Monday, December 27, 2010

Behavior of World Indices in 2010

The year 2008 saw a big correction in stock markets world over and it was followed by a rally from 2008. Many Indices rallied and gave one of the biggest appreciation in 2009. The year 2010 can be considered as not bad.

The European Indices rallied in 2010 but the magnitude is less when compared to the Asian Markets. Many Indices in Asia moved past their 2008 highs. Srilankan Stock indices moved passed their 2008 high. Indian Market came very closer to their high, but so far it has not crossed that levels.

But the notable performance is from China’s SSEC. When compared to their other Asian counterparts, the chinese index has so far under performed. If the stock market continues to under perform in coming months, I doubt whether they could maintain their present growth rate.

Since Stock Market prices reflect the future perception of the Market, continuous underperformance foretell a big correction in China’s Stock Markets. If the fastest growing economy in the world, china, doesn’t see their indices move up, it cannot sustain its growth.

In US, the markets rallied, but is has not rallied as much the Asian markets moved.

Saturday, December 4, 2010

Is Insurance needed ?

          Insurance is needed to face unwanted death or unexpected accident in one’s life. Insurance is ensuring your family’s good life after your death or ensuring a good life for you after an unwanted and unexpected incident in your life. If you have a motor vehicle, you need to insure it for the same purpose.

Types of Insurance

Life Insurance
This insurance is to cover your life. You can have a term insurance or a endowment policy.
In term insurance, you will get coverage but you will not get any money back. But the amount paid here is very meager.
In endowment policy, you will get coverage and also some many back in a future date. But the premium here is more than the term insurance premium.

Accident Policy
In this policy, in case of any accident, the amount insure will be given. Otherwise, you wont get any return.

Vehicle insurance
In this insurance, the cost of repairing the damage or theft, the life of the driver and the life of the third party who is injured by the vehicle will be covered. In case, if none of the above it claimed, you will not get a return.

This policy is to cover all your medical expenses.

A person should take all these policies to secure his family from any unexpected events. In particular, the breadwinner of a family should compulsorily have these insurances.

Friday, November 26, 2010

Auto insurance

              Automobile insurance or otherwise called auto insurance is the insurance obtained for road plying vehicles to protect against physical damages resulting from accidents and against liability that could also arise there from while plying on road. Auto insurance deals with the insurance covers for the damages or the loss to the vehicles or its parts due to accidents or natural calamities. Auto insurance also provides accident cover to the driver who plies the vehicle and the co passengers of the vehicle. It also provides third party liability cover for the third party who was hit by the accident.

                 Auto insurance is compulsory for all road plying vehicles. Auto premium is calculated by considering many factors. The premium increases with the increase in price and age of the vehicle.  Not only the price but also the model of the vehicle, cubic capacity, age of the vehicle may influence the premium calculation. Throughout the world the auto insurance is mandatory for all vehicles plying on the road. Plying a vehicle without auto insurance may attract fine or imprisonment or both. There are two types of insurance cover one is comprehensive and the other one is third party cover. The third party insurance cover safe guard the interests of the third party but not the interest of the vehicle and the vehicle and its user, where as comprehensive covers the both the own damages and lose  and also the third party who involved in the accident with the vehicle.

                 You have invested a big investment on your vehicle so don’t allow its well being to chances. Anything may be happen at any time so protect you and your vehicle by getting a timely insurance and minimize your risk. And you don’t forget to renew your auto insurance policy in regular interval so that to get a attractive discount and no claim bonus (an incentive given if you have not claim anything in the previous periods). Insure your vehicle and drive peace fully throughout the year.

Thursday, November 25, 2010

Risk involving in Foreign investment

Foreign direct investment plays a vital role in the international business. It provides a new market and marketing facilities, production facilities in lesser cost, access to latest technology, new products. Foreign direct investment simply means a firm from one country making raw physical investment to build a factory (direct investment is the investment in buildings and equipments not in portfolio investment) in another country.

                In FDI there are so many risks ply with let us analyze one by one the first and foremost one is the country risk. All business dealings involve risk. When the business cross the national boundary then it faces additional risk beyond our control let us analyze one by one. These risks are of national differences in economic conditions, policies, socio political situations and the currency values. You may categorize them in to following six main headings.

                Economic Risk
                Transfer Risk
                Exchange Risk
                Location Risk

                Sovereign Risk
                Political Risk.

                Economic Risk is the significant change in the economic conditions that can produce major change in the expected return of a foreign investment.

                Transfer risk simply means the risk arising from the decision of the foreign government to restrict capital flow. As the governments have the liberty to revise their policy at any time the transfer risk is also high.

                Exchange risk is an unexpected change in the exchange rate. As the currency hedging mechanisms is impractical over a long period, the exchange risk can be developed.

                Location risk is the risk which includes spillover effects caused by the problems of the particular region or the problems in the partner country.

                Sovereign risk procedures of a government’s capability to pay are similar to transfer risk measures. Sovereign risk has close association with transfer risk.

                Political Risk concerns risk of change in political climate, change in government, and change in society or any other non economic factor.

                 Hence every foreign company examines various methods to measure the risk of investing in a foreign country and the lay a strategy to minimize the risk.

                                                                                                                                          (to be continued)

Saturday, November 20, 2010

Carbon Trading

After the Kyoto Summit, all the developed countries agreed to limit their emission level and if not they have to pay a price for their emission. Here the carbon trading comes to ply. The main idea behind carbon trading is to curtail the emission levels of each country and give monetary benefits to the countries with low emissions. As the developing countries can start with clean technologies they will get more monetary benefits from the developed countries.

          For example if a company in India cuts X tones of carbon, it can sell this much amount of points to a company which is emitting carbons in the developed country. The World Bank itself is the monitoring authority.

                Hence carbon trading allows carbon emitting industries in the developed countries to set of their emissions by investing in a large scale mass reforestation projects in the developing countries to nullify their emission. 100000 hectares of forest can eliminate one million tons of carbon in a year from the environment.

                The calculation is very simple. Half of the trees dry weight is carbon. The amount of carbon stored by the trees is calculated from their volume (the volume is calculated the height and the area of cultivation of forest).From the volume the dry wood is calculated and from this carbon proportion is estimated. These projects not only directly fetch money but also indirectly give social, economic and environmental benefits to the developing country.
                India is the second largest country after china. India has generated 30 million carbon credits and expecting 140 million credits in the long run. Around thousand carbon credit projects have already started and around two hundred new projects every year added every year.
                Presently, carbon credit from thermal projects gives 7 to 8$ in the international market. Now NCDEX  is to commenced carbon trading in Indian market. Carbon trading is one of the fast growing volatile market.