Tuesday, August 6, 2013

Malaysia Trade: Foreign Investors Don't Like What They See

Hantu Laut

With Fitch's downgrade of Malaysia's sovereign credit outlook to negative, Malaysia will suffer more capital outlaw in coming months as foreign investors continue to dump Malaysian government bonds and liquidate equity stocks. The ringgit will slide down further against major currencies.

Foreign investors are jittery of the expected Malaysia's economic downturn, an uprise that depend much on Najib's transformation policy that ain't coming. 

I expect the economy to perform worse than the figure adjusted downward by the World Bank. I expect a worse scene scenario of less than 5 % of GDP growth for 2013.

Three days ago I bought physical US$ at US$1.00 to RM3.22. The lowest against the dollar in three years. In May this year it was RM2.96 to US$1.00.

The racial tension prevailing in the country is a cause for great concern and could get out of hand if both sides of the ethnic divide do not come to their senses.

DAP had thrown down the gauntlet on the ROS and I expect ROS will rise to the challenge with a well-deserved de-registration of the party. I say well-deserved because it is what the DAP wanted, a devious ploy to show the Chinese community that the government is taking revenge on the community for their wholesale support of the party in the 13th GE. 

DAP leaders, particularly the Lims, want the Chinese community to continue to be angry with the government so as to sustain the supports for DAP until the 14th GE, where DAP expect to gain more grounds if the momentum is kept alive.

DAP leaders knew by not acceding to ROS demand to hold fresh elections, which they should have, because the complaints came from party members who felt they have been cheated, the next action would be de-registration of the party by ROS. 

Both sides are testing each other's resolve.

There were rumours, true or not, that certain DAP leaders want a merger with PKR, which if materialised will make them very formidable. Out of PKR's 30 MP seats, only 14 or thereabout are held by Malays.

Fortunately for BN, Anwar Ibrahim will not allow it, not in a million years.

Najib's transformation seemed to be on delayed mode. His government spend more time on pettifogging and listening to leaders bankrupt of constructive ideas.

From the WSJ:

Malaysia’s exports continued to weaken Monday, another worrying sign for an economy facing increased investor scrutiny.


Purple Haze said...

A simple analogy would be that Malaysia had good sources of revenue - oil, palm oil and manufacturing (principally electronics). It is neither a high end manufacturer nor a low cost one.

But our debt ratio kept rising over the decades, which means the govt was spending more than it afford.

Basically, we were making money but it seems to have vanished and creating new debt to service old debt will eventually lead to alarm bells ringing.

GoldTrex said...


THis is unforgivable. The negative Fitch rating happened during a time when our oil prices were high. The economies of the region were all doing well. It is therefore time for Malaysia to have a full time Minister for Economics.

The EPU reports to the PM. As things look today, he is failing even as a politician, let alone as an able economist.

The Finance Minister. Unfortunately we are looking at the same man.

Even if our Finance Minister is world class, Finance Minister's focus, for any country, is about balancing the budget / national cheque book.

He is focused on year to year, while economics management requires longer term thinking and strategies.

The International Trade Minister - is concerned with external trade matters and not on the management and planning of the whole economy.

The central bank governor could not be a functioning 'economic minister'. Central banks are narrowly concerned about price and interest rates stability, than on steering the country to achieve economic breakthroughs and sustained growth.

We need a top notch economist. If a local could not be found then an expatriate would need to be engaged.

If Idris Jala who had not spent a day in MAMPU nor the ICU, could be made to transform our civil service, by appointing him to lead PEMANDU, then the options open to Malaysia to scout around the world for someone suitable -- could not be that difficult.


Anonymous said...

Fitch is 9ne of 3. Our economy is quite diverse and our gdp growth is quite impressive as compared to our neighbours. Granted the stock market will be affected but mainly on the foreign speculators I.e hot money. As for the foreign debt it comprise about 10% of the total debts which is still below the threshold of 55%. The rating agencies have been proven wrong time and time again as evidenced by their spectacular booboo on the subprime crisis in the US. Our records for the past 55 yrs is proof of our resilience and prudent management of the economy. Its not all gloom and doom you know. Have a bit of faith on our ability pls...

SM said...


Pak Lah has just come out with a Book on his years as PM.

In it are some very telling stuff on why he did not implement all the improvements that he wanted to do.

Maybe Najib should have a read & make a "Real" effort in his ETP.

Out Household Debt Ratio to GDP is one of the highest in Asia. The Economic Crisis in the US & Europe in 2007 started with the same signs. Bank Negara is placing a few measures to try to curb this trend. Will it work? Time will tell. In the eman time, have a great Hari Raya & may Allah bless Malaysia.

Anonymous said...

McGraw Hill Financial Inc., Moody’s Corp. and Fitch Group Inc. have been sued by liquidators of two collapsed Bear Stearns hedge funds seeking more than $1 billion over allegedly faulty investment ratings, Bloomberg reports.

In a separate suit, the U.S. has been seeking more than $5 billion in civil penalties from McGraw Hill’s Standard & Poor’s unit over credit ratings on mortgage-backed securities. An effort to have the Justice Department’s fraud lawsuit thrown out was tentatively rejected by a federal judge in California this week.

Bloomberg reports that:

The liquidators accuse the companies of “improperly and fraudulently” rating securities and “intentionally and knowingly” misrepresenting information about their independence, the accuracy of the ratings, the quality of their models and their surveillance of collateralized debt obligations and residential mortgage-backed securities.’’

“Defendants, by omitting information they knew to be material from their credit rating analyses, including the then-deteriorating quality of the mortgages underlying the CDOs and RMBS at issue, offered a product and/or service, i.e., a rating, that was materially different from what they represented it would be,” the liquidators said in their filing.


Anonymous said...

paklah wrote a book?

senile mind must be the world's greatest retard to accreditate a slumberjack's nightmarish experiences

edited by kiasu island's employee, at most sleepyhead will be remembered as the world's second greatest retard


Anonymous said...

The politicalization of the WSJ has moved to a new and more risky phase. The paper is now in danger of being a money loser — not for its investors (tho that has already happened), but for those traders who read its content.

It used to be that articles on the Market or specific companies or various finance stories were objective and reliable and free from bias. Sure, you could always count on money losing, bat-shit crazy nonsense in the editorial pages, but that was a special area of sequestered partisans, who due to their insanity cared not a whit about how much capital their lunatic ravings lost their readers. (The list is long and varied, but the Boskin “Obama Crash” on March 6th is a good place to start; then read anything Don Luskin writes — he is a reliable contrary indicator).