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This blog is brought to you by Gilbert & Samuels Company Limited, a financial advisory services and consulting company based in Suva, Fiji.
To contact the authors of this blog, please call telephones (679) 3342719, (679) 3544897 or e-mail info@gilbert.com.fj.


Thursday, April 16, 2009

Fiji Ratings Downgraded by Standard and Poors

Fiji's ratings by Standard & Poors have been downgraded with effect from 15 April 2009. The revised ratings are as follows :

  • Credit Rating (Foreign Currency), Rating B-/Negative/C;
  • Rating of the US$150 million foreign debt 6.875% maturing on 13 September 2011, B-.

The foreign credit rating was reduced from 'B/B' rated in February 2009. The Standard & Poors definitions of ratings are provided at the end of this post.

The downgrade would mean that accessing debt financing from abroad would be more expensive for the Fiji Government and Fiji based businesses. Given that banking system liquidity has been quite tight in recent months, there was an option for businesses to access debt from abroad.

Also, aside from having to pay higher interest for the higher perceived risk, Fiji based businesses would also have to contend with paying more in Fiji dollar terms after the 20% devaluation by the Reserve Bank of Fiji yesterday, 15 April 2009.

Import prices might also be expected to rise as foreign based merchants and businesses price in the higher risk of default after consideration of the latest S&P ratings and those by similar agencies.

The higher prices of imports will again be passed onto ordinary consumers and households in the form of higher prices of products and services.

For advice, pls contact our office on 3342719 or email info@gilbert.com.fj.


Standard & Poors definitions :

  • ISSUE CREDIT RATING DEFINITIONS - A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion evaluates the obligor's capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
    Rating of B - An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

  • ISSUER CREDIT RATING DEFINITIONS - A Standard & Poor's issuer credit rating is a current opinion of an obligor's overall financial capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. In addition, it does not take into account the creditworthiness of the guarantors, insurers, or other forms of credit enhancement on the obligation. The issuer credit rating is not a recommendation to purchase, sell, or hold a financial obligation issued by an obligor, as it does not comment on market price or suitability for a particular investor.
    Rating of B - An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.

  • RATING OUTLOOK DEFINITIONS - A Standard & Poor's rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.
    Positive means that a rating may be raised.
    Negative means that a rating may be lowered.
    Stable means that a rating is not likely to change.
    Developing means a rating may be raised or lowered."

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Wednesday, April 15, 2009

Reserve Bank of Fiji places ceiling on interest rates and interest spreads

The Reserve Bank of Fiji today imposed a ceiling on lending rates of banks and other lending institutions (including the Fiji National Provident Fund). The ceiling imposed on each institution is the weighted average lending rate of that particular institution as at 31 December 2008.

Additionally, the Reserve Bank of Fiji has also taken the major action of putting a ceiling on interest spreads, which (depending on the definition used) I would understand to be the difference between an institution's weighted average lending rate and it's weighted average cost of funds (i.e. the average rate it pays for customers' deposits placed with it).

The high interest spreads of banks and lending institutions in Fiji has been the subject of much contention by consumers of banking services over the years, with the two large foreign owned banks each making over F$30 million per year in recent years. It is understood that the interest spreads/margins of banks in Fiji are much higher than what they are in most developed economies.

The move to contain lending rates and spreads has not usually been undertaken in recent years by other countries, particularly those with central banks that use open market operations to influence interest rates like Fiji. However, it would seem appropriate for Fiji at this time, given our present circumstances.

Another good move taken by the Reserve Bank of Fiji would see an emphasis on building micro finance lending by banks and financial institutions in Fiji. As a result of the global/local crisis, more and more people would be displaced from jobs. Upskilling and training them to run their own small businesses would help them fend for themselves.

PS : The Reserve Bank of Fiji today announced that it has a new Governor, Mr Sada Reddy, who was Deputy Governor up to last week. Read about it in other media.

For advice, pls call our office on (679) 3342719 or email info@gilbert.com.fj.

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Fiji Dollar Devalued

The Reserve Bank of Fiji has devalued the Fiji Dollar by 20%. The devaluation takes immediate effect today, 15 April 2009.

The devaluation has been done to contain Fiji's falling foreign reserves as well as the impact of recent developments on the economy. Additionally, further restrictions on exchange controls have been put in place.

In simple terms, the devaluation would mean that more Fiji dollars are needed to purchase imports and exporters get more Fiji dollars when they export goods and services. This makes imports more expensive while exporters earn more local currency.

Devaluations are meant to discourage imports and to encourage exports, a reason for which is to assist maintain or boost our country's foreign reserves.

Given that things in or from Fiji will be cheaper to overseas buyers, it should help encourage more purchases of our goods and services from foreign buyers, including tourism.

However, for locals, cost of living would be expected to rise in the short/medium term as a direct result of the devaluation as prices of goods, particularly imported ones, rise. One outcome of this may see people putting pressure on employers to raise their salaries. However, raising salaries and wages would be a real challenge for employers given the current state of the economy, its performance, and the high costs of doing business.

PS : Note our post on the impact of the new ceiling on lending rates which were announced today by the Reserve Bank of Fiji.

For investment and business advice, please call our office on (679) 3342719 or email info@gilbert.com.fj.

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Wednesday, April 08, 2009

Invest in Fiji Blog Readership : March 2009 vs February 2009

We provide you with statistics on our blog readership. Here are the readership statistics for our Promoting Suva blog for the months of February and March 2009. Data for February is given first followed by data for March.

February 2009
March 2009
Observations
  • Readership of the blog again grew in March 2009 compared to the month earlier;
  • Readers from Fiji, USA, Australia, New Zealand, India and Canada form our largest readership group. Readers from these countries can best be targeted for marketing from this blog;
  • Our top referring site continues to be google.com. This indicates our good visibility on google searches.
  • Keyword searches indicate that readers are searching for a issues relating to investing in Fiji. Interestingly there is an increase in searches on the impact of the global financial crisis on Fiji.

Companies can utilise our wide readership base and high search rankings to market and advertise their products.

For advertising to our wide readership base, check our advertising rates here. If you wish to discuss how we you can advertise your products and services on our blog, e-mail us on info@gilbert.com.fj.

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George Soros warns shares will fall further

Read the following article by Louise Armitstead from http://www.telegraph.co.uk/ on Billionaire financier's expectations on share prices.


"George Soros, the billionaire financier, helped unsettle markets by voicing fears that share prices had further to fall. In an interview, he said: "It's a bear-market rally because we have not yet turned the economy around. This is not a financial crisis like all the other financial crises that we have experienced in our lifetime."

Markets across the world slid as a raft of bad news stalled the powerful rally that has fuelled optimism for over a month. In Britain, fresh concerns over bank stability and oil prices pushed the FTSE 100 index down 63 points, or 1.6pc, at 3930.5. The Dow dipped 2.3pc to 2789.6 on fresh concerns that the bank bail-out would not stabilise US lenders and after a report showed that chief executives' confidence in the economy had fallen in the past few months.

Germany's DAX lost 0.6pc and France's CAC 0.9pc. In Asia, Japan's Nikkei was down 0.3pc, Hong Kong's Hang Seng sunk 0.3pc and Australia's ASX slipped 1.3pc after interest rates were cut to a 49-year low. The trend threatens to undo the recent two-week rally, in which time the FTSE 100 has jumped 13pc, the S&P 24pc and the Nikkei 25pc.

Like Mr Soros, analysts at Morgan Stanley warned the bear market was not over. They said in a note: "We have to decide whether this is towards the end of another bear market rally that we should sell into now that hope has grown, or the start of a much larger advance, maybe even a new bull market. Our decision is to sell into strength now."

Optimism around the world was boosted last week after the leaders of the G20 countries agreed to a six-point plan designed to ensure the global recession does not turn into a depression. But now there are concerns the leaders did not go far enough.

Mr Soros, whose flagship Quantum Endowment Fund generated 8pc returns last year compared to an average decline of nearly 20pc among other hedge funds, told Bloomberg Television: "The recovery will look like an inverted square root sign. You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shaped recovery or anything like that. You settle down, step down.

"[President Barack Obama] has done very well in every area, except in dealing with the recapitalisation of the banks and the restructuring of the mortgage market.""

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Our Portfolio Management Services

The impact of the global financial crisis for Fiji can be seen in the figures released by the Reserve Bank of Fiji with a reduction in inward remittances by 26.7% during 2008. The tourism industry has also indicated how tough their marketing has been to attract tourists to Fiji at this time.


How can the crisis affect companies and individuals in Fiji?

Primarily, the impact of the crisis will be on those companies and individuals who have some assets or liabilities denominated in foreign currency or have products and services that they market to non-Fiji residents.

Companies and individuals who have their assets or liabilities denominated in foreign currency may find that their assets may increase or reduce in value depending on movements of the foreign currencies in which those assets have been denominated, against the Fiji dollar. For liabilities, they may find that they owe more or less than what they had previously owed, due again to movements in exchange rates.

Similarly, if an individual or company offers its products and services to a target market that are non-residents of Fiji and sell those overseas, then what they expect to get for those sales may change due to changes in exchange rates. More importantly, the global crisis may bring about a reduction in consumption demand in most of the economies/markets overseas which may include the economy/market where the individual or company offers its products and services.


Investment Advice and Portfolio Management Services

If you have investments or are considering some, it might be the best time to consult a professional that can assist you.

To protect your investments, we can assist you with portfolio management services at a competitive fee. As part of this service, we can review your current investments and make suggestions on how they can be improved to better weather the crisis. We can also review and recommend for you new investments that will meet your investment objectives. We will also provide you with regular (at least quarterly) updates on how your investments are performing during the time we manage your portfolio for you.

Investments will be held in your own name rather than by us giving you all the rights and control over investments made.

Our principal, Gilbert Veisamasama Jr, is a licensed investment advisor and with his licence he can provide investment advice and portfolio management services to clients.

If you are interested to discuss this further, please contact us on telephones (679) 3342719 or (679) 3544897 or email info@gilbert.com.fj.

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Tuesday, April 07, 2009

RBF Drops Statutory Reserve Deposit (SRD) Rate

In its continued bid to stabilize the local financial sector and improve liquidity in the country, The Reserve Bank of Fiji has announced the reduction of the Statutory Reserve Deposit (SRD) from 6 percent to 5 percent, effective today. This comes exactly a week (01/04/09) after the RBF implemented its flood rehabilitation facility for businesses affected by the recent floods, and underpins the central bank’s seriousness about generating economic activity in the country.
The SRD is a legally mandated proportion of total deposits and similar liabilities of each licensed bank in the country that needs to be deposited with the RBF. The relaxing of the SRD rates will inject much needed funds into the highly illiquid local financial sector.

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Thursday, April 02, 2009

RBF Help for Flood Affected Businesses

Following its announcement of a Flood Rehabilitation Facility in an RBF press release dated 27/2/09, The Reserve Bank of Fiji has today (01/04/09) announced the implementation of the facility proper. The facility is aimed at businesses affected by the recent floods by providing low interest paying loans. The facility is worth FJD 20 million, maximum interest charged is 6 percent per annum and the loan term is a minimum of 6 months with the possibility of extension.
Businesses may apply for funds for the following reasons:
  • Replacement of flood-damaged inventory;
  • Loss of sales (including working capital) due to the flood;
  • Repair or replacement of flood-damaged plant, machinery and equipment;
  • Restoration of flood-damaged buildings including resorts and hotels;
  • Replacement of vehicles damaged by the flood.

For interested businesses, further information can be obtained from the Fiji Development Bank, commercial banks in the country or The Reserve Bank of Fiji.

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Wednesday, April 01, 2009

Colonial National Bank Interest Rates (Updated 1.4.09)

Schedule of interest rates released by Colonial National Bank are as follows:
  • Business Banking Base Rate – 9.20%;
  • Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
  • Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
  • Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

Interest rates are on a per annum basis and may be varied by the bank without prior notice.

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Contact us also if you require investment portfolio management services. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

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Westpac Interest Rates (updated 1.4.09)

Schedule of interest rates released by Westpac Fiji are as follows:

  • Business Lending Rate (effective 20.4.09) - 10.99%;
    Residential Property Loan (effective 20.4.09) : Variable Rate – 10.50%, 1 year Fixed Rate – 8.50%;
  • Investment Loan (effective 20.4.09) : Variable Rate - 10.50%, 1 year Fixed Rate - 8.50%;
  • Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

Interest rates are on a per annum basis and may be varied by the bank without prior notice.

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Also contact us if you require investment portfolio management services. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

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