RMB TO WEAKEN?: (contributed by Chan Cheh Shin - Fund Manager)
Thoughts for October 2012............
We often hear analysts and economists telling people that there is nothing to worry about China's capital outflows as the world No. 2 economy has US$3.2 trillion in FX reserve. This, however, ignores the impact of a shrinking FX reserve on Chnese liquidity. Capital outflow is a drain to China domestic liquidity.
The People's Bank of China (PBoC) does have US$3.2 trillion of so-called "fire power" to prop up the currency in the unlikely event of massive capital outflow, but the success of it will come at the expense of domestic liquidity.
PBoC might use other tools (on top of the routine use of reverse repo) to ease liquidity, such as outright bond buying, or perhaps guiding a depreciation of the Chinese yuan (as Renminbi is commonly called) and hope that inflows will appear again.
And the latter option appears to be what the PBoC is actually using. As the US Fed announced QE-Infinity, at some point it may (or perhaps not) necessitate PBoC FX intervention again, essentially to print Chinese yuan in order to bring the price closer to the fixing.
Watch out!.......for other Asian currencies to possibly slide too.....
Question: Will an exchange of new party leader have a significant positive impact on China economy?
My opinion: No correlation at all. In fact, the political/position in-fighting within the party since March 2012 this year may only result in the following two outcomes:
* A mad rush to pump up the economy so that the new "leader" will look good. But it will be bad for the fundamental economy as the growth is again pumped up by stimulus.
* Party members will spend much more of their energy in jockeying for positions and thus put the economic growth plan to the back seat.
Happy Thinking!
Keep Watch On The Yuan & Asian Currencies.....
LATEST ABOUT PRS IN MALAYSIA
PRIVATE RETIREMENT SCHEME (PRS) PRODUCTS ROLLING OUT ANY
TIME NOW
Six months ago, on April 19, I posted an article about the
national Private Retirement Scheme, in which I said the scheme was taking shape
fast. I also mentioned that the appointed eight PRS providers were required to
submit their product plans within six months’ time for approval by the
Securities Commission. True enough, now that it is October (six months from
April), some of the providers are set to roll out their products any time very
soon. As proactive preparatory actions to capture the market when the products
are launched, they have already begun road shows to introduce the PRS to their
targeted distributors and also to train them.
My research for updated information via sources in the
industry, including a few providers, enables me to share the following affirmed
key standard features and mechanisms of the products for your easy reference:-
*Open to both Malaysians and foreigners (with valid documents)
above age 18.
* Tax relief on contribution of up to RM3,000 per annum,
available next 10 years from 2012.
* Employers sponsoring contributions for employees are
eligible to claim tax deduction up to 19% of their employees’ overall annual
remuneration.
* Three (3) core funds, namely Growth Fund (maximum 70%
equities and balance in fixed income assets), Moderate Fund (maximum 60%
equities and the balance in fixed income) and Conservative Fund (80% in fixed
income). Apart from the core funds, a provider may have non-core funds parked
under the core funds, e.g. an Islamic Moderate Fund which is being made
available by one provider.
* Participants have the option to select the fund/s of their
choice.
* For participants who do not elect any particular fund, the
default option automatically will apply, which allows the provider to auto-pick
the core fund on behalf of the participant according to the age group as
follows: Growth Fund (below age 40), Moderate Fund (40 – 50 years old),
Conservative Fund (above 50 years old). When the participant moves to the next
age group, the provider will redeem units from the existing core fund to
purchase units in the next core fund identified for the newly attained age.
* Participants can request to switch funds along the way,
between core funds and non-core funds. A provider is allowed to either charge a
low or no switching fee. It can also stipulate the limit in number of switch
times per year.
* A participant is allowed to sign up with more than one
provider.
* A sponsoring employer may choose the provider while
selection of funds lies with employees.
* Employers sponsoring the contributions may opt for a
vesting schedule formula to promote employee loyalty. For example, the vesting
ratio may range from 0 to 100% from 1st to 10th year of
service. If an employee leaves early, say in the 5th year, only 50%
of the invested savings may be vested to him.
* Some providers may offer regular contribution scheme and/or
single lump sum contribution. Additional or top-up contributions are allowed.
* Unlike unit trust investments, withdrawal of savings from
Employees Provident Fund (EPF) account to fund the contributions toward PRS is
not allowed.
* Contributions can be on monthly mode and remitted via bank
or credit-card auto-debit arrangements.
* Contributions go into two sub-accounts: Sub-account A
constitutes 70% of all contributions and the balance in Sub-account B.
Sub-account A cannot be withdrawn/redeemed before retirement.
* Rules For Withdrawal/Redemption: (a) Pre-retirement withdrawal is allowed from Sub-account B.
Participant is allowed to withdraw the whole amount from this sub-account or
partial. Redemption is subjected to 8% tax, deducted and collected by the
provider upfront on behalf of the tax authority. (b) Retirement redemption can be done either in lump sum or
periodically. Participant may also opt to retain the scheme. No tax is imposed
on retirement redemption. (c) Withdrawal because of permanent departure from Malaysia through emigration is allowed.
For foreigners, it can be done upon producing evidence of documentation
cancellation such as work permit or permanent residency.
* Transferability/portability of savings in any amount from
one provider to another is allowed, limited to once per year. The first
transfer can only be done one year after the initial contribution. A provider
can only charge the actual or reasonable expenses incurred for the transfer.
Special Note: I understand that as a form of consumer
protection, participating members of a PRS provider may invoke a meeting under
Regulation 20 of the PRS regulation upon fulfilling the following condition:
·
*Not less than 50 members or one-tenth of all
members of the PRS or the fund as the case may be, direct the PRS provider to
do so in writing.
· *Purpose of the meeting is to consider the most
recent financial statement, or to give the scheme trustee such directions as
the meeting deems proper, or to consider any other matter in relation to the
PRS or the fund or the deed.
Happy Retirees
CAVEAT: The contents of this sharing are based on my personal
research and sources of information. Therefore, you should also relate to other
relevant sources in order to verify the validity of the contents. Thank you.
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