Today's whacking of KLCI due to:

http://www.thestar.com.my/Business/Busines...alysts-say.aspx

Published: Wednesday July 31, 2013 MYT 1:59:00 PM
Updated: Wednesday July 31, 2013 MYT 2:01:05 PM
Fitch ratings downgrade of Malaysia's outlook no surprise, analysts say


KUALA LUMPUR: As the market reacted anxiously to Fitch Ratings' move to downgrade Malaysia's sovereign credit rating outlook to Negative from Stable, analysts say the decision by the ratings agency came as "no surprise".

According to CIMB Equities Research, it had previously mentioned the risk of the Big 3 rating agencies - Moody's, S&P, Fitch - downgrading Malaysia's sovereign credit rating outlook if there was no clear indications from the government on fiscal reforms regarding subsidies, taxes and government spending after the election.

Unfortunately, there has indeed been none.

The research house pointed to the stasis in the implementation of the GST and the request put in earlier this month in Parliament by the government to add RM12bil to Budget 2013 via supplementary budget, as examples.

The Fitch downgrade on Tuesday, which still maintained the country's existing high investment-grade ratings of "A-" on long-term foreign debt and "A" on long-term local debt, appears to have already spooked the market, with BIMB Securities Research saying it may have triggered a flight of foreign funds out of the country on the very same day.

Before the announcement was made by Fitch on Tuesday, the FBM KLCI closed down 3.7% at 1,795.08 points on profit-taking, while government bond yields climb to their highest level since April 2011 and the ringgit weakened to a three-year low.

At midday on Wednesday, the Malaysia's blue chips came under selling pressure, with fund selling seen in Maybank and CIMB which was sparked by Fitch Rating's downgrade. The KLCI was down 17.88 points to 1,777.20 at midday.

BIMB Securities Research pointed to Malaysia's public finances as its key rating weakness.

Federal Government debt rose to 53.3% of GDP at the end-2012, up from 51.6% at end-2011 and 39.8% at end-2008. The general government budget deficit (Fitch basis) also widened to 4.7% of GDP in 2012 from 3.8% in 2011, led by a 19% rise in spending on public wages in a pre-election year.

Hong Leong Investment Bank Research said while the downgrade came earlier than expected, it was already negative on the fundamental aspect of emerging Asia. The research house said it was hopeful the Fitch downgrade would lead to a revisit of fundamentals in Malaysia.

"Due to high foreign shareholding (of more than 47% in Malaysian government securities and 25.2% in equities), we expect both fixed income and equity markets to experience heightened volatility.

"Nevertheless, we do not expect a crisis as BNM has enhanced banking surveillance; reserves are at all-time high, and government debt is mostly financed domestically," it said.

Meanwhile CIMB Research said the Standard & Poor's team - which had affirmed Malaysia's Stable outlook five days prior to the Fitch downgrade - is reportedly heading to Malaysia in September for ratings review exercise.

Stressing that the government was now under pressure to act, it said it expects Budget 2014 presentation on Oct 25 to provide clarity on fiscal policy issues and direction.

Affin Investment Research pointed out that Fitch had warned that Malaysia's long-term foreign and local currency ratings could also be downgraded in the future, if Malaysia's fiscal performance continued to deteriorate and constrain its sovereign ratings.

"The risk of a downgrade in the country's credit ratings will make it expensive for Malaysia to borrow money from abroad. A lower rating will also dampen investment flow into Malaysia's equity and bond markets, with negative perceptions of the country's deteriorating credit quality," it said

However, it reiterated that Malaysia's economic fundamentals remained sound, with economic outlook improving, current account surpluses sustainable (albeit narrowing), and foreign exchange reserves steadily increasing.

"It is unlikely that other international rating agencies, such as S&P or Moody's, will downgrade Malaysia's sovereign rating outlook to negative in the near term. We believe the government is committed to a lower budget deficit of 4% of GDP in 2013 (4.5% of GDP in 2012), as well as sustaining government debt as well as contingent liabilities.

2 more days till the 1% sc will end... Top up top up

Topped up Kidsave and CIMB APDIF (this 1 no promo SC)

bought into HSAO, EI GEM and UOB Emerging Opportunity.

but need keep some bullet for KLSE. will go bargain hunting!

As pinky pointed out, your aunt is suggesting you to buy SG reits directly from the stock exchange. Not go for UT which is diversified. She's right in a way, there are bargains now after the recent sell off.

possible to buy sg reit thru this fundsupermart?

REIT Fund, yes but if wan specific SG REIT Fund counter, need fundsupermart sg. REIT, go for stock exchange broker.

Other than HwangIM funds, nothing in mind

But topping up the 2 HwangIM funds will increase my ASEAN exposure

Feel wanna dump some units of OSK-UOB Income Fund
MYR bond yields rising, but the fund is supported by its HK and SG bond holdings, RM depreciating, value of foreign holdings go up

Unker gark, how

Entered Malaysia fund (OSK-UOB Emerging Market, Kenanga Growth Fund and Hwang Select balanced) before the downgrade.. feel a bit worry now .

Keep calm and follow portfolio allocation.

Currently 52/48

Treasury yield threaten to go higher last nite...before recovering.

Feel wanna go 55/45

My MYR bond fund IRR less than 3% at the moment, only 2.9%

This post has been edited by Pink Spider: Aug 1 2013, 09:46 AM

For your age and profile..actually you should do a 70 Equity : 30 Bond... higher volatility, but better gains in long term.

Whatever goes up must come down.. soon...

This post has been edited by gark: Aug 1 2013, 09:52 AM

Today might top up EM equity fund, increase UT portfolio to 55/45

Stock portfolio...maybe will go to 66/33 (my "33" is OSK-UOB Income Fund, I use this UT bond fund to hedge against my stock portfolio)
But nothing to buy now...APM semalam rally pulak, IGBREIT, waiting for 1.22

IGB REIT is already 1.23.... current price 1.26-0.03 ex divvy = 1.23

66/33 is a reasonable number. Bond and REIT will have further headwinds, I expect MGS to reach stability at 4.5% cause we still lag US and ASEAN bonds yield increase.

This post has been edited by gark: Aug 1 2013, 10:05 AM

This tered getting harder to understand.. ETF IGB REIT APM O.o

because all sifu use some acronyms that we newbie to this UT cannot undersand mah haha...

IGBREIT is the REIT holding Mid Valley and The Gardens
APM is name of a stock...APM manufactures and markets automotive parts like suspension, air con, etc

It is wise to switch bond to money market for now? I see the emerging bond market are starting to affect our local bonds.

Why so tense up? How long have you invested in bonds?

A lot of us here won't switch bond to MM. The reason being a lot of us are holding AmDynamic Bond Fund, but switch other bond fund maybe lar

I also got amdynamic bond. Wont switch that one. But now still holding other bond funds. 1 year performance only 4% .

I won't touch EM bonds lor, cos Ringgit depreciation will offset the rise of EM bond yields. I see potential still in EM bonds.

Switching half of my OSK-UOB Income Fund to CMF, park there until I see opportunity in local stocks, then

This post has been edited by Pink Spider: Aug 1 2013, 02:09 PM