Greek Referendum – What a ‘Yes’ or ‘No’ vote on July 5 would mean?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

Greece debt crisis is deepening. Neither the Greece government nor its creditors are ready to budge this time around. Greek Prime Minister Alexis Tsipras has been making contradictory statements which has made this crisis more complicated and the creditors are now readying themselves for an actual default.

Two days from now on July 5th, Greeks will cast their votes in a referendum in which they decide whether their government should accept or reject the proposals made by its creditors – International Monetary Fund (IMF), European Union (EU) and European Central Bank (ECB). These entities are collectively known as the Troika.

If Greeks vote ‘NAI’ (YES) while casting their votes, it would mean that they have voted in favour of the Troika’s proposals and they want the Troika to provide the Greece government a much needed bailout package. In exchange of this bailout package, the Greece government will have to implement some strict austerity measures involving spending cuts, tax increases and speed up economic reforms.

On the other hand, if they opt for ‘OXI’ (NO) while voting, it would mean that they are not in favour of any kind of austerity measures or tax increases and they are ready to live in a situation in which their government could be officially announced as in default and their top banks would go bankrupt in no time.

Tsipras has urged Greeks to vote against the bailout offer, saying ‘No’ to the proposals. It seems that a ‘No’ to the creditors’ proposals in Sunday’s crucial referendum would lead Greece out of the eurozone and probably out of European Union as well.

All these developments could derail an already fragile global economic recovery and would put more pressure on the global central banks to try and introduce more innovative measures to keep their respective economies floating.

It is a highly uncertain economic environment that we are living in for the past few days and it seems that uncertainty will prevail for a few more days, weeks and months before a clear picture emerges out of this crisis.

Cost of a car in Singapore which costs Rs. 775,000 here in India – Shockingly Very High at Rs. 7,000,000

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

Wish you all a Happy Dussehra! Festive season has started here in India and though somewhat muted, usual festival activities are up and running now. People have started shopping for the festival stuffs and winter clothing here in North India.

These days are considered auspicious for various kind of consumer durable purchases also, like TVs, refrigerators, washing machines, furniture, cars etc. I am sure many people in India wait for these festive offers to finalize their buying decisions.

But, due to slowdown and high interest rates, people are trying to postpone their discretionary spending for quite some time now. Auto industry has also suffered one such blow here in India. On one hand, auto manufacturers are raising their product prices to maintain their margins and on the other hand, to attract the customers & beat this slowdown, they are trying different kind of things and showering various offers on the prospective buyers.

But, will you be interested in buying a car if the government today hikes the excise duty or import duty and imposes some kind of additional tax to make its price nearly 5-10 times its current market price? Yes, it is not 5-10%, it is correctly written as 5-10 times.

To be precise, I mean, will you be interested in buying a Honda City for Rs. 65,78,550 against its current on-road price of Rs. 10,58,196 for the same model?

Background to this Post

Last weekend, I, along with a friend of mine, went to Select CityWalk Mall in Saket, New Delhi. We had nothing lined-up in our agenda to shop for but to kill time and to quickly check if anything is there on the shelves for the coming winter season to match our spending budgets. If you are familiar with this area of Delhi, you must be knowing that Select CityWalk has two more malls besides it, one is MGF Metropolitan Mall and the other is DLF Place.

After we got exhausted with Select CityWalk, we decided to quickly roam around MGF Metropolitan Mall which is relatively smaller in size and not fully occupied also. While passing by the Volkswagen showroom, our eyes fell on a stunningly looking black Volkswagen CrossPolo. It is not that we saw Polo for the first time, but this recently launched sporty version of Polo, in the form of CrossPolo, was looking amazingly super hot.

Price of Volkswagen CrossPolo in Delhi

Just to satisfy our curiosity of knowing its price, we asked the sales guy for its price. He handed the price list to us, which was reading its ex-showroom price as Rs. 7,75,000 and the on-road price of Rs. 8,71,875, including RTO/registration charges & Road Tax of Rs. 69,750 and insurance of Rs. 27,125.

Though its looks were simply amazing, we felt it was much overpriced. We discussed with each other that one would rather buy a bigger sedan like Honda City or Hyundai Verna or an entry level SUV like Renault Duster or Ford EcoSport with such a price tag.

After wasting 3-4 hours there, I came back to my place and started checking my regular mails. While deleting my spam mails, a mail from one of the car blogging websites striked me. I decided to visit the site and started to research more about CrossPolo. Then somehow I searched about it on Google and saw a link which had its Singapore price.

I clicked on the link and what I saw was this:

Submodel                 Price          Fuel Economy     Power     Transmission     Detailed Info

1.2 TSI DSG (A)      $138,800       18.1 km/L            105bhp     7-speed(A) DSG      Specs/Features

Note: ‘$’ is Singapore Dollar or SGD here.

As I had an idea about the exchange rate of Singapore dollar vis-a-vis Indian Rupee, I quickly opened the calculator on my desktop and started pressing the keys of my keyboard. I was stunned to see the figure. At Rs. 49.50 to a Singapore dollar, it was Rs. 68,70,600.

I thought I was making some kind of mistake somewhere or I was missing something which should be there in the details of its price. To cross-check, I decided to check it on Volkswagen Singapore website. The price its “Price List” carried was quoted even higher at $1,54,300. So, probably there was nothing which I was missing. At $1,53,300, the price tag in Indian Rupee stands at Rs. 75,88,350.

Break-up of Volkswagen CrossPolo Price

Some other cars with huge price differences

So, why the cars in Singapore are so expensive?

Though the cost of car ownership is shockingly very high in Singapore, it has all the noble reasons behind it. Singapore is a relatively smaller country with a land area of only 710 square km, which is less than half of Delhi’s land area of 1,484 square km and just more than Mumbai’s land area of 603 square km.

It is the policy of the Singapore government to discourage individual car ownership, make its people use public transport to the maximum extent possible and thereby prevent congestion on its limited road space.

The government there does not raise taxes to discourage vehicle buyers, rather it has Vehicle Quota System (VQS) in place, which helps its authorities in controlling the number of cars out there at any point of time. Thereafter, the demand and supply factors determine the price of Certificate of Entitlement (COE) via fortnightly auctions.

Land Transport Authority of Singapore (LTA) has set 0.50% as the annual growth rate of its vehicle population between February 2013 and January 2015. In India, we don’t even have a system of scrapping old cars, how can we think of controlling our vehicle population growth and set a target for the same. Our automobile industry gets disappointed if the import duty or excise duty on vehicles gets raised by the finance ministry.

Some other interesting facts about Singapore Car Market

* Average Life of a car is 10 years – As per the policy of Singapore government, you will be given a Certificate of Entitlement (COE) which remains valid only for 10 years, after which it gets expired and you are not allowed to run your car on its roads. After 10 years, you may choose to de-register your car or get your COE revalidated for another 5 or 10-year period by paying the prevailing Quota Premium.

We buy a Maruti 800 here in India for Rs. 52,500 (on-road price Delhi, 1983), make it run for 25 years and celebrate its Silver Jubilee. That ways the average cost of owning a Maruti 800 works out to be Rs. 2,100 per year. Now, if you buy a Honda City in Singapore at SGD 132,900 with a cap of 10 years running life, your average yearly cost would work out to be Rs. 657,855. I think this is more than what an average urban youth would earn in an entire year here in India.

* Average Interest Rate < 2% – Singapore is a developed country and the risks, which make loans costlier in a country, are in control there. So, the interest rate charged there on a new car loan is below 2% p.a. for 1-5 year tenors. I think it must be more than 12% average here in India.

* Maximum Loan Tenure of 5 Years – Even though the life of a car in Singapore is considered to be 10 years, the maximum tenure you can ask for a loan is 5 years.

* Maximum 60% loan, Rest Down Payment – If you are in Singapore seeking to buy a car, the maximum loan you will be able to get from a car financier is 60% and that too if the Open Market Value (OMV) of the car of your choice is less than SGD 20,000. Rest you will have to manage from your own pocket. For cars with OMV of more than SGD 20,000, the percentage of loan you can avail is even lower at 50% of the price. So, the higher the market value of your car, the lower loan is available at your disposal.

Let’s quickly take an example:

  • Honda City 1.5 AT Price – SGD 132,900 i.e. Rs. 65,78,550
  • Open Market Value (OMV) – SGD 16,120
  • 60% Loan Availed – SGD 79,740 i.e. Rs. 39,47,130
  • Tenure of the Loan – 5 years
  • Interest Rate – 1.88% p.a.
  • EMI works out to be SGD 969 i.e. Rs. 47,966 per month

* Yearly Road Tax – A car owner in Singapore is required to pay road tax on a yearly basis. For the same model of Honda City, it is SGD 684 i.e. Rs. 33,858.

* Petrol costs SGD 2.20 a litre – No, this will not cost you 5-10 times its price here in India, but it is still costly. It is SGD 2.20 a litre i.e. Rs. 108.90. I have taken this price from Caltex Singapore website and Shell Singapore website.

What makes up “Pump Price” there in Singapore? Here is the chart having the break-up of SGD 2.20 a litre. High quality and premium service standards come at a cost. Here in India, we keep playing politics in the name of poverty and providing subsidies to the poor Indians. Unlike India, oil marketing companies (OMCs) in Singapore are allowed to earn reasonable profits.

So, now you must be thinking that it is really very costly to own a car in Singapore and probably the government is crazy there to do that. But, then I think if these crazy policies of the government there have been successful enough to make that country such a beautiful place to live, work and enjoy your holidays, then these policies are perfectly superior to the policies of the Indian government here.

Finally, I am no expert of Singapore car market, so whatever I have mentioned here is just a small research work. So, if you find any major discrepancy in any of the information here, please let me know, I’ll correct it immediately.

India ETF for UK Investors

I got an email on Saturday from a reader who wanted to know whether there were any ETFs that provide exposure to India for a UK investor.

Tony had left a comment on the water ETF post mentioning a water ETF for UK investors, so I asked him if he knew about any India ETFs for UK investors.

He sent me a detailed email about such ETFs, and I am really thankful for him for it. Using his email, here is a list of India ETF for UK investors.

db x-trackers S&P CNX Nifty ETF (India): This is an ETF that tracks the Nifty, which is one of the most popular indices in India. It contains 50 stocks and covers 22 sectors of the Indian economy. Total expense ratio of the fund is 0.85%. The assets under management are 279.54 million.

Lyxor has two India ETFs, both track the S&P CNX Nifty, one has the currency listed as GBP, and the other one as USD. Here are the two links:

Lyxor ETF India S&P CNX Nifty GBP: This one shows a year performance of +79.63%, and has 18.99 million assets under management. It has an expense ratio of 0.85%.

Lyxor ETF India S&P CNX Nifty USD: This one also shows a one year performance, assets under management and expense ratio same as the one above, but the currency is USD.

As you can see from the above comparison, these three funds are quite identical, the db-x trackers India ETF is much bigger in size, and that seems to be the biggest difference between them.

The garlic bubble

I first came across China’s garlic bubble on the Economist, which said prices in China’s garlic growing capital – Jinxiang have risen 40 times since March. China produces as much as 75% of the world’s total garlic, and is the biggest producer in the world.

Here are the ostensible reasons for this garlic mania:

1. Ward off H1N1: Some schools are mandating their students to eat garlic with lunch every day, as they believe it wards off H1N1. This seems to have triggered a price rise because people are buying garlic as prevention to this virus. So much for people worried about actually getting the vaccine.

2. Reduced garlic plantings last years: Garlic prices had collapsed last year, and farmers moved to other crops reducing the land under cultivation. This led to reduced supply this year, and when demand built up, there wasn’t enough garlic to go around for everyone.

3. Garlic hoarding: There are reports that coal mine bosses are engaged in hoarding garlic. They buy garlic and haul it between warehouses keeping supply low, and fueling the price rise.

4. Increased exports: There is increased garlic demand from abroad, possibly for the H1N1 reason, and this is also fueling the fire.

5. Speculation: Increased liquidity is funneling money into various assets, and garlic happens to be one of them. Combined with the other factors, speculative trading is leading to price rise. Among all reasons, I think this one must contribute the maximum.

Just like demand from India and China didn’t explain the rise in oil prices sufficiently, just the demand and supply factors can’t explain this spectacular gain in garlic prices.

Amazing what goes on around the world.

GEM of a stock exchange

Growth Enterprise Market (GEM) is the brand new stock exchange of China. It is a NASDAQ style stock exchange aimed at providing finance to smaller companies.

It started trading last Friday, and on the first day of trading — created 13 paper billionaires. 28 companies listed on the GEM, aka ChiNext, and they rose between 76% and 210% in the first day of trading.

It’s another thing that 25 out of these 28 companies fell on the second day, and many of them fell by as much as 10% (which was the lower limit).

I read a few articles about ChiNext or GEM, and there were several things that caught my eye:

  1. Volatility: The first thing that I noticed was volatility. Anyone following the Chinese IPO market will not be surprised by it, but it’s hard to not take notice of. China’s IPO market is the biggest in the world right now, and the IPO market is really hot there. Given this backdrop, regulators were expecting volatility, and it seems they have created some rules to curb speculation, and have warned investors that they will crack down on aggressive speculation.
  2. Continue reading “GEM of a stock exchange”

Crazy oversubscription numbers

At first I thought it was not reading it right, but I was: Sinopharm Group Company, which is China’s largest drug distributor company, recently came out with an IPO, and the issue got oversubscribed 570 times its Hong Kong part!

It attracted about 884 billion dollars (Hong Kong not Zimbabwe), and raised its maximum of HK 8.73 billion dollars. It just goes to show how hot this IPO market has become. In the past I have written about how this is shaping up like a bubble, and this promises to grow much bigger and bigger.

Continue reading “Crazy oversubscription numbers”

Image by betta design

For a brief period I worked with an Indian washing machine company. My boss there told me how they were scared when India was liberalizing, and companies like LG and Samsung were entering the Indian markets. Those companies had enormous resources, advanced technology, competitive pricing and almost everyone in those days thought that they will drive others out of business.

That never happened of course. Everything just went fine. My boss said that a big part of that was local knowledge. They had developed a sort of an ear for local nuances, which gave them an edge over the LGs and Samsungs of the world.

I was reminded of this yesterday when I started hunting for reasons why Baidu does much better than Google in China (I don’t remember why I started doing this). Baidu is a search engine, much like Google, and has a commanding position in China.

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Japanese Elections

The Japanese elections have just concluded yesterday, and a major political change has taken place there. The ruling party: Liberal Democratic Party (LDP), which has been ruling for the last 50 years or so (except for a brief period in 1993) has been defeated by the main opposition: Democratic Party of Japan (DPJ).

DPJ won quite easily scoring 302 out of 480 seats in the lower house, and this comes at the back of a 70% voter turnout, which is the highest in the last two decades.

Continue reading “Japanese Elections”