Monday, December 1, 2008

Interest rates

I was observing the interest rates lately and find that Fixed deposit rates are dropping really quickly and normal saving rates are going up.

Banks like UOB has upped their basic savings rates and banks like HSBC has even made it more complicated by pegging it to the 1 month Singapore Interbank rates. Pegging it to the Interbank rates is a really smart idea. Not only do you make depositors happier, you reduce your risk greatly, as the banks will not ever have the chance of 'over giving' money to you, as the interbank rates are ever changing.

Also, while reading today's business times, I found out that currently, DBS bank has the lowest lending interest rates as compared to other banks. Its rate is 4.5% as compared to other banks which are around 5-6%. This shows that the Singapore government is really making an effort to make credit readily available to the Singapore companies at the risk of their own banks having profitability problems. This might/might not be a good thing. If these companies happen to default, DBS is going to have lots of write downs, and create a mini Singapore financial crisis. However if all goes well, DBS will come back really strong as compared to the other banks, when the overall market turns around. ( So if you really have confidence in Singapore companies in general, buying DBS shares will be a really really good investment for the long term)

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