Friday, November 25, 2016
Latest update on 9 SG armoured tanks seized in HK port.
http://www.todayonline.com/singapore/9-armoured-vehicles-bound-spore-seized-hk
This was the first time Taiwan was tasked to ship the tanks back to SG and Taiwan screwed it up. Previously, SG was responsible for all the shippings. Taiwan was not supposed to en route to HK for this shipping trip but it entered HK port anyway and offloaded SG tanks. SG tanks were secretly cordoned off in the port with surrounding containers to mask its presence but a whistle blower informed the port authority which resulted in the investigation and seizure. Under HK laws, no military equipment can enter HK without authorization and HK has the right to seize such illegal military equipment.
This was the first time Taiwan was tasked to ship the tanks back to SG and Taiwan screwed it up. Previously, SG was responsible for all the shippings. Taiwan was not supposed to en route to HK for this shipping trip but it entered HK port anyway and offloaded SG tanks. SG tanks were secretly cordoned off in the port with surrounding containers to mask its presence but a whistle blower informed the port authority which resulted in the investigation and seizure. Under HK laws, no military equipment can enter HK without authorization and HK has the right to seize such illegal military equipment.
China-Cambodia port is going to start operation soon!
This new deep sea port is capable for berthing China aircraft carrier and can be turned into a military seaport anytime. This port will be under China management for 99 years to safeguard its interest in south east asia.
http://english.cctv.com/2016/10/13/VIDEUV5FyRopLpEeJ2N0HFK8161013.shtml
Look like SG heyday is over!
Dubai new hyperloop train! Super cool and fast!
Thursday, November 24, 2016
Singapore downgrades its GDP growth in 2016.
https://sg.finance.yahoo.com/news/singapore-downgrades-2016-gdp-exports-003300147.html
Our government's estimate (-4.1%) was overly pessimistic on 14 October compared to the actual fall of -2%. Was this due to being too conservative or our government economist was too lousy? The estimation was too way off!
Our government's estimate (-4.1%) was overly pessimistic on 14 October compared to the actual fall of -2%. Was this due to being too conservative or our government economist was too lousy? The estimation was too way off!
Wednesday, November 23, 2016
Singapore port volume is expected to decline again in 2016!
The TEU in 2015 was 30.92m. If we analyse the figures in 2016 as shown above, the expected TEU in 2016 will be around 30.5m. Therefore, the 9% drop in 2015 is not an aberration but is the harbinger of further fall in 2016. Look like China has succeeded in containing Singapore growth.
Singapore port handling capacity volume CAGR!
Singapore port handling capacity volume in TEU:
2011 = 29.94m
2012 = 31.65m
2013 = 32.6m
2014 = 33.87m
2015 = 30.9m
From 2011 (29.94m) to 2015 (30.9m), the CAGR is 0.79%.
29.94*(1+0.79%))^4 = 30.9
Once the CAGR becomes negative, Singapore will be in an extremely precarious position.
Is Singapore resilient enough for the upcoming economic downturn?
Singapore is a heavily entrepôt dependent country till now as it is a small country with no natural resources. Yes, Singapore had been through the vicissitudes of economic cycles and had been resilient throughout all the economic and financial crises. Singapore was able to weather all these harsh tribulations because its port had been increasing the port handling capacity volumes throughout the years. However, Singapore had lost its world’s busiest port to Shanghai and its port volumes fell in 2015 by 9%. I hope that this decline in port volumes in 2015 is just an aberration and not the harbinger of more declines in the future. If the port volumes begin to decline, Singapore will find it hard to recover from any economic crises in the future.
When the port volumes are having positive CAGR annually, it means that businesses are sustainable in the foreseeable future despite any negative economic growth and Singapore can recover from any recession or crisis. Conversely, when the port volumes are having negative CAGR annually, businesses become unsustainable because there will be declining demands for the ancillary services and products pertaining to the entrepôt trades. In a nutshell, when Singapore loses its sea hub, it will also lose its financial hub and Singapore will retrograde into a 2nd or 3rd world country.
Tuesday, November 22, 2016
No more TPP! Japan and ASEAN can stop harping on it now!
http://news.asiaone.com/news/business/trump-says-he-will-move-withdraw-tpp-day-one
We need to move on to RCEP and FTAAP. Please stop harping on TPP anymore!
We need to move on to RCEP and FTAAP. Please stop harping on TPP anymore!
Monday, November 21, 2016
Why would fund manager buy bonds with negative yields?
Government bonds are often labelled as risk-free investments and are favourite financial instruments among fixed income fund managers.
Government bonds are IOUs issued by the government and the government pays interest rates on its IOUs just like bank loans. However, some government bonds are sauntering into negative yields these few months. What does this negative yield mean? It means consumers have to pay interest rates to the government for buying the bonds. In other words, you pay interest rates for lending money to someone instead of collecting interest rates for money lent out. Many people cannot reconcile this negative bond yield with the traditional bank loan concept that is imbued in them.
Thus, why would fund managers be interested in these negative bond yields? Surely, they have the financial literacy to know this is a money losing investment. Well, fund managers know something that ordinary people don't. Fund managers can perform the midas of turning negative yield into positive yield. How is this possible?
Let's suss out the MIDAS!
Fixed income fund managers will sift out arbitrage opportunities in other interest rates related financial derivatives as a trade off to the negative bond yields by doing interest rate swaps in different currencies.
Example of USD-Yen interest rates swap:
A USD fund manager will borrow yen and lend out USD using Libor rates.
Facts:
3-month USD Libor : 0.82%
3-month JPY Libor : -0.02%
USD-Yen interest rate swap spread: 0.64%
3-month JPY Bond yield: -0.24%
When a USD fund manager borrows yen, he will pay JPY Libor (-0.02%) and receive USD Libor (0.82%) for lending out USD with a spread of 0.64%. Since the JPY Libor is a negative rate, the USD fund manager will receive interest of 0.02% instead of paying 0.02% interest.
Therefore, the net effect in carrying out this USD-Yen interest rates swap is 0.82% - (-0.02%) + 0.64% = 1.48%
Then the fund manager will invest in JPY bonds with -0.24 yield with the borrowed yen which means the net effect is 1.48% - 0.24% = 1.24% because he has to pay an interest rate to the government instead. As you can see, the smart USD fund manager has managed to earn 1.24% instead of 0.82% when he invests only in USD Libor.
Since China has the largest USD foreign reserves, it has performed the USD-Yen interest rate swap and bought a lot of negative JPY bond yields these few months.
Government bonds are IOUs issued by the government and the government pays interest rates on its IOUs just like bank loans. However, some government bonds are sauntering into negative yields these few months. What does this negative yield mean? It means consumers have to pay interest rates to the government for buying the bonds. In other words, you pay interest rates for lending money to someone instead of collecting interest rates for money lent out. Many people cannot reconcile this negative bond yield with the traditional bank loan concept that is imbued in them.
Thus, why would fund managers be interested in these negative bond yields? Surely, they have the financial literacy to know this is a money losing investment. Well, fund managers know something that ordinary people don't. Fund managers can perform the midas of turning negative yield into positive yield. How is this possible?
Let's suss out the MIDAS!
Fixed income fund managers will sift out arbitrage opportunities in other interest rates related financial derivatives as a trade off to the negative bond yields by doing interest rate swaps in different currencies.
Example of USD-Yen interest rates swap:
A USD fund manager will borrow yen and lend out USD using Libor rates.
Facts:
3-month USD Libor : 0.82%
3-month JPY Libor : -0.02%
USD-Yen interest rate swap spread: 0.64%
3-month JPY Bond yield: -0.24%
When a USD fund manager borrows yen, he will pay JPY Libor (-0.02%) and receive USD Libor (0.82%) for lending out USD with a spread of 0.64%. Since the JPY Libor is a negative rate, the USD fund manager will receive interest of 0.02% instead of paying 0.02% interest.
Therefore, the net effect in carrying out this USD-Yen interest rates swap is 0.82% - (-0.02%) + 0.64% = 1.48%
Then the fund manager will invest in JPY bonds with -0.24 yield with the borrowed yen which means the net effect is 1.48% - 0.24% = 1.24% because he has to pay an interest rate to the government instead. As you can see, the smart USD fund manager has managed to earn 1.24% instead of 0.82% when he invests only in USD Libor.
Since China has the largest USD foreign reserves, it has performed the USD-Yen interest rate swap and bought a lot of negative JPY bond yields these few months.
NATO unity is breaking up!
Turkey which is part of NATO is very unhappy about EU and is mooting the idea to create and join a China security bloc. This will definitely create tensions in EU and NATO as Turkey gets closer to Russia and China. Turkey maybe just issuing empty threat to gain more bargaining chips for its political interest.
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