Archive for category Finance

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

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. Read the rest of this entry »

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Is there a reprieve in sight for the ringgit?

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. Read the rest of this entry »

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Malaysia’s Ringgit in a Tailspin

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. Read the rest of this entry »

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Malaysia suffers today because it didn’t in 1990s

― 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. Read the rest of this entry »

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How Low Can Malaysia’s Ringgit Go?

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. Read the rest of this entry »

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Amid political crisis, Malaysia sees Asia’s fastest foreign exodus as stocks sink

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. Read the rest of this entry »

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Economic research body says ringgit to decline further if confidence crisis remains

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. Read the rest of this entry »

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Malaysia’s ringgit takes a wild ride

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.” Read the rest of this entry »

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Malaysia’s overdue housecleaning clamor

by Gary Kleiman
Asia Times
August 3, 2015

Malaysia’s stock market was down over 10 percent at end-July after Prime Minister Najib Razak, fighting to extend his six-year tenure in the wake of the 1MDB debt and campaign funding scandal, sacked his deputy and other cabinet members openly challenging him.

His public approval rating at 45 percent has suffered since the United Malay party won re-election last year, despite the opposition getting a larger vote total.

His predecessor Mahathir Mohamed did not think he deserved another term for lack of economic and political vision, as the household debt burden, which soared to 85 percent of GDP through government programs to boost consumption, is no longer sustainable to offset falling oil exports.

Foreign investors, with respective one-third and one-quarter ownership in the local bond and equity markets, were once enthusiastic about early promises to change the state-dominated business and financial sector model. But the results were meager and with the currency now at a 15-year low as the region’s worst performer, aversion is spiking as in the Asian financial crisis aftermath. Read the rest of this entry »

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What Europe should learn from Malaysia and other Asian crises

— William Pesek
Malay Mail Online
Tuesday July 21, 2015

JULY 21 — Asian leaders could be excused a degree of exasperation over the ongoing Greek mess. China’s slowdown and stock-market chaos are worry enough; the last thing the export-dependent region needs is a Europe in chaos. Worse, European leaders seem intent on misreading or ignoring lessons from Asia’s own brush with collapse.

Greece’s financial odyssey

Of course, the circumstances in 1997 were quite different. Where Greece is insolvent, Asia then was illiquid. As capital fled, Thailand, Indonesia and South Korea suddenly couldn’t pay foreign-currency debts, much of it short-term. Still, there are at least three lessons officials in Athens and Brussels can learn from Asia’s post-crisis repairs.

One: The debate over austerity is a distraction. Pundits quarrelling over Greek Prime Minister Alexis Tsipras’s motivations, or whether German Chancellor Angela Merkel has a heart, are missing the real issue: structural reform. Read the rest of this entry »

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Default risk climbs for Malaysia as Najib probe outweighs Fitch

The Edge
Bloomberg
July 10, 2015

(July 10): Less than two weeks after Fitch Ratings refrained from downgrading Malaysia, the cost of insuring the nation’s debt is at a six-month high amid a graft probe involving Prime Minister Najib Razak.

Five-year credit-default swaps protecting sovereign notes climbed as much as 12 basis points in July to 148 after the Wall Street Journal reported last week that $700 million of a state investment company’s funds may have ended up in Najib’s bank accounts, a claim he is disputing. The contracts could rise toward 200, a level last seen in 2011, according to Macquarie Bank Ltd.

Heightened credit risk is lifting bond yields, raising funding costs to build railways, roads and power plants as Najib presses ahead with a $444 billion development program. It’s also weighing on the ringgit, which has led losses among Asian currencies this year as lower oil prices hurt Malaysian exports. Brent crude is down 7.2 percent this month and is 49 percent cheaper than it was from its high a year ago.

“Everything seems to conspire against Malaysian bonds and the ringgit in the last couple of weeks,” said Nizam Idris, head of currency and fixed-income strategy at Macquarie Bank in Singapore. “The political scandal involving the prime minister was a big surprise that hit market sentiment” and the CDS price could surpass 160 and head toward 200, he said. Read the rest of this entry »

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Ten consequences of Greek referendum’s ‘No’

— Mohamed A. El-Erian
Bloomberg
July 6, 2015

JULY 6 — By heeding their government’s advice and voting “No” in the referendum on Sunday, Greek citizens sent an unambiguous message. Much like the fictional Americans portrayed in the movie “Network” who threw open their windows and shouted out, “I’m as mad as hell and I’m not going to take this anymore,” the Greeks are demanding that the rest of Europe acknowledge their distress.

At this stage, however, only a handful of European leaders seem willing to listen; and even fewer appear willing to deliver the sort of relief that Greece desperately needs. The implications will be felt primarily in Greece, but also in Europe and beyond.

Here are 10 consequences of the vote that could unfold in the next few days:

1. The victory of the “No” camp—with more than 60 per cent of the vote, according to preliminary returns—will initially lead to a general selloff in global equities, along with price pressures on the bonds issued by Greece, other peripheral euro zone economies and emerging markets. German and US government bonds will benefit from a flight to quality.

2. Having been caught off guard, European politicians will urgently seek to regain the initiative: Chancellor Angela Merkel of Germany and President Francois Hollande of France will meet in Paris on Monday to work on a response. In a perfect world, these leaders would move quickly and effectively with the Greek government to get past the conflict and acrimony that preceded the referendum. This is likely to be difficult, given the mistrust, bad blood and damaging accusations that have poisoned the relationship. Read the rest of this entry »

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Cabinet Ministers must individually and collectively explain when and why they had approved a further US$4.71 billion (RM17.8 billion) government guarantee for IPIC loans as latest bailout for 1MDB

1Malaysia Development Bhd (1MDB) has lost out in the public argument with DAP MP for PJ Utara, Tony Pua over whether there is a government guarantee amounting to US$4.71 billion (RM17.8 billion) to Abu Dhabi’s International Petroleum Investment Corporation (IPIC) with regard to IPIC loans in the latest bailout of IMDB.

This is also the judgment of the founding editor of KiniBiz, P. Gunasegaram who, in his article “A new RM17.8 bil twist in 1MDB ‘guarantee’” on Monday, concluded:

“On all accounts, Pua is right and 1MDB is wrong – it is 1MDB which is misleading the people, not Pua.”

Gunasegaram fully agreed with Pua that IPIC’s statement to London Stock Exchange on 10th June meant that the Ministry of Finance now also assumes the obligation together with 1MDB to transfer assets totalling US$4.71 billion, which means “the MOF is effectively undertaking to fulfil the obligation, not just 1MDB”.

Even Gunasegaram asked: “Why was such an important point not disclosed?” Read the rest of this entry »

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Business leaders fret over ‘cocktail of political risks’ as UK election nears

Larry Elliott and Jill Treanor in Davos
The Guardian
25 January 2015

Davos delegates fear possibility of minority government and second poll, as well as uncertainty over EU membership

The general election risks exposing the UK to a “cocktail of political risks” that could threaten growth and force the country out of the European Union, according to business leaders.

The growth of minority parties such as Ukip and the Greens and the fall in popularity of the Liberal Democrats are forcing bosses to prepare for the possibility that a second poll may have to be called months after the one scheduled for 7 May.

The Conservatives’ pledge to call an EU referendum in 2017 if they are in government is also causing anxiety. Doubts over Britain’s political future were voiced openly by executives at the World Economic Forum in Davos.

Speaking on the sidelines at the gathering of political and business leaders in the Swiss Alps, John Cridland, director general of the CBI, said: “Britain is no longer a two-party system, it is a six-party system, and it looks like it won’t be until 5am on the morning after the election until we know what the result is going to be. The UK could end up with a minority government and a repeat of 1974, when there were two elections in swift succession. Read the rest of this entry »

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Is Davos just an excuse for the 1% to have a bonding session?

Larry Elliott
The Guardian
23 January 2015

Thomas Piketty wasn’t there but they were talking about his ideas: they’re committed to progress as long as nothing changes

Committed to improving the state of the world. That’s the motto of the World Economic Forum, which wraps up in Davos tomorrow with the rich and powerful pondering whether to listen to Mark Carney’s views about the global economy or head for the ski slopes.

Many will opt for the latter, not because they have anything against the governor of the Bank of England. On the contrary, the former Goldman Sachs banker picked by George Osborne to run Threadneedle Street is very much part of the Davos family. It is simply that one of the reasons the WEF is held in Davos and not in Atlantic City or Blackpool is that it has plenty of black runs available for those who, after four days, have had enough of hearing Christine Lagarde warn about the risks of rising inequality.

All of which raises a couple of obvious questions: is Davos simply an excuse for the 1% to have a big bonding session in which they convince themselves that we are all in it together? And does it actually do any good? Read the rest of this entry »

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Is the economy in crisis now?

By P Gunasegaram
Malaysiakini
Jan 22, 2015

QUESTION TIME Granted we have lots of problems in the country and tonnes of wastage. We overpay for contracts, we have a strategic investment fund which has gone amok and is investing willy nilly with borrowed money, we have a looming disaster in the form of RM30 billion at risk in a private finance initiative gone wrong and we have loads of patronage.

Does this necessarily mean that the economy is in crisis if we put all this together with a weakening ringgit and oil prices which have fallen off a cliff? Does this mean this year will be a disaster and one of gloom and doom for Malaysia?

It is tough to do but this is when we need to be rational about things and assess economic conditions with a cool head, separating this to some extent from the sad state of politics in the country which leads to a whole host of economic concerns.

Let’s just take a couple of the most serious concerns and examine them in some detail to see what gives. First, the weakening ringgit which was at its lowest levels in six years. But why was it low six years ago – early 2009 to be precise? Read the rest of this entry »

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Sustainable development goals: changing the world in 17 steps

Liz Ford
Guardian
19 January 2015

The countdown has begun to September’s summit on the sustainable development goals, with national governments now discussing the 17 goals that could transform the world by 2030

What are the sustainable development goals?

The sustainable development goals (SDGs) are a new, universal set of goals, targets and indicators that UN member states will be expected to use to frame their agendas and political policies over the next 15 years.

The SDGs follow, and expand on, the millennium development goals (MDGs), which were agreed by governments in 2000, and are due to expire at the end of this year.

Why do we need another set of goals?

There is broad agreement that while the MDGs provided a focal point for governments on which to hinge their policies and overseas aid programmes to end poverty and improve the lives of poor people – as well as provide a rallying point for NGOs to hold them to account – they have been criticised for being too narrow. Read the rest of this entry »

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New Oxfam report says half of global wealth held by the 1%

Larry Elliot
Guardian
January 19, 2015

Oxfam warns of widening inequality gap, days ahead of Davos economic summit in Switzerland

Billionaires and politicians gathering in Switzerland this week will come under pressure to tackle rising inequality after a study found that – on current trends – by next year, 1% of the world’s population will own more wealth than the other 99%.

Ahead of this week’s annual meeting of the World Economic Forum in the ski resort of Davos, the anti-poverty charity Oxfam said it would use its high-profile role at the gathering to demand urgent action to narrow the gap between rich and poor.

The charity’s research, published on Monday, shows that the share of the world’s wealth owned by the best-off 1% has increased from 44% in 2009 to 48% in 2014, while the least well-off 80% currently own just 5.5%.

Oxfam added that on current trends the richest 1% would own more than 50% of the world’s wealth by 2016.

Winnie Byanyima, executive director of Oxfam International and one of the six co-chairs at this year’s WEF, said the increased concentration of wealth seen since the deep recession of 2008-09 was dangerous and needed to be reversed. Read the rest of this entry »

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It is not too late for Najib to convene a special meeting of Parliament to present the revised 2015 Budget

The question the Prime Minister, Datuk Seri Najib Razak must answer is why he is not convening a special meeting of Parliament to present the restructuring of the 2015 Budget.

As it is Parliament which approved the RM273.9 billion 2015 Budget, it is only right and proper, fully in accord with the principle of parliamentary democracy, that Najib should convene a special Parliament to present the restructured 2015 Budget because of the weakening of ringgit and the plunging oil prices.

It is not too late for Najib to do what is right, and convene a special meeting of Parliament to present the revised 2013 Budget as a special Parliament can be convened even within 48 hours. Otherwise, Najib would be showing utter contempt to Parliament and the principle of parliamentary democracy. Read the rest of this entry »

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To rescue the economy, put national interests before self-interest

Rash Behari Battacharjee
The Malaysian Insider
17 January 2015

It is as plain as daylight that Budget 2015 must be revised in the wake of plunging world oil prices, given that some 30% of government revenue comes from petroleum. In addition, it has been noted, the unprecedented ferocity of the year-end floods which will require a multi-billion ringgit reconstruction effort means that development expenditure must be reallocated to rehabilitate damaged infrastructure and restore normalcy to the victims’ lives and the economies of the affected regions.

Last week, Prime Minister and Finance Minister Datuk Seri Najib Razak indicated, not a day too soon, that an announcement about a possible restructuring of the budget to address these challenges would be made this week.

Analysts have noted that a confluence of external and internal factors in recent months – including the oil price shock, capital outflow, flood devastation and 1MDB’s performance, besides corrosive political developments – have heightened concerns about the prospects for the Malaysian economy, both in the immediate future and the longer term. Read the rest of this entry »

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