile industry. Mr. Tarun Sharma enlightened the students regarding the importance of exports for the development of any economy. Mr. Pramod Kasat elaborated upon the importance of investment, the differences between the Indian and the Chinese growth models, and the growth strategies to be followed. Among the wide array of questions raised by the audience were the ever increasing population challenges faced by the two nations, and whether it is a challenge or an opportunity, the political unrest between India and China, and how it may impact the economic ties between the two nations, the importance of trade fairs and the merits and challenges of the democracy in India and autocracy in China.

Mr. Seshagiri Rao concluded the discussion perfectly by saying “India and China need not confront and have conflict, but they need to collaborate and cooperate”. The event was concluded with a vote of thanks by the SIMSREE Finance Forum Coordinators.      

- Sufiyan Sarguroh,

  SIMSREE Finance Forum    

Aktiepriser enligt obligationsmarknaden (och enligt mig)!

Välj vilket företag som helst och sannolikheten är mycket stor att det finansierat sig dels med aktier och dels med lån. Detta gör att såväl aktier som företagsobligationer kan användas som termometrar för att känna av ett företags väl och ve. Vi är alla vana vid att utläsa något positivt av att t.ex Pfizers aktie gått upp ett par procent. En del av oss är kanske också vana vid att utläsa en ränteuppgång för en av Pfizers obligationer som något dåligt osv. I teorin ska naturligtvis obligationer och aktier utgivna av samma företag bete sig konsistent med varandra. En plötslig aktiekursuppgång samtidig med en kraftig ränteuppgång signalerar t.ex. att företaget, enligt marknaderna, står inför en ökad risk vilket kan gynna aktieägare (begränsad nedåtsida) men inte långivare (inget uppåtsida).


En fråga jag ställde mig i min nya artikel ”Stock Prices and Stock Return Volatilities Implied by the Credit Market” är därför om man kan använda obligationsmarknaden och en teoretisk modell för att backa ut aktiepriser implicerade av räntorna i oblationsmarknaden. Dvs, vad är en viss dag en rimlig prisnivå på Pfizer aktien enligt obligationsmarknaden? Jag använder kreditderivat i stället för obligationer då de sistnämnda inte handlas frekvent nog och så använder jag en kommersiell modell för att koppla aktiepriser, volatiliteter, skulder och räntor till varandra. Artikeln kan nås här och ett exempel kan ses i figuren ovan. Den svarta grafen är priset enligt kreditmarknaden och den ljusblå är det egentliga aktiepriset. Detta betyder att Pfizer-aktien var övervärderad den 1 februari 2013 (slutdagen i mitt sample)! Åtminstone enligt kreditderivatmarknaden och åtminstone relativt situationen i februari 2004.