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.

Read more.

Malaysia Going Gangbuster

By CYNTHIA KOONS

New York, Hong Kong, London...Kuala Lumpur? Malaysia is going gangbusters. Now, it must sustain the momentum.

The Southeast Asian nation is home to the world's second and third largest initial public offerings this year—the $3.3 billion listing of Felda Global Ventures  and IHH Healthcare's $2 billion IPO. Meanwhile, the benchmark KLCI hit a record Wednesday after rising almost 7% this year.

State backing for Malaysian equities is a factor. Felda's IPO was largely bought by government-backed investors such as individual Malaysian states. Mandatory retirement savings boosts domestic pension funds that typically invest a lot in the local market too.

The economy is also performing well. Unemployment is low. Inflation is benign at about 2%. Gross domestic product growth is around 5%. That is important because the Malaysian stock market is mainly comprised of domestically focused companies.

Diverse exports are also relatively robust. Commodities like palm oil, petroleum and gas make up about a quarter of exports, while electronics and manufactured goods make up the rest. HSBC notes that Malaysia's exports are down just 2% since last August, compared to a 13% aggregate decline for shipments from Singapore, Thailand, Indonesia and the Philippines. 

The country's banks look healthy too. Asset quality is strong and deleveraging by European banks isn't a big threat, says Moody's. "Their claims on the Malaysian economy amount to a mere 5% of GDP," notes the rating company.

Still, there are risks that warrant caution. A prolonged slump in global trade would hurt. Net exports are equal to about 16% of GDP—much higher than the ratio for neighbors such as Indonesia and the Philippines. Read more.

The Blame Game Continues

Hantu Laut

What lessons have we learned from high-profile crooks like Bernard Madoff and Allen Stanford ? Are they any different from the gangsters and organised crime bosses that makes their money in similarly illicit fashion. Are they worse than the rats,flies,maggots, cockroaches and all the vermin that humans find awfully disgusting.They can cheat you for yonks without you knowing it.They live the high life at the expense of those they cheated.

This is the where they talk so much about high moral, transparency and accountability but are now caught with their pants down. The West, themselves, rotten to the core.These are the crooks and scoundrels of the financial world, the money mincing machines that not only bankrupted their own companies but other innocent individuals and countries.

Below are some articles that decried the unpleasant and unconscionable action of those people whom we placed our trust in.

Are executives villains or morons?
In the past few months, we've been riveted and disgusted by the exploits of scamsters like Bernard Madoff and Allen Stanford (characters who, if they didn't exist, would have to be invented by Tom Wolfe). It's both easy and convenient to hold them up as the ultimate symbols of the just-ended boom. But we shouldn't. While there was some crime in the mortgage industry, law-abiding, respectable, upstanding citizens caused the overwhelming majority of financial losses suffered thus far. Skeezy money managers and mobbed-up boiler rooms didn't create the economic catastrophe. Read more....

PHOTOS:

Who Is To Blame?

There are plenty of people who contributed to the sad state of our economy. But when it comes to bad decision making, these seven folks arguably deserve the bulk of the blame. (Want to add to this hall of shame? Follow the e-mail link at the end of this gallery.)

Is Wall Street Evil?

Americans have always hated the moneymakers, rather than hate themselves.

Saving The Financial Monsters

Can this man save Wall Street?

by Katrina Brooker, senior writer

October 29, 2008: 6:32 AM ET

(Fortune Magazine) -- At 11 o'clock in the evening on Saturday, Sept. 13, Larry Fink was about to board a flight from New York to Singapore. The following Monday he was scheduled to meet with the managers of several Asian sovereign-wealth funds. For the head of BlackRock, one of the world's largest asset managers, this trip was a huge opportunity that could mean billions of dollars in new business.

Still, he knew that the next 19 hours would be a bad time to be unreachable. Just a few miles west of the airport, bankers and government officials were huddled in the offices of the New York Federal Reserve Bank to hash out the fates of three of the biggest financial institutions on Wall Street - namely, Lehman Brothers, AIG, and Merrill Lynch. Two of the troubled firms - Lehman Brothers and AIG - were BlackRock (BLK, Fortune 500) clients; Merrill Lynch was BlackRock's biggest shareholder.

Fink made one final call before boarding. "Can I get on this plane?" he asked a colleague inside the meetings at the New York Fed.

"You can go," came the response.

At that moment Fink thought Barclays (BCS) had agreed to buy Lehman. So he boarded. As Fink took off, he could see through his window the lights of lower Manhattan. He did not know it then, but it would be the last time he would see Wall Street - at least the one he recognized - in one piece.

When Fink landed in Singapore at 5 a.m. on Monday morning, he checked his BlackBerry and scanned the headlines: Lehman bankrupt, Merrill Lynch bought by Bank of America, AIG collapsing. "I felt like Charlton Heston landing on the Planet of the Apes," says Fink. "My world had transformed."

In that moment, Fink knew as well as anyone how treacherous the capital markets had become. As chairman and CEO of BlackRock, he had seen the hidden liabilities of just about every financial institution that would be pulled into this whirling vortex of doom.

AIG, Lehman Brothers, Fannie Mae, and Freddie Mac had all hired BlackRock over the past few months. As Fortune went to press, Treasury Secretary Hank Paulson had BlackRock on his short list to manage, well, your money - a chunk of the $700 billion bank bailout known as the Troubled Asset Relief Program, or TARP.

If Paulson and Federal Reserve chairman Ben Bernanke have been the public faces of the financial crisis, Fink has been its behind-the-scenes fixer and father confessor. The reason so many CEOs have kept him on speed dial in recent months is simple: No other firm is trusted to pick through the exotic securities infecting banks' balance sheets and place an accurate value on them.

At a time when the credit-rating agencies like Moody's and Standard & Poor's have lost face, BlackRock's valuations have become a kind of de facto Good Housekeeping seal of approval that buyers and sellers of distressed assets trust.

"I think of it like Ghostbusters: When you have a problem, who you gonna call? BlackRock!" says Terrence Keely, a managing director at UBS, who worked with BlackRock last spring to dispose of a troubled $20 billion portfolio of mortgage-backed securities (BlackRock unloaded it for $15 billion).

But before anyone organizes a ticker-tape parade for Fink, keep in mind that 25 years ago he was an early and vigorous promoter of the CMO (collateralized mortgage obligation). Today the CMO and other asset-backed securities have become the monsters responsible for the credit crisis.

BlackRock itself has not been unscathed: Its money market funds saw $50 billion withdrawn in the month of September. In the third quarter, assets in its fund-management business lost more than $100 billion, dropping from $1.4 trillion to $1.26 trillion. Its stock, trading at $113 on Oct. 23, is down 40% for the year.

"The market declines are so severe, BlackRock is not immune," says Fink, 55. "I've been in this business for 32 years, and in a 20-week period - from Bear Stearns's collapse until now - the landscape has changed so dramatically. It's very unsettling. Very disorienting."

So the question is, Can Fink stop this monster - and make a profit along the way?

Read more

Malaysia Fast Asleep

Hantu Laut

"Yesterday the Dow went up 11% and every where other markets soared.The Nikkei went up 12% in a day.Will the trend continue or was it a flash in the pan before the big dive to the abyss of economic disaster." Hantu Laut, Wednesday 14 Oct.

That what I said when the world's stock exchanges made dramatic recovery 3 days ago on a false sense of emboldened euphoria.The good feelings have now manifested into stark reality that the world might have to face the inevitable adversity of its own making.What happened to the world's economy today is not adventitious but the result of human folly.

As citizens I think we have the right to know what actions the government has in store to lessen the burden on the people in the event we go into a recession.High unemployment and business failures are two most imminent things in a recession.

The Nikkei was down 11.41% at today's closing, Hong Kong about 7% and Seoul 9.44%.The European markets which had just opened declined with the London FTSE down 5.17%.Most of the gains on Tuesday's rally have either been completely wiped out or are in bigger negative territory.

Bad news bear no significant in Malaysia where politics is still the master of the day.The sky might come down on Malaysia and if pigs have wings we would still be as strong as ever and no conundrum is beyond our ability to overcome.Both the Prime Minister and Deputy Prime Minister have full confidence in our economy to being able to withstand the onslaught of the global recession.

Deputy Prime Minister and Finance Minister Najib Tun Razak visited Kota Kinabalu yesterday to officially launch the Sabah International Expo 2008 and said "We Won't Fare Badly" and that the Malaysian economy is resilient and can withstood the global financial meltdown and recession.

I expect the KLCI to drop at least between 3 to 4% at today's closing.The ball will start rolling down hill from now on with small rebounds every now and then before the finale.

"The whole world is in financial turmoil.Malaysia is still in a slumber.More concerned with politics than state of the economy.The KLSE is the only exchange that is not in sync with the other markets.Are we fundamentally strong or are we living in a state of denial.Watch the market next week." Hantu Laut, Friday Oct 10

Malaysian leaders need to wake up to reality.Even our neighbour down south, Singapore has officially announced they are going into a recession and here, they are still playing politics and telling the people not to worry as we can overcome the crisis.

Can we ?

Derivatives:Hantu Was Right

Hantu Laut

On 2nd October I wrote about the state of the American economy and the likely causes of the financial meltdown in America under my posting "American Get Screwed".

One of the reasons leading to the financial crisis was the use of financial derivatives. These are very complex financial instruments that not many investors understand the workings and risk involved.They are supposed to reduce risk but in the wrong hand,greed and overexposure could be disastrous.

There are wide range of derivative contracts traded on the financial markets based on different kind of assets and indexes.You can even have derivatives on the weather.How all these different instruments work you may have to visit the investment gurus on Wall Street(where it was invented) to explain to you.

Below is a paragraph of what I wrote on 2nd October:

"Much of the troubles started from highly innovative and risky financial derivatives, over-extended credit,over-speculation of trading in stocks and bad financial management.Some of the top CEOs in America are undeservedly overpaid with some having pay packages running into hundreds of million.Their over-indulgence in highly speculative financial derivatives were the cause of the meltdown"

Many of you would still remember Baring Bank and its rogue trader Nick Leeson who speculated in derivatives trading that brought the centuries- old bank to its demise.That's what derivatives can do to banks,corporations or anyone who are greedy,careless or have no understanding of the mechanics of these complex instruments.Former Federal Reserve Chairman Alan Greenspan was a great believer and supporter of these beastly business tools.

Lehman Brothers and Merrill Lynch were creators of credit derivatives.These derivatives are the sweethearts of investment banks and brokerage houses by selling them and making huge upfront fees and premium payments.Another victim,AIG jumped on the bandwagon and went overboard in derivatives involving the sub-prime market.

Below is an article on the subject that appeared in the New York Times yesterday, 8th Oct:

By PETER S. GOODMAN

Published: October 8, 2008

“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004

George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”

And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added. Read more....

The Asian markets are going to take a big tumble today because of what happened on Wall Street yesterday.The Dow was down 7.3% in yesterday's trading.

The whole world is in financial turmoil.Malaysia is still in a slumber.More concerned with politics than state of the economy.The KLSE is the only exchange that is not in sync with the other markets.Are we fundamentally strong or are we living in a state of denial.Watch the market next week.

Next post:'Where Crude Oil Heading For'