Saturday 30 July 2011
Wednesday 27 July 2011
Largest gold bar
Largest gold bar
Monday 25 July 2011
Impact of Prudential Regulations and Equity Investment
Banks are allowed to bring their exposures in equity investment within the prescribed limit and share valuation be calculated on cost basis
These show the efforts of the central bank to improve the image of the country, to enhance its international rating in order to attract portfolio investments.
These polices encourage the asset management companies to float mutual funds, and to introduce fund managers for provident funds etc.
Moreover, the Islamic Banks are being encouraged to park their funds in the equity market and they will have the option to invest as much as 35 percent of their equity in the stock market, as compared to 20 percent allowed to commercial banks..
DFIs play their primary role to support the equity market
Consultative process would achieve national objectives in the financial sector.
The valuation of banks' portfolio have been revived at cost while calculating their investment limits, and to extend the time frame for disinvestment of extra shares taken up as part of underwriting obligations.
Banks' profits get enhanced from capital gains, dividends
In 2002, as far as incremental earning is concerned, profits of Bank Alfalah and Faysal increased the most, with growth of Rs 1.7 billion and Rs 1.5 billion, respectively. Bank Al-Habib was third with an increase in earnings of Rs 0.4 billion.
Moreover, the banks now cannot even own more than 30 percent in any company's paid up capital.
While appreciating the need to regulate the activity of commercial banks in the stock market, the market shows reactions upon the perception on these regulations in the context of time frame for implementation of these regulations, inclusion of DFIs for the purpose of these regulations, off-loading of shares underwritten by the banks/DFIs and its time frame, valuation mechanism for valuation of marketable securities etc, and their adverse impact on the stock market.
DFIs are such as Pak-Kuwait and PakLibya
DFIs are such as Pak-Kuwait and Pak
Currency strength
Currency strength shows value of currency.
By economists, it is often calculated as purchasing power.
Influencing Factors
By financial traders it can be as an indicator, depicting many factors to the currency, for example fundamentals, overall economic performance or interest rates.
Calculating Methods
It can also be calculated from currency relation to other currencies, usually using pre-defined currency basket.
Typical example of this method is the U.S. Dollar Index. The current trend in currency strength indicators is to combine more currency indexes, in order to make Forex movements easily visible.
Currency strength based trading indicators
Currency strength is calculated from the U.S. Dollar Index which is used as a reference for other currency indexes.The basic idea behind indicators is "to buy strong currency and to sell weak currency".
With this kind of indicators one is able to:- see the reactions of each currency on moves in correlated instruments (for example CAD/OIL or AUD/GOLD)
- look for a strong trend in one currency
- observe most of the Forex market in one chart
Examples
Typical example of indicators based on currency strength are Relative currency strength and Absolute currency strength. Their combination is called Forex Flow indicator, because one is able to see the whole currency flow across the Forex market.
Signals
One can use Relative currency strength for pattern trading as well, among basic patterns which can be used are:
Cross
Trend-break
Divergence
Tuesday 19 July 2011
Reasons Cited for Speculation in Gold
World's largest solid gold brick weighing 220kg (485lb)
· Converse connection with Equity investment & direct relation with crude
· Degree of investment demand from wealthier investors
· IMF announcement of its plans for sell or buy under the Central Bank Gold Agreement
· Indian central bank’s purchase of gold
· Recent euro weakness as the result of fiscal issues in Greece and other peripherals
· Gold’s Physical Market – jewellery fabrication
· Longer-term impact of President Obama's bank proposals on gold
· Actual and anticipated monetary tightening in China
· Royalty taxes that apply to mining projects
· US Federal Reserve Open Market Committee meeting
World Gold Council
Australia world’s third largest gold producer
Analysts can Act as an Early Bird for Market Fiascos
Security analysts who focus on financial fundamentals failed to flag the major stock-market fiascos, such as Enron and WorldCom, until it was too late. Could technical analysis have provided a better early warning? The answer seems to be yes.
Rather than relying on something outside the market to forecast stock prices, relying on the market itself has proven to be a sound method. Above all, market gives one continuous information whereas fundamentals not.
By looking at where the market is and how it got there using charts, technical analysts rely measuring changes in supply and demand.
Over time, the price changes, created by buying and selling behavior, create partners on the charts. Each pattern is usually followed by a certain high- probability response in the market. This is not to say that charts can predict the future. rather they lay the foundation for the bottom-line decision to buy, sell or hold, which is really all that counts.
In other words would technical analysis have told us to get out of stocks like Enron and WorldCom? The answer is “yes”. May be not at their peaks but certainly before they imploded, and that is no trivial triumph. Technical analysts did not know what was coming down the pike, but they knew enough not to own the stock.
It is usually kind enough to tell us to get out of the way before small losses become catastrophic. The charts are simply the earpieces we just to listen the message.
Saturday 16 July 2011
DERIVATIVE MARKETS AND HEDGING
The concept of risk is at the heart of investment management. Financial analysts and portfolio mangers continually identify measure and mange risk. In a simple world where only stocks and bonds exist, the only risks are the fluctuations associated with market values and the potential for a creditor to default.
One way to reduce risk is to use insurance. The financial markets have created their own way of offering insurance against financial loss in the form of contracts called derivatives.
A derivative is a financial instrument that offers a return based on the return of some other underlying asset.
A derivative contract initiates on certain date and terminates on later dale.
TYPES OF DERIVATIVES
Derivative contracts can be classified into two general categories:
(1) Forward commitments and
(2) Contingent claims.
THE PURPOSE OF DERIVATIVE MARKETS
Perhaps the most important purpose of derivative markets is risk management. Often this process is described as hedging, which generally refers is the process called speculation.
All one needs to hedge or speculate is a party that mines gold could hedge the future sale of gold by entering into a derivative transaction with a company that manufactures jewelry. Both of these companies are hedgers, seeking to avoid the uncertainty of future gold prices by locking in a price for a future transaction. The mining corporation has concerns about a price decrease, and the jewelry manufacturer is worried about a price increase.
Friday 15 July 2011
6 Factors That Influence Exchange Rates
Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health.
Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world.
For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures.
But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio.
Here we look at some of the major forces behind exchange rate movements.
Overview
Overview
Before we look at these forces, we should sketch out how exchange rate movements affect a nation's trading relationships with other nations.
A higher exchange rate can be expected to lower the country's balance of trade, while a lower exchange rate would increase it.
Determinants of Exchange Rates
Numerous factors determine exchange rates, and all are related to the trading relationship between two countries.
The following are some of the principal determinants of the exchange rate between two countries.
Note that these factors are in no particular order; like many aspects of economics, the relative importance of these factors is subject to much debate.
1. Differentials in Inflation
As a general rule, a country with a consistently lower inflation rate exhibits a rising currency value, as its purchasing power increases relative to other currencies.
Those countries with higher inflation typically see depreciation in their currency in relation to the currencies of their trading partners. This is also usually accompanied by higher interest rates. (To learn more, see Cost-Push Inflation Versus Demand-Pull Inflation.)
2. Differentials in Interest Rates
Interest rates, inflation and exchange rates are all highly correlated.
By manipulating interest rates, central banks exert influence over both inflation and exchange rates, and changing interest rates impact inflation and currency values.
Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise.
The impact of higher interest rates is mitigated, however, if inflation in the country is much higher than in others, or if additional factors serve to drive the currency down. see What Is Fiscal Policy?)
3. Current-Account Deficits
The current account is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest and dividends.
A deficit in the current account shows the country is spending more on foreign trade than it is earning, and that it is borrowing capital from foreign sources to make up the deficit.
In other words, the country requires more foreign currency than it receives through sales of exports, and it supplies more of its own currency than foreigners demand for its products.
The excess demand for foreign currency lowers the country's exchange rate until domestic goods and services are cheap enough for foreigners, and foreign assets are too expensive to generate sales for domestic interests. (For more, see Understanding The Current Account In The Balance Of Payments.)
4. Public Debt
Countries will engage in large-scale deficit financing to pay for public sector projects and governmental funding. While such activity stimulates the domestic economy, nations with large public deficits and debts are less attractive to foreign investors. The reason? A large debt encourages inflation, and if inflation is high, the debt will be serviced and ultimately paid off with cheaper real dollars in the future.
In the worst case scenario, a government may print money to pay part of a large debt, but increasing the money supply inevitably causes inflation.
Moreover, if a government is not able to service its deficit through domestic means (selling domestic bonds, increasing the money supply), then it must increase the supply of securities for sale to foreigners, thereby lowering their prices.
Finally, a large debt may prove worrisome to foreigners if they believe the country risks defaulting on its obligations.
Foreigners will be less willing to own securities denominated in that currency if the risk of default is great.
For this reason, the country's debt rating (as determined by Moody's or Standard & Poor's, for example) is a crucial determinant of its exchange rate.
5. Terms of Trade
A ratio comparing export prices to import prices, the terms of trade is related to current accounts and the balance of payments.
If the price of a country's exports rises by a greater rate than that of its imports, its terms of trade have favorably improved. Increasing terms of trade shows greater demand for the country's exports.
This, in turn, results in rising revenues from exports, which provides increased demand for the country's currency (and an increase in the currency's value).
If the price of exports rises by a smaller rate than that of its imports, the currency's value will decrease in relation to its trading partners.
6. Political Stability and Economic Performance
Foreign investors inevitably seek out stable countries with strong economic performance in which to invest their capital. A country with such positive attributes will draw investment funds away from other countries perceived to have more political and economic risk. Political turmoil, for example, can cause a loss of confidence in a currency and a movement of capital to the currencies of more stable countries.
Conclusion
The exchange rate of the currency in which a portfolio holds the bulk of its investments determines that portfolio's real return.
A declining exchange rate obviously decreases the purchasing power of income and capital gains derived from any returns.
Moreover, the exchange rate influences other income factors such as interest rates, inflation and even capital gains from domestic securities.
While exchange rates are determined by numerous complex factors that often leave even the most experienced economists flummoxed, investors should still have some understanding of how currency values and exchange rates play an important role in the rate of return on their investments.
Saturday 9 July 2011
Pakistan a Trading country in Future
Pakistan's emerging strategic position in geo-economic areana had made this coutry a most powerful trading country in coming future.
pakistan is now surrounded among mass production countries like China and India on one side and mass consumpiton coutries on monetary terms on other side like Gulf and Central Asian.
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