Dubai World “crisis” – a look at the sukuk market

What is the effect of Dubai World "financial crisis" on sukuk market ?

Take a look at Sukuk market data:
Sukuk market data

It seems that Nakheel Sukuk (nakh.sn), of type "Ijara", previously 90, has down 28 to 62, a drop of 31.11%. However, it seems like there isn’t much effect on other sukuks, even on entities that are downgraded their credit ratings, for e.g. Jebel Ali Free Zone FZE (jafz.sn), DEWA (dewa.sn) and Emaar Properties Sukuk (emaa.sn). Jebel Ali Free Zone FZE even rises by 0.65%.

Hey, I saw our country’s PETRONAS Global Sukuk and Sarawak Corporate Sukuk Inc..

We can look at the detailed chart of Nakheel Sukuk here;
and Sukuk news wire, Islamic finance news and Sukuk Education here.

Global Property Guide - a good resource on global residential property investment

Global Property Guide
This is a one-stop website for global residential property investor.

Some highlights:
1. Interactive Comparison tool
Its Interactive comparison tool is useful.

Add to list the countries that you want to compare, click "compare" and it will yield a comparison table of

• buying price,
• gross rental yield,
• rental income tax,
• roundtrip cost,
• capital gains tax,
• buy-to-let income rating.

I try to compare Malaysia, Singapore, China, Taiwan, Hong Kong, Australia, USA, UK as these are the countries most Malaysian, especially Malaysian Chinese, will invest.

It seems that among these countries, Malaysia’s buying price (1366 USD/sq m) is lowest, gross rental yield (9.22%) is highest, rental income tax (22.42%) is 2nd highest, buy-to-let rating highest, roundtrip cost, capital gain tax not very high.

2. Countries/regions data
Its data on regions/countries is impressive.
Take for examples:
Malaysia
Singapore

"In depth" comes with overview, price history, rental yields, taxes and costs, tax on rent, buying guide, landlord & tenant, inheritance, living there, useful links, country statistics.

Regional statistics are abundant:
Sq M prices, rental yields, rents, price/rent ratio, price/GDP per cap, buy/sell costs, rental income tax, capital gains tax, price change 1 yr, price change 5yrs, landlord & tenant law, GDP per capita, GDP/cap growth 1 yr, GDP/cap growth 5 yrs, economic freedom, ec. freedom 5 yrs, competitiveness, property rights index, currency +/- value… Wow !

These indicators set me thinking what residential property investors need to look at.

3. Directory
It has directories of realtors, accountants, lawyers, foreign exchange, mortgages.

4. School of Profit
In its School of Profit, it has 2 guides that are insightful for residential property investors and real estate academics respectively:

• Guides to making money in residential property investment
• Guides to the academic literature

5. Rating

The website even has rating on countries, much like bond credit rater S&P, Fitch, Moody’s but it is on residential estate.

6. Real estate news
Its real estate news have a more local insights on specific countries.

7. Email subscription
There is a free email newsletter for subscription.

My genereal views:

I like the presentation of data of Global Property Guide. It tells you date of data used, sources of data, assumptions etc..

Beware though that the date of data may not be the most updated ones. Probably Premium Data subscription may have a more updated data.

Look at the assumptions too. Most of the times it is assuming the residential property investor is a foreign investor, for e.g. in tax, cost etc. If you are a local investor, you may need to adjust on that.

A great one-stop resource on global residential property investment indeed !

Crowdsourcing on knowledge, example : best source of business / investment news in a country

(This is the elaboration on Mahalo Answers that I mentioned in the comment of this post.)

For foreign investors, one of the major drawbacks is :

• the investors are not familiar with where and how to get updated local news related to business/investment aspect of that country. He may be disadvantaged on information aspect.

It will be good if I can find these insights/resources from Mahalo Answers’s community. Hopefully there are locals that can point me to relevant information sources.

So I ask this questions in Mahalo Answers:

• What is the best source (in English) of business / investment news in:
  Middle East, Australia, India, France, Germany, UK, Brazil, Russia…etc...(respectively) ?

Some of the questions are not answered, some yielded great, insightful answers, for examples:
India, UK, Australia.

The most insightful answer comes when I ask on Middle East.
This answerer saves me the need to ask similar question again, country-by-country.
A great "thank you" to him/her.

His/her answer is on EINnews.
Take a look at EINnews.

It provides access to breaking news, organized within 300+ countries (classified under Europe, Asia Pacific, Middle East, Russia & CIS, Latin America, Africa, North America), regional, US states and specialised topics (in categories of industry, business & economy, government & politics, miscellaneous).

Wow, that’s amazing !

Mahalo Answers is also a venue to seek valuable local opinions/surveys.
Some examples that I have asked:

• "For Mahaloians in US, have you observed "green shoots’ in US economy, in real life ?"
• "For Mahaloians in US, will option ARM reset incur a big financial burden to your family ?"

I have also learnt a lot from others’ Questions. This widens my horizon.

Mahalo Answers has widgets that can be put on blog, showing Answers by me to others’ Questions. I have removed the "Mahalo Answers Widget" from this blog since this blog is already too cluttered. However, I still put up the widget on my Innovation For the Future blog.
You may check it out.

Gold price time series (dated back to 1950s)

Gold price time series is available in Deutsche Bundesbank website, yearly average, monthly average and daily rates.

Data on website

We can find:

• Price of gold in London, morning fixing and afternoon fixing, USD;
• Price of gold, Frankfurt Stock Exchange fixing, DM;
• Price of gold, Dresdner Bank AG fixing, Euro.

These time series are amazing, with monthly average of price of gold in London, morning fixing dated back to 1950 !

US Public Debt and Statutory Debt Limit

• How much is current US Public Debt ?
• Is the US Public Debt near the Statutory Debt Limit ? How near ?
• Where can we find updated information on these ?

Daily Treasury statement
http://www.fms.treas.gov/dts/

Example:
Nov. 17, 2009 Daily Treasury statement

Go to "Table III C – Debt Subject to Limit", look at the "Closing balance today", at items "Total Public Debt Subject to Limit" and "Statutory Debt Limit".

On Nov. 17, 2009:
Total Public Debt Subject to Limit is $11,982,556 billions (11.982556 trillions).
Statutory Debt Limit is $12,104,000 billions (12.104000 trillions).

The Statutory limits on Federal Debt are changed many many times.
We can see the changes from this file (This file is from White House’s website.):
Statutory limits on Federal Debt: 1940 – current

Amazing !
In 1940, statutory limit for Federal Debt is 49 billions.
Sep 29, 2007, it is 9,815 billions.
Feb 17, 2009, it is 12,104 billions.

Saudi drops WTI oil contract, use Argus Sour Crude Index instead.

From this FT article: "Saudi drops WTI oil contract", Saudi Arabia will use Argus Sour Crude Index instead.

What is this Argus Sour Crude Index ?
I did a search on Argus Media which created the index.
Found this PDF file: Argus Sour Crude Index.

We can see the methodology and specifications from this file (details and examples of calculations are illustrated).

This Argus Sour Crude Index (ASCI) calculation method has some interesting features..

Argus Sour Crude Index (ASCI): daily volume-weighted average of aggregate deals of components grades: Mars, Poseidon, Southern Green Canyon (SGC).
It claims to be "a pricing tool designed to serve primarily buyers and sellers of imported crude that need a broader index of US Gulf coast medium sour crude value for use in long-term contracts".

Argus Sour Crude Index Price = Argus Sour Crude Index Differential + same month WTI Formula Basis

WTI Formula Basis: pricing series by combining Nymex futures (before expiry) and WTI spot prices (after expiry), to represent mean of WTI Cushing spot assessment for 3 business days after expiry which precede pipeline scheduling.

This "normal" calculation method (daily volume-weighted average of aggregate deals of Mars, Poseidon, SGC) is to be used if combined volumes of all 3 grades reach "volume minimum" (6000 barrels per calendar day).

If volume minimum is not reached, then "Proportional Assessment" is to be used.

Proportional Assessment:
Beginning of every trade quarter, Argus will average volume of trade in each of last six trade months and assign each grade a % of traded volume (for example 71% Mars, 22% Poseidon, 7% SGC).
ASCI will be constructed using individual volume-weighted average prices for Mars, Poseidon and SGC using the % (for example 71% Mars, 22% Poseidon, 7% SGC).

To address difficulties associated with "stream disruptions" (output from pipeline ceases, market for that grade becomes illiquid), there is this "Intelligent Assessment".

Intelligent Assessment
If stream disruptions happen (1 grade becomes illiquid), Argus will assesses and decides whether to suspend daily price or continue with Intelligent Assessment.
If trade in remaining 2 grades > volume minimum, index will be calculated from the remaining 2 grades. If remaining 2 grades < volume minimum, then the "proportional assessment" will be applied in the same proportion, using Argus published prices for the grades (actual trade or intelligent assessment). If all streams are very disrupted until integrity of index damaged, Argus will consult with industry to form an alternative index (other sour grades, import values, intelligent assessments).

My summary:
1. ASCI uses both futures and spot price to try to arrive at a better price representation.
2. ASCI uses past volume% to calculate index if current trade volume is low (i.e. illiquid; demand low, supply intact).
3. ASCI calculation takes away grade with stream disrupted (i.e.: illiquid; demand intact, supply disrupted).
4. ASCI is still using WTI, Nymex to arrive at its data. It is still dollar-denominated.
5. ASCI is volume-weighted; uses deal volume when market is normal, uses past volumes when overall market is "illiquid" (volume low). Volume weighted "price" may be more representative than, say, closing price.

Basically, it’s trying to have a better price representation (against fluctuations, manipulations, distortions etc)... We can also guess this from its claim: "a pricing tool designed to serve primarily buyers and sellers of imported crude that need a broader index of US Gulf coast medium sour crude value for use in long-term contracts".

Hamburg Ship Evaluation Standard : a mark-to-model shipping evaluation

Saw this interesting article on Financial Times, titled:
Ship valuation method sparks inflation fears.

It was said that "German shipping banks are expected to follow the lead of HSH Nordbank, the world’s largest shipping bank, and Deutsche Schiffsbank, Germany’s second-largest, which have praised the Hamburg Ship Evaluation Standard and look set to start using it".

It was said that there is a report by PwC, the accountants, endorsing this new standard.
Let’s take a look at what the new evaluation standard is.

Hamburg Ship Evaluation Standard, is devised by Hamburg Shipbrokers’ Association (Vereinigung Hamburger Schiffsmakler und Schiffsagenten, VHSS).

From VHSS’s website, I found this insightful PDF file.

It claims that due to illiquidity in ship sale-and-purchase market, forced sales, charter rate at level of required operating expenses makes traditional method unusable as ship evaluation standard. Therefore, this new Hamburg Ship Evaluation Standard appears, as a tool for "value assessment (Long Term Asset Value, LTAV), beyond short term market fluctuations".

The LTAV is "determined on grounds of vessels long term earnings potential, using present value…. DCF method… incorporate volatility of shipping cycle… conservative, statistically proven… transparent…".

It defines when it is a dysfunctional/irregular market, when 2 of 5 scenarios apply (Refer to PDF for details). The formula to calculate LTAV is also given, basically it is using discounted cashflow, residual value analysis with inputs of charter incomes, operating costs, discount rate, residual value, 20-25 years.

Will other banks that loan to shipping companies, other shipping companies in the world going to change to this mark-to-model method to evaluate fair value of their shipping assets ?

Some more "philosophical" questions:

• We see that a switch from mark-to-market to mark-to-model method has happened on "financial toxic assets" and now on shipping assets, will this trend spreads to other assets ? Where to draw a line ?
• How should investment analysts or investors adjust their investment analysis ?