Hong Leong Bank drops BLR rate to 5.55%

As expected, more Malaysian commercial banks are announcing a lower BLR rates following Bank Negara OPR rate reduction. The new BLR rate for Hong Leong bank will be 5.55% effective from 2 March 2009.

Singapore Airlines KrisFlyer American Express Credit Card

American Express has launched a new co-branded credit card with Singapore Airlines which allows the card members to accumulate KrisFlyer miles with all purchases made with the credit card. Card members will get 1 KrisFlyer miles for every RM 1 spent. As a promotional award, the first usage of the card will be awarded with 3000 KrisFlyer miles. Annual fee is RM 250 for principal card and RM 125 for supplementary card. For more details, click here.

This card should be suitable for frequent flyers to accumulate KrisFlyer miles. Based on my personal experience with Singapore Airlines, they are one of the best airlines you can get with their superior connectivity, convenience, and good food and entertainment channels So, if you are those who likes to fly, get this card soon!

ABM: Lower Monthly Installment Within Same Tenure

Association of Banks in Malaysia (ABM) has announced that all bank customers with loan facilities with Malaysian commercial banks that are pegged to the Base Lending Rate (BLR) will automatically enjoy a lower monthly installment within the same loan tenure. The banks will be notifying the customer on the new lower monthly installments as well as the effective date of the new installment amount.

However, for those who wish to maintain the current monthly installment and hence shorten the loan tenure, you should get in touch with the banks' customer services to obtain further information.

Maybank reduced BLR to 5.55%

I was wrong, and I'm glad I was wrong on this case. My previous post mentioned that the BLR for most commercial banks in Malaysia will most likely to be reduced to 5.65 - 5.7%. Yesterday, Maybank started the ball rolling by reducing their BLR rate to 5.55%. It wasn't the same margin of 0.5% reduction of OPR as announced by Bank Negara, but at least it's much better than my guesstimates.

I would expect most major commercial banks in Malaysia will follow this Maybank taikor, except those smaller banks that might want to squeeze a bit more reduction to 5.5%, based on past BLR reduction precedence.

So, for those who wants to refinance, DO IT NOW!!! Those attrative refinancing rates of up to BLR - 2.4% are NOT going to last forever, since the BLR is at the historical low level now.

Avenue Liquidity Fund

Avenue Invest Berhad launched a new money market fund that invests in short term deposits in Malaysian licensed financial institutions. This fund is suitable for who needs to temporarily park their cash portion while waiting for equity market upswing as well as for those with very low risk tolerence.

The minimum initial investment amount is RM100,000 and minimum additional investment is RM50,000. The annual management fee is 0.3% while the trustee fee is 0.08%.

With such a large initial investment amount, i guess this fund is probably out of reach for most of the end customers. This fund is likely to attract investments from high net worth clients or commercial institutions.

BLR is going down again!

Yesterday, Bank Negara Malaysia announced that the Overnight Policy Rate (OPR) will be reduced by half percentage point to 2% effective March 1, 2009. This means, the Base Lending Rate (BLR) of Malaysian commercial banks will be reduced again. Yes, yes, yes, to all bank customers in Malaysia!

However, based on the experience of previous cuts in OPR rate, do not expect the banks to reduce the BLR in the same margin. So, my guesstimate is that most banks will reduce another 0.25 - 0.3% of BLR of 5.95% currently (for most major banks in Malaysia) to probably around 5.65 - 5.7%.

With the reduction of BLR, that means more bad news for those with fixed (time) deposits. The rates will be falling again and yes, it will be reduced by a larger margin as compared to BLR rate reduction.

Let's just wait for the official announcements from the banks in the coming weeks.

Why do you invest in money market funds?

One word: Liquidity. Money market funds typically invest in short term monetary instruments, such as deposits in the banks. The advantage of these funds is that they can negotiate a flexible and better rate due to their sheer fund size as compared to individual's deposits.

As an investor, money market funds are useful as a temporary parking facility, i.e. to temporarily deposit the money in a liquid instrument after switching out from equity funds. Another plus point is that most of the money market funds don't incur sales charge and typically only charge 0.3 - 0.5% management fees per annum.

So, the question of whether you should have money market funds in your portfolio? The answer is YES, if you fulfill the following requirements:

1. You want to switch out from equity to cash while waiting for market upswing.
2. You have spare cash lying idle in the deposit accounts in the bank. Money market funds generally have a better yield than savings/current accounts in the banks.
3. In Malaysian tax perspective, money market funds are potentially more tax effective, if you have large sum of cash in the banks in the form of savings account/fixed (time) deposits as the interests earned from these accounts/deposits might incur tax.

Investing during crisis time

During financial crisis time, there is a tendency for investors to switch out of equity to financial instruments that are stable, such as cash, money market, capital guaranteed funds and fixed income. Let's look at these individual financial instruments and see how each of these fits into your portfolio during financial upheaval time.

• Cash -As people says, cash is king. It is liquid and can be deployed at any time. No doubt on that. BUT, sitting on a pile of cash for long term is counter productive as cash hardly generates any income even if we park them in the fixed (time) deposits. Cash can be a good option if your portfolio is mainly consisting of shares.
• Money market funds - this is a better option if you are mainly investing in unit trusts/mutual funds. Money market funds are basically unit trust funds that invest in short term money instruments and are highly liquid. Investors will probably get a better deal than parking their money in savings account.
• Capital guaranteed funds - these are primarily close ended funds which has a small portion in equities. The good point is that you dont lose your capital if you hold through maturity even in the downturn, but do get to enjoy the upswing via the equity portion of the funds.
• Fixed income funds - mainly consisting on bond investments. It's a liquid investments with minimal fees but typically an investor will need to hold the funds for longer terms, such as longer than 6 months to enjoy some returns.

As a general guideline, if you do plan to re-invest in the short term in shares/stocks, you should hold cash, but if the majority of your investments are in unit trusts/funds, you should consider switching to other funds mentioned above.