Archive for May, 2009

China Pushes Out the Dollar, Asks for Yuan

2 comments Written on May 11th, 2009 by
Categories: China
Xinhuanet: Yuan edges into place as international trade currency
Buyers and sellers at the 105th Canton Fair in south China's Guangdong Province are no longer restricted to using the U.S. dollar to settle their deals. This year they can also use the yuan, China's currency.

Last week, the State Council (Cabinet) gave the green light to five major trade cities -- Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan -- to use the yuan, also known as Renminbi, as an option to settle international trade deals.

Last December, pilot programs were announced to allow the country's two economic powerhouses, Guangdong Province and the Yangtze River Delta (including Shanghai), to use the yuan to settle trade deals with the two special administrative regions of Hong Kong and Macao.

A similar arrangement has been proposed for exporters in Guangxi Zhuang Autonomous Region and Yunnan Province in south China, which will be allowed to use the yuan to settle trade with ASEAN (Association of Southeast Asian Nations) members starting this year. Details of that program are yet to be disclosed.

China has also been arranging currency swaps with trading partners to bypass the U.S. dollars in trade settlements. Since mid-December, the Chinese mainland has signed currency swap contracts worth 650 billion yuan (95.6 billion U.S. dollars) with central banks in Hong Kong, the Republic of Korea, Malaysia, Belarus, Indonesia and Argentina.

This is quite significant. If they earlier required USD settlement for trades done with Hong Kong and Macau, that kept the dollar demand going. And now, they're even looking at Asean with the Yuan Renminbi.

India should do this too - what better time than now for such a move! Getting the rupee accepted locally isn't much of a deal - already much of it happens in Dubai and I'm sure Singapore would be happy too. Plus, we should convert some of our dollar reserves to the Yuan, to facilitate trade.

The US won't like too much of this. The response will be very interesting; could be to eventually renege on Freddie/Fannie debt, or to coax China back into the fold. But the trade leverage is slowly slipping away with the US recession continuing and deepening. Plus, China has a huge internal growth problem and needs fairly quick and decisive action.

Posted in China

Amit Varma’s "My Friend Sancho" Launching Soon

1 Comment » Written on May 10th, 2009 by
Categories: Books
My friend Amit Varma has released his first book, My Friend Sancho. The Delhi launch is on Wednesday and I shall go.

I've read a tiny part of it, and liked what I read. I'm a sucker for fiction and Amit writes well, so this one's going to be bought and hopefully signed by the author as well. If you're wondering why I'm posting this to an investing blog, this signed book could well prove to be my best investment. (And he's the 49th "most powerful Indian"!)

My potentially biased recommendation is to please buy the book. More details after the book is launched and read by yours truly.

Posted in Books

DLF’s Westend Heights Project (Bangalore) in Trouble

13 comments Written on May 9th, 2009 by
Categories: DLF
DLF has gotten a reprimand from the BBMP - Bangalore's Mahanagar Palike, or Municipal council on it's Westend Heights project.
The BBMP has cautioned the public from booking apartments in this project as the builder has not taken approval from the competent authority. In a public advertisement dated April 26, DLF had announced opening of bookings for its proposed apartments and said the Bangalore Development Authority’s (BDA) approval had been obtained to build up to four floors. The BBMP said according to the advertisement, the apartment complex consists of 18 floors and not four as mentioned. The project consists of 1,980 units spread across 19 towers that are stilt+18 floors high.
The actual ad is below (click for a larger picture)

While getting actual sactions later is common, it's obvious that DLF hasn't even done the basic groundwork of what it takes to get BBMP on the same page. It must be quite a crisis to get slapped on the wrist from those they would scramble to keep happy at any cost.

Btw, Moneycontrol says 600 homes have been sold. I hope they get their money back. But at this point I wouldn't hold my breath.

I have decided NEVER to buy a house that isn't ready to move in immediately. Builders will delay. They will change specs and you won't be able to do anything. And then, they will over charge and under-deliver on maintenance because they can. My parents have had a lot more trouble due to this, and I've learnt from them, and now from a number of friends stuck with yet-to-arrive homes, that a house is a house when it's ready to move in.

Hey, I might even buy land and build my house - why not, at least I have some level of control there. But a paper plan from a "reputed" builder? No way.

Posted in DLF

PFRDA Opens the New Pension Scheme (NPS) to all citizens

6 comments Written on May 3rd, 2009 by
Categories: NPS, Pensions
PFRDA - a horrendously complex acronym for a pension fund regulator has opened up the New Pension Scheme (NPS) to all citizens. Read the Offer Document, Welcome Kit, Subscriber Registration Form and Investment Guidelines.

Note: I've written about PFRDA earlier as part of my Make Rating Agencies Irrelevant theme, and I'm happy to note a certain part of my thoughts have been addressed: now, the section for investment in credit instruments asks for only 75% of the investment to be done in "investment grade" corporate bonds - the rest is left to the investment managers discretion. This is slightly better, and given investment grade rated stuff is on the same line as (unrated) liquid funds, fixed deposits and PSU/PFI/Muni/Infra bonds, it should help in making rating agencies irrelevant.

Let me go through the fundas of the New Pension Scheme (NPS) in some detail.

  • First a small primer. Government employees must contribute to the NPS, and the government will match their contributions. It's only since May 1 that all other citizens can register with the NPS.
  • Any citizen can register. NRIs need a local bank account, and need to be KYC compliant. There are a lot of NRI regulations - present in detail in the offer documents. (I know that some of you are NRIs, and perhaps want some clarity on this, maybe I can do another post on the NRI applicability of this in another post.)
  • Mandatory payments: 500 per contribution, 6000 per year. And you have to transact four times a year, minimum. If you don't meet the minimums, you have to pay Rs. 100 per year of default, and make up all minimum amounts. Your account gets marked "dormant" till then.
  • Two kinds of accounts - Non-withdrawable (Tier-I), and savings (Tier II). Right now, there's only Tier I.
  • Fees: There's about Rs. 100 for registration (350 to one entity and 40 to another). Apart from that, there's a Rs. 30 per transaction that you'll pay. Annual fees are 350 a year. The fund mgmt charges are very low - add up to about 0.009% or so.
  • Investment control: You can choose any of the six shortlisted fund managers to manage your money.
  • Your money can be invested in Equity (E), Credit (C) or Government (G) instruments, and you can decide the ratio of these instruments in your portfolio.

    Equity is linked to the Nifty/Sensex. Government is G-Secs, or Gilts. Credit involves liquid funds, fixed deposits, PSU bonds, Infrastructure or municipal bonds and corporate bonds.

    You can't put more than 50% into Equity. If you don't want to choose the ratio, there's an "auto choice" option that chooses between the three options depending on your age.

  • Once you select you can't change the fund manager or your investment ratio till May 2010. For Now.
  • Withdrawals: If you withdraw before you're 60, you have to invest 80% of your money in an annuity and take the remaining as a lumpsum. At 60, you have to put at least 40% into an annuity, and take the rest out (you can phase the rest till you're 70). And if you die, the whole amount will be given to the nominee as a lumpsum.
  • Taxation: All pension fund investment is tax-free, uptil 100K per year, under section 80c. Don't rejoice, because this 100K includes all other 80C instruments (like Housing loan principal, Employee PF, Life Insurance, Children's education fees etc.)
  • Withdrawals are currently fully taxed. PFRDA is trying to get withdrawals tax free too, but it's not quite worked yet.
  • You will get an IPIN and a TPIN to get your account status online or on the telephone. The site online is: http://npscra.nsdl.co.in
So is this NPS a good deal? That's a very good question. First, we don't know yet how it will pan out - will an investment manager be better than another? Will you really be able to change things at will? Will the taxes screw you out of your own money?

Another post coming up...

Posted in NPS, Pensions

"Sal" on the Geither Plan

3 comments Written on May 3rd, 2009 by
Categories: Education
The Khan Academy, a non-profit started by Salman "Sal" Khan, has a fantastic series of videos on the Geithner Plan. The Khan Academy site is more spectacular, featuring videos on Algebra, Calculus, Physics, Finance, Banking and Differential Equations - apart from the financial crisis. I'm a sucker for good teaching, so I'm going to spend a good amount of time learning all the stuff I'm already supposed to know - and I think this will be useful to pretend I actually know something when my son grow up and asks me to solve (shudder) a differential equation.

This kind of stuff is going to change education.

Posted in Education

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