@Leisure - Vol-6 | srei

@Leisure - Vol-6

Newsletter
 

Asian Currency Crisis – Reasons and impact

In the 1990s, encouraged by the prospects of high interest rates and earning quick profits in developing economies, foreign investors poured their money into the countries of South East Asia. But much of this money was invested in an uncontrolled manner and often found their way into the pockets of corrupt and inefficient governments.

However, the economic environment began changing in the mid-1990s. The Chinese began devaluing their currency and the US economy became stronger. Foreign investors who once crowded the markets of Thailand, Indonesia, Singapore and the Philippines began finding China and the United States more attractive investment destinations.

As the foreign investors began pulling out their money, the ASEAN countries (Association of Southeast Asian Nations) suddenly found themselves saddled with excessive foreign debt. They had to dig into their pool of foreign exchange reserves and devalue their currencies to pay off this debt. Thailand was the first to face the brunt of this economic calamity in May 1997. This time period is regarded as the beginning of the Asian currency crisis.

The problem soon spread to Indonesia, Malaysia, Philippines, Singapore, Hong Kong and South Korea. Markets around the world reacted badly to this news and started falling rapidly. The problem became compounded as speculators started betting against the currencies of these countries sensing the crisis as an opportunity to make quick profits.

The countries sought help from the International Monetary Fund. The IMF agreed to bail out these countries with billion dollar loans, but only on the condition that they raise taxes, take austerity measures and follow tough economic reforms. However, the conditions of the IMF loans were regarded as humiliating and protests broke out in these countries with the President of Indonesia even forced to resign. Many large finance companies and banks were forced to close. After two years of economic hardship, the economies of Asia and the global economy in general finally started recovering in the middle of 1999.

 
 

How safe is investing in NCDs?

This question may be the first to arise in your mind when your advisor suggests that you invest in NCDs. The question is justified since NCDs are a little different from fixed deposits with which you may be very familiar. There are many aspects that you would need to look at to be convinced about investing in NCDs:

  1. The credit rating of the issue: An NCD is usually issued with an alphabetic indicator of its quality. These could be AAA, AA, A, BBB, C or D. There may also be a + or – symbol that is added after the alphabet (like AA+ or BBB-). While AAA represents the highest credit quality, D represents default or junk status. You would do well to restrict your investments to the AAA and AA bands to ensure safety of capital and interest payments.
  2. Security: NCDs are usually backed by assets of the issuer. The identified assets are pledged to a third party entity, usually a trust, which would automatically sell the assets and repay NCD holders in case the issuer is unable / unwilling to repay as promised.
  3. Debenture Redemption Reserve: Issuers are required to create a reserve fund to which they keep periodically transferring money and this would ultimately be used to repay investors. This has to be done even if the issuer has the intention of issuing fresh NCDs on maturity.

Well, you may rest assured that NCDs with a good rating and from a reputed issuer is safe enough for you to invest in. Srei Infrastructure Finance Ltd. has consistently earned higher ratings from various prominent agencies and offers various choices in NCDs. The company’s focus in priority sectors like infrastructure lending with interests in equipment finance and project advisory, and over 25 years’ of experience, give its offering high credibility.

 
 

Bonds make better investments than gold

Gold is often considered a sound investment due to the fact that in the past, it has acted as a store of value and offered a hedge against inflation. However, for many reasons, bonds offer a better investment avenue…

Performance of Gold and BondsTraditionally, Indians have preferred investing in gold over various other avenues. However, a closer look at bonds reveals that they have many attractive features that could suit your needs better...

Regular income: While most bonds give investors the option to receive a regular income in the form of interest pay-outs, once purchased, gold does not deliver any stream of income. If anything, it results in an outflow of income in the form of storage costs.

Hedge against inflation: Holding gold in times of high inflation usually results in rise in the price of the yellow metal, which is assumed to compensate for the general rise in prices. However, over the past year, for instance, while inflation was ruling high in the range of 8-10 per cent, gold prices have risen by only about 5 per cent. The return on bonds, on the other hand, is usually fixed at a premium over the prevailing and expected rates of inflation.

Capital preservation: There is no assurance that the price of gold will be high during the period when you wish to redeem your holdings. You may be faced with situations wherein you suffer a loss, merely because you have chosen to sell your gold during a time when the prices were low. Further, if gold is held in the form of jewellery, there is some loss of value when it is exchanged for cash due to making charges and melting. With investments in bonds, your capital remains intact.

 
 

Buddy Jokes

1. The phrase in your yearly performance reviews really mean:
OUTGOING PERSONALITY means ‘Always going out of the office’
GOOD COMMUNICATION SKILLS means ‘You spend a lot of time on phone’
INDEPENDENT WORKER means ‘Nobody knows what you do’
EXCEPTIONALLY GOOD JUDGEMENT means ‘You are lucky’
LOYAL means ‘You can’t get a job anywhere else’
OF GREAT VALUE TO THE ORGANIZATION means ‘You get to work on time’

2. Manager: What is the difference between “COMPLETE” and “FINISH”?
Candidate: I would like to explain this with an example - If you marry a right person you are ‘Complete’, but if you marry a wrong one then you are ‘Finish’.

3. Manager: Sorry, but I can’t hire you; we don’t need much help.
Applicant: In that case, I’m just the right person. I won’t be of much help anyway!

A big company announced that they would pay a reward of Rs 5,000 for each money-saving idea submitted by its employees. The first prize went to the employee who suggested cutting down the reward money to Rs 2,500.