Oil Price

Source : www.chedet.com


The price of crude oil has increased by 400 percent in the last three years. It follows that the price of products must increase, sooner or later. In other countries petrol prices had already increased. In the United Kingdom one litre of petrol sells for more than one pound sterling or RM7. In the United States it is about RM5.

That the price in neighbouring countries has gone up is shown by the rush to fill up by Thai and to a lesser extent Singapore vehicles.

The Government has now announced an increase in petrol price by 78 sen to RM2.70 per litre, an increase of more than 40 per cent.

I may be mistaken but there seems to be less vehicles on the road today. But obviously that is not all that will happen. All other consumer goods, services and luxury goods would increase in price.

The cost of living must go up. Put another way there will be inflation and the standard of living will go down.

Obviously our increase in petrol price is far less than in the United Kingdom or the United States. But our per capita income is about one-third of theirs. In purchasing power terms our increase is more than in the UK or the US.

The increase hurts but the pain is greater not just because of the increase percentage-wise is higher than in developed countries but because of the manner the increase is made.

A few days ago the Government decided to ban sale of petrol to foreign cars. It flipped. Now foreign cars can buy again. Flopped.

Knowing that in a few days it was going to raise the price and foreigners would be allowed to buy, why cannot the Government just wait instead of banning and unbanning.

But be that as it may what could the Government have done to lessen the burden on the people that results from the increase in petrol price.

In the first place the Government should not have floated the Ringgit. A floating rate creates uncertainties and we cannot gain anything from the strengthened Ringgit. Certainly the people have not experienced any increase in their purchasing power because of the appreciation in the exchange rate between the US Dollar and the Ringgit.

Actually the Ringgit has increased by about 80 sen (from RM3.80 to RM3.08 to 1 US Dollar) per US Dollar, i.e. by more than 20 per cent. Had the Government retained the fixed rate system and increased the value of the Ringgit, say 10 per cent at a time, the cost of imports, in Ringgit terms can be monitored and reduced by 10 per cent. At 20 per cent appreciation the cost of imports should decrease by 20 per cent. But we know the prices of imported goods or services have not decreased at all. This means we are paying 20 per cent higher for our imports including the raw material and components for our industries.

Since oil prices are fixed in US Dollar, the increase in US Dollar prices of oil should also be mitigated by 20 per cent in Malaysian Ringgit.

But the Government wants to please the International Monetary Fund and the World Bank and decided to float the Ringgit. As a result the strengthening of the Ringgit merely increased our cost of exports without giving our people the benefit of lower cost of imports.

This is not wisdom after the event. I had actually told a Government Minister not to float the Ringgit three years ago. But of course I am not an expert, certainly I know little about the international financial regimes.

I believe the people expect the increase of petrol price. But what they are angry about is the quantum and the suddenness. The Prime Minister was hinting at August but suddenly it came two months earlier, just after the ban on sale of petrol to foreigners.

If the increase had been more gradual, the people would not feel it so much. But of course this means that the Government would have to subsidise, though to a decreasing extent.

Can the Government subsidise? I am the “adviser” to Petronas but I know very little about it beyond what is published in its accounts. What I do know may not be very accurate but should be sufficient for me to draw certain conclusions.

Roughly Malaysia produces 650,000 barrels of crude per day. We consume 400,000 barrels leaving 250,000 barrels to be exported.

Three years ago the selling price of crude was about USD30 per barrel. Today it is USD130 – an increase of USD100. There is hardly any increase in the production cost so that the extra USD100 can be considered as pure profit.

Our 250,000 barrels of export should earn us 250,000 x 100 x 365 x 3 = RM27,375,000,000 (twenty seven billion Ringgit).

But Petronas made a profit of well over RM70 billion, all of which belong to the Government.

By all accounts the Government is flushed with money.

But besides petrol the prices of palm oil, rubber and tin have also increased by about 400 per cent. Plantation companies and banks now earn as much as RM3 billion in profits each. Taxes paid by them must have also increased greatly.

I feel sure that maintaining the subsidy and gradually decreasing it would not hurt the Government finances.

In the medium term ways and means must be found to reduce wasteful consumption and increase income. We may not be able to fix the minimum wage at a high level but certainly we can improve the minimum wage.

Actually our wages are high compared to some of our neighbours. The investors who come here are attracted not by cheap labour but by other factors, among which is the attitude of the Government towards the business community and the investors in particular.

From what I hear business friendliness is wanting in the present Government – so much so that even Malaysians are investing in other countries. There are rumblings about political affiliations influencing decisions. Generally Government politicians are said to be arrogant.

Malaysia is short of manpower. The labour intensive industries are not benefiting Malaysians. Foreign workers are remitting huge sums of money home.

The industrial policy must change so that high tech is promoted in order to give Malaysians higher wages to cope with rising costs of living.

The world is facing economic turmoil due to the depreciation of the US Dollar, the sub-prime loan crisis, rising oil and raw material prices, food shortages and the continued activities of the greedy hedge funds. The possibility of a US recession is real. In a way the US is already in recession. The world economy will be dragged down by it.

Malaysia will be affected by all these problems. I wonder whether the Government is prepared for this.

We cannot avoid all the negative effects but there must be ways to mitigate against them and to lessen the burden that must be borne by all Malaysians. I am sure the Government will not just pass all these problems to the people as the review of oil prices every month seem to suggest.

Fuel hike: 78 sen more to RM2.70 per litre....!!!

Source : M'Kini

YennaMike Says : "Petrol sudah hike up, Electric sudah hike up, Nasi sudah hike up, Living cost sudah hike up....tapi BOSS bila Gaji nak hike up to match all these lah...!!!"

The government has announced that petrol price will go up by 78 sen at midnight - a 40.6 percent jump from RM1.92 per litre to RM2.70.

"Effective from tomorrow, June 5, 2008, the price of petrol will be raised by 78 sen and the price of diesel will be raised by RM1," Prime Minister Abdullah Ahmad Badawi told a 50-minute press conference at his office in Putrajaya.The price of diesel will increase by a whopping 63.3 percent - from RM1.58 per litre to RM2.58.

The price hikes are among government measures to drastically cut the spiralling bill for oil subsidies, which is expected to amount to RM56 billion this year.

With the new structure, Second Finance Minister Nor Mohamed Yakcop - who was also present at the press conference - said the government is expected to spend about RM18 billion a year on oil subsidies.

At a press conference held at 5.30pm, Abdullah also announced that the government plans to offer rebates to motorists to offset the fuel price increase.

Under the scheme, vehicles below 2000cc will receive an annual rebate of RM625 to compensate for 800 litres of fuel used under the new price.

"Owners of private motorcycles of engine capacity of up to 250cc will be paid a cash rebate of RM150 per year," he said.

According to the prime minister, the money will be paid by money order. Rebate will be paid when motorists renew the road tax for their vehicles.
The government is expected to save RM13.7 billion under this new subsidy restructure and other levies.

The figures are derived from the savings made by state-owned oil company Petronas in gas and oil (RM8 billion), petrol (RM4 billion) and the independent power producer and palm oil (RM1.7 billion).The surplus of RM13.7 billion will be used for food security policy (RM4 billion), subsidies in cooking oil (RM1.5 billion), rice import (RM400 million), flour and bread (RM300 million), petrol, diesel and gas (RM7.5 billion), Abdullah explained.

Since 2004, petrol has gone up by 97.1 percent, while diesel increased by a whopping 231 percent [see chart below].

Higher TNB tariffs Abdullah also announced that the road tax for vehicles above 2,000cc will be reduced by RM200.

For motorbikes above 250cc, their road tax will be slashed by RM50, but a minimum rate of RM2 road tax will be maintained.The diesel subsidy for fishermen and vessel owners have been fixed at RM1.43 per litre. Previously fishermen bought diesel at RM1 per litre while vessel owners paid RM1.20 per litre.The premier also announced a price hike in gas supply for electrical and industry sectors.The premier added that the electricity tariffs too will be increased, effective July 1.He said the power tariff rate would remain the same for households which use below 200 kilowatt of electricity, which amount to RM43.60.However, those using more than 200 kilowatt will have to pay around 20 percent more.

National power supplier Tenaga Nasional will announce its new price structure at 12 noon tomorrow.The prime minister, in anticipating public anger from price hikes, has urged Malaysians not to organise street protests.

"The cost of petrol and commodities has risen drastically and so subsidies have to be restructured," he lamented.

"God willing I hope Malaysians will not demonstrate over this," he said, referring to fury over earlier hikes in a country where public transport is poor and most people are reliant on their cars.

Expect more price hikesAbdullah said that under the new scheme, the government will maintain a 30-sen fuel subsidy, which is independent of the market rate of fuel prices.For example, if the market rate is RM3 per litre, the local pump price will be RM2.70 per litre with the 30-sen subsidy.He said that the government would review the market price on monthly base and announce the subsidised price accordingly.Abdullah also said that he was confident the economic growth could be maintained at five percent and inflation at four to five percent.

Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad, who was also at the press conference, conceded that the increase would impact on inflation, which came in at 3.0 percent in April.

"With this hike, the CPI (consumer price index) is expected to rise to 5.0 percent" this year, he said.He also said that the new price of RM2.70 did not reflect the full market value, which could be as high as RM3-4 when the price controls are completely removed in August.Also at the press conference were Deputy Prime Minister Najib Abdul Razak, Minister in the Prime Minister's Department Amirsham Abdul Aziz, Information Minister Ahmad Shabery Cheek and International Trade and Industry Minister Muhyiddin Yassin.

Malaysian Stock Index Rebounds From Biggest Decline in a Decade

Source : Bloomberg


March 11 (Bloomberg) -- Malaysia's stock index rebounded from its biggest tumble in a decade as some investors judged the decline, sparked by the ruling coalition's worst election performance in 50 years, excessive.

Malaysian Resources Corp. surged the most in two months, leading construction stocks higher while water-related shares including Kumpulan Perangsang Selangor Bhd. advanced, after the prime minister said he still had government support for public works spending.

"Yesterday was panic selling, it was overdone", said Lye Thim Loong, who helps manage the equivalent of $593 million at Avenue Invest Bhd. in Kuala Lumpur. The government also eased investors' concerns by backing the prime minister, he said.

The Kuala Lumpur Composite Index rose 24.68, or 2.1 percent, to 1,197.90 as of 12:47 p.m. local time. It earlier climbed as much as 3.3 percent, set for its biggest gain since Aug. 20. The measure, down 21 percent from its Jan. 11 peak, yesterday fell 9.5 percent, the most since Sept. 8, 1998.

The benchmark's 14-day relative strength index fell to 18 yesterday, below the 30 level that some investors use as a signal to buy.

Malaysia's stocks lost $27 billion in market value yesterday, as opposition parties took control of almost half the states contested in March 8 elections, raising doubt over Prime Minister Abdullah Ahmad Badawi's political future and a 200 billion- ringgit ($63 billion) spending plan.

Malaysian Resources, the biggest developer of office space, climbed 9 sen, or 7.1 percent, to 1.36 ringgit, after plunging 34 percent yesterday. UEM World Bhd. added 23 sen, or 8.4 percent, to 2.96 ringgit, after yesterday's 21 percent slump. MMC Corp., a builder and port operator, rose 8 sen, or 2.8 percent, to 2.98 ringgit.

"More Certainty"

Abdullah said yesterday that the ruling National Front coalition supported his leadership and that the government has no intention of changing policies.

"There's more certainty", with the leadership after he was sworn in as prime minister yesterday, said Ang Kok Heng, who manages 450 million ringgit at Phillip Capital Management Sdn. in Kuala Lumpur. Still, the market "isn't completely stabilized".

Some analysts say the market may extend declines this week.

The Composite Index may "head all the way south to 1,100 points" this week, Gan Kim Khoon, head of equities at OSK Investment Bank in Kuala Lumpur said in an interview with Bloomberg Television. "The sentiment in the market is very, very weak", he said.

Projects under the government's development program may be delayed or deferred, he said.

With yesterday's slide, Ang said he's taking advantage of yesterday's selloff to buy "recession-proof", stocks such as betting and power company Tanjong Plc, Digi.Com Bhd. and Bumiputra-Commerce Holdings Bhd., he said. He won't buy construction stocks, citing uncertainty of possible delays in building contracts, he said.

Bursa Malaysia halts trading after KLCI falls 10% limit

Source : The Star


KUALA LUMPUR: Bursa Malaysia halted trading at 2.58pm after the Kuala Lumpur Composite Index (KLCI) fell 10%, which is the maximum limit.

Trading will resume at 3.58pm.

The KLCI fell 130.01 points to 1,166.32, the biggest one-day percentage loss in recent years.

Turnover was 913 million shares valued at RM2.47bil. Losers hammered gainers 887 to 19.

Sime Darby fell RM1.90 to RM9.10, KPS lost RM1.74 to RM1.68, DiGi RM1.70 to RM21.30 while BCHB fell RM1.65 to RM8.55.

Other losers were IJM, down RM1.45 to RM5.50, Puncak RM1.36 to RM3.16, Tenaga RM1.25 to RM7.40 and Bursa RM1.05 to RMN8.90.

Bumi policies affecting investment...aper nak di kato..?

Source : AFP
Image : Net

Former deputy prime minister Anwar Ibrahim said today Malaysia was losing out economically to regional rivals because of long-running policies favouring ethnic Malays.

He said Malaysia's ability to attract foreign investment had been compromised by keeping the country's affirmative action policies in favour of the Malay majority.

"That policy is obsolete... We are losing our competitiveness. Malaysia is less competitive than the 1990s," Anwar, whose PKR party is formally led by his wife, told reporters in Hong Kong.

"Foreign investments, we have lost. Growth, we have lost. Attractiveness, which is key to an emerging market, is lost. Not to China and India, but to Vietnam, Thailand and Indonesia because of our obsolete policies.

"If you persist in pursuing this agenda, you do it not only at the expense of the Chinese and the Indians, but also of the Malays."

Malaysia has pursued the policies for Malays and indigenous groups known as bumiputras since the 1970s to close a wealth gap with the minority Chinese community.

In recent months, the government has been shaken by rare public demonstrations which erupted last November, including against alleged discrimination against the country's ethnic Indians.

Religious controversies

Anwar added that Malaysia's creeping 'Islamisation' was also turning away foreign investors.

Malaysia has experienced a string of religious controversies in recent months.

A Catholic newspaper was banned from using the word 'Allah', in its Malay language section, while a Hindu woman lost her bid to stop the conversion of her child to Islam after Malaysia's highest court ruled that her now-Muslim husband can convert their elder son.

Anwar was sacked from the former government of Dr Mahathir Mohamad in 1998 after being jailed for six years following sodomy and corruption charges.

The sodomy charge was later overturned and Anwar was released but he is barred from public office or holding any position with a political party until April because of the corruption conviction.

Anwar added that an upcoming election, expected to be held in March, would be crucial in determining Malaysia's future.

"Given free and fair elections, these elections will be a defining moment for the country," said Anwar, at a press conference organised by the Hong Kong-based Asian Human Rights Commission.

He added he thought his opposition PKR party would damage Prime Minister Abdullah Ahmad Badawi's Umno in the vote.

Anwar said about 20 potential legislators running for his party were prepared to stand down once he is able to take part in a by-election after his ban expires.

Black Monday: recession fears spark global share crash

Source : The Guardian


· FTSE suffers biggest fall since 2001
· Interest rate cuts predicted

Fears that 2008 will see the looming recession in the US spreading to every other continent triggered a global crash in share prices yesterday, wiping £77bn off the value of the City's blue-chip stocks in the biggest one-day points fall in London's history.

On a day of panic selling, hefty overnight falls on far eastern stock markets prompted a ripple effect through Europe and left the City's FTSE 100 index down 323.5 points at 5578.2 at the close.

Since the start of the year share prices have dropped by 14%, with the near 900-point fall in the FTSE 100 wiping out all the gains of the last 18 months and putting renewed pressure on pension funds. Yesterday's 5.48% fall was the biggest in percentage terms since the immediate aftermath of the 9/11 terrorist attacks but less than half as big as the record 12.2% drop in October 1987.

In the City's money markets, traders were betting that the risk of a synchronised global downturn would force the Bank of England to cut interest rates by a full percentage point during the course of 2008 despite its concerns about inflationary pressure. Economists are expecting the toughest year for the UK since the pound was removed from the Exchange Rate Mechanism in 1992.

In the US, pressure is mounting on the Federal Reserve to cut interest rates by 0.75 points at its meeting later this month, taking its main policy rate down to 3.5%. Some analysts believe it will be necessary to cut rates to 1% by the end of this year to prevent the contagion from bad loans to subprime mortgage borrowers causing even more damage to the rest of the economy.

Shares in London closed near their lows for the day amid concerns that the market rout would continue today when Wall Street opens after being closed for the Martin Luther King public holiday. Last night, there were indications that the Dow Jones industrial average would open more than 600 points lower.

In other markets, Japan's Nikkei index was down almost 4%, while Germany's Dax and France's CAC index both fell by 7%. With markets in the developing world also suffering, the MSCI gauge of stock markets globally sank 3.3% percent, falling below its 2007 trough to lows last seen in December 2006 and taking it down more than 12% so far this year.

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, warned western countries to expect knock-on effects from the slowdown in the US, the world's biggest economy. "The situation is serious," Strauss-Kahn said after meeting the French president, Nicolas Sarkozy. "All countries in the world are suffering from the slowdown in growth in the United States, all countries in the developed world."

After briefly rising above $100 a barrel earlier this month, the cost of oil fell by $2 a barrel to $88.59 yesterday in expectation that weaker demand for energy would push down the price of crude. Mining stocks were among the biggest losers in London amid concern that the boom in commodities seen in recent years would be ended by a global slowdown.

Nick Parsons, head of strategy for NAB Capital said: "There was no real trigger for what was a Black Monday. Overnight there was the very large sound of pennies dropping followed by a general market capitulation. What the markets have woken up to is that, yes, there will be a recession in the US and, no, the rest of the world won't be immune to that slowdown."

Graham Turner of GFC Economics said the gloomy mood in the markets might have been the delayed reaction to news last week of financial troubles for the US companies that insured the bonds linked to subprime mortgages, the value of which has plummeted as a result of falling real estate prices and rising home repossessions.

"The stock market has finally cracked and it has cracked because of all the underlying problems. People are worried about consumer spending going down, and with the stock market going down as well the two factors will start to feed off each other," said Turner.

On the day that the chancellor, Alistair Darling, announced his rescue plan for Northern Rock, the main UK casualty of the first wave of the subprime turmoil, the beleaguered bank was one of only a handful of shares to rise. But Scottish Widows became the third company in recent days to freeze its property fund following sharp falls in the price of commercial property. Investors will not be able to access their money for six months

Malaysia Hot Stocks-Market seen down on U.S. recession fears

Source : Google
Image : Net


KUALA LUMPUR, Jan 22 (Reuters) - Malaysian shares are likely to drop sharply on Tuesday following a global sell-off on growing worries about a U.S. recession, with banks and plantation stocks such as IOI Corp (IOIB.KL: Quote, Profile, Research) being hit hard,dealers said. U.S. stock index futures sank in holiday-shortened trade in New York on Monday, indicating Wall Street was likely to join the global equity markets plunge when trading resumes on Tuesday.

Shares in Tokyo and Seoul also fell sharply in early trade on Tuesday. "There will be panic selling in Malaysia too," said one dealer at a local brokerage. "The market looks very much bearish and I don't see any immediate bottom yet."

He expected the main index, the Kuala Lumpur Composite Index. KLSE, to drop 2 to 2.5 percent, adding to Monday's 2.2 percent loss. The 100-share index closed down at 1,408.60 points on Monday. Top two banks, Malayan Banking (MBBM.KL: Quote, Profile, Research) and Bumiputra-Commerce (BUCM.KL: Quote, Profile, Research), led falls, dipping 4.1 percent and 5.4 percent respectively.

Another dealer said the index could find an immediate support at around 1,380 points. The January futures contract KLIF8 put the index at 1,387.5. U.S. markets were closed on Monday for the Martin Luther King Day holiday, but stock index futures sank, indicating Wall Street was likely to join a global equity markets plunge that may usher in a bear market when trading resumes on Tuesday.

There was no respite for other leading centres, with Britain's leading shares falling 5.5 percent, the largest one-day loss since Sept. 11, 2001, while Japan's benchmark Nikkei tumbled more than 3 percent to its lowest close since Oct. 2005.

Asia stocks sink amid US recession fears

Source : Net
By CARL FREIRE, Associated Press Writer


TOKYO - Asian stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

India's benchmark stock index was down a stunning 10.9 percent in afternoon trading, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Investors dumped shares because they were skeptical about an economic stimulus plan President George W. Bush announced Friday. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

Concern about the U.S. economy, a major export market for Asian companies, has sent Asian markets sliding in 2008.

"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."

Be Prepared - Financial Outlook for 2008

Source : Telegraph UK

City experts give us their top predictions

CREDIT SUISSE: ASIA TO WEATHER GLOBAL SLOWDOWN
Dong Tao, chief regional economist for Asia ex-Japan, Credit Suisse

We expect export growth in Asia in the first half of 2008 to be constrained by a substantial fall in G3 growth and a tightening of global credit flows, but the slowdown in the region will be moderated by robust domestic demand.

For the year, the bank downgraded its 2008 growth forecasts for Asia from 8.3pc to 7.8pc, with the biggest adjustment seen from export-dependent South Korea and Taiwan.

This follows a cut in Credit Suisse's G3 growth forecast to 1.5pc from 2pc for 2008, and its US growth projection to 1.5pc from 2.5pc, with most of the slowdown expected to take place between Q4 2007 and Q2 2008.

Inflationary pressures remain a concern in Asia, with Credit Suisse raising inflation forecasts sharply next year for Hong Kong, Singapore, Malaysia, Indonesia and Vietnam.

Asia's exports will be affected by the slowdown but domestic demand in the region remains strong. China seems to be heading for a soft landing; it can provide a buffer to the rest of the world but cannot totally compensate for the decline.

Growth forecasts for China and India were revised down, from 10.2pc to 10pc for the former and from 9.6pc to 8.5pc for the latter, in Credit Suisse's newly published Emerging Markets Quarterly report.

China is well positioned to weather an anticipated G3 slowdown. Factors such as an overheated economy that may have caused concerns previously may stand it in good stead during a downturn.

The growth of exports is expected to slow to 16pc-17pc in 2008 from 27pc in the first ten months of 2007. But the impact on net trade, and hence GDP, will be muted as more than 50pc of export earnings are used to pay for imported materials.

However, there are four major risks to the Bank's forecast: a sudden and sharp fall in the A-share market, a significant policy-induced correction on housing prices, a slow response to a G3 slowdown, and heightened cross-Strait tensions.

On the currency front, Credit Suisse expects a 10pc RMB appreciation against the US dollar in 2008 compared with the 6.23pc year-on-year gain at end-November 2007 and 3.3pc rise in 2006.

In Hong Kong, the Bank expects growth to be driven by private consumption, with GDP growth in 2008 forecast at 4.6pc versus a projected 6pc for 2007.

Residential property prices could rise 20pc-30pc over the next six months, as rising inflation, strong capital inflows, negative real interest rates, and a positive wealth effect generated by the equity market pushes up transaction volumes. Inflation is likely to surprise on the upside, fuelled by strong economic momentum and robust employment conditions.

Other factors driving inflation include high food prices from the mainland, surging commodity prices, rising rents, and rising wages. The Hong Kong dollar peg will remain despite pressure for revaluation.

In Southeast Asia, Vietnam is again expected to lead the region in terms of growth with projections for 2008 of 9.1pc versus a forecast 8.5pc for 2007. The expansion of market share and capacity, the technological upgrade of existing industries, and FDI-driven investment should provide a buffer to a global slowdown but concerns of overheating persist.

Inflation hit a new three-year high of 10pc year-on-year in November 2007 and is forecast to rise to as high as 12pc year-on-year in 2008. Growth in Singapore is likely to moderate to 6pc in 2008 from nearly 8.0pc in 2007, reflecting slow external demand from G3 economies.

Banks face Financial turmoil despite abundant Global Liquidity

Source : Channel News Asia / AFP

PARIS : The international banking sector is grappling with a grave financial crisis at a time when, paradoxically, there is an abundance of ready cash available, notably from emerging market countries.

Big banks since August have slashed the amount of credit they are prepared to offer each other, anxious to avoid lending money to any institution that could be liable to huge losses because of exposure to the crisis in the US housing market.

The sub-prime, or high-risk, sector of the US market has been hit with a wave of foreclosures by homeowners unable to meet higher mortgage payments.

That in turn has undermined the value of billions of dollars' worth of securities backed by sub-prime mortgages and issued by major banks and finance institutions.

But according to Jean-Francois Robin of the French bank Natixis, "it's not that there is a lack of liquidity (in the global financial system), it's that it is not circulating."

If the inter-bank market has seized up, there are in fact funds available.

"The world's money supply is growing at a red-hot pace - 10 to 15 percent a year," said Jean-Herve Lorenzi of the French research group Cercle des Economistes.

Foreign exchange reserves held by emerging market powerhouses such as China and other big commodity exporters - Russia and members of the OPEC oil cartel, for example - are steadily expanding.

In such countries, along with Japan and Norway, sovereign wealth funds have been created to find fruitful investment outlets for the reserves that have built up over the years.

The funds, which are said to total more than US$2.8 trillion, have lately come to the rescue of some of the biggest names in global finance.

The US investment bank Merrill Lynch is to be re-capitalised thanks to a US$5.0 billion injection by investment company Temasek.

Morgan Stanley has been reinvigorated by the participation of the China Investment Corporation, also in the amount of US$5.0 billion, while another US behemoth, Citigroup, has received a US$7.5 billion lifeline from the Abu Dhabi sovereign fund.

Swiss banking giant UBS, which has been especially hard hit by the sub-prime meltdown, raised 11 billion dollars from another Singapore fund.

But sovereign funds are not the only entities sitting on piles of cash.

US billionaire investor Warren Buffett announced Tuesday he was buying a 60 percent stake in Marmon Holdings Incorporated, an industrial group owned by one of America's richest families, for US$4.5 billion.

Buffett's investment firm, Berkshire Hathaway Incorporated, will acquire the remaining 40 percent of Marmon over five to six years at a price to be based on the group's future performance, the two sides said.

Marmon, which has been owned by Chicago's Pritzker family since 1953, is a manufacturing and services group with more than 125 units and whose products range from railroad tank cars to electrical wires and cables.

In addition, said Robin of Natixis, "there's lots more liquidity" held by insurers and pension funds, which manage savings worth hundreds of billions of dollars.

"They have taken their capital out of risky assets," such as stocks and bonds linked to real estate, he said.

"And they have lots of money to invest in the coming months, which should help the markets get back on their feet."