Comparing Australian Foriegn Exchange Fixed Deposit Rate

The following is a list of all the available banks in Singapore offering Australian Fixed Term Deposit.

CIMB Fixed Deposit Rate

HSBC Fixed Deposit Rate

HSBC Premium Fixed Deposit Rate

DBS Fixed Deposit Rate

Maybank Fixed Deposit Rate

 

Maybank Fixed Deposit Rate(2)

Standard Chartered Fixed Deposit Rate

  UOB Fixed Deposit Rate

The data taken above is accurate as of the 26 December 2009. The following is the FX rate of the above banks in Singapore offering Australian dollar vs Singapore dollar.

DBS Foriegn Exchange Rates

UOB Foriegn Exchange Rates

Maybank Foriegn Exchange Rates

OCBC Foriegn Exchange Rates

CIMB Foriegn Exchange Rates
  

HSBC Foriegn Exchange Rates

From the above data i have created a table to compare the various rates.

Summary FxFd Rates

Values in bold indicate the highest.

The "-" entry indicates that the value is not available, however you can still request from the bank and I'am sure they would accommodate your request.

From the above table it is obvious that Maybank offers the best interest rates, with OCBC coming in second for most of the entries.

I will compare the interest rates with the exchange rates offered by the banks in the next post.Till then I wish all readers Happy Holidays and a good 2010!!!

Returns on Australian Dollar Term Deposit ( Part 2)

The australian dollar does not reach parity with the singapore dollar till 6 Oct 2008

6 Oct 2008

FV = 55138.25 (1 + 0.045)^(6)
FV = AUD $71804.34

On 6 Oct 2008, the AUD vs SGD had an exchange rate of 0.9423. So,

Capital Invested
SGD $10000 = AUD $10612.33

Total investment now = $71804.34 + $10612.33 = $82416.67

The current AUD vs SGD rate is 1.2317 (25/12/09), after coming off the high of 1.2987 (17/11/09). Let us now calculate how much our total gains would be up till this point.

25 Dec 2009

i am taking the interest rate to be 3%, since Oct 2008.
FV = 82416.67 (1 + 0.030)^(1)
FV = AUD $84889.17

Converting to SGD: AUD $84889.17 * 1.2317 = $104557.99

Total Amount invested in 10 years: SGD 10000 * 6 = SGD $60000
Profit: SGD $104557.99 - 60000 = 44557.99

We have made a profit of 44557.99 over 10 years.

Points to take note

• I have used a very conservative average of 4.5% in reality it is more likely to be around 5-5.5%.

• All figure have been rounded to 2 decimal places.

• The profit show above is the worst case scenario.
  

• Most banks usually have a better 6-month interest rate than i have used. As they find it easier to hedge their position as compared to a 12 month period
  

• The reader needs to understand that although investing in the S&P or STI would give better annual compounded rate of return. There is also more risks involved.  
  

• If the reader is a more sophisticated investor with knowledge of technical analysis, he/she can deposit in a more optimum position.

• Another point to take note is that gains in fixed deposits are not taxable and there is no cost involved in opening an account. Banks would only require a fee if you withdraw the deposit before the term ends.

If you are wondering, "Why dont i put in a lump sum of $100,000 for one deposit?". The answer is yes that would be more ideal, however i have taken into consideration that not everyone has $100,000 in cash.

In my next post i will include a more optimum return of the basic method. Happy Holidays!!!

Returns on Australian Dollar Term Deposit ( Part 1)

From the image above we can take a conservative average of 4.5% on the returns on the Australian term deposits. Based on the previous posts on the aud vs sgx charts. I will now discuss the strategy i have.

Strategy

This strategy is basically a buy and hold strategy and is NOT intended for traders or investors with a short term perspective. The investor must restrain themselves from collecting the rewards early on, but rather allow the powers of compounding interests to do its magic.

I have further divided this into 2 different methods, depending of the sophistication of the investor in technical and financial analysis. We shall first take a look at the basic strategy.

Basic

The basic strategy is to simply invest SGD $10000 into a fixed term deposit, When the aud vs sgd is 1.0000 or below. As a rule once we have invested in the term deposit, I am putting in place a grace period of at least 6 months. This is done as it is not realistic to invest 10000 each time it fluctuates.

Let us look at how much we would have now, if we had invested SGD $10000 since 1999 (10 year period).

Amount: SGD 10,000
Interest rate: 4.5%
Time: 10 Years

On 7 Aug 2000, the AUD vs SGD had an exchange rate of 0.9925. So,

Capital Invested
SGD $10000 = AUD $10075.57

In 12 Feb 2001
Interest reinvested it would be worth:

In the formula below, i is the effective interest rate per period. FV and PV represent the future and present value of a sum. n represents the number of periods.

FV = 10075.57 (1 + 0.045)^(6/12)
FV = AUD $10299.78

On 12 Feb 2001, the AUD vs SGD had an exchange rate of 0.9188. So,

Capital Invested
SGD $10000 = AUD $10883.76
Total investment now = $10299.78 + $10883.76 = $21183.54

 

 
13 Aug 2001
FV = 21183.54 (1 + 0.045)^(6/12)
FV = AUD $21654.92

On 13 Aug 2001, the AUD vs SGD had an exchange rate of 0.9373. So,

Capital Invested
SGD $10000 = AUD $10668.94
Total investment now = $21654.92 + $10668.94 = $32323.86

18 Feb 2002
FV = 32323.86 (1 + 0.045)^(6/12)
FV = AUD $33043.14

On 18 Feb 2002, the AUD vs SGD had an exchange rate of 0.9393. So,

Capital Invested
SGD $10000 = AUD $10646.23
Total investment now = $33043.14 + $10646.23 = $43689.37

19 Aug 2002
FV = 43689.37 (1 + 0.045)^(6/12)

FV = AUD $44661.56

On 19 Aug 2002, the AUD vs SGD had an exchange rate of 0.9545. So,

Capital Invested
SGD $10000 = AUD $10476.69
Total investment now = $44661.56 + $10476.69 = $55138.25

To be continued in the next post.....

The power of compounding

Albert Einstein once remarked that,

“The most powerful force in the universe is compound interest”

Einstein understood that the returns of compounding a small amount over time would lead to a significant amount. He therefore came up with the famous rule of 72. This states that if you take 72 and divide it by the Annual Percentage return, it will give you the number of years your investment would double.

For example, if the percentage return of your investments was 15%. So if you take 72/15 = 4.8 years. This means that a $10,000 investment would take 4.8 years to turn into 20,000 at an annual rate of return of 15%.

In the next post i will explain more on using the powers of compounding in Australian dollar investing.

Investing in the Australian Dollar

This blog is created to give the reader an insight into investing in the Australian dollar. As I'am a firm believer of using technical indicators. A 5 year and 10 year chart has been posted below.

5yr AUD vs SGD

Looking the 5 Yr chart, the highest and lowest value is 1.3337 (Oct 29 2007) & 0.9345 (Oct 20 2008) respectively. The red line indicates the 100 day moving average.

10yr AUD vs SGD

We shall now take a look at the 10 yr Chart of the AUD vs SGD. The highest point still remains unchanged at 1.3337 (Oct 29 2007). However the lowest point is now 0.847(Sept 17 2001).

It should now be evident to the reader that the lows of the Australian dollar is reached during an economic downturn. The last two major ones being the bursting of the DOT.COM bubble, terrorist attacks of Sept 11 2001 & subprime mortgage crisis leading to the chaper 11 filing of bankruptcy of lehman brothers.

Analysis of the Australian Economy

Australia is prosperous, free market economy dominated by its services sector, representing 68% of Australian GDP. The agricultural and mining sectors (10% of GDP combined) account for 57% of the nation's exports.

The Australian per Captia GDP is slightly higher than developed countries such as France, UK and Germany.

Australia's current account is more than 7% of GDP negative: Australia has had persistently large current account deficits for more than 50 years. Australia has grown at an average annual rate of 3.6% for over 15 years, well above the OECD average of 2.5%. Australia's average GDP growth rate for the period 1901-2000 is at 3.4% annually.
As of September 2009, there were 10,770,200 people employed, with an unemployment rate of 5.8%. Over the past decade, inflation has typically been 2–3% and the base interest rate 5–6%. The service sector of the economy, including tourism, education and financial services, constitutes 69% of GDP.
Although Agriculture and natural resources constitute only 3% and 5% of GDP, respectively, they contribute substantially to export performance. Australia's largest export markets are Japan, China, the US, South Korea and New Zealand.
Rich in natural resources, Australia is a major exporter of agricultural products, particularly wheat and wool, minerals such as iron-ore and gold, and energy in the forms of liqufied natural gas and coal. Australia has a labour force of about ten million people.
In the past decade, one of the most significant sectoral trends experienced by the economy has been the growth (in relative terms) of the mining sector (including petroleum). In terms of contribution to GDP, this sector grew from around 4.5% in 1993-94, to almost 8% in 2006-07.
Growth in the services sector has also grown considerably, with property and business services in particular growing from 10% to 14.5% of GDP over the same period, making it the largest single component of GDP (in sectoral terms). This growth has largely been at the expense of the manufacturing sector, which in 2006-07 accounted for around 12% of GDP. A decade earlier, it was the largest sector in the economy, accounting for just over 15% of GDP.
External trade for the year ending 2008 between Singapore and Australia amounts to 25,996,000,000. This makes up about 2.8% of Singapore's External trades for the yr 2008.
Sources:
http://www.singstat.gov.sg/pubn/reference/yos09/statsT-trade.pdf
http://en.wikipedia.org/wiki/Economy_of_Australia