DianaTan.net

Depositors will be getting higher returns for their savings as banks raise interest rates for fixed deposits (FD) in tandem with the rise in lending rates. In a telephone survey, StarBiz found that most banking groups, with the exception of EON Capital Bhd, and Alliance Financial Group Bhd (AFG), had already increased their FD rates by about 0.25% yesterday. Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, RHB Capital Bhd and Affin Holdings Bhd have also upped their savings rates.

In general, a rising interest rate environment will bode well for banks with a low exposure to fixed-rate loans and a low proportion of current accounts and saving accounts (CASA) and alternative deposits. According to ECM Libra, among banking stocks, AFG would have the greatest potential for earnings accretion due to its high proportion of variable rate loans at 84% as well as high proportion of CASA at 37%. “We believe key beneficiaries include AFG, CIMB, Maybank and RHB Capital due to a combination of high exposure to floating-rate loans (average around 70%) and large pool of CASA deposits (average around 30%),” TA said.

The Kuala Lumpur Interbank Offer Rates (Klibor), which serves as the benchmark rates for interbank lending and borrowing activities, has also increased by 20 to 25 basis points across the board since March 4. Hong Leong Bank Bhd chief operating officer Kua Wei Jin said banks would have to borrow at higher rates from the interbank market if there was a hike in OPR.

“The FD, being one of the sources for banks to fund their loans, will also go up when the Klibor or OPR increases,” he said. Nevertheless, Citibank Bhd consumer bank treasurer Lee Chet Leng noted that FD rates were not linked one-to-one to Klibor as they were often driven by different factors. “FD rates are a reflection of market-based factors such as Klibor, the competitive and regulatory environment and the desire for banks to achieve a particular nature of funding mix,” Lee said.

Susan McCarthy, a financial adviser in Oklahoma City and author of The Value of Money, lists her top four credit card don’ts:

1. Don’t make only the minimum payments. This stretches out your payment and, thanks to the interest, significantly increases your overall cost.

2. Don’t carry too many cards. Multiple cards make it easier to rack up debt because it’s harder to keep track of your spending. Having lots of cards isn’t necessarily bad for your credit, but misusing them is. So limit your plastic to two national cards (store cards often carry higher interest rates) that you manage carefully.

3. Don’t miss payment due dates. Not only will you be hit with a late fee-as high as $39 on some cards-but your interest rate could also jump. Sign up for online banking or pay over the phone if you’re up against the deadline. (You may pay a processing fee, but it will probably be less than the late fee and the possible interest-rate hike.)

4. Don’t take cash advances. These advances generally come with sky-high interest rates and service fees, making them a far too expensive way to get cash. Avoid at all costs.

AGENCIES that help banks market their credit cards have seen the take-up rate for new cards plunging 80 per cent, since the government announced the re-introduction of a RM50 service tax for credit card a week ago.

In a press conference called in Kuala Lumpur yesterday, some 40 credit card agencies, representing 3,000 agents around the country called for the government to either scrap, or review the implementation of the service tax.

“As of now we really cannot estimate the magnitude of the damage that will be done as the months pass by,” Titanium Alliance Sdn Bhd executive director H. K. Tan told reporters.

It is estimated that some 80 per cent of credit card sales agencies may go bankrupt with the ruling, as they fail to get the economies of scale for its promotion work, due to the drop in volume. Credit card agencies spend around RM300 a day for a promotion booth in shopping malls. For exhibitions, credit card agencies can spend up to RM2,000 a day for their booth.

It is understood that the tax is a resurrection from eight years ago. It was scrapped to increase spending among consumers. In 1996, the government introduced the RM50 service tax to curb the extensive use of the payment tool. In 2001 however, the government abolished it.

The agencies which also plan to set up an association to take care of its interests, plan to send a memorandum to the government once details of the service tax are revealed in November by regulator Bank Negara Malaysia.

On an average, an agent can sign up between 40 and 45 new credit card holders in a month. However, only around 25 credit cards are approved in a month.

“We request that if the government insists on going through with the tax, it should only tax for membership renewals and waive it for newly issued credit cards, in a move to help credit card agents like us,” Tan said. A suggestion has also been mooted that the rate of service tax be fixed according to the credit card’s credit line.

At a default rate of 2.5 per cent, the credit card industry in Malaysia is among the healthiest in the world, compared to places like the US, where default rates are as high as 10 per cent and Japan, where default rates are 20 per cent. There are 18 credit card issuers in Malaysia, 16 of which are banks.

Public-listed companies will be required to provide an e-dividend payment system to shareholders by the third quarter of next year. Investors will be given a one-year grace period to provide their bank account number to Bursa Malaysia Depository to enable the dividend payments to be credited directly into their bank accounts. It plans to undertake a series of investors’ awareness programmes to familiarise investors with the benefits of e-dividends.

Stockbroking companies, meanwhile, will by mid-2010 be required to provide e-share payment options for clients to receive and make payments on their share transactions. This way, payments will be credited into bank accounts more quickly and efficiently compared with cheques.

The e-dividends and e-share payment are an intergral part of the initiative to move towards a paperless environment and promote usage of electronic payments in the capital market. These new measures were recently announced by our Prime Minister in the 2010 Budget.

With the paperless share transaction to be put in place next year, I guess those who are IT savvy may start to invest in the stock market and I hope there will be a convenient way to check the share movement online real time. You can also invest online through Public Bank and Maybank internet banking of the banks’ shares from their individual web sites. I have yet to try out this method as I only go for safe money instruments like Fixed Deposits and Government Bonds. But if you have excess money to invest and put away for a few years, then you might consider the above methods to invest online. What do you think?

In the last 10 years, gold has been increasing in price steadily and will continue to increase. Therefore if you have extra cash to invest, it is good to buy gold and keep it. In the 1970s, a gram of gold only cost $20; while the current price has gone up to $127 per gram! During very long period of mankind’s history gold was, actually, “money” – a measure of value for other goods. Now when somebody talks about reasons for buying gold, he or she usually means gold’s unique ability to save money, and as a rule such words as ‘inflation’ and ‘portofolio diversification’ are pronounced. When we speak ‘investment’ we mean something that can bring us profit. It’s really tricky question whether is possible to make a fortune on gold. The gold price is typically not very volatile, that makes it difficult to earn money on price fluctuation. It’s a very trait that makes gold convenient for saving money but not convenient for making profit. The average investor traditionally uses gold just as a ‘safe haven’.

Some authors argue about influence of inflation on the gold prices: “The main attraction for investors is that gold is seen as the ultimate hedge against inflation. While the pound or dollar may lose their value, depending on the fortunes of the economy, gold historically goes up in value when inflation gathers pace. That is because everyone from market traders to high-powered investors would prefer to be paid in gold when cash starts to lose its worth.” Others just states some facts about the gold rush: “We have seen people in Europe buying gold in quantities that are more typical of the Middle East and Asia. There has been a tremendous amount of activity in countries such as Germany and Switzerland, with people buying coins and 1kg bars, very often just to take home and hide.”

If you want to grow your money, you need to read Personal Money Magazine for good tips to increase your finances by taking a few simple steps. It is a monthly magazine written by The Edge. Every monthly issue is different and certain months, there may be information on which stocks to buy or the top stocks in Malaysia to look out for. Other months, there may be tips on maximizing your EPF money and let it grow with higher interests rates than banks’ fixed deposits. I find that the magazine is worth investing, unless you frequent book stores like I do and get to read for free.

Sometimes Personal Money magazine features certain personalities who are successful working from home or own a business in Malaysia and we can try to emulate them by learning from their experiences. Other pages may include REITS – Real Estate Investment Trusts or even unit trusts that we can invest in. By the way, unit trusts is a basket of shares that the fund manager manages for you for a fee. This is to relieve you from the tedious round the clock monitoring of the various stocks that you have.

I have constantly been reading Personal Money magazine since 3-4 months ago. I don’t subscibe it yet but read it for free in MPH, Gurney Plaza in Penang. It sells for RM9 per copy and I must say that the articles are noteworthy. Because of reading Personal Money magazine, I have decided to put in more money into my EPF (employees provident fund) account from 12% to 50%. So that means, I save about half of my basic income every month just to earn higher interests compared to putting my money in Fixed Deposits giving me only a measly 2% return annually. Last year in 2008, EPF or KWSP (Kumpulan Simpanan Wang Pekerja) in Malay gave a return rate of about 4.5% to the depositors.

Personal Money magazine also have articles on choosing the right unit trusts and financial instruments to invest, being your own boss and success stories, money tips from featured writers, buying insurance policies and comparisons of the various public companies traded in Bursa KLSE and their profits. The magazine also teaches you how to grow your money and to cut down on credit card spending – and never to owe money via credit cards because of the 18% interests charges annually.

Yesterday, I was in MPH Gurney Plaza looking for the magazine but it was not found yet for October issue. Today I am going to check again but I am sure it will be displayed soon on the shelves. The magazine gives you insights on how to manage your money smartly and never to owe Ah Longs (illegal money lenders) money. It also introduce the use of debit cards so that you will spend within your budget. As long as you put in money into your debit card, you can spend up to the limit put in and not beyond that. Debit cards are useful for those who want to enjoy the priviledges of using credit card but you have to initially put in money first – as opposed to credit cards where you spend on borrowed money from the banks.

This year, I applied for Public Bank Visa Electron Debit card to withdraw money from my Paypal account and I manage to take out cash successfully after some difficulties and problems initially. If you like to know more knowledge on smart money management, then you can start reading Personal Money magazine or even subscribe to it. Every issue is different and there are many interesting articles written on financial matters. If you want to grow your money, then this is the magazine that you should not do without.

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Warren Buffett is the richest man in the world overtaking Bill Gates sometime last year. As a teenager, Buffett was already reading company reports belonging to his father while his classmates were crazy with comics. He started business early in life and went to study finance in college. Armed with accounting business knowledge, he invested USD100,000 fifty years ago which compounded to billions today. What is interesting to note is that Warren Buffett made all his fortune from the stock market. He never earned money from selling products or offer services. And his company Berkshire Hathaway is the most expensive one is the world with USD100,000 per share. His motto is to buy low, sell high in the stock market.

That was why in March this year, Buffett invested USD8 billion of his money in the stocks when everyone else was selling due to fear, recession and panic. By now I guess Buffett would have made a handsome profit from that investment.

Despite his massive wealth, Buffett is a simple man – he lives in a three bedroom house, drives a second hand old car and flies economy. He never flaunted his wealth – instead he gave millions away to charity and to Bill Gate’s Foundation. Such an unassuming man. I guess it pays to read more about this great investor and his methods of investing to make money from the stock market. His first rule in investing is “Never Lose Money.” And his second rule is “Don’t forget rule number 1.”