Category: Finance

by Y-Sing Liau
Bloomberg
October 2, 2015

The ringgit fell and stocks retreated as concern Malaysia may miss its target of balancing the budget by 2020 hurt a currency already reeling from a worsening slowdown in China and allegations of corruption against Prime Minister Najib Razak.

The fiscal shortfall may be “in the region” of 1 percent of gross domestic product at the end of the decade, compared with a current deficit of 3.2 percent, the New Straits Times reported Thursday, citing comments by Najib to fund managers and investors in New York. Malaysia derives 22 percent of government revenue from oil-related sources and its finances have been sapped by a 49 percent drop in Brent crude over the past 12 months.

The ringgit fell as much as 1.2 percent before closing 0.3 percent down at 4.4152 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It’s dropped 21 percent so far in 2015, trailing only the Brazilian real, Turkish lira and Colombian peso among 24 emerging markets tracked by Bloomberg amid a deepening slowdown in China and the prospect of higher U.S. interest rates. Continue reading “Ringgit Retreats as Malaysian Budget Woes Add to China Concern”

Steve Johnson
Financial Times
1st October 2015

Amid vigorous debate as to whether slumping currencies still have the ability to stimulate significant emerging market export growth, the recent example of Malaysia is fascinating.

During the Asian financial crisis of 1997-98, the collapse of the ringgit led to a sharp and almost instantaneous rise in exports.

Export growth accelerated from zero in mid-1997 to more than 40 per cent by early 1998, according to analysis by Hak Bin Chua, Asean economist at Bank of America Merrill Lynch.

As a result, Malaysia’s current account balance swung from a deficit of 12.4 per cent of gross domestic product in the second quarter of 1997 to a surplus of 18.7 per cent of GDP by the end of 1998.

“The J-curve effect, the temporary worsening [of the trade balance] following the depreciation, was short or even negligible in 1997,” says Mr Chua.

Since September 2014 the ringgit has plunged once again, tumbling to its lowest level against the dollar since the 1997 episode.

Yet, as Mr Chua observes, “the depreciation has not strengthened exports or improved the trade balance at all. There is no ‘J’ so far, only a flat ‘U’.” Continue reading “Ringgit rout fails to revive Malaysia exports”

Congratulations are in order for Malaysia moving up two spots in terms of global competitiveness, ranking 18th from last year’s 20th position in the Global Competitiveness Report 2015-2016 released by World Economic Forum (WEF).

Malaysia is now ranked ahead of Belgium (ranked No. 19 ) and Luxembourg (No. 20). Malaysia was ranked No. 20 last year with a score of 5.16, behind Belgium (ranked No. l8 with score of 5.18) and Luxembourg (ranked No. 19 with score of 5.17).

There is a confusion however as according to the World Economic Forum (WEF) Global Competitiveness Report 2015-2016, although Malaysia is placed No. 18, it shares the same score of 5.2 with Belgium and Luxembourg both of whom also scored 5.2.

Be that as it may, congratulations should not be begrudged Malaysia’s ranking, although commiserations are also in order for Malaysia’s “perfect storm” of a crisis of confidence in the government with no light at the end of the tunnel. Continue reading “Congratulations in order for Malaysia moving up two spots in global competitiveness ranking but commiserations also for “perfect storm” of crisis of confidence with no light at end of tunnel”

Will the next two months be as disastrous for Malaysia as the past two months?

Before the Prime Minister, Datuk Seri Najib Razak launched an offensive against his enemies inside and outside of UMNO two months ago, Malaysians were already quite punch-drunk with a myriad of scandals of high-level political corruption which included the two mega-scandals of 1MDB and the RM2.6 billion “donation” in Najib’s personal banking accounts, the blocking of the whistleblower website Sarawak Report, a notice to Interpol for the arrest of editor of Sarawak Report, Claire Rewcastle Brown, the three-month suspension of the Edge publications, and a slew of police actions under Section 124 of Penal Code against purported international plotters to “topple” Najib as Prime Minister.

On 28th July, Najib launched a multi-pronged offensives which included:

• abrupt sacking of his Deputy Prime Minister, Tan Sri Muhyiddin Yassin and Minister for Regional Development, Datuk Seri Shafie Apdal for continuing to raise questions about the 1MDB scandal which Muhyiddin in his last speech as DPM to the Cheras UMNO Division said had ballooned from a RM42 billion to “over RM50 billion” scandal;

• the sacking of Attorney-General Tan Sri Gani Patail, with a charge sheet appearing subsequently giving support to the speculation that Gani was preparing to prosecute Najib for corruption over the 1MDB scandal when his action was pre-empted by Najib’s summary dismissal in the nick-of-time; and

• sabotage of Parliamentary Public Accounts Committee (PAC) investigations into the 1MDB scandal by the elevation of the Chairman and three committee members as Minister and deputy ministers, causing PAC investigations into 1MDB scandal to grind to a halt for more than three months until the four vacancies are filled in the October meeting of Parliament.

Continue reading “Will the next two months be as disastrous for Malaysia as the past two month?”

Leslie Shaffer
CNBC
Sept. 25, 2015

The sell-off in the Malaysian ringgit, already among the world’s worst performing currencies, may run further amid a toxic mix of shaky economic fundamentals and the spreading of what is being called the country’s worst-ever political crisis.

The ringgit has fallen around 40 percent over the past year, with the U.S. dollar fetching around 4.34 ringgit on Thursday. That’s the Malaysian currency’s weakest against the greenback since late 1997, when the dollar at one point fetched as much as 4.88 ringgit.

“There remains significant downside risk even after the sharp ringgit correction,” Hak Bin Chua, an analyst at Merrill Lynch in Singapore, said in a note Wednesday, noting that he sees little comfort from claims Malaysia is much stronger than in 1997, when it took a wallop from the Asian Financial Crisis (AFC). Continue reading “Does Malaysia’s ringgit face 1997 all over again?”

From candidate as a Tiger Economy in the early nineties to a candidate for junk bonds – this is an indication of how far Malaysia has fallen under the premiership of Datuk Seri Najib Razak.

In two decades, Malaysia has transformed from a “darling” to a “villain” of the international media in our “transformation” from a model nation into a rogue state.

What has happened?

We seem to have the most useless and incompetent Cabinet in the nation’s history, unable to deal with the grave issues of the state at its meeting yesterday, especially the Sept. 16 Red Shirts Rally organized by UMNO which in fell swoop desecrated the concept and vision of Malaysia on the 52nd Malaysia Day anniversary and Najib’s own signature policy of 1Malaysia on the importance of racial peace, social harmony and national unity.

Nor was the Cabinet brave enough (with Najib absent, as the Prime Minister had left secretly for his UN, US and UK trip) to deal with two current issues which occurred after the last Cabinet meeting on 9th Sept, viz: (i) the Al Jazeera 101 East current affairs programme on “Murder in Malaysia” on new evidence on the brutal murder of Mongolian Altantuya Shaariibuu; and (ii) the New York Times report that a US federal grand jury is examining allegations of corruption and money laundering involving Najib and people close to him under the Department of Justice’s Kleptocracy Asset Recovery Initiative. Continue reading “From candidate as Tiger Economy to candidate for junk bonds – how far Malaysia has fallen under Najib!”

by Lyubov Pronina
Bloomberg
September 24, 2015

Six developing nations including Malaysia and South Africa deserve to follow Brazil into junk status, if credit-default-swaps traders are to be believed.

Two weeks after the Latin American country’s credit rating was lowered, CDS investors are punishing other emerging markets facing similar challenges, sending their implied sovereign ratings at least five levels below their official grades, according to data from Moody’s Corp.

Malaysia is A3 at the company, though traders see it six levels lower at Ba3. South Africa, which is a Baa2, is viewed as a B1 borrower. Three Aa3 nations including China are perceived by the markets as deserving the lowest investment grade. Continue reading “Do Malaysia, South Africa Deserve Junk? Moody’s Model Says Yes”

by Emily Chow and Umesh Desai
Reuters
Wed Sep 23, 2015

Investors have voiced doubts over potential conflicts of interest posed by Malaysia’s plan for an equity fund to buy “undervalued” shares, reflecting their growing unease as a scandal over an indebted state fund engulfs Prime Minister Najib Razak.

Last week, Najib announced a series of measures to support the economy. Chief amongst them was a plan to infuse 20 billion ringgit ($4.6 billion) into defunct equity fund called ValueCap so that it can buy underperforming shares.

Analysts and investors have raised questions of propriety over the idea of a state-directed fund picking stocks to support. Continue reading “Investors harbour doubts over Malaysia’s stock market rescue plan”

Yesterday, the Prime Minister Datuk Seri Najib Razak announced the reactivation of ValueCap with a fund size of RM20 billion, which will be used to invest in selected stocks on Bursa Malaysia.

An injection of RM 20 billion may prop up the market briefly. The Chinese tried this approach with limited success.

Malaysia may find that this is a futile step that will prop up prices of GLCs and UMNO linked companies briefly. However, these steps will not result in lifting the GDP growth rate, enhancing investment, creating jobs, propping up employment or checking inflation.

It is a palliative step with no likely impact on the economic prospects or correcting the economic fundamentals.

Indeed, there may be a backlash effect – artificially propped-up share prices may induce share investors, both local and foreign, to cash in and take the proceeds out of the country, thus adding to the capital flight that is being experienced. Continue reading “Call for true national government with a strong technocratic background to address current economic crisis”

By John Berthelsen
Asia Sentinel
September 14, 2015

Najib says this should do It

Rising economic and political problems could render Najib’s moves ineffective

Malaysian Prime Minister Najib Razak’s announcement that a revived government equity investment firm intends to pour RM20 billion (US$4.6 billion) into shoring up the country’s stock market may face serious headwinds in a flagging economy.

“Malaysia’s market is much thinner than China’s so RM20 billion could make quite a bit of difference. On a fundamental basis the ringgit is grossly oversold and probably Malaysian equities are too,” said a Hong Kong-based financial analyst who covers Malaysia. “The problem is that fundamentals fly out of the window when there is growing concern about the probity of the political elite and the direction of policy. Malaysia has to resolve the 1MDB debacle before the market and the currency can stabilize and recover. That was supposed to happen in January and we are still waiting, which reflects entirely the poor economic and political management of the country.” Continue reading “Malaysia Acts to Save its Markets from Crisis”

The Prime Minister cum Finance Minister, Datuk Seri Najib is expected to announce tomorrow measures to strengthen the economy as falling commodity prices and the ringgit currency plumbs near 18-year lows.

I call on Najib to include in his announcement tomorrow the following three measures to address the economic crisis:

Firstly, to suspend the Goods and Services Tax (GST) as it is choking domestic consumption apart from increasing the cost of doing business in difficult economic times;

Secondly, to embark on a regime of government economic austerity, starting with halving the number of 10 Ministers in the Prime Minister’s Department to five. Continue reading “Three measures which Najib should announce tomorrow to address economic crisis”

David Pilling
Financial Times
September 2, 2015

The country is facing comparisons with the 1997 Asian financial crisis

Malaysia is in the middle of a political maelstrom. But the country’s worries do not stop with the scandal affecting Najib Razak, the prime minister. Weak oil prices, a creaking Chinese economy and the prospect of higher US interest rates have all hit Southeast Asia’s third-biggest economy simultaneously. Could this be a re-run of the 1997 financial crisis?

Critics will call such a scenario alarmist. In many ways, Malaysia appears to be in better shape than it did before the last Asian financial crisis. It has had consistent current account surpluses, as opposed to deficits in the run-up to 1997. Its foreign exchange reserves, though depleted, are nearly double the four months’ export cover it had in 1996, the year before the precipitous fall of the Thai baht triggered capital flight all over Asia. Malaysia was not the worst affected back then. That honour went to Indonesia. Even so, Malaysia’s economy shrank more than 6 per cent in 1998. Continue reading “Malaysia’s economic frailty is all too familiar”

The country is sick and in crisis.

Today sees the rout of the Malaysian ringgit which fell to a record 17-year low of 4.26 to a US dollar and another record low of 3.08 against the Singapore dollar.

Malaysia’s foreign exchange reserves fell 19% since the start of the year, dipping below the US$100 billion for the first time last month since 2010, fueling speculation that Bank Negara is digging into the reserves to shore up the currency.

It has fallen to US$94.5 billion on August 14 from US$96.7 billion on July 31.

The lower a country’s forex reserves, the less it is able to do to shore up a sinking currency.

Meanwhile, capital outflows from the country are accelerating, to three times the size of capital investments in the country in Q1.

The reserves slid four times as fast as Indonesia, whose rupiah is the second worst-performing currency in the region. Continue reading “Acknowledgement by IGP Khalid that “no confidence” move against Najib is neither criminal nor police concern will allow a proper and less inhibited discussion of alternatives to the present Najib administration”

G. Sharmila
KiniBiz
August 21, 2015

TigerTalk

The ringgit has taken more than its fair share of beatings this month, weakening past the 4.0 level against the greenback and some analysts are predicting that it will hit the 4.2 level. Tiger thinks that the currency desperately needs a reprieve and believes that it may happen, though not as soon as she would like.

“Desperation is like stealing from the Mafia: you stand a good chance of attracting the wrong attention.” – Douglas Horton

A special trait that all Tigers have is the ability to sniff out desperation kilometres away from the source, which is usually an unfit kijang struggling to get away or a human being desperately climbing a tree to avoid being eaten by yours truly and the rest of her kind.

But the desperation of the worst kind is when it comes from panicking investors – in this case, those heedlessly fleeing from the weak ringgit. Tiger thinks in some ways they are unjustified and believes that there could be a reprieve in sight for the ringgit, if a confluence of factors take place sooner rather than later. Continue reading “Is there a reprieve in sight for the ringgit?”

By ANJANI TRIVEDI and EWEN CHEW
Wall Street Journal
Aug. 14, 2015

Currency falls more than 3% Friday to a fresh 17-year low

Malaysia’s ringgit suffered its largest one-day loss in almost two decades, with investors pulling cash out of stocks and bonds, as the nation’s list of challenges appears to be getting longer.

The ringgit shed more than 3% against the U.S. dollar Friday, leading the losses in global currency markets and falling to a fresh 17-year low.

Malaysia’s benchmark index was down 5.4% for the week, the region’s worst-performing stock market. Yields, which move inversely to prices, on five-year Malaysian government bonds rose 0.20 percentage point this week to their highest level since the global financial crisis. Continue reading “Malaysia’s Ringgit in a Tailspin”

― William Pesek
Malay Mail Online
August 11, 2015

AUGUST 11 ― Malaysia’s ongoing currency crash has many causes: a worsening global outlook, plunging commodity prices and, of course, the political scandal enveloping Prime Minister Datuk Seri Najib Razak. But the real culprit is the year 1997.

The conventional wisdom is that Malaysia’s then-leader Tun Dr Mahathir Mohamad saved the country from the worst ravages of the Asian financial crisis when he imposed capital controls, pegged the ringgit and waged verbal war against speculators. It’s true that Malaysia avoided much of the chaos that toppled economies in Indonesia, South Korea and Thailand. But events today show why, 18 years later, Malaysia may wind up the biggest loser in the region.

Malaysia’s neighbours recovered by improving transparency, strengthening their financial systems, and limiting collusion between public and private sectors. Such urgency never swept Malaysia, where the ruling coalition has held power for almost six decades.

Improvements in Malaysian corporate governance have been slow and uneven. Hopes for an end to 46 years of affirmative action ― which benefits the Malay majority while sapping productivity and repelling foreign investors ― have been for naught. Efforts to weed out corruption and ween the economy off energy exports have been tepid. Continue reading “Malaysia suffers today because it didn’t in 1990s”

By ANJANI TRIVEDI
Wall Street Journal
Aug. 7, 2015

Malaysia’s ringgit is plumbing new lows and foreign-exchange reserves are dwindling

Malaysia’s tumbling ringgit, heading toward its weakest level in two decades, is highlighting the mounting pressure its central bank faces to stem the slide.

The currency has reset its 17-year trough for five consecutive days this week, losing 2.8% of its value in that period. It last traded at 3.9280 against the U.S. dollar Friday.

After weeks of pouring foreign-exchange reserves into currency markets to prop up the currency, the central bank’s pool of resources is dwindling. Foreign exchange reserves have fallen by almost $15 billion over the last six months and a half months, with the ringgit down 12.2% for the year so far. The pace of deterioration of Malaysia’s foreign reserves is unsustainable, analysts say.

Foreign-exchange reserves data for the two weeks ended July 31, due later Friday, likely will show the degree of the central bank’s worries. Continue reading “How Low Can Malaysia’s Ringgit Go?”

Bloomberg
The Malay Mal Online
August 7, 2015

KUALA LUMPUR, Aug 7 ― International investors are selling Malaysian stocks at the quickest pace in Asia as Prime Minister Datuk Seri Najib Razak struggles to contain a political scandal and doubts grow over the outlook for the economy.

Foreign funds have pulled a net RM11.7 billion of the nation’s shares this year as the benchmark FTSE Bursa Malaysia KLCI Index retreated 4.1 per cent. The ringgit has slumped to its lowest level since 1998 after tumbling 11 per cent against the dollar, the biggest decline among Asian currencies.

Overseas money managers are paring holdings amid concern the crisis will distract Najib as a commodities rout and the prospect of higher US interest rates threaten economic growth. The prime minister is fighting off a scandal linked to 1Malaysia Development Bhd (1MDB), a debt-ridden state investment company. A probe into about RM2.6 billion that was deposited into Najib’s personal accounts found that the funds were legal donations from the Middle East.

“Already shaky trust of foreign investors is being eroded,” said Mixo Das, a strategist at Nomura Holdings Inc. in Singapore. “Further outflows are possible.”

Net foreign sales in Malaysian stocks this year are almost double the RM6.9 billion for the whole of 2014, exchange data show. Overseas investors have been net sellers for 14 straight weeks through the week ended July 31, the longest selloff since 2008, according to MIDF Amanah Investment Bank Bhd. Continue reading “Amid political crisis, Malaysia sees Asia’s fastest foreign exodus as stocks sink”

The Malaysian Insider
4 August 2015

The ringgit can be expected to deteriorate further if Malaysia does not solve its confidence crisis stemming from political instability in the country.

Malaysian Institute of Economic Research (MIER) executive director Dr Zakariah Abdul Rashid said lack of public confidence is the key factor resulting in the weakening ringgit, should crude oil prices remain stable.

“The political situation is complex – from the lack of confidence on how 1MDB is handled to the Cabinet reshuffle – these have put pressure on investors’ confidence and the ringgit,” he said during MIER’s 13th national economic briefing. Continue reading “Economic research body says ringgit to decline further if confidence crisis remains”

Leslie Shaffer
CNBC
3rd August 2015

Malaysia’s currency, already under pressure from a political scandal and the oil price drop, really fell out of bed Monday, with the ringgit falling nearly 1 percent.

The central bank, Bank Negara Malaysia (BNM), has been intervening in the market to support the currency, but analysts said those efforts may be stumbling.

“(The central bank) can’t hold the level of the currency where it is, given that their reserves have been declining. Now maybe they’re starting to throw the towel,” Khoon Goh, senior foreign-exchange strategist at ANZ, told CNBC Monday, noting he hadn’t expected the currency to hit the 3.85-handle until next year.

The U.S. dollar was fetching as much as 3.85 ringgit in Asian trade Monday, compared with around 3.8156 ringgit Friday, before the Malaysian currency abruptly strengthened to 3.8460 against the U.S. dollar around midday. That’s still hovering around its weakest levels since 1998, during the Asian Financial Crisis, with the currency among the world’s worst performing after falling around 10 percent so far this year.

“Domestic political developments are suddenly to the fore and on top of that we have (central bank) Bank Negara, which tried to hold the currency earlier in July at around the 3.80 level (against the U.S. dollar) and using up around $5 billion of their FX reserves,” Goh said. “I think that reserves are probably under the psychological $100 billion mark now and I think that is starting to spook the market.” Continue reading “Malaysia’s ringgit takes a wild ride”