Impact of new BNM Rulings on Household Indebtness

Due to the rising household debts as compared to GDP in Malaysia, Bank Negara Malaysia (BNM) recently introduced new measures to further tighthen credit lending especially on housing and personal loans as follow:

 

1. Maximum tenure of 10 years for financing extended for personal use.
2. Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties.
3. Prohibition on the offering of pre-approved personal financing products.

Now that we have these new measures, so what does it means to the people on the street? This is my opinion on the impact of new BNM rulings to the rakyat:

•  Housing loans will be less afforable to the property investors/buyers, especially for the younger investors/buyers. With the shorten loan period, monthly installment is expected to rise and affect debt-to-income ratio, which is probably one of the factor financial institutions take into considerations.
• Hopefully, the new measure can cool down/reduce the property market speculations, especially those developments without DIBS. Personally, i still wonder why Malaysian government hasnt banned DIBS as done by Singapore government few years back. In my opinion, DIBS is one of the factor that push property prices to beyond the reach for most of the rakyat.
• Reduced availability of personal loans. A lot of youngsters and people in the lower income brackets are taking personal loans to cover for daily expenses as well as paying off credit card debts. With the introduction of such new measures are going to be painful to those people affected, but i do agree that such measure is needed to instill better financial management for the youngsters.

In summary, the measures are good for long term financial stability of the country. No doubt that it's going to be painful for those affected, but it's necessary to bring down household debts. I guess people needs to get the basic fact right: you must spend less than what you earn!

Making Sense of Money is back online!

Dear readers,

My blog, Making Sense of Money, was blocked by Google and flagged as scam blog by their bots for the past 6 months. If you were my faithful readers, you will know that my blog is for sharing of financial topics for the good of general audience.

Few days ago, I received good news from Blogger that my blog has been reinstated. So, there you go, my blog is fully back online! I will try to update as much information on my blog articles as possible for missing out much of the financial news for the past 6 months.

Do drop by from time to time for the latest financial news and knowledge! Cheers!

Portfolio Rebalancing Strategy

Apart from asset allocation decision, financial experts around the world are advocating periodic portfolio rebalancing to bring your investments portfolio that has deviated from the target asset allocation back in line. In short, portfolio rebalancing is the action of selling of high performing investments to buy lower performing investments, with the condition that the fundamentals of lower performing investments are still intact. While this logic deviates from normal human psycology, what portfolio rebalancing is doing is basically to sell high and buy low. With periodic portfolio adjustments, we can take advantage of the system to take profit devoid of our emotions in making investment decisions.

Public Mutual PRS Funds Explained

Public Mutual is the fourth private retirement scheme (PRS) provider in Malaysia that launched their PRS funds on 26 November, 2012. Public Mutual will have two PRS schemes, conventional and Syariah, of which each PRS scheme will have 3 core funds, namely Public Mutual PRS Growth / Public Mutual PRS Islamic Growth, Public Mutual PRS Moderate / Public Mutual PRS Islamic Moderate and Public Mutual PRS Conservative / Public Mutual PRS Islamic Conservative funds.  In this article, I will focus on the conventional PRS funds.

Public Mutual PRS Growth Fund is targeting those investors below age of 40 years old or have high risk profile. This fund will mainly invest in combination of index/dividend/growth stocks. 20% of the fund's NAV can be invested in warrants, while up to 40% of the fund's NAV can be invested in existing Public Mutual unit trust funds. 20% of the equity portion of the fund can be invested in Asia Pacific markets.