Tuesday, August 19, 2008
Trading volume in Hong Kong was relatively thin, suggesting the market could see more downside, analysts said.
Chinese commodity producers were also hit, with China Coal dropping 4.33 per cent and Angang Steel falling 3.77 per cent.
In China, the key Shanghai Composite Index fell 5.3 per cent to 2,319.87 - its lowest close in 20 months - amid a sweeping sell-off of large-capitalized airlines, refiners and other financial shares. Analysts said the sell-down reflected disappointment over a lack of new market support from the government.
Online comments seen Monday that summarized a weekend discussion between government regulators and reporters for state-run media suggested the authorities ``would not take any move to save the market,'' said Zhai Peng, an analyst at Guotai Junan Securities in Shanghai.
``Obviously, the market was very disappointed with this,'' Zhai said. ``This is far below investors' expectations.''
Airlines, which reported falling passenger traffic last month partly due to visa restrictions related to the Olympics, were among the biggest decliners. China Southern Airlines dropped 9.9 per cent, while rivals Air China and China Eastern Airlines both plunged by the 10 per cent daily limit.
Shanghai's biggest listed share, PetroChina, dropped 4 per cent and Petroleum & Chemical Corp., or Sinopec, slumped 6 per cent.
The market has also suffered from liquidity pressure as billions of newly tradable shares have begun trading this month. The strain was seen in the relatively modest performance by China Southern Locomotive, whose 3 billion shares began trading Monday in Shanghai after an initial public offering that, along with a dual listing in Hong Kong, raised nearly US$1.5 billion.
China Southern Locomotive's shares peaked at 83 per cent above their IPO price of 2.18 yuan in early trading but later fell back, closing at 3.45 yuan - or 58 percent higher than the IPO value.
Elsewhere, Taiwan's benchmark lost 2.7 per cent, South Korea's Kospi slipped 0.3 per cent and India's Sensex index was 0.5 per cent lower.
In currencies, the dollar stayed steady against the yen Monday, trading at 110.24 yen in the afternoon from 110.49 yen late Friday. The euro bought US$1.4719 compared with US$1.4687.
SHANGHAI-CHINA: Asian markets were mostly lower Monday, as mainland Chinese shares sank to a 20-month low on heavy selling by investors disappointed over a lack of new market-boosting measures.
That, along with a rebound in oil prices, help to drag down stocks in Hong Kong, Taiwan, South Korea and Singapore.
However in Tokyo, the region's biggest market, the benchmark Nikkei 225 index added 1.1 per cent to close at 13,165.45, as real estate and bank issues climbed.
Mitsubishi UFJ Financial Group gained 3.3 per cent. Sumitomo Mitsui Financial Group added 2.49 per cent. After the markets closed, MUFG said UnionBanCal had agreed to a share price of US$73.50 for the 35 per cent of the US bank that Mitsubishi UFJ doesn't own. The deal is worth about US$3.5 billion.
Major bank stocks had lost ground last week, sapped by lethargic earnings and rising credit costs following recent bankruptcies among midsize real estate firms.
A relatively strong dollar against the yen boosted most major exporters, including Toyota Motor Corp., Sony Corp. and Canon Inc.
Top property developer Mitsui Fudosan Co. rose 2.2 per cent. The benchmark index in Australia was the only other major stock measure to gain, eking out a rise of less than 0.1 per cent.
Throughout most of the region worries over the global economic outlook and a rebound in oil prices helped pull share prices lower.
Hong Kong's blue chip Hang Seng Index fell 1.1 percent to close at 20,930.67 in weak trading. ``We're trying to find the bottom,'' said Alex Tang, head of research at Core Pacific-Yamaichi. ``How far it will go is anybody's guess.''
Most sectors suffered losses. Foxconn International Holdings, the leading contract mobile phone maker, plunged 24.06 percent after issuing a profit warning last week.
Retail goods and textile exporter Li & Fung lost 0.21 per cent on worries about slumping demand overseas. Upstream producer CNOOC was down 1.87 per cent and Cheung Kong dropped 1.5 per cent.
That, along with a rebound in oil prices, help to drag down stocks in Hong Kong, Taiwan, South Korea and Singapore.
However in Tokyo, the region's biggest market, the benchmark Nikkei 225 index added 1.1 per cent to close at 13,165.45, as real estate and bank issues climbed.
Mitsubishi UFJ Financial Group gained 3.3 per cent. Sumitomo Mitsui Financial Group added 2.49 per cent. After the markets closed, MUFG said UnionBanCal had agreed to a share price of US$73.50 for the 35 per cent of the US bank that Mitsubishi UFJ doesn't own. The deal is worth about US$3.5 billion.
Major bank stocks had lost ground last week, sapped by lethargic earnings and rising credit costs following recent bankruptcies among midsize real estate firms.
A relatively strong dollar against the yen boosted most major exporters, including Toyota Motor Corp., Sony Corp. and Canon Inc.
Top property developer Mitsui Fudosan Co. rose 2.2 per cent. The benchmark index in Australia was the only other major stock measure to gain, eking out a rise of less than 0.1 per cent.
Throughout most of the region worries over the global economic outlook and a rebound in oil prices helped pull share prices lower.
Hong Kong's blue chip Hang Seng Index fell 1.1 percent to close at 20,930.67 in weak trading. ``We're trying to find the bottom,'' said Alex Tang, head of research at Core Pacific-Yamaichi. ``How far it will go is anybody's guess.''
Most sectors suffered losses. Foxconn International Holdings, the leading contract mobile phone maker, plunged 24.06 percent after issuing a profit warning last week.
Retail goods and textile exporter Li & Fung lost 0.21 per cent on worries about slumping demand overseas. Upstream producer CNOOC was down 1.87 per cent and Cheung Kong dropped 1.5 per cent.
Market breadth turns negative
India's rupee fell for a fifth day, the longest losing streak in more than eight months, on speculation refiners stepped up purchases of crude oil. The rupee weakened 0.5% to 43.29 per dollar.
Grasim Industries (down 4.96% to Rs 1,954.45), Ambuja Cements (down 2.72% to Rs 82.40), ACC (down 1.98% to Rs 597.70), Sterlite Industries (down 1.75% to Rs 609.35) edged lower from the Sensex pack.
Hindustan Unilever (up 1.63% to Rs 242.80), Bharat Heavy Electricals (up 1.21% to Rs 1,729.50), Larsen & Toubro (up 1.19% to Rs 2,692), Jaiprakash Associates (up 0.61% to Rs 173.35) edged higher from the Sensex pack.
India’s largest aluminum producer by sales Hindalco Industries fell 2.95% to Rs 131.80. The company has fixed the price of its rights issue at Rs 96 per share, at a premium of Rs 95 per share. The equity shares are of a face value of Rs 1 per share. The board of directors of the company at its meeting on Thursday fixed the ratio of rights entitlement at three equity shares for every seven equity shares held by the shareholders. The record date for the rights issue has been fixed as 5 September 2008, a company release said.
India’s second largest telecom services provider by sales Reliance Communications was down 1.45% to Rs 417.95. The company added 1.75 million wireless users in July 2008, taking its total user base to 52.5 million, the company said on Thursday, 14 August 2008.
Bartronics India rose 2.35% to Rs 180.45 after company won a contract worth over Rs 400 crore from the Employees State Insurance Corporation for providing smart cards
Inflation is expected to accelerate further after the Prime Minister Manmohan Singh's cabinet on 14 August 2008 approved an average 21% salary increase for about 50 lakh government employees. The higher wages will cost the government Rs 3.38 lakh crore this year.
The Prime Minister added that various steps are being taken to bring inflation under reasonable control. He blamed the surge in prices to a 16-year high this month to higher global costs of fuel and food.
Meanwhile the Finance Ministry allowing private sector managed provident fund and superannuation trusts to have greater exposure in the stock markets, may boost the market sentiment. They can invest up to 15% of their investible funds in shares on which derivatives are available in the BSE or NSE.
Asian markets were trading lower today, 18 August 2008. China's Shanghai Composite, Hong Kong's Hang Seng, Taiwan's Taiwan Weighted, Singapore's Straits Times, South Korea's Seoul Composite were down by between 0.28% to 4.06%. However, Japan's Nikkei rose 1.12%.
US markets ended mixed on Friday, 15 August 2008. The Dow Jones Industrial Average advanced 43.97 points, or 0.38%, to 11,659.90. The S&P 500 index gained 5.26 points, or 0.41%, to 1,298.20. However the Nasdaq Composite index declined 1.15 points, or 0.05%, to 2,452.52.
India's rupee fell for a fifth day, the longest losing streak in more than eight months, on speculation refiners stepped up purchases of crude oil. The rupee weakened 0.5% to 43.29 per dollar.
Grasim Industries (down 4.96% to Rs 1,954.45), Ambuja Cements (down 2.72% to Rs 82.40), ACC (down 1.98% to Rs 597.70), Sterlite Industries (down 1.75% to Rs 609.35) edged lower from the Sensex pack.
Hindustan Unilever (up 1.63% to Rs 242.80), Bharat Heavy Electricals (up 1.21% to Rs 1,729.50), Larsen & Toubro (up 1.19% to Rs 2,692), Jaiprakash Associates (up 0.61% to Rs 173.35) edged higher from the Sensex pack.
India’s largest aluminum producer by sales Hindalco Industries fell 2.95% to Rs 131.80. The company has fixed the price of its rights issue at Rs 96 per share, at a premium of Rs 95 per share. The equity shares are of a face value of Rs 1 per share. The board of directors of the company at its meeting on Thursday fixed the ratio of rights entitlement at three equity shares for every seven equity shares held by the shareholders. The record date for the rights issue has been fixed as 5 September 2008, a company release said.
India’s second largest telecom services provider by sales Reliance Communications was down 1.45% to Rs 417.95. The company added 1.75 million wireless users in July 2008, taking its total user base to 52.5 million, the company said on Thursday, 14 August 2008.
Bartronics India rose 2.35% to Rs 180.45 after company won a contract worth over Rs 400 crore from the Employees State Insurance Corporation for providing smart cards
Inflation is expected to accelerate further after the Prime Minister Manmohan Singh's cabinet on 14 August 2008 approved an average 21% salary increase for about 50 lakh government employees. The higher wages will cost the government Rs 3.38 lakh crore this year.
The Prime Minister added that various steps are being taken to bring inflation under reasonable control. He blamed the surge in prices to a 16-year high this month to higher global costs of fuel and food.
Meanwhile the Finance Ministry allowing private sector managed provident fund and superannuation trusts to have greater exposure in the stock markets, may boost the market sentiment. They can invest up to 15% of their investible funds in shares on which derivatives are available in the BSE or NSE.
Asian markets were trading lower today, 18 August 2008. China's Shanghai Composite, Hong Kong's Hang Seng, Taiwan's Taiwan Weighted, Singapore's Straits Times, South Korea's Seoul Composite were down by between 0.28% to 4.06%. However, Japan's Nikkei rose 1.12%.
US markets ended mixed on Friday, 15 August 2008. The Dow Jones Industrial Average advanced 43.97 points, or 0.38%, to 11,659.90. The S&P 500 index gained 5.26 points, or 0.41%, to 1,298.20. However the Nasdaq Composite index declined 1.15 points, or 0.05%, to 2,452.52.
Market breadth turns negative
The key benchmark indices are trading flat in the afternoon trade of Monday. The market breadth has turned negative from positive. IT stocks have gained. Public sector oil marketing companies fell as the crude oil price recovered. Reliance Industries extended losses. Grasim Industries fell almost 5%. Asian markets which opened before Indian market were mostly in the red.
Oil rose over $1 to near $115 a barrel as investors eyed a potential supply threat from Tropical storm Fay to oil and gas production in the Gulf of Mexico.
At 12:24 IST, the BSE 30-share Sensex was down 1.85 points or 0.01% to 14,722.33. The key benchmark indices had recovered after opening weak dampened by latest economic data which showed India’s wholesale price index rose to a 16-year high. At day’s high of 14,824.92 hit during the mid-morning trade, the index gained 100.74 points. At the day’s low of 14,602.12, the Sensex lost 122.06 in early trade.
The S&P CNX Nifty was down 15.85 points or 0.36% to 4,414.85.
The BSE Mid-Cap index was down 0.12% to 5,816.52 and the BSE Small-Cap index was down 0.06% at 7,106.
The market breadth turned negative on BSE with 1,122 shares advancing as compared to 1,145 that declined. 98 shares remained unchanged.
India’s largest private sector firm by market capitalisation and oil refiner Reliance Industries fell 2.47% at Rs 2,219.70.
Great Offshore (up 4.31% to Rs 454.10), Gujarat NRE Coke (up 3.75% to Rs 108), Sun Pharmaceuticals (up 3.61% to Rs 1,500), Indian Bank (up 3.39% to Rs 114.40) edged higher from BSE's A group shares.
India Infoline (down 4.64% to Rs 147), Sintex Industries (down 3.41% to Rs 313), Pantaloon Retail (down 2.97% to Rs 367.10) and Hindustan Construction Company (down 2.93% to Rs 96.10) edged lower from A group stocks.
Reliance Natural Resources clocked the highest volume of 59.76 lakh shares on BSE. Kaashyap Technologies (30.68 lakh shares), Vishal Information Technologies ( 28.86 lakh shares), IFCI (22.39 lakh shares) and Ispat Industries (20.75 lakh shares) were the other volume toppers in that order.
Public sector oil marketing fell as crude oil price bounced back from a recent low. BPCL (down 2.69% to Rs 307.65), Indian Oil Corporation (down 1.27% to Rs 434.95) and HPCL (down 2.29% to Rs 218) edged lower.
How Long to hold on the shares?
Historically, it has been demonstrated that investments in equities offer the best long term returns and hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity markets, the better will be your returns.
However, this holds true for the equity market as a whole, and not necessarily for shares of individual companies. The value of shares of specific companies are subject to various pulls and pressures which could cause a share that is highly valued one day, to drop its value overnight, as a result of unpredictable factors ranging from Government policy to acts of omission and commission by the management of the company.
It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether to continue with them or change them.
However, one very important thumb rule which the professionals offer is, never to get emotional about a share. In other words, do not hold on to the share of a company whose value is declining, just because its history has been very good!
Are investment in shares safe?
Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest element of risk. The only services riskier than shares are lotteries and other games of chance.
These risks arise as a result of factors described earlier.
However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing public.
NOTE:- There is no risk involved if you follow our calls and then invest as our tips are very useful.
Historically, it has been demonstrated that investments in equities offer the best long term returns and hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity markets, the better will be your returns.
However, this holds true for the equity market as a whole, and not necessarily for shares of individual companies. The value of shares of specific companies are subject to various pulls and pressures which could cause a share that is highly valued one day, to drop its value overnight, as a result of unpredictable factors ranging from Government policy to acts of omission and commission by the management of the company.
It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether to continue with them or change them.
However, one very important thumb rule which the professionals offer is, never to get emotional about a share. In other words, do not hold on to the share of a company whose value is declining, just because its history has been very good!
Are investment in shares safe?
Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest element of risk. The only services riskier than shares are lotteries and other games of chance.
These risks arise as a result of factors described earlier.
However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing public.
NOTE:- There is no risk involved if you follow our calls and then invest as our tips are very useful.
| What is equity trading? |
| It is simply buying and selling of equities. However, unlike other commodities, equities are not traded everywhere, and are traded only in special market places called exchanges. |
| What is an exchange? |
| An exchange is a mechanism through which buyers and sellers of equities are brought together. These days, this is largely electronic and done with computers. Investors cannot, however, participate directly in the exchange and can participate only through members of the exchange, popularly referred to as brokers. |
| How does the exchange works? |
| An exchange has pre-specified timings. During that time, all the members of the exchange link up to a central computer through their remote terminals. The members then place bids to buy equities, or make offers to sell equities. Other members who can match the bid or the offer confirm their acceptance, and the transaction is completed. Members of stock exchanges place bids and offers on behalf of their clients, who are the investors. |
| Why are brokers required? |
| Investing in equities is quite risky. The broker is a professional, who knows the risk and can advise the investor accordingly. Secondly, an exchange will become an unwieldy mechanism if the entire universe of investors were to go and start making bids and offers. Reducing the number of individuals is a way of keeping control. Third, equity trading can also be abused. To prevent these abuses, exchanges as well as the Government has a number of regulations in place. Restricting activity to the members of the exchange will enable the regulations to be followed, preventing abuse of the system. |
| How are shares traded? |
| Like in any other buying or selling, once the broker confirms the trade, if you are buying the share, you pay the broker the value of the shares and take delivery of the shares. If you are selling the shares, you hand over the equities to the broker and the broker will pay you for your shares. |
When settlement does happen? |
| Each exchange has its own settlement period within which the entire process of delivery and purchase should be completed. Typically, the process is completed in a week to ten days time. |
| Which shares to Buy and sell? |
| An index is an indicator of how the stock market is doing on the whole. An index comprises a basket of stocks. The collective value of these stocks on a given date is taken and given a score of 100. From that day onwards, the value of these stocks is tracked and its score relative to 100 is computed. The stocks selected are based upon a number of parameters that the creators of the index decide. Equally, the valuation is also done using complex mathematical principles. Periodically, the list of shares used for computing the index also undergoes a change. These changes are decided by the index creators based on the parameters they have set for the stocks for inclusion. An index shows whether the stock market, on the whole, is appreciating in value or declining in value. The movement of the index itself is no indicator for individual shares. You may find that a particular share may be increasing in its price even when the index is down and vice versa. The index is only an indicator of the general trend The common indexes in Indian stock markets are the SENSEX, the index for stocks listed on the Bombay Stock Exchange and Nifty, the index for stocks listed on the National Stock Exchange. |
| What is an index? |
| Buying and selling shares involve a fair amount of research. These involve assessing how well the company is managed, how the company is performing compared to others in the industry, how the industry itself is doing, the financial performance of the company, the interest of the lay public in the company, etc. It is best that you consult an expert in such analysis, before you decided to buy or sell a particular share. Such investment advice is also provided by your share brokers. |
General Market Advice:
1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share are the key.
8. Look for the dividend paying record.
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is to grow.
13. Buy when everyone is selling and sell when everyone buys.
14. Invest a fixed amount each month.
Tuesday, August 12, 2008
2 Business Mistakes You Must Avoid
Many mistakes can be made in business and if you are able to avoid some of them by reading and taking note of some of the warnings, then the time taken to put these warnings together will be worth while.
Here are some warnings on business mistakes you should avoid because they are common to many entrepreneurs.
1. No plan.
Many people go into business without any plan at all. The old saying that “if you don’t have a plan you won’t know when you’ve got there” still holds true today. You need to set up a business plan and that plan will contain other subsidiary plans such as a marketing plan, a finance plan, a sales plan, etc.
2. Be flexible.
If you have a business idea and you are looking at developing that into your business, then be prepared to change and be flexible. Sometimes the original idea needs some fine-tuning before it becomes commercially viable and profitable for you. By all means stay with your dreams, vision and ideas, but be flexible and allow yourself the luxury of discussing those ideas with professional advisers, as well as those...
WAIT! ...Do Your Homework First
For every business that is a successful profitable venture, there are many businesses that just haven’t worked.
If you find yourself brimming with ideas for beginning your own business, save yourself a lot of time and money by first evaluating and testing your ideas before you jump right in and open shop. By taking the time to test your business ideas you will more than often highlight problems that you had not taken into account originally.
The highlighting of these problems will mean that your final business concept will have a higher chance of success as you have anticipated and dealt with potential problems before they appear. Evaluation doesn’t have to cost a lot of money; you just need to take the time to work through your ideas.
Here are some ways to evaluate your business concept:
Ask for opinions from family and friends.Ask them what they think of your ideas and to be honest about their opinions. They will be able to highlight potential problems that you have not seen, or give advice on a better way to do some task. Ask if they would buy the product or service you are offering, if they wouldn’t why not? Hav...
Good Knowledge - Key to Success
The first and most important thing you need, in order to succeed in a small business, is good business knowledge.
It is believed that at least 90% of all small business failures can be traced to the fact that the business owners had little or no knowledge about how to run a successful business.
Obtaining this knowledge can involve you (as the business owner) taking a small business course or reading up on all the areas involved in starting, running and growing a business. One of the most important things you have to do when you are desirous of starting a business is to calculate the feasibility of your idea.
You need to do a feasibility assessment and if this shows that the business has no likelihood of making a profit, then it has to be set aside.
A small business owner can avoid many mistakes and he/she will not know about this without that knowledge. Good business knowledge plays such an important role in determining success or failure that it would be a good idea for the government to bring in a simple registration process, where no one can start a business without passing a very basic exam on how to set up and run ...
Slash Tax when Buying a Business
When buying a business, how the "purchase price" is made up can affect what you pay in tax. The plan is to make as much of the price tax deductible for you and not the other party.
Once a final price has been agreed upon, try to allocate that price in the sale and purchase agreement in such a way that you get maximum benefit.
Here are some ways to do this:
- If you are buying allocate as high a value as possible to the assets in the purchase price (plant, equipment, computers, vehicles, fittings, machinery) so you can claim a higher deduction for depreciation of those assets. If you are selling, keep asset values down so you are not taxed for any depreciation recovered (that is, the excess of the amount you have sold the assets for over their book value).
- If buying value goodwill at the lowest figure possible because it is not tax deductible to you but it does increase the assets allocation. If selling then the higher the goodwill figure the better for you as this lowers the assets figures in the price.
- If buying, the higher the valuation for stock the better, because you pay tax on the stock prof...
Avoiding Stress Overload
If you experience an overload of stress in the workplace you could be heading towards burnout which can be a dangerous stage to reach.
Lots of people suffer from stress due to the endless pressure that we put on ourselves and eventually high levels of stress will damage both our health and wellbeing.
As we become stressed hormones that activate the adrenal glands are released and the output of adrenaline into our bloodstream is increased. As we become more worked up there is no outlet that allows release from this stress and we are constantly tense. This leads to emotional and physical illness including depression, anxiety, sleep deprivation and irritability.
Some common causes of stress include:
- Workplace relationship difficulties. Personal clashes and harassment, bullying, injustice and group pressure are causes of workplace stress.
- Unemployment. Loss of self respect and being anxious about the future.
- Low self esteem. Lack of support, anger, jealousy, powerless, undervalued.
- Bad environment. Pollution, noise and bad working conditions.
- Workplace frustration. Overloaded at work, not receiving a deserved promotion, injustice.
- Lack of time. Rushing from one job to another, not meeting deadlines.
- Private relationship difficulties. Problems within a relationship, children, family conflicts.
Some ways to eliminate the causes and effects of stress include:
- Learn to say no. Say no to anything that increases your workload – and increases your stress, whether it be private or public.
- Learn some relaxation techniques. Take up yoga or pilates or learn some relaxation techniques which can help you cope in a stressful situation.
- Diet and exercise. Make sure you have a healthy, well balanced diet and partake in regular exercise.
- Stop feeling guilty. Stop worrying about what you should or should not have done – you can only do so much and to overextend yourself will lead to a stressful situation.
- Use time management. Time management is an important tool in avoiding stress. Plan your days and weeks in advance so that you are clear on what you are doing. Isolate any events which are time wasters and eliminate them. Stop procrastinating over the tasks that aren’t enjoyable and do them. Having unpleasant tasks building up will lead to a lot of stress.
- Support network. Surround yourself with a support network of people who you can share your problems and offer practical help.
- Attitude change. Take responsibility for your actions but don’t accept responsibility for things which are not your problem. If someone offloads at you for no justifiable reason it is their problem - not yours.
- Humour. Laugh. Laughter is the best medicine.
Investors Like Residential Property
The single most important point that should be observed when investing in residential property is that the investor should think long term.
It is unlikely that they would make a quick profit by buying and selling very quickly by buying and selling within a short period so investors should take into account that they will only generate good gains if the property venture is for a medium to long-term time.
Most people get involved in property to create income or create capital growth. You have to be clear about your own expectations because it will determine what type of investor you are. You have to make sure that the property you purchase is in line with your budget and therefore should not overstretch your resources.
If you are looking for a steady income from your properties then the short-term rental income becomes more important than the potential capital gains.
You should consider popular suburban areas, as well as student accommodation etc. If you are looking for growth, then look for properties around the prime city locations or in top areas where it is likely you will see substantial long-term growth in value.
Whatever your objectives, your residential property investment depends on two things:
- Consistent demand from tenants.
- Maximisation of possible rental yields.
Your property will definitely lose money if it stands empty because you will end up having to cover the running costs. Even if you are looking for capital gains it is unlikely that the value obtained will outweigh the losses you will be achieving because the costs are running, but revenue is nil.
Choose our property carefully and make sure you are in the right location for your target market and that it will achieve the goals you have set down. Your investment in property is a business, so approach it professionally and keep in mind that your one objective is to make profit.
This profit can be an income or it can be in capital gain.
Why Buy When You Can Start Your Own from Scratch
When you start investigating whether to buy a business, you will come up with a list of advantages as well disadvantages if you go down the purchase option rather than starting one up from scratch.
Before you make your decision to buy, take time to fully assess the advantages and ensure that they clearly outweigh the disadvantages because one major disadvantage can easily outweigh a number of advantages. Many feel that buying a ready-made business that has a track record is a much safer way to get into business. They acknowledge that starting a business from scratch is fraught with many potential headaches and risks that are not present when buying an existing operation.
People will look at buying a business rather than starting up one from the beginning for a number of reasons. The main one will be that buying an existing operation gets you off to a flying start without the need to get involved in the headaches of developing something from nothing.
Whatever the final decision, new business owners need to appreciate that there will be some form of risk involved in going into any type of business, whether you are starting one up or buying an existing operation. The choice will depend a great deal on the goals new owner has and what he/she wants to achieve.
If you are not a risk taker and lack confidence in your ability to own and run a business, then it would be best not to proceed. Too many people imagine that buying a business means all their worries will be over and that all they need to do is stand behind the counter and tally up the sales. Nothing could be further from the truth. Being a business owner involves a lot of hard work, a lot of sacrifice and the ability to manage money and people if you are going to be successful with the business you buy.
Here are the main FORs and AGAINST to weigh up when you choosing between buying rather than starting up from scratch.
FORs
- Existing customers.
The fact that the business will already have existing customers is a big advantage. Existing customers mean existing cash flow, as well as the opportunity to market other products to them, or to encourage them to increase their purchasing. Having an existing and experienced customer base is very valuable because the relationships have taken time to establish over the years and are firmly established - resulting in ongoing sales. - Existing suppliers.
Having existing suppliers means suppliers accounts have already been set up so there is not the need to go through the process of checking the credit history or track record of your business suppliers before an account can be commenced. Your suppliers are also aware of your requirements and payment terms have been agreed so you won't have to negotiate terms for your buying. - Less competition.
The fact that the business has already been in operation means that no new competitors are added into the marketplace. This would be pleasing to the other competitors. - Should be a more efficient operation.
By the time you take over, the business should have fully established systems in place which ensure the efficiency of the operation. The previous owner would have put systems and methods in to reduce costs so only essential expenditure was spent on various areas of the business. The end result should be high efficiency and lower costs. - Successful future.
If you have bought a successful business there is no reason why you cannot continue it on the road to success. In fact, you should be able to bring in new methods and ideas to make the business more successful than previously. - Less stress and strain.
You should have less stress than if you had to set up from scratch. You can run the business with all procedures and controls in place. You would have less of a gamble and if you follow (for a short time) the previous owner's systems, it should result in less heartache and pressure, as well as reduced stress.
AGAINST
- Cost of purchase.
In most cases it would cost you more to buy a business than to start up one from scratch. You will have to pay for goodwill, which is added on to the cost of assets that make up part of the business. However sometimes the cost of starting up a business can be higher than buying one outright. This often happens when the business starting up has to purchase plant and equipment, set up offices, buy machinery, etc. More often then not the cost of these items would be higher purchased new than if they were part of the books of an old business. In addition the costs of setting up can sometimes overrun if problems arise during the early set up period. - Stock.
Sometimes the new owner will take over stock that is slow moving or obsolete and this is something that needs to be watched, because it may have little value when put on the market. - Staff.
Sometimes it is better to start off with new staff who do not have preconceived ideas and who have not set up their own "little kingdoms". These kingdoms which can often result in major problems for you as the new owner. - Past problems.
If the business has had past problems, either through a poor reputation with paying bills or poor customer service etc you will inherit all this. - Old plant and equipment.
Very often the plant and equipment taken over is old or needs replacing, or requires substantial maintenance. The low cost you pay for a business can sometimes be outweighed by the condition of the plant and equipment especially if repairs are necessary or the equipment needs replacing. Watch this. - Value of the business.
Often the previous owner values their business at an amount that is far higher than it's true worth. This is always the case if the goodwill figure, added on to the assets of the business, is excessive. Valuations can be tricky because the previous owner is trying to get maximum price, while you are trying to get a bargain. - Lease.
If you are buying an existing business with leased premises, you will generally be required to take over the lease on the premises. Difficulties arise when the landlord is uncooperative, or seeks an increased rent. Repairs may be required which the landlord refuses to fix. This would strain the relationship. If you are starting a business from scratch, these problems don't arise because you will take over the premises only after being happy with the landlord and the terms of the lease. - Poor facilities.
The premises and equipment might need modernisation and maintenance or repair. You will be stuck with these premises and it’s the layout and it would be expensive to make changes. The Landlord may not be happy with you changing things around anyway.
History of Today's Sharemarket
The world’s sharemarkets have an interesting history. The first publicly issued security can be tracked back to the fourteenth century in Venice.
The governing body of Venice wanted to begin paying back debt to neighbouring countries which had been incurred.
After discovering that they were unable to do so, the government made the first known issue of bonds. These government securities were purchased by merchants and landowners as investments. Bonds are still issued today by governments primarily to service debt and also to encourage cash based investment.
In London in 1693 King William of England raised one million pounds from the public at a fixed interest rate of 10%. A year later the Bank of England was formed so the government could finance wars. Credit facilities were set up to encourage merchants to expand their business, and systems were put in place to enable merchants to raise public funds through the issue of an early type of share.
The largest public company at that time was the South Seas Company which was listed In 1711. Robert Harley took over the government debt of 9 million pounds in exchangeMonday, August 4, 2008
World Bank Group
The World Bank Group (WBG) is a family of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference (1 July – 22 July 1944). It also provided the foundation of the Osiander-Committee in 1951, responsible for the preparation and evaluation of the World Development Report. Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date). Its five agencies are:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
The term "World Bank" generally refers to the IBRD and IDA, whereas the World Bank Group is used to refer to the institutions collectively.[1]
The World Bank's (i.e. the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution.
The activities of the IFC and MIGA include investment in the private sector and providing insurance respectively.
The World Bank Institute is the capacity development branch of the World Bank, providing learning and other capacity-building programs to member countries. Two countries, Venezuela and Ecuador, have recently withdrawn from the World Bank.
Organizational structure
Together with four affiliated agencies created between 1956 and 1988, the IBRD is part of the World Bank Group. The Group's headquarters are in Washington, D.C. It is an international organization owned by member governments; although it makes profits, these profits are used to support continued efforts in poverty reduction.
Technically the World Bank is part of the United Nations system, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization. The President of the World Bank is nominated by the President of the United States and elected by the Bank's Board of Governors.[1] As of November 1, 2006 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5%, and France and the United Kingdom each held 4.3%. As changes to the Bank's Charter require an 85% super-majority, the US can block any major change in the Bank's governing structure.[2]
World Bank Group agencies
The World Bank Group consists of
- the International Bank for Reconstruction and Development (IBRD), established in 1945, which provides debt financing on the basis of sovereign guarantees;
- the International Finance Corporation (IFC), established in 1956, which provides various forms of financing without sovereign guarantees, primarily to the private sector;
- the International Development Association (IDA), established in 1960, which provides concessional financing (interest-free loans or grants), usually with sovereign guarantees;
- the Multilateral Investment Guarantee Agency (MIGA), established in 1988, which provides insurance against certain types of risk, including political risk, aw primarily to the private sector; and,
- the International Centre for Settlement of Investment Disputes (ICSID), established in 1966, which works with governments to reduce investment risk.
The IBRD has 185 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of Governors meeting once a year.[1] Each member country appoints a governor, generally its Minister of Finance. On a daily basis the World Bank Group is run by a Board of 24 Executive Directors to whom the governors have delegated certain powers. Each Director represents either one country (for the largest countries), or a group of countries. Executive Directors are appointed by their respective governments or the constituencies.[1] The agencies of the World Bank are each governed by their Articles of Agreement that serve as the legal and institutional foundation for all of their work.[1] The Bank also serves as one of several Implementing Agencies for the United Nations Global Environment Facility (GEF).as per provision world bank donates loan at higher rate.
Presidency
Traditionally, the Bank President has always been a U.S. citizen nominated by the president of the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term.[1] Also traditionally, the International Monetary Fund's Managing Director is nominated by its European governors.[1]
Current President
On May 30, 2007, US President George W. Bush nominated former deputy secretary of state Robert Zoellick to succeed Paul Wolfowitz as President of the World Bank. The Executive Directors unanimously approved Zoellick, effective July 1, 2007, as the 11th President of the Bank for a five-year term.[3] Robert Zoellick is the former Deputy Secretary of the U.S. State Department and the former Chairman of Goldman Sachs' Board of International Advisors. He graduated magna cum laude from Harvard Law School and Phi Beta Kappa from Swarthmore College.[4]
Zoellick announced in October, 2007 that his priorities for the World Bank included increasing efforts to reduce poverty in the world's poorest countries, increasing support for neglected Arab countries, increasing support for countries emerging from violent conflicts, addressing poverty in "emerging" economies like India and China, increasing emphasis on environmental issues (especially global warning), and improving access to treatments for HIV and malaria. [1] [2]
Wolfowitz
The World Bank Group up until recently was headed by Paul Wolfowitz, appointed on June 1, 2005. Wolfowitz, a former United States Deputy Secretary of Defense, was nominated by US President George W. Bush to replace James D. Wolfensohn. On May 17, 2007, it was announced that Wolfowitz would resign effective June 30, 2007. This was due to allegations of improper conduct involving Wolfowitz and his partner, Shaha Riza, who worked at the World Bank, for whom he had allegedly arranged a generous pay increase. He had previously asked to be recused from the deliberations regarding her pay, but his request for recusal was denied. The committee in accepting his resignation admitted that they were also at fault in the matter. Prior to this the committee had exonerated him of any wrongdoing.
Evaluation at the World Bank
Social and environmental concerns
Throughout the period from 1972 to 1989, the Bank did not conduct its own environmental assessments and did not require assessments for every project that was proposed. Assessments were required only for a varying, small percentage of projects, with the environmental staff, in the early 1970s, sending check-off forms to the borrowers and, in the latter part of the period, sending more detailed documentation and suggestions for analysis.
During this same period, the Bank’s failure to adequately consider social environmental factors was most evident in the 1976 Indonesian Transmigration program (Transmigration V). This project was funded after the establishment of the Bank’s OESA (environmental) office in 1971. According to the Bank critic Le Prestre, Transmigration V was the “largest resettlement program ever attempted... designed ultimately to transfer, over a period of twenty years, 65 million of the nation’s 165 million inhabitants from the overcrowded islands of Java, Bali, Madura, and Lombok...” (175). The objectives were: relief of the economic and social problems of the inner islands, reduction of unemployment on Java, relocation of manpower to the outer islands, the “strengthen[ing of] national unity through ethnic integration, and improve[ment of] the living standard of the poor” (Le Prestre 175).
Putting aside the political aspects of such a project, it otherwise failed as the new settlements went out of control; local populations fought with the migrators and the tropical forest was devastated (destroying the lives of indigenous peoples). Also, “[s]ome settlements were established in inhospitable sites, and failures were common;” these concerns were noted by the Bank's environmental unit whose recommendations (to Bank management) and analyses were ignored (Le Prestre, 176). Funding continued through 1987, despite the problems noted and despite the Bank’s published stipulations (1982) concerning the treatment of groups to be resettled.
More recent authors have pointed out that the World Bank learned from the mistakes of projects such as Transmigration V and greatly improved its social and environmental controls, especially during the 1990s. It has established a set of "Safeguard Policies" that set out wide ranging basic criteria that projects must meet to be acceptable. The policies are demanding, and as Mallaby (reference below) observes: "Because of the combined pressures from Northern NGOs and shareholders, the Bank's project managers labor under "safeguard" rules covering ten sensitives issues...no other development lender is hamstrung in this way" (page 389). The ten policies cover: Environmental Assessment, Natural Habitats, Forests, Pest Management, Cultural Property, Involuntary Resettlement, Indigenous Peoples, Safety of Dams, Disputed Areas, and International Waterways.[5]
The Independent Evaluation Group
The Independent Evaluation Group (IEG) (formerly known as the Operations Evaluation Department (OED)) plays an important check and balance role in the World Bank. Similar in its role to the US Government's Government Accountability Office (GAO), it is an independent unit of the World Bank that reports evaluation findings directly to the Bank's Board of Executive Directors. IMF, WBI and U.S. Treasury Department Lead Economists Fatafehi Tupoumalohi, Dr. Vinod Thomas and Lin Chen are three of the Independent Evaluation Group's 5 Director-Generals whose evaluations provide an objective basis for assessing the results of the Bank's work, and ensuring accountability of World Bank management to the member countries (through the World Bank Board) in the achievement of its objectives.
Extractive Industries Review
After longstanding criticisms from civil society of the Bank's involvement in the oil, gas, and mining sectors, the World Bank in July 2001 launched an independent review called the Extractive Industries Review (EIR – not to be confused with Environmental Impact Report). The review was headed by an "Eminent Person", Dr. Emil Salim (former Environment Minister of Indonesia). Dr. Salim held consultations with a wide range of stakeholders in 2002 and 2003. The EIR recommendations were published in January 2004 in a final report entitled "Striking a Better Balance".[6] The report concluded that fossil fuel and mining projects do not alleviate poverty, and recommended that World Bank involvement with these sectors be phased out by 2008 to be replaced by investment in renewable energy and clean energy. The World Bank published its Management Response to the EIR in September 2004.[7] following extensive discussions with the Board of Directors. The Management Response did not accept many of the EIR report's conclusions. However, the EIR served to alter the World Bank's policies on oil, gas and mining in important ways, as has been documented by the World Bank in a recent follow-up report.[8] One area of particular controversy concerned the rights of indigenous peoples. Critics point out that the Management Response weakened a key recommendation that indigenous peoples and affected communities should have to provide 'consent' for projects to proceed – instead, there would be 'consultation'.[9] Following the EIR process, the World Bank issued a revised Policy on Indigenous Peoples.[10]
Impact evaluations
In recent years there has been an increased focus on measuring results of World Bank development assistance through impact evaluations. An impact evaluation assesses the changes in the well-being of individuals that can be attributed to a particular project, program or policy. Impact evaluations demand a substantial amount of information, time and resources. Therefore, it is important to select carefully the public actions that will be evaluated. One of the important considerations that could govern the selection of interventions (whether they be projects, programs or policies) for impact evaluation is the potential of evaluation results for learning. In general, it is best to evaluate interventions that maximize the possibility of learning from current poverty reduction efforts and provide insights for midcourse correction, as necessary
Allegations of corruption
The World Bank is supposedly working against corruption both outside and within its organisation. Its website states:
Recognizing that any program to assist in controlling corruption worldwide needs to start with the example of best practices at home, the Bank has taken initiatives to stamp out conflicts of interest and any possible corrupt practices among its own staff.[3]
Beginning in 2005, Paul Wolfowitz, President of the World Bank, allegedly used his position to influence a pay and grade increase for his girlfriend Shaha Riza. Riza, who had held a position at the bank before Wolfowitz was appointed president in June 2005, was required to leave the bank and re-assigned to the State Department to avoid a conflict of interest, working in the office of Liz Cheney, daughter of Dick Cheney, while remaining on the bank's payroll. Her salary was increased from nearly $133,000 to tax-free compensation of $180,000, and eventually reached $193,590 after subsequent raises. The panel concluded that the salary increase "at Mr. Wolfowitz's direction" was "in excess of the range" allowed under bank rules. As a result of this controversy, Paul Wolfowotz has resigned effective June 30, 2007.[citations needed]
- Further information: Shaha Riza#Wolfowitz Scandal, Paul Wolfowitz#Wolfowitz's relationship with Shaha Riza, and Paul Wolfowitz#Wolfowitz's leadership of the World Bank.
The World Bank head of "Institutional Integrity" department is Suzanne Folsom. She is the wife of George Folsom who is the President of the International Republican Institute and a personal friend of Paul Wolfowitz. According to the Financial Times her appointment as "a person close to Mr Wolfowitz, and with a political background...to a unit that was seen as independent of the president’s office since it was set up in 2001" was met with great concern by some senior staff. Wolfowitz's efforts to control the bank are seen by some senior staff to have led to "a lack of consultation by Mr Wolfowitz’s advisers, and an atmosphere of suspicion."[11]
Criticism
The World Bank has long been criticized by a range of non-governmental organizations and academics, notably including its former Chief Economist Joseph Stiglitz, who is equally critical of the International Monetary Fund, the US Treasury Department, and US and other developed country trade negotiators.[12] Critics argue that the so-called free market reform policies – which the Bank advocates in many cases – in practice are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence, or in very weak, uncompetitive economies.[13]
World Bank standards and methods are, however, highly valued and adopted in areas such as transparent procedures for competitive procurement and environmental standards for project evaluation.[citation needed] World Bank also engages in funding the education of promising young people from developing countries through its graduate scholarship programs.
In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine Caufield makes a sharp criticism of the assumptions and structure of the World Bank operation, arguing that at the end it harms southern nations rather than promoting them. In terms of assumption, Caufield first criticizes the highly homogenized and Western recipes of "development" held by the Bank. To the World Bank, different nations and regions are indistinguishable, and ready to receive the "uniform remedy of development". The danger of this assumption is that to attain even small portions of success, Western approaches to life are adopted and traditional economic structures and values are abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad.
A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO driven imperialism and that its intellectual contribution functions, primarily, to seek to try and blame the poor for their condition.[14]
Defenders of the World Bank contend that no country is forced to borrow its money. The Bank provides both loans and grants. Even the loans are concessional since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are at below market-value interest rates. The World Bank argues that it can help development more through loans than grants, because money repaid on the loans can then be lent for other projects.
In The Globalisation Tapes (http://www.imdb.com/title/tt0407827/) an Indonesian palm plantation worker states that his son has to help him meet his daily quota. For this ton of fruit that is worth over $31 he and his unpaid son get only $1.14 in wages.
AIDS controversy
The World Bank is a major source of funding for combating AIDS in poor countries. In the past six years, it has committed about US$2 billion through grants, loans and credits for programs to fight HIV/AIDS.[15] Its critics, however, claim these financial expenditures to be insufficient. In the 2005 Massey Lecture, entitled "Race Against Time", Stephen Lewis argued that the structural adjustment policies of the World Bank and the International Monetary Fund have aggravated and aided the spread of the AIDS pandemic by limiting the funding allowed to health and education sectors.[citations needed]
Other information
The World Bank provides summer internships to local DC students at its headquarters every year. This youth development program is a large investment in the city's youth and the World Bank partners with a local nonprofit, Urban Alliance Foundation, to provide this opportunity.
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