If you recall the 1997 crisis, it started with the speculative attack on the MYR. This time it is also the depreciation of the MYR. If oil price keeps falling, we will run into a twin deficit as early as the first qtr 2015. It means that the MYR will depreciate further. This time it is not expected to have a v-shape recovery as the is no more QE. Interest rates are expected to rise in order to cap the MYR from dropping. This is of course bad for the market.

..which means that commodity prices will continue to drop. And it is already happening.

What if crude oil drops to between UD20 to USD40? Most of the analyst & politicians are thinking there is no such possibility.

If u look at the charts, the support level is around 1650

From TheEdge today, "Asian central banks have ramped up their intervention in currency markets to stem the sell-off roiling emerging markets, testing the notion that the region is better placed to handle a market rout than during the 1997/1998 Asian crisis.." Russia spend USD90 billion of exchange reserves but the rouble keeps falling.

This post has been edited by Oracles99: Dec 17 2014, 12:11 PM

shale oil producers have become the new 'swing producers' in the global oil market as production can be turned on & off more easily than conventional oil producers. OPEC call on them to cut production but OPEC themselves do not want to do it. In the future, the ceiling price of oil should be around USD50 to USD60.

If that happens, there will be a fire sale.

Well, it is not that easy to fish at the bottom either.

Crude oil hits new low USD53. (Fr RHB invest)

The Edge reported that most of the shale oil producers have already hedged their production and are making profit in spite of the drop in oil price. It looks as if the low price environment will continue for at least a year.

A lot of analyst live in the make-believe world. Now this is happening.

Some analyst are still harping on the average price of crude in 2014. Others are harping on GDP growth in 2014. It does not matter any more. It is already history. Looking forward, there will be no quick rebound for crude oil. With shale oil producers protected by hedges in the futures market, oil glut is expected to continue at least for a year. Every crisis has a trigger. 1997/98 crisis was trigger by speculators. 2008 crisis by sub-prime, 2015 crisis ? trigger by fall in crude oil and commodities.

the question is: when is the right time to hunt

Most shale oil producers are unprofitable at USD48. But most have already sold their production forward at USD89 in the futures market. Probably it may rebound in the 2nd half but uptrend would be capped as shale oil producers have become the new 'swing producers' taking the role of s.Arabia in the 1980s.

Ask Tan teng Boo & he will tell you..."if it drops to UD40-00 and stay low for a prolonged period of time. " The destructive part is .."stay low for a prolonged period of time. Of course, in every crisis, an opportunity arises.

In 2008, the V shaped recovery was due quantitative easing worldwide. This time around, there is no QE. Shale oil producers have already hedged their production with price was around UD89. It takes time for their hedging contracts to expire. Then a recovery will come. Again if it goes high, shale oil producers will start pumping again. After all, who doesn't want to make $$$$

From this chart, the support is around USD40-00.

The real hit is our economy. Government spending will be curtailed. Most of this spending is thru Petronas. Without this spending to make up for the shortfall in domestic demand expected when GST comes in, expect a stagnant economy.

Against this backdrop, upside in KLSE is capped.

Maybe. Oil keeps dropping but shares are up.