The MasterCard Financial Literacy Index brings in a lot of surprises about the financial literacy rate of various countries. The survey conducted among 12,205 respondents aged 18 – 64 in 27 countries across Asia/Pacific, Middle East and Africa (APMEA) between April 2013 and May 2013.
As per the survey New Zealand is the most financially literate country in the Asia Pacific region. Second comes Singapore and Taiwan is third in Asia Pacific Region. This survey had three components and separate results were generated on the base of these three.
In Basic Money Management New Zealand scored 77 points came as the top place Australia got the second place with 75 points. Third place went to Singapore. In this segment the worst performer is India that too in the last place with 50 points which is 5 points lesser than 2012. This result is solely for Asia Pacific Region.
In Financial Planning the small country Myanmar topped the first place with 88 points they remained in the first place last year also. Taiwan came second with 83 pointsbut the worst performers in financial planning is surprisingly Japan with 68 points like last year. This is just for Asia Pacific Region. The countries who improved are Bangladesh, Thailand, India, China, Australia and New Zealand.
The countries that did well in an investment segment of Asia Pacific Region are Thailand, China, Australia, New Zealand and Hong Kong. China comes first in the list and Hong Kong second. The worst performer in this segment is Myanmar.
In APMEA Region financial literacy rate is highest in New Zealand however surprisingly Japan is the lowest financial literate country below India. In this study countries from Asia Pacific Region were included.
Friday 27 September 2013
Tuesday 24 September 2013
The Chancellor is not for Experiments!
The lowest rate of unemployment in the last 2 decades could be the real reason which helped Ms Angela Merkal to win the current elections as Chancellor of Germany for the consecutive third term. Her party, Christian Democratic Union won 41.5% votes against 25.7% votes of Social Democrats led by Mr Peer Steinbruck. But she is still in need of a coalition since she doesn’t have an absolute majority.
The Chancellor seem to be the pet of Germans since she satisfied them with her strict measures she took on Euro-crisis, Libyan war, Syrian uprising. Her “ NO WAR” attitude was visible when she send a small troup of 8000 to Afgan rejecting the criticism of her allies and to keep an ok bilateral relationship with the US.
She has shown her commitment towards her country by not giving away for the bailout demands of other European countries like Greek, Spain and Cyprus. She called for strict austerity measures in these countries which truly affected not only eurozone but other countries as well.
Ms Merkal holds the blame for increased burden on these countries but her measures are for the future not for the present. That’s her view. For eg the merchandise exports from India to Europe declined from $42.7 billion in 2011 to $37.3 billion in 2012. But the current account in eurozone got a growth from $100 billion deficit to a $300 billion surplus.
There are worries also. The amount of the debt Germany has is € 2.1 trillion. This has affected the growth of many federal states, municipalities and cities. The other main issues which can be a trouble for her government are:
Debt Sharing
The idea of euro bonds under which 17 European countries share their debt will be rejected by the new government. Germany may not be interested in buying new bonds which is capable to make poor countries to borrow cheaply. Greens Party , the supposed coalition partner is in favor of buying bonds and this can create a tension inside the ministry.
Growth
Ms Merkal already carrying the blame on her for not funding crisis hit countries like Spain, Greece and Cyprus. The European Central Bank has already designed few
measures to help these countries.
Troubled Banks
Zombie banks all over the Europe need restructuring and setting up European Union wide agency was not appreciated by German Finance Minister Mr Wolfgang Schaeuble till now. This will be a crucial issue during the current term.
Third Greek Bailout
Greece is in need of 11 billion euros to cope up with unemployment and related issues. The old 2 bailouts were about 240 billion euros.
Throughout the next four years she will be scrutinized for ger unfriendly attitude to other countries and specifically towards the eurozone. But her loss in the lower house forces her to be in a coalition with rivals who will force her to keep a friendly rapport with the neighbourhood.
Wednesday 18 September 2013
G 20 on Shadow Banking
The recent G20 meeting ended with a strong affirmation of regulatory functions on the top banks. The control on NBFC s has great importance since the bankruptcy of Lehman Brothers was the first indication of global economic crisis of 2008. The G20 leaders have given lots of attention on the issue of shadow banking and they have taken a decision to strengthen the regulation over the shadow banks.
In the roadmap document to regulate shadow banks, International Organization of Security commission (IOSCO) will analyze the global hedge fund sector to the Financial Stability Board (FSB). FSB, the international body to monitor and recommend about the global financial system was established soon after G20 summit in 2009. Based in Basel, Switzerland the board members are G20 nations, FSF members and the European commission. FSB provides regular monitoring of shadow banking services. There are various procedures assigned to FSB and IOSCO, to keep the services of NBFC is on track.
In the G20 preamble the 62nd point is all about shadow banking regulation and in that it says that the G20 group is implementing a wide range of policies to correct the global economic crisis by ensuring the financial institutions, markets and the participants are working in a regulated environment.
The shadow banking sector is around $60 trillion among that $30 trillion is in the Europe itself. This year witnessed a huge credit bubble in China because of the shadow banking. Chinese overall credit grew from $9 trillion to $23 trillion in the five years since 2008, the Lehman collapsed. The shadow banking in the US shows the signs of shrinking since 2010 for eg: the size of repurchase agreements is down by 3% to $1. 60 trillion.
Tuesday 10 September 2013
Capital Flights: A Fact
Bovespa going down by 18% in June 2013 indicates a lot when you read it along with the report that the Brazilian IPO s has given only losses to its investors since 2005. The rapid capital flight is keeping the country on the verge of a breakdown and internal issues as we witnessed during the Confederation Cup series. This is even influencing the global markets.
As per June 2013 reports investors have pulled $1.5 billion out of emerging market bond funds. Brazil’s primary budget balance went down these years and the reasons behind the capital flights could be the excess domestic credit, and high loan-to-deposit ratio of 1.6. Brazilian banks which benefited from the once capital inflows are affected by these outflows, even the metal and mining sector are under threat.
Investors foresee a hard landing of Chinese economy and the most capital flights are feared to occur by late 2013 and early 2014 and people are careful about the failing forecasts. As the Fed tightens the measures Chinese economy is likely loose more capital even though they keep their currency undervalued. Looking at this situation IMF, in its July update has warned China on this capital flight on the backdrop of Chinese government deciding on opening capital accounts and allowing the Chinese to invest in securities abroad.
An amount of $71 bn will be taken out of Russia in 2013 according to the reassessment done by The Russian Ministry of Economic Development. In 2012 the amount of capital exited from the country was $56bn.
Ailing Indian currency is affected by the massive capital flight which country witnessed late August. The RBI data say FDI worth $7.6 billion was invested in between April and June 2013, but at the same time $11.2 billion flowed out of the country. Finance Minister is expecting more and more FDI but the capital flight remains unsolved.
Major Capital flights
The phenomenon of capital flight is not limited to these countries but it is omnipresent.
In 1998 Indonesia went through a capital flight which made the country unstable. The 2009 UK capital flight was due to the tax laws. The capital flight in 2006 from France that too on the base of reviving tax laws are the major capital flights than which happens in the Euro area especially in Greece and Spain.
As per June 2013 reports investors have pulled $1.5 billion out of emerging market bond funds. Brazil’s primary budget balance went down these years and the reasons behind the capital flights could be the excess domestic credit, and high loan-to-deposit ratio of 1.6. Brazilian banks which benefited from the once capital inflows are affected by these outflows, even the metal and mining sector are under threat.
Investors foresee a hard landing of Chinese economy and the most capital flights are feared to occur by late 2013 and early 2014 and people are careful about the failing forecasts. As the Fed tightens the measures Chinese economy is likely loose more capital even though they keep their currency undervalued. Looking at this situation IMF, in its July update has warned China on this capital flight on the backdrop of Chinese government deciding on opening capital accounts and allowing the Chinese to invest in securities abroad.
An amount of $71 bn will be taken out of Russia in 2013 according to the reassessment done by The Russian Ministry of Economic Development. In 2012 the amount of capital exited from the country was $56bn.
Ailing Indian currency is affected by the massive capital flight which country witnessed late August. The RBI data say FDI worth $7.6 billion was invested in between April and June 2013, but at the same time $11.2 billion flowed out of the country. Finance Minister is expecting more and more FDI but the capital flight remains unsolved.
Major Capital flights
The phenomenon of capital flight is not limited to these countries but it is omnipresent.
In 1998 Indonesia went through a capital flight which made the country unstable. The 2009 UK capital flight was due to the tax laws. The capital flight in 2006 from France that too on the base of reviving tax laws are the major capital flights than which happens in the Euro area especially in Greece and Spain.
Monday 9 September 2013
Major Challenges for Mr Raghuram Rajan the new Central Banker in India
North Block vs. Mint Road
The home of Union Finance Ministry in North Block and the RBI HQ on Mint Road will have much more communication in the coming days. After the new RBI chieftain steps in with Himalayan tasks his prime duty should be satisfying the North Block which is answerable to the general public at many fronts. The political circle in Delhi never comes under the jurisdiction of the RBI chief and they may not be interested in understanding the worries of common man. So the toughest task will be keeping the balance between Finance ministry and RBI
Strengthening Rupee
Uplifting a currency which has gone down by 12% in the current financial year can’t be defined just as a tough task instead this is an uphill task. This depreciation does not purely depend on country’s internal and the external issues are not in the control of policymakers as well. The massive stimulus withdrawal has put not only India but all the emerging economies growths at stake. The RBI chief is not a policy making authority and he can’t design or execute programs which inject liquidity into the system. Various issues like dependence on foreign energy, the invasion threat from China, exports and imports, broadening of tax polices, infrastructure program are not at his say.
Curbing Inflation
Mr Raghuram Rajan who was the chief advisor to the Finance Minister has performed the duty of the Chief Economist of IMF is the man who predicted the economic crisis of 2008 way back in 2005. In 2012-2013 the fiscal deficit was slashed down to 4.9 % of GDP from 5.8% of GDP in 2011-2012 by the Finance Minister. Until May 2013 this plan was functioning well by stabilizing rupee, controlling inflation, and even an RBI interest rate cut was boosting up industrial segment. An extra $20 billion was invested in Indian equities but the slowdown in QE easing by Fed Chairman made everything go wrong. Raising the interest rates is a solution but the slow growth of the economy may not support the high interest rates especially the business establishments. Recently The Confederation of Indian Industry has demanded again fro interest rate cut from RBI. How new RBI chief will execute his plans to halt the inflation is a question.
More Bank Licenses
Opening new banks and starting branches all over the country and eventually lowering the percentage of assets which banks have to hold in government securities. This is another challenge and this plan may have severe consequences for farmers and small to medium – sized business. The main challenge lies in the risk behind finding proper banks.
In the press conference Mr Raghuram Rajan cleared his intentions by telling. “Some of the actions I take will not be popular. The governorship of the central bank is not meant to win one votes or Facebook ‘likes.’?” This proclamation itself is an indicator for his reformative plans.
The home of Union Finance Ministry in North Block and the RBI HQ on Mint Road will have much more communication in the coming days. After the new RBI chieftain steps in with Himalayan tasks his prime duty should be satisfying the North Block which is answerable to the general public at many fronts. The political circle in Delhi never comes under the jurisdiction of the RBI chief and they may not be interested in understanding the worries of common man. So the toughest task will be keeping the balance between Finance ministry and RBI
Strengthening Rupee
Uplifting a currency which has gone down by 12% in the current financial year can’t be defined just as a tough task instead this is an uphill task. This depreciation does not purely depend on country’s internal and the external issues are not in the control of policymakers as well. The massive stimulus withdrawal has put not only India but all the emerging economies growths at stake. The RBI chief is not a policy making authority and he can’t design or execute programs which inject liquidity into the system. Various issues like dependence on foreign energy, the invasion threat from China, exports and imports, broadening of tax polices, infrastructure program are not at his say.
Curbing Inflation
Mr Raghuram Rajan who was the chief advisor to the Finance Minister has performed the duty of the Chief Economist of IMF is the man who predicted the economic crisis of 2008 way back in 2005. In 2012-2013 the fiscal deficit was slashed down to 4.9 % of GDP from 5.8% of GDP in 2011-2012 by the Finance Minister. Until May 2013 this plan was functioning well by stabilizing rupee, controlling inflation, and even an RBI interest rate cut was boosting up industrial segment. An extra $20 billion was invested in Indian equities but the slowdown in QE easing by Fed Chairman made everything go wrong. Raising the interest rates is a solution but the slow growth of the economy may not support the high interest rates especially the business establishments. Recently The Confederation of Indian Industry has demanded again fro interest rate cut from RBI. How new RBI chief will execute his plans to halt the inflation is a question.
More Bank Licenses
Opening new banks and starting branches all over the country and eventually lowering the percentage of assets which banks have to hold in government securities. This is another challenge and this plan may have severe consequences for farmers and small to medium – sized business. The main challenge lies in the risk behind finding proper banks.
In the press conference Mr Raghuram Rajan cleared his intentions by telling. “Some of the actions I take will not be popular. The governorship of the central bank is not meant to win one votes or Facebook ‘likes.’?” This proclamation itself is an indicator for his reformative plans.
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