Categories
Taxes

Indonesian High Yield Bond Market Structure and Opportunities

Global investor demand for Indonesian corporate paper increased substantially in 2012 and 2013 after the rating upgrade of Indonesia to investment grade early last year and investors looking for exposure in the country’s strong growth story (Indonesia’s GDP growth averaged above 6.0% over the last five years). Majority of the global bonds issued are USD-denominated and are non-investment grade due to the sovereign rating cap (Baa3/BB+/BBB-).

High yield bonds in Indonesia are typically issued through an SPV located in tax efficient jurisdictions like Singapore, Netherlands, or Cayman Islands. The bonds generally benefit from parent guarantee as well as guarantee from major operating subsidiaries, but in some instances certain key operating subsidiaries are excluded from guarantee. Investors should, therefore, carefully analyse the structure of the bond to ensure a tightly structured cash trap mechanism, which minimises chances of cash leakage. Also, given the fact that majority of the bonds issued are unsecured in nature, structural subordination and recourse to operating assets might be a concern if the bonds are loosely structured.

Covenants in the high yield bonds issued by Indonesian corporates are largely financial in nature, which restricts/ regulates the issuer’s financial activities within pre-determined limits. Generally, covenants fall into one of the following three categories:

· Affirmative Covenants: These covenants outline company requirements while the bonds are outstanding, and would include requirements such as maintenance and submission of quarterly accounts, payment of taxes, maintenance of insurance, payment of bank interest and fees, etc.

· Negative Covenants: These covenants limit company activities. For example limits on mergers/ acquisitions, asset sales, dividend payment, negative pledge, etc.

· Financial Covenants: These covenants require that the issuer maintain a minimum financial condition, usually in the form of ratios. Standard financial covenants include restrictions on debt incurrence (the most commonly used being Fixed Charged Coverage ratio), restricted payments, restriction on asset sales, Interest Reserve Accounts, etc.

High yield bond covenants in Indonesia are broadly in line with those in China, Hong Kong, Singapore, and India. They do act as an early indicator of any potential default. For example, certain high yield bond indentures require that the issuer to maintain an Interest Reserve Account with a Trustee Bank, where at least one interest payment amount on the bonds is deposited at all times. If the issuer of the bond fails to timely top-up this account, it acts as an early indication of liquidity issues within the issuer company.

As a result of global tightening bias and flight safer assets, the USD-denominated bonds issued by Indonesian corporates have consistently declined in price over the last two months. The long dated papers, in particular, have declined considerably reflecting increased inflation expectations amidst ongoing fuel reforms in the country. This trend is in line with other emerging market bond performance, as global investors moved funds out of emerging markets to safer assets. While it is difficult to say if the bond prices have bottomed at current levels, the running prices adequately price-in the expected Fed tapering and tightening interest rate environment in Indonesia. Therefore, the current low prices offer select good investment opportunities for global fixed income investors and wealth management firms.

Categories
Taxes

Investment Opportunities in Serviced Accommodation

This type of company is generally a disruptive business. The Ford Model T revolutionized the car industry; Dyson did the same for the vacuum cleaner; Amazon took advantage of the Internet to change the way we purchased books all sorts of other products; and now AirBnB have made it simple to book accommodation not in hotels but in people's homes.

Who does not like to be nosy by looking at how other people live and how their homes reflect their lifestyle and personal taste in home decor and furnishings? It seems therefore that AirBnB really did hit the sweet spot.

While most people will have stayed in a hotel at sometime in their life, they now accept that there are alternative accommodations. The term "serviced accommodation" relates to property that delivers somewhere to eat and sleep but in a property that offers the much more than a conventional hotel by including a fully fitted kitchen, a lounge area in which to relax and additional bedrooms for the rest of the family all within one property that will offer a "home from home" experience.

They have raised the bar so this type of accommodation is now what most people when traveling for both business and pleasure want to stay in. They want somewhere that is flexible so they can stay for a night, or longer; and where they can enjoy spacious accommodation, home comforts, the opportunity to cook a meal to save the cost of eating out at a restaurant; the chance to catch up on their washing and above all, the opportunity to share their experiences with the host, as and when they are resident.

The other contributor to the success of serviced accommodation has been technology. Without this it would not have been possible for the model to gain traction and therefore attract hosts to register their properties, at the speed they have.

Guests have benefited too by having the power and speed to locate properties at the click of a button, possibly for booking on demand; having a friendly person to communicate with throughout the booking process; and having peace of mind, knowing that previous guests have written reviews to say how wonderful the host and property was.

It seems that now travelers have experienced AirBnB, and other online travel websites, as leisure guests they are now insisting that their employers allow them to use the same option for their business travel.

This market is therefore expanding at rapid rate. Research suggests that there are now about 750,000 serviced apartments worldwide – an increase of 80% in just 8 years. In the UK, serviced accommodation supply is expected to grow by 8% in the two years leading up to 2017, outstripping the growth of hotels at 6% according to research performed by Savills, the estate agent.

While supply has increase so has demand. It seems that over 36 million overseas visitors came to Britain in 2015 – an increase of 50% over the previous 12 years. The number of UK residents taking a holiday at home is also on the increase especially as the exchange rate between sterling and both the dollar and euro has depreciated following the referendum vote to leave the EU. This would suggest a long term boom for the British tourism industry and an unprecedented demand for overnight accommodation.

The location and the facilities on offer are the two major contributors to higher occupancy levels. If a property is situated close to good transport links, major companies and popular tourist attractions; as well as being well furnished and fitted it to a high standard it will be popular with guests and therefore be in demand.

Obviously, nobody is forecasting the imminent demise of the hotel industry or the private rental accommodation sector as a whole because they are both substantial but anybody with an eye for a property investment with a generous long-term fixed yield income could do a lot worse than investigate this emerging property investment sector.

Private individuals have often invested in HMO multi-let properties to secure a higher rate of return but recent UK tax changes have made this proposition less attractive.

Now that the serviced accommodation sector is growing at such a rapid rate, there are greater opportunities to realize a higher rental income on these compared to HMO's. One just needs to be certain that demand and therefore occupancy levels are sufficiently high to provide the margin required to deliver a healthier rate of return than one achieves when leaving money in bank savings accounts.

Categories
Currency Trading

Automated Currency Trading Opportunities – Can You Stand To Miss This?

Foreign exchange happens to be the simplest industry for almost any investor to jump right into. The fastest way into this industry must be with forex trading software and find out as you go, no knowledge necessary!

Clearly there was a period when foreign exchange programs were restricted to major corporations and traders. This particular style of software program was not extremely advanced by today’s expectations and the level of automation had been rather restricted. These products which are presented these days can simply be described as mind-blowing. Had this kind of software been offered, even to merely a select few, it would have given rise to a volume of competition never seen before. Expert software program used to cost tens of thousands of dollars, but today we can find solutions ranging within the hundreds if not much less. Most of these varieties of software system tend to be significantly better than the kinds the expert put to use as little as a few years ago.

This is focused on the revenue

The primary indication for your success is actually the sum of profit against the particular amounts of loss produced. Although there is certainly a lot of skills a professional dealer needs to possess to be in a position to set markets appropriately, the primary procedure for any novice professional will be to not make too many losses. It could be unjust to anticipate a new trader to start producing enormous revenue without having errors right from the beginning. The learning curve can be faster and less difficult for some than it is for others. An automated foreign currency dealing program negates the need for expertise and in many cases the normal customary understanding.

The internet speculator

Trading through forex has never been so swift. There’s always been an increased amount of competition; of course this is an inclusive element of the business, but using high speed Internet connections and computerized opponents, deals in addition to market making tend to be without the constraint. The nonstop worldwide trades have switched currency exchange trading into a true market lacking boundaries.

The best process

Everybody would wish to find out which computer software application is best, most profitable and totally free of malfunction. Of course this is the program we would all love to use. With all the current product sales promises and testimonies that abound the web it’s very difficult to decide on the system which is right for you. The purpose to remember is usually that the software program falls into distinct categories, and this also identifies who should work with a particular type. As an example, a number of the higher priced software program can deal for you but in addition would provide you with highly developed analysis of past explorations along with data which you can use in order to often shape a judgment regarding potential trading, or simply for different tactics maybe a long-term pair. Even if the less expensive software program can also present you with statistics as well as data investigation, it is not as advanced as the specialized variants. It doesn’t signify you are unable to get productive strategies with just the information it can provide, it simply implies you’ll likely require background understanding of the particular currency markets and precisely how forex trading can be impacted.

How much cash can one generate?

The forex trading marketplace can be so lucrative, the sky is the limit. However, it does entail investing your personal funds, which will mean that there’s an associated risk. No person wishes to throw money away yet this is the certainty of which not every trades are going to be financially rewarding, and may result in a loss. Computer software is only going to do as it is directed, and will require a strategy. It might be best to take on great activities through figuring out the system along with trying several approaches until you find a strategy that increases results as compared to another. Customer service is one of the most critical facets of our hands free program. As well as accompanying booklets there are always software systems and financial industry experts offered from the issuing businesses that are always available to provide guidance along with general help. From your software programmers’ standpoint they would like as many happy and completely satisfied customers as possible, so word of their software program might pass on that would increase their business. Unsatisfied purchasers protesting and complaining on multiple web sites has to be serious problem for their product sales office.

The final tip will be to figure out what kind of speculator you are and also to find the software program designed to accurately match what you want. There is typically demonstration models presented, often free, that permits the user to run the market without basically investing any money. It is however merely a representation of earnings you’d have produced if you had been connected and also had invested in a specific currency pair, using your system. Very often this is ample in order to encourage a lot of people how the solution is what they might need. That being said in case you were to constantly get it wrong with your tactic most likely you have to read more about currency exchange before you go further or perhaps put your hard earned money in a standard bank.

Categories
Mutual Funds

Career Opportunities In Mutual Fund Industry

Indian retail investors are considered to be risk averse due to many reasons. Mutual Funds can therefore be regarded as a boon for such investors. Mutual Fund industry is playing an active role in the capital market today and is one of the fastest growing industries.

What’s a Mutual Fund?

Wikipedia says, “a mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.”

Structural Framework of a Mutual Fund:

This article aims to highlight the various job opportunities in each of the departments in an Asset Management company of a Mutual Fund.

Asset Management Company (AMC):

1. Fund Management

In a mutual fund, the Fund Manager, who is also known as the portfolio manager, decides about the investment of the fund’s underlying securities (money received from investors for investment), realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors.

Who’s required? Here, deep economic analysis is required for effective investment decision making and therefore professionals from Commerce, Economics, Finance, Mathematics and Management background are required. Chartered Accountants, MBA Finance, Financial Analysts, Economics Masters, Statistics Masters are in huge demand. The pay package for such professionals ranges between Rs. 3 lacs – Rs. 6 lacs p.a. approx.

2. Operations

Investments on the recommendation & directions of the Fund Manager are actually required to be done through series of trading transactions; for which ‘Dealers’ are required.

National Stock Exchange (NSE) has a facility for testing and certification by launching NSE’s Certification in Financial Markets (NCFM). NCFM is an online testing system, a revolutionary concept in administration of examinations and the only one of its kind today in the country. It tests the practical knowledge and skills required to operate in the financial markets in a secure and unbiased manner and awards certificates based on relative merits thus ensuring that the calibre of persons entering this field is kept high in the best interests of a mature and vibrant market.

It has been specified by SEBI that all brokers/dealers in the stock market have to mandatorily obtain the NCFM certification.

The various Certification Modules are: Derivatives Market (Dealers) Module, Capital Market (Dealers) Module, Debt Market (Basic) Module, Surveillance in Stock Exchanges Module, NSDL – Depository Operations Module, Commodities Market Module, Corporate Governance Module, Compliance Officers (Brokers) Module, Compliance Officers (Corporates) Module, Information Security Auditors Module (Part-1 & Part- 2).

The certification remains valid for 5 years from the date of the test for all modules except Derivatives Market (Dealers) Module, Commodities Market Module and Information Security Auditors Module.

Who’s required? Candidates having knowledge of Capital Markets, Derivatives, Equities, Stock Exchange functioning, etc. are required along with certifications in one or more above mentioned Modules. The pay package ranges between Rs. 90 thousand to Rs. 1.20 lacs p.a. approx.

The Registrar & Custodian is a trust company, bank or similar financial institution responsible for holding and safeguarding the securities owned within a mutual fund. A mutual fund’s custodian may also act as the mutual fund’s transfer agent, maintaining records of unit holder’s transactions and balances.

Who’s required? Here, candidates from Secretarial, Legal background and semi-qualified professionals are required. The pay package ranges between Rs. 80 thousand- Rs 1.20 lacs p.a. approx.

3. Marketing

The AMC launches various schemes through which it invites investors to put their money. To reach the retail investors and provide them with the information about the schemes, extensive marketing is done through various channels of the media.

The distribution / selling of these schemes are done through Agents, Advisors, Third-party Distributors.

SEBI has made mandatory for any entity / person engaged in marketing and selling of mutual fund products to pass AMFI certification test (Advisors Module) and obtain registration number from AMFI. This certification remains valid for 5 years from the date of the test.

The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders.

Who’s required? Here, graduates having the AMFI certification can work as Business Development Managers / Relationship Managers / Advisors for the marketing and distribution of the mutual fund schemes. Relationship Managers / Advisors assist investors in their financial planning by recommending them ideal investment portfolio and build a customer relation. The pay package ranges from Rs. 1.5 lacs to Rs. 2 lacs approx.

NCFM and AMFI certifications can be taken by anybody. There are no restrictions of age or qualifications for anyone to take these Tests. These certification tests are automated online examinations conducted on computer. One does not need any prior knowledge of computers to be able to take the test.

Conclusion:

Mutual Fund industry provides huge job opportunities and has tremendous scope for making a career in mutual funds. ASSOCHAM says ‘MF industry is slated to grow at 30% to Rs. 9.50 lakh crore by 2010’.