Published on Mon, Mar 09 2009
Economic and financial situation are deteriorating. And, in spite of the worldwide attempt to alleviate markets and revitalize augmentation, it is only a matter of time before weak confidence opens doors to panic yet again. Signs of establishing damages are noticeable in economics, market operations and surely price. Examining the market’s more usual asset classes, the sense of risk aversion is instantly recognizable. The FTSE 100 has closed pushed to 6 year lows, the Dow Jones Industrial Average has outpaced its fall in the great recession to close for 12 year lows and the Nikkei 225 is just off of levels not seen in a quarter of a century.
Rising damages in worldwide economic Markets
Can US dollar still remain as safe heaven?
Published on Thu, Mar 12 2009
Looking at recent situation it’s difficult to see if we can still take US Treasuries as the risk-free assets or not. Apparently the safe-haven position that has advocated the world’s most liquid currency for almost 8 months currently is beginning to confront struggle. Growth predicts for the US keep on reducing as policy attempts dropped short of a consumer and credit-led force in economic movement. On the contrary, the FX market’s distinctive high yielders are in fact finding economic projections that indicate a fast revival. It is making these currencies gainful for both their sound fundamentals and relatively high return. But sentiment after expansion projections and sentiment according to liquidity come under 2 very diverse states of anxiety and risk.
US dollar extending losses
Published on Mon, Mar 16 2009
US Dollar flaw is ready to go on in the upcoming week as an upward correction in risky assets gives capital out of risk free assets in seek of yield. Last week, the US Dollar Index decisively broke under an increasing trend line that had directed prices higher from mid-December, showing the way for an extensive pullback in opposition to the range of main currencies. In fact, the US dollar average value in opposition to its major counterparts is at present -93.7 percent inversely related with the MSCI World Stock Index.
US retail sales may influence risk trends
Published on Thu, Mar 12 2009
US dollar price action was mainly to blame for much of what occurred over the forex markets on Wednesday, as the DXY index at last broke under severe trend-line support, indicating the currency is officially spinning below. There was not much in the way of fundamental news for the US, but that is going to be different on Thursday as the Commerce Department is predicted to reveal that US retail sales drop negative for the 7th time throughout the last 8 months in February, as worsening labor markets, tight credit situations, and a year-long depression influence badly on the minds of consumers. More particularly, advance retail sales are expected to have contracted 0.5 % throughout the month, and keeping out auto sales are predicted to have drooping 0.2 %, marking what might result in being a steady trend throughout the 1st half of 2009.
SBP goes for OMO for absorbing additional money
ublished on Sat, Jun 27 2009
KARACHI: State Bank of Pakistan (SBP) Friday obtained Rs59.40 billion from banks for one day at a markup of 7.25 percent for absorbing additional money from the banking system. Today, the central bank conducted an open market operation for absorbing additional liquidity from banks. Banks offered Rs82 billion for the purchase of treasury bills; however, the central bank sold treasury bills worth Rs59.40 billion at a markup rate of 7.25 percent. According money market dealers, additional liquidity is being witnessed in the banking system owing to commodity operation by various organizations.
Oil below 69 dollars in Asia
Published on Fri, Jun 26 2009
SINGAPORE: Oil prices fell in Asian trade Thursday on a stronger US dollar after the US Federal Reserve reaffirmed its policy of keeping interest rates at near zero. New Yorks main futures contract, light sweet crude for delivery in August, shed 15 cents to 68.52 dollars a barrel. Brent North Sea crude for August delivery declined 16 cents to 68.17 dollars.
SECP introduces criteria for open-end schemes
Published on Fri, Jun 26 2009
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has introduced the criteria for categorization of open-end schemes managed by Asset Management Companies. Categorization has been introduced to facilitate investors in making informed investment decisions, specify investment parameters and eligible asset classes, áidentify risk profile of a scheme, enable investors to compare performance of various open-end schemes with others and against a relevant benchmark and bring uniformity. On the whole, categorization of schemes will enhance investor confidence by improving transparency to catalyze growth of the mutual funds industry, in line with best international practices.
Bullish KSE closes at 7163 up 34 points
Published on Sat, Jun 27 2009
KARACHI: Karachi Stock Exchange (KSE) 100-index closed over 7100-point level, as the last trading session on the last day of week ended in positive zone. Today the market began in possible territory and the same trend lasted in both the session. On one point, the benchmark index was witnessed touching 7217-point level; however, the investors preferred selling owing to the last day of the week, which forced the index to close at 7163 up 34 points. The trade volume today was 150 million shares, of them, the most activity was seen in Arif Habib Bank shares, which closed at Rs7.41 up 97 paisa. The experts said the bullish market may cruise its journey into the next week as well.
SBP goes for OMO for absorbing additional money
Published on Sat, Jun 27 2009
KARACHI: State Bank of Pakistan (SBP) Friday obtained Rs59.40 billion from banks for one day at a markup of 7.25 percent for absorbing additional money from the banking system. Today, the central bank conducted an open market operation for absorbing additional liquidity from banks. Banks offered Rs82 billion for the purchase of treasury bills; however, the central bank sold treasury bills worth Rs59.40 billion at a markup rate of 7.25 percent. According money market dealers, additional liquidity is being witnessed in the banking system owing to commodity operation by various organizations.
Qatar to provide LNG to Pakistan
Published on Sat, Jun 27 2009
DOHA: Pakistan will get 1.5 million ton Liquefied Natural Gas(LNG) annually from Qatar. The sources of investment ministry told Geo News that the decision was taken during a meeting of Minister of Investment Senator Waqar Khan with Qatar�s Deputy Prime Minister and Minister of Energy and Industry of the State of Qatar Abdullah bin Hamad al-Attiyah in Doha. The two sides also agreed that experts from their respective Petroleum Ministries would meet, shortly, to discuss the technical aspects of export of LNG from Qatar to Pakistan.
Not enough time for finance ministers and central bankers
For how long do policy-officials need to get financial expansion and steady the economic markets? If the international leaders are not able to reach an important, joint policy response to the world’s slump, the situation most likely to get poorer. How much worse? These are the most popular and should-be popular questions the market is struggling with currently; and throughout the coming weeks and months, traders ought to very carefully examine and pay a very close attention on ‘just how bad can things actually become.’ While the fundamental position for general risk trends is not hopeful, carry interest got a major increase this past week. The Index went up more than 650 points from last Friday, indicating a important break above resistance in the force-ridden.
The Foreign Exchange Rate
In the international market, the Foreign Exchange rate is demonstrated by five numerals, for example:
EUR/USD 1.2653
USD/JPY 107.65
GBP/JPY 195.03
The Exchange Rate Change
The exchange rate smallest change for the final figure (is 1 pip), for example:
The EUR/USD smallest change is 0.0001
USD/JPY smallest change is 0.01
Quoted Price
All quoted prices can be divided into direct quoted price and the indirect quoted price, for example:
The direct quoted price currency includes: EUR/USD, GBP/USD, AUD/USD, NZD/USD ......
The indirect quoted price currency includes: USD/JPY, USD/CHF, USD/CAD ....
For example, the EUR/USD quoted price is 1.2653, which means each euro could convert to 1.2653 US dollars, while the USD/JPY quoted price is 107.65, which means that each US dollar could convert to 107.65 Japanese Yen.
The buying price and the selling price of the foreign currency is decided by the bank or the broker house, customer decides only the buying trend. For example, the EUR/USD quoted price general demonstration is 1.2652/57, which means the broker house is willing to buy Euro dollar at the price of 1.2652, and sell at the price of 1.2657. At this time, the price difference between the buyer and the seller (pip difference) is 5 pips, for foreign exchange trading, the smaller the point means the trading cost is lower and the chance of profit making is much larger.
Characteristics of Forex Market
In recent years, the foreign exchange market could favor more and more people, it becomes a favorite for the international investors, and this is strongly related to the characteristics of the Forex market. The main characteristics of the foreign exchange market are:
1st, It consists market but no trading field
The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work
Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game
In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.
Forex Charts
Forex charts assist the investor by providing a visual representation of exchange rate fluctuations. Many variables affect currency exchange rates, such as interest rates, bank policies, geopolitics, and even the time of day may affect exchange rates.
In order to help the investor attempt to predict when or in what direction a rate may change, advisors provide forex charts. Quality forex websites provide subscribers with a daily newsletter that includes a forex chart, forex signals and a forex forecast.
There are a variety of forex charts available for the investor to use and study. Some are very simple using only a couple of forex signals or indicators and are ideal for beginners. Others include 30 or 40 forex signals or indicators and live on-line streaming data so that the investor may analyze trades quickly and accurately.
In order to make an accurate forex forecast, it would seem that the more indicators, the better, but some analysts prefer a simpler system.
The idea behind studying forex charts is that history repeats itself. Instead of trying to “see the future”, a forex forecast evaluates the past. That is to say that the analyst who is responsible for attempting to predict future currency moves analyzes what happened to an exchange rate yesterday, last week, last month or last year and uses this knowledge to the best degree he knows how.
Some people trade short term, some intermediate term, and some long term. All three types of traders may benefit from the use of forex charts, just adapted to their own trading time frame.
Investors also create their own forex charts to evaluate their own performance. Creating a forex strategy for oneself is the goal of many investors. Instead of looking to a professional to analyze forex signals, these investors choose to create their own forex forecast.
Others, however, create their own strategy but also follow the opinions of professional currency traders at the same time. It all depends on your personal preferences.
There are other forex charts that deal with known correlations between two currency pairs, that is, how they move in relation to each other. Some exchange rates are known to affect other exchange rates, either by moving in the same or the opposite direction depending on the correlation.
Charts are available that explain these correlations in detail and show which pairs have strong correlations or strong negative correlations, so that an investor can use the movement of the exchange rate of one currency as a signal to trade another currency. These correlations are also the basis for some forex forecasts.
It can be difficult and overwhelming to enter the world of forex trading alone. Experts recommend education, practice with a demo account and advice from a reputable broker who is backed by a quality institution. Learning to read forex charts and evaluate forex signals is a skill that comes with time, skills that are essential when an accurate forex forecast is the the goal.
What Is The Difference Between Forex and Futures?
1. A Forex trader could trade more transaction compared to the futures market (the trading volume could be a times larger), and the risk will be strictly under control. The trading volume of the Forex market is 46 times larger compared to the futures market, moreover Forex traders could make more profit from the Forex market due to the larger trading volume (the transaction volume is a few times larger), the REFCO Switzerland rich transaction platform allowed transaction between 1-100 times to be carry on, moreover a Forex trader could decide his or her own transaction amount, for example: Your account has $30,000, the basic transaction unit is each $1,000 (which transaction amount in $1.00, million), namely, so the proportion of the margin of each transaction unit is 100:1.
2. The risk of the Forex trader is under control, such margin call will not happen compared to futures, through the Forex trading system, your risk will receive the strict limit, even if your margin if lower then the deposit required, the Forex trading system will automatically settle your position, this means even if a Forex trader suffered losses, moreover if the market is suffering from a disaster fluctuation, your loss could not surpass your account amount. In order to understand the advantages, please apply for the demo account to carry on the complete zero risk.
3. A Forex trader will receive a large limitation of liquidation and a relatively fair market because the trading volume of the Forex market is large and it is also the largest liquidation market in the world. At present the trading volume in the Forex market is 140 billion Dollars, such big market will completely digest your transaction cash.
4. A Forex trader may do 24 hours transactions and other markets are different, the Forex market is a 24 hour linkages market, it starts from every Sunday before dawn Australian Sydney market, substandard collect the transaction center Singapore, Tokyo, London, Frankfurt to New York continuously to open, such linkage market enable you to do 24 hours transactions, also provide flexibility for Forex trader to do transaction.
Forex Development History
Foreign exchange development history - exchange market evolution foreign exchange development history - exchange market evolution gold remittance system and Bretton woods agreement
In 1967, a Chicago bank rejected to provide pound loan to a professor named Milton Friedman, because his purposed was to use this fund to sell short the British pound. Mr. Friedman realized excessively that the price ratio from the British pound to US dollar at that time was high, he wanted first to sell the British pound, after the British pound fell he buys back the British pound to repay the bank again. This family bank rejects the loan offer based on the "Bretton woods Agreement" which was established 20 years ago. This agreement has fixed the various countries' currency to US dollar exchange rate, and the price ratio between the U.S dollar and the gold is also fixed to 35 US dollars to each ounce of gold.
The Bretton Woods Agreement was signed in 1944, the purposed was to prevent the currency to escape between countries, and also to limit the international speculation, thus to stabilize the international currency. Before this agreement was signed, the gold remittance standard system which was widely used since 1876 - was leading the international economy system until the First World War. In the gold remittance system, the currency was at the stable level under the support of the gold price. The gold remittance system has abolished the old time king and the ruler which depreciates the currency value unlawfully, which will lead to inflation.
But, the gold remittance standard system is certainly imperfect. Along with a country economic potentiality enhancement, it can import massive products from overseas, until it exhausts the gold reserve of certain country. It resulted the supply of the currency reduces, the interest rate raises, the economic activity will start to decline until it reaches the recession limit. Finally, the commodity price falls to the valley, gradually attracts other countries to stream in, massively rushes to purchase this country commodity. This will pour gold into this country, this will increase this country currency supplies quantity, and it will reduce the interest rate, and will create the wealth. This is so called the "the prosperity - decline” pattern and is the circulation of the gold remittance standard system, until the trade circulation and the gold freedom was broken by the First World War.
After several catastrophes wars, the Bretton Woods agreement has appeared. The countries which signed the treaty agreed to maintain the domestic currency to US dollar exchange rate, as well as the necessity of the corresponding ratio of the gold, and only allow a small fluctuation. Countries are prohibited to depreciate the currency value for the gain trade benefit, only allows the country to depreciate not more then 10%. Enters the 50's, the continuous growth of the international trade causes the fund large-scale shift which produces because of the postwar reconstruction, this causes Bretton Woods system which establishes the foreign exchange rate to lose stability.
This agreement was finally abolished in 1971, US dollar no longer could convert to gold. Until 1973, each major industrialized nation currency exchange rate fluctuation has been more freely, mainly regulates by the foreign exchange market through the currency supplies and demand quantity. The business volume, the transaction speed as well as the price variability, have achieved a comprehensive growth in the 1970's, come along with the emerge of price ratio fluctuation, the brand-new financial tool, then only the market liberalization and the trade liberalization could be achieved.
In the 1980s, along with the published of the computer and correlation technology, the international capital has flow rapidly, and strongly related the Asia, Europe and America market. Foreign exchange business volume from 80's rises daily from 70 billion US dollars to 150 billion US dollars after 20 years.
European market inflation
One of the reasons why the foreign exchange developed rapidly was the rapid development of the Euro dollar market. In a Euro dollar market, US dollar is stored beyond the border of America banks. Similarly, the European market is refers to property depositing outside the currency rightful owner country market. A Euro dollar market was formed at first in the 50's, at that time Russia deposited its petroleum income beyond the US border, avoid being freeze by the US government. This has formed a large offshore US dollar national treasury which is beyond the control of the US government. The American government has formulated a law to prohibited US dollar from lending money for the foreigner. Because the degree of freedom of the Euro dollar market is bigger and the rate of return is bigger, therefore it has large attraction. Starting from the 80's, the American company starts to borrow loan from the offshore market, they discovered that the European market is a wealth center which consists of large amount of floating capital which could provide short-term loan.
London once was (until now still is) one of the main offshore market. In the 80's, the Bank of England in order to maintain its global finance industry center dominant position, using US dollar as England pound substitution to make loan, thus to become a Euro dollar market center. London's convenient geographical position (is situated between Asian and Americas market) also helps to maintain the European market as the dominant position.
Famous Forex Quotes
1. “If you get in on Jones’ tip; get out on Jones’ tip”. If you are riding another person’s idea, ride it all the way.
2. Run early or not at all. Don't be an eleven o'clock bull or a five o'clock bear.
3. Woodrow Wilson said, "a governments first priority is to organize the common interest against special interests". Successful traders seek out market opportunities capitalizing on the reality that government's first priority is rarely achieved.
4. People who buy headlines eventually end up selling newspapers.
5. If you do not know who you are, the market is an expensive place to find out.
6. Never give advice-the smart don't need it and the stupid don't heed it.
7. Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word-nobody! Thus the successful trader bases no moves on what supposedly will happen but reacts instead to what does happen.
8. Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.
9. Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does console yourself by thinking of all the times when liquidating early preserved gains you would otherwise have lost.
10. When the ship starts to sink, don't pray-jump!
11. Life never happens in a straight line. Any adult knows this. But we can too easily be hypnotized into forgetting it when contemplating a chart. Beware of the chartist's illusion.
12. Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
13. Whatever you do, whether you bet with the herd or against, think it through independently first.
14. Repeatedly reevaluate your open positions. Keep asking yourself: would I put my money into this if it were presented to me for the first time today? Is this trade progressing toward the ending position I envisioned?
15. It is a safe bet that the money lost by (short term) speculation is small compared with the gigantic sums lost by those who let their investments "ride". Long term investors are the biggest gamblers as after they make a trade they often times stay with it and end up losing it all. The intelligent trader will . By acting promptly-hold losses to a minimum.
16. As a rule of thumb good trend lines should touch at least three previous highs or lows. The more points the line catches, the better the line.
17. Volume and open interest are as important to the technician as price.
18. The clearest and easiest way to determine a trend is from previous highs and lows. Higher highs and higher lows mark an uptrend, lower highs and lower lows mark a downtrend.
19. Don't sell a quiet market after a fall because a low volume sell-off is actually a very bullish situation.
20. Prices are made in the minds of men, not in the soybean field: fear and greed can temporarily drive prices far beyond their so called real value.
21. When the market breaks through a weekly or monthly high, it is a buy signal. When it breaks through the previous weekly or monthly low, it is a sell signal.
22. Every sunken ship has a chart.
23. Take a trading break. A break will give you a detached view of the market and a fresh look at yourself and the way you want to trade for the next several weeks.
24. Assimilate into your very bones a set of trading rules that works for you.
25. The final phase in a bull move is an accelerated runaway near the top. In this phase, the market always makes you believe that you have underestimated the potential bull market. The temptation to continue pyramiding your position is strong as profits have now swelled to the point that you believe your account can stand any setback. It is imperative at this juncture to take profits on your pyramids and reduce the position back to base levels. The base position is then liquidated when it becomes apparent that the move has ended.
Forex Margin Trading
Comparing to other investment, the Foreign Exchange margin trading is one of the fairest and the most attractive investment method.
The Foreign Exchange margin trading meaning the traders borrow loan from bank, finance organization or broker house to carry on the foreign currency trading. Generally, the financing proportion is above 20 times, which means the Forex traders’ fund may enlarge to 20 times to carry on the trading. The bigger the financing proportion, means the Forex traders just need to pay very less fund, for example, the financing proportion provided by the financial organization is 400 times, namely the lowest margin request is 0.25%, the traders just need to pay 25 US dollars, then he or she could trade as high as 10,000 US dollars, fully using the contra method to make big profit by only paying a very less price.
Besides the fund enlargement, another attraction of the Forex margin trading method is that it can be traded in both ways, you can make profit by buying the currency when the currency rise (makes many), or to sell a currency when the currency is dropping to make profit (short-selling), thus does not need to be restricted by the restriction so-called bear market is unable to make money.
Making Profit in the Foreign Exchange Market
The currency fluctuate continuously due to reasons such as political, economical reasons, sometimes the changes could be extremely great, therefore, the Forex traders also can have the opportunity in among which makes a profit. For example, the Japanese Yen daily fluctuation is probably between 0.7% to 1.5%, Forex traders may make profit through buying and selling. All trading could be completed in a short time, the trading strategy could be carry up according to the market conditions, it is extremely flexible, even if the direction looks wrong, the lost could be stop immediately, the lost could reduce but profit potential is still great. Therefore, the Foreign Exchange margin trading is the most flexible and the most reliable investment method.
Foreign Exchange Margin Trading elementary knowledge
Introduction to Foreign Exchange Markets
Being the main force driving the global economic market, currency is no doubt an essential element for a country. However, in order for all the countries with different currencies to trade with one another, a system of exchange rate between their currencies is needed; this system, is formally known as foreign exchange or currency exchange.
In the early days, the system of currency exchange is supported solely by the gold amount held in the vault of a country. However, this system is no longer appropriate now due to inflation and hence, the value of one’s currency nowadays is determined through the market forces alone. In order to determine the value of a currency’s exchange rate, two main types of system is used which is floating currency and pegged currency.
For floating exchange rate, its value is determined by the supply and demand of the global market where the supply and demand is bound by all these factors such as foreign investment, inflation and ratios of import and export. Normally, this system is adopted by most of the advance countries like for example UK, US and Canada. All of these countries have a similarity where their market is well developed and stable in economic terms. These countries choose to practice this system due to the reason where floating exchange rate is proven to be much more efficient compared to the pegged exchange rate. The reason behind this is because for floating exchange rate, the market itself will re-adjust the exchange rate real-time in order to portray the actual inflation and other economic forces. However, every system has its own flaw and so does the floating exchange rate system. For instance, if a country suffers from economic instability due to various reasons such as political issues, a floating exchange rate system will certainly discourage investment due to the high risk of suffering from inflationary disaster or sudden slump in exchange rate.
Another form of exchange rate is known as pegged exchange rate. This is a system where the value of the exchange rate is fixed by the government of a country and not the supply and demand of the market. This system is called pegged exchange rate because the value of a country’s currency is fixed to another country’s currency. As a result, the value of the pegged currency will not fluctuate unlike the floating currency. The working principle behind this system is slightly complicated where the government of a country will fixed the exchange rate of their currency and when there is a demand for a certain currency resulting a rise in the exchange rate, the government will have to release enough of that currency into the market in order to meet that demand. However, there is a fatal flaw in this system where if the pegged exchange rate is not controlled properly, panics may arise within the country and as a result of that, people will be rushing to exchange their money into a more stable currency. When that happens, the sudden overflow of that country’s currency into the market will decrease the value of their exchange rate and in the end, their currency will be worthless. Due to this reason, only those under-developed or developing countries will practice this method as a form to control the inflation rate.
However, the truth is, most of the countries do not fully practice the floating exchange rate or the pegged exchange rate method in reality. Instead, they use a hybrid system known as floating peg. Floating peg is the combination of the two main systems where one country will normally fixed their exchange rate to the US Dollars and after that, they will constantly review their peg rate in order to stay in line with the actual market value.
The Foreign exchange market, or commonly known as FOREX, is the largest and most prolific financial market because each day, more than 1 trillion worth of currency exchange takes place between investors, speculators and countries. From this, we can deduce that the actual mechanism behind the world of foreign exchange is far more complicated than what we may already know, and that, the information mentioned earlier is just the tip of an iceberg.
Bahrain All Shares Index
Bahrain All Shares Index:
The Bahrain All Share Index was launched in 2004. It is a benchmark index consisting of all the local-publicly listed companies on the BSE.
Esterad’s Index:
Esterad Index was launched in 2004 and it consists of a basket of selected local-publicly listed companies, selected according to specific criteria such as Sectorial and market representation, and liquidity.
Mechanism of Calculation:
Both indices are value-weighted price return indices. They are calculated by dividing the total current market capitalization by the total base-period market capitalization (Base Value), then multiplying the result by a factor (multiplier) of 1000 as shown in the formula below:
Dow Jones Index:
The Dow Jones Bahrain Index was launched in July 2005. This index is a composite index of all tradable stocks listed on the Bahrain Stock Exchange. Eligible companies must be domiciled and headquartered in Bahrain, and the company’s stock must have its
Trading System of Bahrain
In 1999, the BSE installed the Automated Trading System (ATS) to carry out all the exchange’s transactions. The Automated Trading System at the BSE is one of the most advanced trading systems used in capital markets worldwide. Such system ensures accuracy, speed, and fairness in executing transactions providing greater flexibility to operate several markets at once and list various instruments. The mechanism of the ATS can be controlled according to the rules and regulations of the BSE.
Before launching the automated trading system at the BSE, trading was done manually known as “written bidding” system. Using this system, the broker had to write the bid and offer orders that they receive from the investor on the trading boards at the trading floor. The transaction takes place when the prices of the bid and offer match.
Markets supported by the Automated Trading System
The automated trading system installed in 1999 supports 5 markets:
# The Regular Market.
# The IPOs Market: The market in which shares of a company are traded for the first time following its listing on the exchange.
# The Special Orders Market (Min. BD 500,000).
# Bonds Market: This market is specialized for the trading in bonds and Islamic Sukuk.
# Mutual funds market: This market is specialized for the trading in mutual funds.
Trading Mechanisms
During the pre-opening period (9.15a.m.-9.30a.m.), brokers input the bids and offers they receive from investors into the system until they match. The mechanism for which the price of equities is determined is as follows:
# The best price (price priority): The transaction is executed for the best price.
# Type of order:If an order is conditional, precedence of execution is given to orders that are un-conditional. For example, if there are two orders with the same price, the system will give precedence to the un-conditional order.
# Source of order: The sources of order are given precedence of execution as follows:
- Priority 1: client’s order, foreign investor’s order, market control’s order
- Priority 2: mutual fund’s order, the issuing company’s order, specialist’s order
- Priority 3: insider’s order
# Time of order priority: In case the price and type are the same, precedence is given to the orders entered into the system first.
# Cross priority: Cross priority is implemented if the one with the priority is on the active side. Trading in cross priority takes precedence over other house, then against the same house order.
# Random factor priority: In case two orders are received in the same time, precedence is given to the random factor.
Trading Session
The trading session is from 9.30a.m. to 12.30 noon, from Sundays to Thursdays excluding the official holidays.
Price Fluctuations
During one trading session, the price fluctuation is fixed to a maximum of 10% either way from the last closing. i.e. If the closing price of a company was 500 fils the previous day, the maximum price it can reach the next day is 550 fils and the minimum is 450 fils.
Bidding Units
The change is calculated by one fils and its multiples regardless of the price share. If the trading is in US dollars, the change is calculated according to the below schedule:
Share’s Price Unit Price
0 – 50 cents 0.005 cents
51 cents and above 0.01 cent
The Exchange’s and Brokers’ Commission
The Brokers’ Commission is 0.275% i.e. 0.00275 of the total value calculated based on the total value of buy and sell transactions for each investor and issue within the same trading session with a minimum amount of BD3. The Exchange calculates its commission at the rate of 20% of the brokers’ total commission.
Bonds and Islamic Sukuk
Value of Transaction (Bahraini Dinar)* Commission
Minimum one Dinar 0.0005
* US$ 1 = BD 0.377
25 Jun 09
On Tuesday, June 30, guests of Universal Travel Group will visit the NYSE. CEO Jenny Jiang will ring The Opening Bell in celebration of the company’s recent listing on NYSE Amex on May 28, 2009.
Universal Travel Group is the first Chinese company in the travel and tourism industry to list on NYSE Amex and the seventh company to list on NYSE Amex in 2009, year-to-date.
MEDIA OPPORTUNITIES
Interview opportunities available with CFO of Universal Travel Group, Jing Xie. If interested in setting up an interview, please contact Annmarie Gioia.
Universal Travel Group (NYSE Amex: UTA)
Universal Travel Group, a growing travel services provider in the PRC, is engaged in providing reservation, booking, and domestic and international travel and tourism services throughout the PRC via the internet and through customer representatives. Under the theme "Wings towards a more colorful life" the Company's core services include tour packaging for customers, booking services for air tickets and hotels. In 2007, Universal Travel Group completed the acquisitions of Speedy Dragon, specializing in air cargo transportation; Xi'an Golden Net, specializing in travel packaged tours; Shanghai LanBao, specializing in hotel reservation; and Foshan Overseas International, a PRC-based company that handles domestic and international travel inquiries. In 2009, Universal Travel Group sold Shenzhen Speedy Dragon to focus on more profitable travel related businesses and its cost effective TRIPEASY Kiosks expansion. Universal Travel Group's goal is to become the PRC's leading travel services provider in all fields of the tourism industry including the aviation, cargo, hotel booking and tour packaging segments. For more information about the Company, please visit http://us.cnutg.com.
WHEN/WHERE:
TUESDAY, JUNE 30, 2009/ NYSE Security Checkpoint at Exchange & Broad Streets
9:00 a.m. Media escorted into the building for bell ringing
9:30 a.m. The Opening Bell is rung
Is The U.S. Dollar Topping?
A tentative bottom in action for the U.S. economy
After having plunged for many months, growth appears to have found a bottom in the United States. Some banks are beginning to lower credit standards on businesses and commercial real estate loans, as few key indicators start the manifest a slight better picture. A milder scenario might anticipate a tentative stabilization for the U.S. economy that must be confirmed over the course of the year. The real estate market is leading the way, but other sectors are beginning the move. For the second consecutive month, pending home sales rose in March 3.2%, as construction spending moved up 0.3% for the first time in five straight months. In effect, despite staying below the benchmark of 50 for the fifth straight month, the ISM non-manufacturing index rose to the highest level since October of last year and reached 43.7 in April (40.0 expected) from 42.2 in March. New orders climbed to 47, while employment moved up to 37 from 32.3.
Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.
Growth improving and the U.S. Dollar Declining?
he U.S. dollar to decline further
The economy is on the move again in the United States. The housing market appears to be designing a bottom at current levels, industry’s output is increasing and consumer confidence is improving. In April, new home sales moved up 1,000 to 352,000 units from March’s 351,000. Inventories declined 13,000 month-on- month and are down 160,000 year-on-year and In would take 10.1 months to buy all the new homes in storage, down from 10.6 months in March and 12.4 months in January. In reality, the economic growth of the past ten years will not be repeated in the foreseeable future. However, improvements could be seeing in the final part of this year supported by the monetary and fiscal incentives. The process is challenging, but even a moderate growth would help mitigate the huge budget deficit, albeit an increase of inflation is inevitable.
Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international
ECB: What is Next?
Despite the unstable economic environment, the worst might be over in the United States and in Europe. As a result, rates should remain on hold for some time and then climb again along with the economic expansion. The U.S. dollar is moving away from the lows of the past days, but the medium term trend remains bearish for now.
Aussie, Euro Surges vs USD
The dollar tumbled sharply against the Aussie, falling past the 0.80-handle for the first time since October. The greenback also struggled versus the euro, slipping to 1.4168 and the sterling, falling just shy of the 1.62-level. Crude oil extended gains, edging up past the $66 per barrel level while US equity bourses were relatively unchanged on the session.
The economic reports released earlier in the session were mixed, with growth and manufacturing reports deteriorating while a key sentiment survey improved by better than estimates. The preliminary Q1 GDP revealed a larger than expected contraction in economic activity, posting a 5.7% decline compared with a 6.1% decline in the previous quarter. The core PCE prices held steady at 1.5%, while corporate profits reversed a steep 10.7% decline in the previous quarter to improve by 1.1%. The New York NAPM index improved in May to 361.6 from April at 356.0. Meanwhile, the Chicago PMI disappointed in May, falling to 34.9 and missing estimates for an improvement to 42.0 from 40.1 in April. The PMI employment component fell to 25.0 from 31.8, while new orders fell to 37.3 from 42.1.
On an upbeat note, the University of Michigan consumer sentiment survey beat forecasts for an improvement to 68.0 in May from 65.1 in April, with the final reading edging up to 68.7. The expectations component jumped to 69.4 versus 63.1 a month earlier, while the conditions
GBP Breaks above 1.60
The greenback was mixed in the Wednesday session, slumping sharply against the sterling to a near 7-month low and edging up versus the yen.
Economic data from the US was better than expected earlier today. Existing home sales shot up by 2.9% in April to 4.68 million units, reversing a downwardly revised 3.4% decline in March. Traders will look ahead to data on Thursday, including weekly jobless claims, April durable goods orders and new home sales.
This article contains the following sections:
Greenback Rallies Sharply
The greenback reversed previous session’s losses, rallying sharply against the euro by over two big figures to 1.4111 and the sterling by nearly four big figures at 1.6244. US equities bourses pulled back further with the Dow Jones and Nasdaq sliding by over 1.2%, while the S&P 500 lost over 1.8%.
With markets eagerly anticipating the May US labor report due out on Friday, the May ADP private-sector payrolls were worst-than-expected, posting a loss of 532k jobs and exceeding expectations for a loss of 520k jobs from 491 private sector jobs lost previously. April durable goods orders increased by 1.7%, albeit less than the 1.9% increase from March, while factory orders improved by 0.7% from 0.9%. The May non-manufacturing ISM report improved to 44 versus 43.7 a month earlier, remaining beneath the key 50-level though.
Data slated for release on Thursday include weekly jobless claims, Q1 labor costs and non-farm productivity. The key reports will be released on Friday, consisting of the May unemployment rate, which is seen creeping up to 9.2% and the non-farm payrolls reading, expected reveal a 520k job loss from 539k loss of jobs a month earlier.
Dollar Tumbles to ’09 Lows
The greenback slid across the board in the Tuesday session, tumbling to its lowest level of the year against the euro at 1.4321 and a seven month low versus the pound at 1.6590. The dollar remains under pressure amid renewed skepticism over its position as the world’s reserve currency, with comments from Russian President Medvedev reiterating his proposal for a new global currency.
Dallas Fed President Richard Fisher expressed optimism, saying the Fed has been successful in pulling the economy back from the brink and is beginning to see the results from its efforts to support the credit markets. Although he said the US economy is “getting less worse” with time, he believes it is still “not out of the woods” and expects the recovery to be very slow. He did offer a somewhat upbeat assessment, saying consumer confidence was picking up somewhat and retail sales was no longer plunging. Fisher said the aggressive action adopted by the Fed helped stave off the worse of the US downturn.
The US data released earlier in the session was better than expected. The April pending home sales sharply beat expectations for an increase of 0.5% from the March reading at 3.2%, instead posting highest increase since 2001, advancing by 6.7%.
USD Extends Gains
The greenback traded higher in the London session, starting the week where it left off from last Friday, extending its gains from the stronger than expected May non-farm payrolls report. The dollar pushed the euro to 1.3805 and the pound toward the 1.58-figure before relinquished some of its strength in New York trading. The major equity bourses traded lower, with the Dow Jones, Nasdaq and S&P500 down by around 1%, while both spot gold and crude oil drifted lower as well.
There has been speculation that the recent data, particularly the May non-farm payrolls report, point toward a bottom in the economic downtown – prompting an advance in the dollar and declines in stocks amid inflationary concerns. The Fed’s current monetary policy remains highly stimulative and we believe it will remain so for the remainder of the year and into early 2010. Thus, we deem it to be premature for markets to begin pricing FOMC rate hikes.
The economic calendar from the US will see on Tuesday, April wholesale inventories, wholesale sales, on Wednesday: the April trade deficit and May Federal budget, on Thursday: weekly jobless claims, May retail sales, April business inventories and on Friday: the June University of Michigan consumer confidence survey and May import / export prices. Retail sales for May are expected to reverse the 0.4% decline in April, improving by 0.2%, while the core retail sales figure is seen edging up by 0.3% from a 0.5% decline a month earlier. The April trade deficit is estimated to edge up to $29.0 billion from a month earlier at $27.58 billion. The Federal budget deficit is expected to surge in May to 195.0 billion compared with $165.93 billion in April. The dollar may come under pressure toward the latter part of the week as the twin deficits come into focus, likely to trigger some profit-taking in the latest greenback run-up.
USD Surges Despite Twin Deficit Data
The dollar sharply rallied against the euro and sterling, reversing yesterday’s losses and climbing to 1.39 versus the euro and 1.6242 against the sterling. The 10-year Treasury note edged up toward the 4% level, reflecting underlying fears of forthcoming rate hikes, while the major US equity bourses slid by nearly 1%.
Traders analyzed the US twin deficit data released earlier in the session. The April trade deficit was slightly higher than expectations, edging up to $29.16 billion, from an upwardly revised $28.5 billion from March. US exports slid to its lowest level in 3-years, falling by $2.2 billion to $121.1 billion, while imports fell by $2.2 billion to $150.3 billion. The US Treasury released the May budget deficit earlier, revealing a record $189.5 billion deficit – higher than forecast and up from a $165.93 billion budget deficit a year earlier. The 2009 fiscal deficit climbed closer to the $1 trillion at $991.95 billion.
The Federal Reserve’s Beige Book said economic conditions in the 12 Fed districts either remained weak or worsened through May. The report saw five districts acknowledging the downward trend beginning to show signs of moderating while some districts said there are nascent signs that job losses may be moderating. The Fed said districts mostly saw prices at all stages of production to be generally flat or falling, with the notable exception to downward pricing pressures is the widely reported increase in the price of oil. The Beige Book also noted that retail spending remained soft and that real estate markets continued to deteriorate in all districts.
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