Archive for category Finance

Can Tengku Zafrul’s 2021 Budget survive in ten days’ time?

(Tatal ke bawah untuk kenyataan versi BM)

Can the Finance Minister, Tengku Zafrul Tengku Abdul Aziz’s 2021 budget survive in ten days’ time?

Parliament is now at the level of policy debate on the second reading of the 2020 budget, which is to conclude with the backbenchers’ speeches on Thursday followed by replies by the Ministers, with the Finance Minister expected on November 25 to be the last speaker winding up the Budget 2021 debate.

There will then be a vote on the second reading of the 2021 Budget. Read the rest of this entry »

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R. Chander, first Malaysian Chief Statistician (1963-1977) praises Guan Eng for early statement on national debt and stresses urgency of coherent plan to manage Malaysia’s public sector debt

I have received an expert opinion on Malaysia’s public sector debt by Dr. R. Chander, the first Malaysian to hold the office of Chief Statistician of Malaysia (1963-1977) and who went on to serve as the Senior Adviser to the World Banks’ Chief Economist/Vice President from 1977 to 1996. Upon retirement from the Bank, he had served as interntional adviser to multiple international agencies and governments.

Dr. Chander said he was encouraged by the speed with which the Pakatan Harapan government had come to grips with the most pressing issues and praised the Finance Minister, Lim Guan Eng for making an early statement on Malaysia’s debt situation.
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Managing Malaysia’s Public-Sector Debt

By R. Chander


This note, in three parts, focuses on the public sector debt in Malaysia. Part I presents a brief overview of the manner in which the Najib administration approached the issue of public sector debt. Part II presents a summary view of the assessment made by the International Monetary Fund (IMF) in the course of the annual Article IV Consultations completed earlier this year. The IMF Report was critical of the manner in which debt reporting was conducted by the previous administration. Part III looks to the future and makes a number of observations concerning the most appropriate manner in which the new Pakatan Harapan government could better manage Malaysia’s public sector debt.
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Reports of the World Bank and IMF

In past week the World Bank and the IMF have issued reports and statements concerning the Malaysian economy. The IMF released a brief statement entitled IMF Staff Completes 2018 Article IV Visit to Malaysia while the World Bank published its report in the Malaysia Economic Monitor.

The IMF note highlighted in highly nuanced language, in summary form, the outcome of the Annual Article IV Consultations with the Government.

The highlights made reference to recent economic performance and revised forecasts for the current year and expected growth in 2018. The revisions in the estimated and projected GDP growth rates for Malaysia are thus in step with revisions that the IMF has made for almost all countries since it issued its earlier estimates and forecasts.

Beyond the reference to growth prospects the statement took up a number of other policy concerns. It made veiled statements about the need for “higher revenues”—alerting all and sundry that taxes will have to be raised; it reminded the need to implement the adjustment programs outlined in the 11th Five Year Plan; etc. meaning that reform policies are not being implemented. The statement is thus a rap on the Government’s knuckles .

It is not inappropriate to read between the lines from the following:

“In the medium term, fiscal policy should follow a gradual consolidation path, and the composition of adjustment could be improved to make it more revenue based and to make room for the structural reforms and increased social spending for inclusive growth. Medium term fiscal targets should be better communicated.“

The statement contains cautionary remarks that urge the Government to pay heed to the downside risks it faces for which it is ill prepared. Read the rest of this entry »


Malaysia’s currency curbs boomerang on bond markets

Reuters/Malay Mail Online
February 27, 2017

SINGAPORE, Feb 27 — When Malaysia forced foreign investors in its markets not to dabble in offshore derivatives in its currency last year, its target was speculative pressure on the ringgit, but it appears to have shot itself in the foot.

The ringgit was the weakest currency in emerging Asia last year after China’s yuan, prompting Malaysia’s central bank to get a written commitment from foreign banks to stop trading ringgit non-deliverable forwards (NDFs), offshore contracts they use to hedge their exposure to the currency.

The upshot has been a flood of money leaving Malaysian bonds as foreigners, who own US$47 billion of them, were unable to hedge their risks in onshore markets because of a lack of liquidity.

“It’s a market that’s kind of been destroyed,” said Gene Frieda, the London-based global strategist at bond giant fund Pimco, who blamed the inability to hedge for making it difficult to make significant bond trades.

Although Frieda said the currency now looked cheap compared with regional peers, he couldn’t see it rallying under the circumstances.

“We don’t find the bond market particularly interesting at these levels,” he said. Read the rest of this entry »

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Things Will Get Worse for the Malaysian Ringgit: BMI Research

by Will Davies
January 5, 2017

Ringgit was among the weaker major Asian currencies in 2017
China’s economic slowdown will weigh on Malaysian trade: BMI

Malaysia’s ringgit, one of Asia’s worst-performing currencies over the past year, has further to fall, according to BMI Research.

One reason is because it is affected by the yuan, which is going to remain under downward pressure, BMI said in a Jan. 4 note. There will also likely be a narrowing of real interest-rate differentials between the U.S. and Malaysia, with the latter probably staying on hold this year while the Federal Reserve increases rates by a total of 50 basis points. Further weakness in the global bond market would also put the ringgit under pressure given that around 40 percent of Malaysian bonds are held by foreigners.

BMI has lowered its forecast for the ringgit. It expects it to average 4.50 per U.S. dollar this year and 4.40 in 2018, from 4.00 and 3.88 previously. The currency, which fell 4.3 percent against the greenback last year and 18.5 percent in 2015, hasn’t posted an annual gain since 2012. Read the rest of this entry »

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South China Morning Post
20 DEC 2016

Currency hits levels last seen in 1998 as uncertainty over Trump, interest rates and 1MDB scandal create perfect storm – but government denies capital controls could be on the cards

The beaten down Malaysian ringgit is showing no signs of catching a break in the tail end of 2016.

The currency on Tuesday hovered near its lowest level since the height of the 1998 Asian Financial Crisis, as it reeled from a perfect storm of bearish factors including uncertainty about Donald Trump’s impending presidency in the United States, the acceleration of US interest rate hikes and a long-running corruption scandal linked to Prime Minister Najib Razak.

Some observers said the slump – the ringgit is poised to finish the year as Asia’s worst performing currency for a second year running – raised the spectre of a repeat of the controversial capital controls imposed in 1998.

The government has so far swatted away suggestions it will re-introduce such measures.

The ringgit traded at 4.4798 in Tuesday afternoon trade in Asia, according to Bloomberg. It had fallen to 4.4805 on Monday, its weakest point since January 1998.

It has lost six per cent since Trump’s shock victory in the US presidential election on November 8. Read the rest of this entry »


Malaysia’s Vulnerability Exposed by Dollar’s Ascent

Wall Street Journal
Dec. 15, 2016

Foreign investors are fleeing the country’s stock and bond markets

Malaysia has been one of Asia’s worst-hit economies amid the continued climb of U.S. interest rates and the dollar.

Foreign investors sold $5.3 billion of Malaysian stocks and bonds in November, the largest monthly outflow since September 2011, according to ANZ Bank. That is almost a quarter of the $22.1 billion pulled from emerging markets in the region, excluding China.

The bulk of the selling was in Malaysia’s bond market. The $4.5 billion of bonds sold by foreigners in November, in ringgit terms, marks the biggest monthly debt outflow on record, according to ANZ. Read the rest of this entry »

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Malaysian ringgit divides experts, with some seeing Trump, 1MDB risks

Leslie Shaffer
24 Nov 2016

Malaysia’s currency has tumbled in the wake of the market’s “Trump tantrum,” and analysts disagree on whether that’s just the beginning or near the end.

The ringgit has taken it on the chin since Donald Trump’s surprise win in the U.S. presidential election on Nov. 8.

By Thursday, dollar had climbed as much as 6.5 percent against the Malaysian currency for the month so far, with the greenback fetching as much as 4.4630 ringgit, its highest since September 2015, and is flirting with levels last seen during the Asian Financial Crisis in 1997. On Friday, the dollar was fetching 4.460 ringgit at 10:06 a.m. HK/SIN. Read the rest of this entry »


No Break for Worst Asian Currency as Clouds Gather Over Malaysia

Y-Sing Liau
August 4, 2016

The bad news just doesn’t stop for Asia’s worst-performing currency.

Already reeling from a renewed slump in oil prices and a political scandal that just won’t go away, the Malaysian ringgit is now facing the prospect of another cut in interest rates. It’s the region’s biggest loser in the past month and analysts still see scope for it to drop more than 2 percent by year-end.

The currency’s slide highlights all is not well as the nation’s economy heads for its worst performance this decade. Crude oil’s plunge to a four-month low this week undermines the finances of net oil exporter Malaysia, while the appeal of its relatively high bond yields is being tempered by the scandals surrounding a troubled state investment fund. Rabobank Group and UBS Group AG both predict Bank Negara Malaysia will add to its first rate cut in seven years in coming months. Read the rest of this entry »


As Zeti Term Ends, Malaysia Poised to Name Central Bank Governor Shamim Adam

by Shamim Adam & Y-Sing Liau
April 25, 2016

Malaysia’s central bank Governor Zeti Akhtar Aziz has one week to go in the job and investors still don’t know who will replace her.

Zeti is credited by investors with strengthening the credibility and independence of Bank Negara Malaysia in the 16 years she’s been at the helm and the longer Prime Minister Najib Razak drags his feet on announcing a successor, the more market analysts are worrying. It’s something the economy can ill afford with sentiment already under pressure as Najib faces his biggest political crisis since coming to power seven years ago.

“Trepidation is particularly pronounced” given the uncertainty over Zeti’s successor, said Jack Chambers, an economist at Moody’s Analytics Australia Pty Ltd. While the ringgit has gained about 10 percent this year after a 19 percent slump in 2015, a measure of its implied volatility is the highest in Asia. Read the rest of this entry »


Don’t Kill The Goose That Lays Our Golden Egg

Koon Yew Yin
20th April 2016

Recently there was a news report that the serious shortage of labour has caused 14 furniture manufacturers in Johor to close shop. According to Malaysian Furniture Council president Chua Chun Chai, the furniture industry in the peninsula is facing a shortfall of some 35,000 workers. This situation has caused 300 furniture makers and workers in Bakri, Muar to demonstrate and putting up banners proclaiming “No foreign workers = end of the industry”.

According to Mr. Chua, the foreign worker recruitment freeze had dealt a heavy blow to the foreign labour-intensive industry. The hardest-hit states are Johor, Selangor and Penang which together produce 95% of the total furniture the country exports, he said, adding that the biggest markets for Malaysian furniture are the US, Japan, China, Australia, the UK, India and United Arab Emirates.

“Last year, Malaysia’s furniture export hit RM9 billion, which was 14.1% more than the 2014 figure. “If not for the freeze on recruitment of foreign workers, we were looking at breaching the RM10 billion mark this year. But with a shortage of labour we are facing, the export is expected to shrink greatly. “As such, the council is appealing to both the prime minister and deputy prime minister to look into our predicament seriously,” he said.

Actually, the problem of shortage of foreign workers as a result of the recent freeze is not confined to the furniture industry alone. Practically every sector of the country’s economy is dependent on foreign labour. Read the rest of this entry »

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Do Malaysians Want To See Proton Go Bankrupt?

Koon Yew Yin
18th April 2016

I am not surprised to see The Edge front page article ”SAVING PROTON” on 18th April 2016. Dr Mahathir, the founder of Proton was interviewed last week by The Edge. You can read the whole interview on page 65.

Among several other questions, Dr Mahathir was asked “Do you think the Rm 1.5 billion soft loan can turn Proton around? “

Answer quote “Well, under the present condition, yes, but we would have been able to turn around earlier. Proton car sales today have plummeted unusually because normally, we sell about 4,000 cars a week. It came down to 2,000 cars a week, which we can still survive on. We don’t understand why. This month, it came down to 200 cars a week. We don’t understand why”.

I am sure all Malaysians can understand why if you read on. Read the rest of this entry »

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IMF report on Malaysia, politically correct but revealing

– Ramon Navaratnam
The Malaysian Insider
9 February 2016

The preliminary International Monetary Fund (IMF) staff report on the Malaysian economy was published by the press on February 5.

The report followed intense IMF annual consultations held between January 11 and 22 in Kuala Lumpur and Kuching. Pity Sabah was left out.

The IMF report was too politically correct but nevertheless revealing.

IMF mission chairman Dr Alex Mourmouras in his press release subtly suggested that the Malaysian economy faced multiple shocks including “political developments and capital outflows”.

Both these factors reveal that in addition to external problems, there are also serious internal issues within our power to control and overcome.

But how much have we done to overcome these critical domestic issues? Read the rest of this entry »

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Why Malaysia’s 1MDB scandal is denting growth

Leslie Shaffer
29th January 2016

Thought the long-running political scandal over Malaysia’s deeply indebted sovereign fund was over?

It isn’t and the festering scandal is likely to weigh on the economy and may eventually spur a ratings downgrade, Oxford Economics says.

That’s bad news for Malaysia, which is already suffering from a slide in the price of commodities, an important chunk of the economy and a key source of revenue for the government. The currency has tumbled and the government’s debt levels have climbed, fueling investor concerns.

“Just as it appeared that the long-running scandal over state investment company 1MDB had been satisfactorily resolved, the issue has reignited with an appeal against the ruling exonerating the prime minister,” Christine Shields, lead economist at Oxford Economics, said in a note Friday. “The issue is a real worry as it is eroding confidence and contributing to risk aversion about the country.” Read the rest of this entry »


Moody’s Cuts Malaysia Credit-Rating Outlook on Weaker Finances

by Shamim Adam
January 11, 2016

Moody’s Investors Service lowered its credit-rating outlook for Malaysia, citing an external environment that has crimped government revenue despite Prime Minister Najib Razak’s efforts to improve the country’s finances.

The ratings company cut the outlook on the A3 sovereign rating to stable from positive, it said on Monday in a statement. The move brings its outlook into line with that of Standard & Poor’s and Fitch Ratings, with all three companies ranking Malaysia at their fourth-lowest investment grades.

Since Moody’s assigned a positive outlook in November 2013 the government has sought to improve its finances, rationalizing fuel subsidies and putting in place a goods and services tax, the ratings company said. But the impact on the government’s balance sheet has been limited and will remain so, in part due to changes in the external environment, it said.

“Those environmental changes have also undermined Malaysia’s external position, with large capital outflows, a falling current account surplus, sharp exchange rate depreciation and falling reserves,” Moody’s said.

The ringgit, which was already weaker prior to the Moody’s announcement amid general risk aversion related to China, was 0.6 percent lower at 4.4120 a dollar as of 2:05 p.m. in Kuala Lumpur. The yield on the 10-year government bond was up three basis points to 4.25 percent. Read the rest of this entry »

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Retail sector hit as Malaysians cut spending to cope with rising prices

by Ida Lim
The Malay Mail Online
December 14, 2015

KUALA LUMPUR, Dec 14 — Retail outlets here are reporting a drop in business as Malaysians cut spending to cope with the rising cost of living.

For many of those who spoke to Malay Mail Online about their lifestyle changes, cutting out unnecessary purchases and making prudent spending choices are the order of the day.

Fadzilla Hernani, 29, a post-graduate student whose monthly household spending has gone up by around 20 per cent after the introduction of the Goods and Services Tax (GST), said she has switched to hypermarkets’ house brands to get non-food items of equal quality at a cheaper price.

“Milk has no price controls, I choose the cheapest (baby) milk powder. Last time, I chose Anmum, but now it has increased by RM5, RM6, one week one box is RM60, but because it is expensive, I am forced to find a cheaper brand… Dutch Lady at RM25, the quality is slightly lower,” said Fadzilla, who has a three-year-old toddler.

Every sen saved counts for Fadzilla who now buys paper of slightly lower quality at 70gsm just to save RM1 and purchases pens in bulk without caring for the brand. Read the rest of this entry »


China’s generous 1MDB bid seen reaping it big returns

Praveen Menon & Anshuman Daga
3 Dec 2015

A generous winning bid from a state-owned Chinese firm for a scandal-ridden Malaysian fund’s power assets will help Beijing find favour as it seeks more deals in the country and to extend its influence in South-East Asia, financial and diplomatic sources say.

China’s South-East Asia push is widely seen as having come at a perfect time for embattled Prime Minister Najib Abdul Razak, who chairs the advisory board of state fund 1MDB and has been grappling with international probes and public outrage over allegations of graft at the fund.

The US$2.3 billion offer from China General Nuclear Corp, a surprise winner in the bidding, and its assumption of US$1.8 billion in 1MDB debt will result in Chinese firms having pole positions as key rail, port and road projects come up for grabs, sources said. Read the rest of this entry »


Why Malaysia may have hit bottom

Leslie Shaffer
4th November 2015

Malaysia’s hard-hit stock market is getting a less-than-ringing endorsement with one of the world’s leading lenders telling investors that things aren’t likely to get any worse.

“There have been numerous globally attention-grabbing headlines on Malaysia this year, which we believe have increased political uncertainty and risk in investing in Malaysia,” analysts at Deutsche Bank said in a note Monday.

“However, going forward, we do not expect this to increase.” Read the rest of this entry »


Malaysia’s 1MDB Scandal: Political Intrigue, Billions Missing and International Scrutiny

Wall Street Journal
Oct. 23, 2015

Investment fund is under investigation in five countries

HONG KONG — A scandal involving a government investment fund in Malaysia is drawing world-wide attention and has led to calls at home for the ouster of the country’s prime minister. It is also affecting U.S. diplomacy in a strategically important part of Asia. The fund, 1Malaysia Development Bhd., or 1MDB, is under investigation in five countries.

It is a story of political intrigue, backroom politics and billions of dollars in missing money. At the center of it all is Prime Minister Najib Razak, who founded 1MDB. A Malaysian government probe found that nearly $700 million moved through banks, agencies and companies linked to 1MDB before being deposited into Mr. Najib’s alleged private bank accounts ahead of a close election. The source of the money is unclear, though in August, Malaysia’s anticorruption body said the funds were a donation from the Middle East. The donor wasn’t specified.

Here’s a primer on Malaysia, 1MDB and the scandal that has drawn the interest of investigators from around the world. Read the rest of this entry »

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