(WASHINGTON) China is pumping more money into US Treasury bonds, recent data show, despite concerns expressed in Beijing in recent months over the safety of dollar-linked assets.
Mainland China's holding of Treasury securities jumped to US$767.9 billion in March from US$744.2 billion the previous month, according to US Treasury data.
The figure does not include those of Hong Kong, China's special administration region, which climbed to US$78.9 billion from US$76.3 billion.
The statistics showed China sitting comfortably as the top purchaser of Treasury bonds despite years trying to diversify its reserves from the US dollar.
Chinese Premier Wen Jiabao had expressed rare official concern in March over the safety of Beijing's huge US bond holdings but in the same month, according to monthly US Treasury data, Beijing scooped up US$23.7 billion of Treasuries, the largest inflow since November.
'This flies in the face of the 'China is diversifying' stories,' said Andrew Busch, analyst at BMO Capital Markets, commenting on the fresh Treasury data.
Mr Wen's concerns came amid frustration in Beijing that the nearly US$800 billion huge US stimulus measures to prop up the world's largest economy could drive down the value of dollar-based assets.
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In addition, China was concerned that a US Federal Reserve move to buy up to US$300 billion in long-term US Treasury bonds to ease credit flows could dampen returns on its future bond purchases.
'As much as China is whining about the impact of quantitative easing on the US dollar, their purchases of dollar denominated assets was the strongest since November,' said Kathy Lien, director of currency research at Global Forex Trading.
Being the top holder of US Treasury bonds, China is automatically the largest creditor to the United States.
It is also the world's biggest holder of dollar reserves, at nearly US$2 trillion dollars - roughly double that of Japan, and four times more than either Russia or Saudi Arabia.
'Note that in the first quarter of 2009, China's holdings of US Treasuries have increased by US$40 billion, whereas its foreign exchange reserves have increased by only US$7 billion dollars, indicating a continued preference for US Treasuries,' said Barclays Capital analyst Chirag Mirani. - AFP
Monday, May 18, 2009
How the Libor is determined
May 18 (Bloomberg) -- The cost of borrowing in dollars between banks dropped by the most in two months as record low interest rates and rising customer deposits quicken the thaw in lending.
The London interbank offered rate, or Libor, for three- month loans fell four basis points to 79 basis points today, the biggest decline since March 19, according to British Bankers’ Association data. It declined 11 basis points last week, the most since January.
“The rate of decline has increased the last few days and it seems there’s more money around,” said Peter Chatwell, a fixed-income strategist in London at Calyon, the investment- banking unit of Credit Agricole SA. “Things are progressing nicely. It’s looking positive.”
The availability of credit has improved as the Federal Reserve committed $12.8 trillion to stem the longest recession since the 1930s and central banks around the world cut interest rates to near zero. Libor, used to set borrowing costs on about $360 trillion of financial products globally, according to the BBA, has declined from as high as 4.82 percent in October, after the collapse of Lehman Brothers Holdings Inc.
The TED spread, the difference between what banks and the U.S. Treasury pay to borrow for three months, narrowed one basis points to 66 basis points, the lowest level since August 2007, when the credit crisis began. The Libor-OIS spread, another gauge of banks’ reluctance to lend, narrowed five basis points to 58 basis points, the least since March 24, 2008.
Still Wary
Libor has dropped more than two basis points for the past four days. The last time it fell so much was in the four days through Jan. 13.
Some measures show financial institutions are still wary of lending after banks racked up more than $1.4 trillion of writedowns and losses since the start of 2007.
The difference between the Fed’s target rate for overnight bank loans between banks and three-month Libor was 53 basis points today, compared with an average of 22 basis points in the five years before credit markets froze.
“People have become a bit more relaxed now because we haven’t had any bad news recently,” said Jan Misch, a money- market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned bank. “On the other hand, I doubt the turnover has increased at the same pace. We’ve now reached a level where I wouldn’t expect further declines.”
Rising Deposits
The drop in Libor has less to do with rising confidence among financial institutions than it does with surging customer deposits, Jim Vogel, an analyst at FTN Financial said last week. Deposits at U.S. banks jumped by almost $400 billion in the past six months, contributing to reduced demand for loans in the interbank market, Vogel wrote in a note to clients May 11.
Libor is derived from a survey of banks conducted by the BBA each day in London. Institutions are asked how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies from dollars to euros and yen. The BBA then calculates averages, throwing out the four highest and lowest quotes, before publishing them before noon.
The London interbank offered rate, or Libor, for three- month loans fell four basis points to 79 basis points today, the biggest decline since March 19, according to British Bankers’ Association data. It declined 11 basis points last week, the most since January.
“The rate of decline has increased the last few days and it seems there’s more money around,” said Peter Chatwell, a fixed-income strategist in London at Calyon, the investment- banking unit of Credit Agricole SA. “Things are progressing nicely. It’s looking positive.”
The availability of credit has improved as the Federal Reserve committed $12.8 trillion to stem the longest recession since the 1930s and central banks around the world cut interest rates to near zero. Libor, used to set borrowing costs on about $360 trillion of financial products globally, according to the BBA, has declined from as high as 4.82 percent in October, after the collapse of Lehman Brothers Holdings Inc.
The TED spread, the difference between what banks and the U.S. Treasury pay to borrow for three months, narrowed one basis points to 66 basis points, the lowest level since August 2007, when the credit crisis began. The Libor-OIS spread, another gauge of banks’ reluctance to lend, narrowed five basis points to 58 basis points, the least since March 24, 2008.
Still Wary
Libor has dropped more than two basis points for the past four days. The last time it fell so much was in the four days through Jan. 13.
Some measures show financial institutions are still wary of lending after banks racked up more than $1.4 trillion of writedowns and losses since the start of 2007.
The difference between the Fed’s target rate for overnight bank loans between banks and three-month Libor was 53 basis points today, compared with an average of 22 basis points in the five years before credit markets froze.
“People have become a bit more relaxed now because we haven’t had any bad news recently,” said Jan Misch, a money- market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned bank. “On the other hand, I doubt the turnover has increased at the same pace. We’ve now reached a level where I wouldn’t expect further declines.”
Rising Deposits
The drop in Libor has less to do with rising confidence among financial institutions than it does with surging customer deposits, Jim Vogel, an analyst at FTN Financial said last week. Deposits at U.S. banks jumped by almost $400 billion in the past six months, contributing to reduced demand for loans in the interbank market, Vogel wrote in a note to clients May 11.
Libor is derived from a survey of banks conducted by the BBA each day in London. Institutions are asked how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies from dollars to euros and yen. The BBA then calculates averages, throwing out the four highest and lowest quotes, before publishing them before noon.
Wednesday, May 13, 2009
10 things to note to start a business right
SO YOU - a budding entrepreneur - have finally decided to start your own business. But bear in mind the common pitfalls everyone should avoid at all cost. There are 10 things one should take heed of when starting a business.
Related story:» The 4-step guide in starting your own business
1. Don't constantly change your business model
As a new business owner, you cannot afford to spend time reinventing every process in your business.
Your resources are probably limited and your focus should be on revenue generation. Stick to standard business processes and improve on them along the way. Avoid experimenting with processes if they are already working for you.
2. Being on the job rather than taking care of business
Many entrepreneurs get too bogged down with the operations, rather than in the management of the whole business. It is only natural that you would want to work in areas of your business that you understand best.
Yet as an entrepreneur, your job is not to specialise in any one aspect of your business but to manage your company. While it is important to get involved operationally, your ultimate goal is to grow your business.
3. Don't leave the running of your business to others
It is common for business owners to delegate key areas of their businesses to experienced partners or employees. However, key decisions must still be made by the owner.
The responsibility of running the business is still yours. You are accountable for the success or failure of your business. You can pass on work, but not leave it to others to make important decisions for you.
4. If you think small, you will remain small
If you model your company to sustain only your income, you will never grow big and expand your business. Many entrepreneurs start a business with the sole purpose of creating that dream job for themselves.
True entrepreneurs always have big visions that go beyond their limit. They imagine how they can make the world a better place with their product or service - and work towards it every day.
5. A cheaper price doesn't mean more customers
Competing on price will not garner more sales. Offering a lower price does not mean that customers will switch from your competitors to you; it's product or service quality that people look for.
By offering lower prices, you will have smaller profit margins, translating into a smaller budget for product research and development.
Fighting over low prices will never benefit you in the long run. Solely banking on price adjustments as a competitive edge can be your fastest route to bankruptcy.
6. You get what you pay for
Cost-cutting on every aspect of your business, especially for staff, can be detrimental to your business.
Hiring employees on the cheap may appear to save you cost now. But you will be paying more in the long run by losing the opportunities you could have obtained with the right people supporting you.
Talented and capable staff would not want to be paid less than their market value. Don't compromise on the quality of your staff.
7. Cost-cutting damper efficiency
The key is not about cost savings, but to balance out a cost-benefit ratio on everything you do.
Instead of paying people to help you, you choose to do it all by yourself. You avoid using new technology that is deemed too expensive and prefer to keep that old machine, not counting that it actually costs more than buying a new one due to high maintenance cost.
Being efficient is a must for every start-up company where resources are limited, but you should not focus on cost-cutting as a business growth strategy. Instead, you should focus on bringing in more revenue that will cover your cost.
8. Don't focus on just one aspect of your business
Every business needs three legs for it to run: marketing and sales; administration and finance; and operations.
Entrepreneurs who are born salesmen will believe that sales is the most important aspect of their business. Entrepreneurs with experience in operations may believe that a solid business process is the key success factor for companies.
Every business requires marketing and sales, finance and administration, and operations. All of these areas are equally important and it is up to you, the entrepreneur, to balance them, regardless of your field of expertise.
9. Have a proper yardstick in place
Without proper reviewing processes, a business will not have a clear view of its current strengths and weaknesses.
Many business owners rely solely on their instincts to make business decisions. The true entrepreneur takes advantage of data available to help him set appropriate goals, measure the company's performance and implement necessary measures to bring the business to the next level.
10. Work towards a long-term relationship with customers
Relationship management is essential to the survival of any business. Entrepreneurs often make the mistake of chasing after new customers, seeing potential only in new, untapped markets.
Previous customers can often bring in repeat or referral sales which are just as important. Building a good customer relationship management system in your business can help generate additional sales from existing customers.
Having a good business relations framework is also important as it upholds the image of your company for long-term success.
The writer is founder and managing director of Talentpreneur Hub, an independent company that promotes entrepreneurship in Singapore.
Related story:» The 4-step guide in starting your own business
1. Don't constantly change your business model
As a new business owner, you cannot afford to spend time reinventing every process in your business.
Your resources are probably limited and your focus should be on revenue generation. Stick to standard business processes and improve on them along the way. Avoid experimenting with processes if they are already working for you.
2. Being on the job rather than taking care of business
Many entrepreneurs get too bogged down with the operations, rather than in the management of the whole business. It is only natural that you would want to work in areas of your business that you understand best.
Yet as an entrepreneur, your job is not to specialise in any one aspect of your business but to manage your company. While it is important to get involved operationally, your ultimate goal is to grow your business.
3. Don't leave the running of your business to others
It is common for business owners to delegate key areas of their businesses to experienced partners or employees. However, key decisions must still be made by the owner.
The responsibility of running the business is still yours. You are accountable for the success or failure of your business. You can pass on work, but not leave it to others to make important decisions for you.
4. If you think small, you will remain small
If you model your company to sustain only your income, you will never grow big and expand your business. Many entrepreneurs start a business with the sole purpose of creating that dream job for themselves.
True entrepreneurs always have big visions that go beyond their limit. They imagine how they can make the world a better place with their product or service - and work towards it every day.
5. A cheaper price doesn't mean more customers
Competing on price will not garner more sales. Offering a lower price does not mean that customers will switch from your competitors to you; it's product or service quality that people look for.
By offering lower prices, you will have smaller profit margins, translating into a smaller budget for product research and development.
Fighting over low prices will never benefit you in the long run. Solely banking on price adjustments as a competitive edge can be your fastest route to bankruptcy.
6. You get what you pay for
Cost-cutting on every aspect of your business, especially for staff, can be detrimental to your business.
Hiring employees on the cheap may appear to save you cost now. But you will be paying more in the long run by losing the opportunities you could have obtained with the right people supporting you.
Talented and capable staff would not want to be paid less than their market value. Don't compromise on the quality of your staff.
7. Cost-cutting damper efficiency
The key is not about cost savings, but to balance out a cost-benefit ratio on everything you do.
Instead of paying people to help you, you choose to do it all by yourself. You avoid using new technology that is deemed too expensive and prefer to keep that old machine, not counting that it actually costs more than buying a new one due to high maintenance cost.
Being efficient is a must for every start-up company where resources are limited, but you should not focus on cost-cutting as a business growth strategy. Instead, you should focus on bringing in more revenue that will cover your cost.
8. Don't focus on just one aspect of your business
Every business needs three legs for it to run: marketing and sales; administration and finance; and operations.
Entrepreneurs who are born salesmen will believe that sales is the most important aspect of their business. Entrepreneurs with experience in operations may believe that a solid business process is the key success factor for companies.
Every business requires marketing and sales, finance and administration, and operations. All of these areas are equally important and it is up to you, the entrepreneur, to balance them, regardless of your field of expertise.
9. Have a proper yardstick in place
Without proper reviewing processes, a business will not have a clear view of its current strengths and weaknesses.
Many business owners rely solely on their instincts to make business decisions. The true entrepreneur takes advantage of data available to help him set appropriate goals, measure the company's performance and implement necessary measures to bring the business to the next level.
10. Work towards a long-term relationship with customers
Relationship management is essential to the survival of any business. Entrepreneurs often make the mistake of chasing after new customers, seeing potential only in new, untapped markets.
Previous customers can often bring in repeat or referral sales which are just as important. Building a good customer relationship management system in your business can help generate additional sales from existing customers.
Having a good business relations framework is also important as it upholds the image of your company for long-term success.
The writer is founder and managing director of Talentpreneur Hub, an independent company that promotes entrepreneurship in Singapore.
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