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Where would CPF money go if it is nominated to a bankrupt? When Madam Lim Lye Kiang sought to claim the $102,000 from CPF which her late sister had left her, she would never have expected that the CPF Board transferred the money to the OA (Official Assignee) to...

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Why you should not buy IPOs As Sheng Siong is launching its IPO next month, I expected a few calls as whenever an IPO is launching. And if you are my client, you know my answer. I decide to write this article so everybody can benefit...

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Questions to ask your Financial Adviser Every Sunday morning when I flip open the newspapers, I always see articles or advertisements regarding "Financial Advisers". Nowadays, just like the once prestigious word "Banker", which is misused in...

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Revision to Nomination of Insurance Nominees Regulation With the onset of the Mental Capacity Act ("MCA") coming into effect on 1st March 2010, the Insurance (Nomination of Beneficiaries) Regulations 2009 ("the Regulations") will be amended to effect 2 changes: The...

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The ABCs of the Financial Advisers Act The title, Financial Adviser, is always mis-used in the industry and misunderstood by the consumers. On 10 October 2002, the Financial Advisers Act came into effect and all financial institutions are...

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The probablility for Greece to default

Category : Market Commentary

According to an report from bloomberg last week, the record high Credit-default swaps on Greek government debt is “signaling a 91% chance the nation will fail to meet debt commitments”. So Why did the situation become worse and worse.

The article “What an impeccable disaster” in today’s Straits Times describe the event vividly: 

Investors, for whatever reason, fear that a country (Greece) will default on its debt. This makes them unwilling to buy the country’s bonds, or at least not unless offered a very high interest rate. And the fact that the country must roll its debt over at high interest rates worsens its fiscal prospects, making default more likely, so that the crisis of confidence becomes a self- fulfilling prophecy. And as it does, it becomes a banking crisis as well, since a country’s banks are normally heavily invested in government debt.

We have already seen European banks are under tremendous pressure now. What worries the markets is that nobody knows exactly the real impact of a Greece default. It does not mean you are safe if you are not a Greece bond holder. When it becomes a banking crisis, it affects everybody.

If you recall the collapse of Lehman Brothers, it was never a trouble until it troubled you.

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