Emerging-Market Debt Boom Signals End of Crisis

Oct 13, 2009 - Investors are throwing money into the riskiest of emerging markets at a stunning pace, buying as if the global financial crisis is history.

The sovereign credits of Argentina, Ecuador, Pakistan and Ukraine have risen more than 100% year to date on benchmark JPMorgan's Emerging Market Bond Index Global, or Embig. Other impressive gainers include the Dominican Republic, Ghana, Iraq, Serbia and Venezuela.

Investors and market analysts aren't sweating yet. Many say the levels are reasonable, and there is even potential for further advances. A big correction isn't likely, they add, though a modest one is possible. They point out the gains appear outsized given the historic plunges a year ago. Clearly, the problem has gone from, 'What do I sell in order to raise the cash I need?'...to, 'Oh my gosh, where do I put the cash that's being thrown at me,' said Michael Gavin, head of emerging-markets strategy at Barclays Capital. The focus turns from fears of downside risks to upside potential. Mr. Gavin said Barclays Capital doesn't believe current levels have risen to bubble-like levels, but the odds are very high that we will. So far this year, Argentina has advanced 136% on the Embig, while Ukraine rose 112%, Pakistan rose 163% and Iraq gained 94%. Overall, the index has gained 28% this year.

Ultimately, Mr. Gavin and others say, asset prices are defensible, particularly as many sources of money have yet to re-enter the market in full position, including hedge funds and individual investors. The move in these low-grade bonds, which some call junk, comes amid a broad repositioning into riskier assets, including commodities and investment-grade emerging markets such as Brazil.

Emerging-market funds have absorbed more than $40 billion so far this year, according to fund tracker EPFR Global.That means that last year's outflow of $40.1 billion has been completely erased said Andrew Howell, an emerging-markets strategist at Citigroup. We tend to get nervous when inflows surge, suggesting excessive optimism. However, at this point it seems early to get too worried.

Ukraine’s banks start to lower interest rates on hryvnia deposits

KIEV, Oct. 21 – Ukraine’s banks have started cutting interest rates on short-term deposits in hryvnias and on one-year deposits in foreign currency, representatives of commercial banks told Interfax-Ukraine.

One cannot say that now a common trend of interest rate falls in banks is seen. It's likely that the trend is the following: some large banks launched short-term deposit products in hryvnias with interest rates that were higher than those on the market, and now they have fallen to a market level. A fall in interest rates is seen not for all deposits, and the trend affected only those deposits with the shortest terms - up to one month. As for our bank [VAB Bank], we had interest rates that were at the market level, now the bank is not cutting rates said Tsvetan Tetrinin, deputy chairman of VAB Bank for retail business.

Kyrgyzstan to obtain sovereign credit rating.

Oct 10, 2009 Kyrgyzstan to obtain sovereign credit rating.

A "B" credit rating would match the 10% p.a. USD deposit rates available from Banks in Kyrgyzstan.

Nepal - up to 9% p.a.

Nepal investment bank Ltd. offers up to 9% p.a. for a special deposit account in Nepalese Rupee. Nepal Investment Bank Limited is one of the leading commercial banks of Nepal. Previously known as Nepal Indosuez Bank Ltd., the bank was established in 1986 as a joint venture between Nepalese and Credit Agricole Indosuez.

In Nepal, Indian Rs 500 and Rs 1,000 notes are not accepted. So, Indians carry Rs 100-notes. Everywhere you can pay in Indian Currency. The exchange is as follows: IC 100= NC 160.

Pakistan Deposit rates up to 13% p.a.

The Royal bank of Scotland is offering deposit rates up to 13% p.a.

Russian bank offering 11% p.a. for EUR deposit

I have just received confirmation from bank in Russia that until 31 December 2009 they offering 11% p.a. for a 18 month-deposit.

Sent 28 October 2009 : Thank you for your interest in our services. I am glad to confirm that the interest rate for EUR is 11.0% per year for 18 months.
This interest rate is valid for any sum exceeding € 100 000.
The standard interest rate within EUR for deposits
under € 100 000 amounts to 10%. But, as soon as your client has decided to
open such a time deposit with our Bank, he immediately gets a Platinum
status. That is why we would like to offer him to take an additional advantage
(+1%) and to gain some extra returns. - The Head of Client Department.

South Africa interest rate unchanged at 7%

October 2009 - FRANKFURT (MarketWatch) -- South Africa's central bank maintained its benchmark interest rate unchanged at 7% on Thursday, meeting market expectations. "Economic growth is expected to improve in the coming months, but is likely to remain below potential for some time," the South African Reserve Bank said in a statement. "Domestic growth prospects are dependent to an extent on the global recovery which appears to be uneven across countries and regions." The substantial electricity tariff increases requested by public utility Eskom are "the main longer-term threat" to the inflation outlook, the central bank said.

How to make money from Aussie interest rates

In a world of minuscule and moribund interest rates, the Aussies are the only industrialized market where rates are rising – a tasty morsel for an investment.

Vietnam banks pushing up interest rates in hopes of luring deposits

Oct 2009

It’s generally understood that SBV wants to keep loan interest rates low. However, banks still keep raising deposit interest rates.

The Bank for Investment and Development of Vietnam (BIDV) and Agribank, which typically do not join the ‘interest rate race,’ nudged up their rates last week, following the lead of private sector banks. The two state-owned banks are now offering annual interest rates on two year Vietnamese currency deposits are now about 8.8 percent.

Banks have also raised rates on short term deposits. At many commercial banks, a depositor can earn an annual rate of 8.69 percent for a one month term deposit, 9 percent for a three month term, and 9.3 percent for six month deposits. Two or three year term deposits will return interest rates of over 10 percent per annum.

1001 reasons behind interest rate hike

Explaining the interest rate increases, bankers say that they need more capital to get ready to lend in the event that the Government announces another economic stimulus package. They argue as well that they must offer high interest rates to retain depositors, who would otherwise leave banks for the stock market or real estate market in search of more attractive profit.

Yet another reason offered is that banks are intent on mobilizing long term capital at what they consider to be a lower cost than they will have to pay in the future.

Banks may want to secure long term deposits to support long term loans, but depositors seem only willing to make short term deposits. The banks’ strategy is evidently to sell depositors short term notes now and later to offer them other incentives to persuade them to roll over these deposits at maturity.

More harm than good?

Industry experts have warned banks against engaging in a cutthroat interest rate race. Many have pointed to the central bank’s decision to hold the basic interest rate at seven percent for October 2009 as meaning that it wants commercial banks to keep low interest rates to provide low cost capital to the economy.

The deposit interest rates now being offered seem high if in fact and as predicted, price inflation will be held to seven percent or less in 2009. However, noting the attraction of the stock market and real estate ventures, Duong Thu Huong, Secretary General of the Vietnam Banking Association, said that banks are finding difficult to attract capital even when they offer deposit interest of 10.5 percent per annum.

Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, agrees. He says offering high interest rates will simply push up bank costs without securing much in the way of additional deposits, battering the banks’ presently solid ‘bottom lines.’ Hanh added that a sustained rise in loan interest rates could hobble the nation’s efforts to maintain strong economic growth and boost exports when the world economy recovers.

The Government has been spending many trillions of dong to subsidize loan interest rates in order to sustain business dynamism and improve competitiveness. It is not clear whether this economic stimulus package will be continued past the end of the year.

Belize - High Interest Rates are Crushing the Working Class

Deposit rates in Belize are around 10% p.a. higher than any other country in the region.

Malta - EUR 2 year deposit 3% p.a.

The bank of Valletta in Malta is offering a 2 year deposit at 3% p.a. with interest paid quarterly. This is about 1% more than any other EU bank.

Moldova - the hidden strong currency with high rates

Banks offering 14% - 16% p.a. on Moldovan Lue.
Strong and stable currency.

Subsidiary of Society Generale.

Ukraine drops rates - Indonesia banks coerced to drop rates

• Ukraine October 2009 - Ukraine’s banks have started to lower deposit rates cutting interest rates on short-term deposits in hryvnias and on one-year deposits in foreign currency.
  


• Indonesia Aug 2009 - 15 Large Banks Agree To lower deposit rates but so far have been slow to implement.
  

Russia - Economy improves

With the Russian economy improving, rising Ruble and with long-term deposit rates on Rubles around 16% p.a., looks like an ideal time to place deposits in Rubles. These rates won't be around for long.

Tajikistan - 18% p.a for USD

Without a doubt, USD deposit rates of 18% p.a. are highest in the world for eurocurrency. However, administration is a nightmare

Russia - Ruble deposits around 15% p.a.

With oil on the march again, it seems safer to deposit in Russian banks paying on average 15% p.a. in Rubles.

Dominican Republic - 12% p.a. for Peso

The central bank of Dominican Republic is paying 12.0% p.a. for Peso deposits. The 25% withholding tax can be reduced if you get your bank to deposit in their name on your behalf (viz. fiduciary deposit), as this reduces withholding tax to 10%

Armenia - 10% p.a. for USD / EUR

Now that Armenia has signed peace treaty with Turkey, its worth looking at their deposits, especially as they pay 10% p.a. on USD / EUR / GBP deposits.

Non resident withholding tax on interest is 10%, meaning foreigners will net 9.0% p.a.

Moldova - 16% p.a. in MDL

The Moldova banks are offering 16% on local currency deposits. However the MDL has been very strong over the past 5 years, for instance keeping value with the Swiss Franc. Withholding tax for foreigners is 10%, meaning non-residents will still net 13.5%.

Russia - 12% p.a. for USD deposits

Banks in Russia now offering 12% p.a. for 18 month deposits. Withholding tax is 35% of the interest over 9%.

However you have to open the account in person or get a representative to do so on your behalf. Also your passport has to be translated into Russian, and then the translation must be certified by a notary. Then you must go to a local municipal or provincial office to get the certified document stamped with an apostille of the Hague. An apostille means the state verifies that the notary is on the official list of those who can certify copies.

New Zealand highest deposit rates - over 10% p.a.

The highest paying deposits in New Zealand is over 10.0 p.a. with Goldband Finance. Foreigners only pay 2% tax on the interest i.e. keep 98% of the interest.

It's easy for foreigners to remotely open accounts.

Azerbaijan high interest rates

Azerbaijan provides incredible opportunities. Strong oil based economy with petrodollars flowing in fast and furious. The State controlled bank of International bank of Azerbaijan offers up deposits with annual payment so interest to 16% p.a. for USD and 14% for EUR. There is no withholding tax.

And its easy to open accounts without visiting the country.

Highest deposit interest rates in the world

This blog we will discuss where to find the highest interest rate deposits in the world. These are mainly for hard currencies such as Euro, Sterling, US dollar, Ozzie, Kiwi and Loonie and CHF. On occasion we will discuss deposits in the usual carry trade currencies such as Brazilian Real, South African Rand, Ruble, etc.

I will discuss how as a foreigner you can open these bank accounts. Also relevant will be the applicable withholding taxes, deposit insurance schemes and the credit ratings of these banks.

More is available from my site.