QUOTE(chabalang @ Sep 17 2011, 09:34 PM)
Sorry to interrupt. Felt the need to clarify "the blast from the past". I can remember the CRUNCH during 1997/98 as I was working with one of the largest investment banks (or rather merchant banks at that time) in Malaysia. Let me refer to a few articles to help you understand better why it is possible to have 60 months for 10%-11% F.D. during 1998.
1)
http://mrem.bernama.com/viewsm.php?idm=100015/04/1998: refers to the Astro promotion
2)
http://mrem.bernama.com/viewsm.php?idm=99915/04/1998: refers to the AM 50 Plus promotion - "During the promotion period customers will enjoy an additional 0.3 percent on top of AM 50 Plus normal interest rate of 11.20 percent p.a. for the tenures of six and nine months and
11.50 percent p.a. for 12 months and above."
3) http://www.themalaysianinsider.com/busines...s-for-car-loans
“During the 1998 financial crisis, the interest rate for hire purchase loans for cars was around 8.0 per cent. "4)
http://www.bnm.gov.my/index.php?ch=12&pg=6...h=12&EndYr=1998KLIBOR during Sep 1997 to Dec 1998 - please note the sharp increase in KLIBOR during end-1997 and Jan-Aug of 1998 before capital controls were imposed.
During the 1998 financial crisis, there was a LIQUIDITY crunch in Malaysian banking system (local financial institutions were hit badly, people were withdrawing $$$ from local banks/FIs and depositing $$$ into foreign banks). If I recall correctly, there was even a 'bank run' on a local finance company (M--). Although your FD rates does not indicate such a high FD, FD rates of more than 10% were offered during 1998 before capital controls were implemented (note your FD rate is across banks/FIs over the whole year).
Why the finance company is willing to pay such a high interest for such a LONG period (60 mths)? Valid question...
Please refer the articles in 3) and 4) to get an idea why. AmFinance was the largest car financier at that time (HP rate of 8% translates to an effective rate of 14+% for a 5-yr car loan). Someone mentioned on asset-liability management for financial institutions (in this case, duration matching) - it can make sense for the finance company to give such FD rates for such a duration to support its HP loans during the period. During that period, the liquidity crunch was BAD and finance companies were trying their best to ATTRACT as much as longer-term FDs as possible.
Thanks to everyone on the confirmation of AmFin offering 10% FD rates in 1998 for FIVE years.
wonder how they survived?
In 1998 we had rcession, meaning it would be a scenario of low car sales to start with.
How would the low car sales match with, i would imagine long queues of customers taking up the
10% FDs for FIVE years, if there was low car sales due to the RECEssion?
Unless very low sales on the FDs as well?
i am learning a lot here.
But cherroy has not convinced me yet THAT gold is a bad performer!
Sep 18 2011, 08:32 AM
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