Yes, it is not consist only USD, but also Yen, Euro etc.
But majority will be in USD.

Because world trade and export always done primary in USD denominated, except business done with Jap (they prefer Yen), and Europe. While the rest of the world generally use USD as settlement medium.

Petronas export oil, will receive USD as payment as oil is sold in USD term, so it takes the USD and exchange back to RM, BNM will have USD in the foreign currency reserves.

Foreigner buyer come in Malaysia to buy palm oil in Malaysia, they will bring USD to BNM to exchange to RM then pay the palm oil company.

Corporate borrowed from overseas in USD and bring back to Malaysia for their corporate funding, then the USD will go to BNM.

So, USD is the ultimate important currency in the foreign currency reserves coffer.

Yuan is not a international tradable currency, or yet.
That's why Yuan still has a long journey to go before become an international currency.

Direct settlement exchange has its limitation, as you need to have a direct match and quantity may have limitation.

While with USD which is international tradable easily one, you can bring the USD to anywhere to exchange, remit to anywhere or anyone.

Please do not post if you don't know what you are talking about.
Ty.

At the moment, USD 90 bil is barely enough to fund the short term external debt or in other word able to cover short term external debt at 1x level.
RM 50 bil, potential need to look for IMF aid already.

This post has been edited by cherroy: Sep 3 2015, 09:30 PM

USD 90 bil mark is not a dire situation, still has room of comfort as long as the foreign currency reserves is preserved for its primary intention (instead being used in forex market intervention), while still able to register a trade plus and current account surplus in the near future.

But you don't wait until situation worsen only start to worry and react, there is a need to premature cautious about the situation and have plan to counter it.

Incorrect.
It is not a debt crisis to start with.
Malaysia is still able to service the sovereign debt, no issue of defaulting for near term, as long as fiscal deficit is tackled and being pared down.

Majority of Malaysia sovereign debt is in RM denominated, not USD.

The issue now is capital outflow that causing RM depreciation more than others , which also resulted foreign currency reserves dropping fast (but not in dire situation).

Please do not bring in political talk any any political name.
Please post it in RWI discussion section.

This is to prevent the topic being derailed.

Ty.

Control in term of bring cash abroad is everywhere, you cannot bring too much cash abroad or into a country as well, most country imposed a limit on it one, which is vary from one to another.

This is to avoid money laundering, not to do with squeeze money out of people or intend to forfeit public asset.

Even Malaysia imposed capital control back 1998, people still can remit money to overseas, just need to have declaration the intention of it.

So no such thing of forfeit or seizure asset simply.

This post has been edited by cherroy: Sep 4 2015, 04:08 PM

To be fair, give some benefit of doubt in term of

1. July is festive month, lesser working days for many factories so output/export might be a bit lower.

2. Weakening of RM is more pronounce after end of July (July time RM/USD was 3.80, but weakening fast since Aug). So the impact of weak RM has not fully reflected yet.

3. Let see those increase in import will translate into increase in export in Aug. As bulk of import from the past history were semi-finished goods (especially electronics), that being processed here and export later on.
Considered domestic consumption has weaken, so import figure shouldn't be as good, unless those import increase are most semi-finished goods or big capital expenditure like heavy machinery etc.

Yes, a lower trade surplus indeed a concern, but not a disastrous figure.

We need Aug data to see further the real effect and trending.

1) Data sometimes got outlier one, due to seasonal effect or whatever circumstances.

2) We need to compile a number of months data before can make a conclusion, aka to see the trending.

3) As I mentioned before the real weakening RM effect only start after end of July as at July the RM/USD was still at Rm3.7~3.8.
There are details breakdown on countries export/import figure, can find it from there, if interested to look beyond.

Yes, a lower trade surplus is a concern, but at current global environment, export will be weak across. If considered oil price plunging effect, which is almost nearly half the price of last year and plunging CPO price, a maintained export figure is already quite good enough.
Asking for more is a bit "greedy" already.

Actually too low import figure is also a bad number, as if import figure is weak, it suggested weak domestic consumption, which only means domestic economy is weak aka poorer GDP growth.
A strong economy needs both front, export + domestic consumption.

To satisfy every aspect and everyone, we need a goldilock figure (a ++ export with + import).

The potential boost in export due to weak currency is because of your currency is weaker than regional currency, or your competitor, not solely because depreciated against USD.

Every currency in the world also depreciated against USD, so all same playing field level between 2014 up to middle 2015.

But the weak RM is more pronounced when RM plunged from 3.80 to 4.20, whereby we see how RM vs Sgd crossed 3.00 mark, while depreciate against Bath to near 12 level as well.

The only way to have better trade surplus for Aug is a lower import figure, there is remote chance that export can rise further in current worldwide business environment.

The exchange rate of USD/RM 4.25 may deter importer to import more goods for local consumption.

The rising import cost will be hitting more on local manufacturers particularly SME, while large corporate and especially MNC, they are not affected that much as their sales will be in USD so net effect of rising cost due to exchange rate will be nullify by export in USD.

Instead MNC will be the one benefit most from the lower RM, operation and wages cost become cheaper for them. Last time hiring an engineer at RM 6.2K cost them USD2k, now only need USD1.5k.

It is a piece good news for RM out of many.

At least BNM is doing something sensible.

As suspected earlier, the equities outflow has been slowing down.

This post has been edited by cherroy: Sep 4 2015, 06:11 PM

On the contrary, SME majority are for local market.
Bulk of export are from MNC and large corporation actually.

You have a low volume or turnover of less than a few millions, it is hard to do export business, at least within my industry, I knew the situation.
Per order, per load, you need near about million worth of goods before the business looks viable for both seller and buyer, volume too small, transportation cost eating your profit.
You don't buy/sell a few cartoon, but a container.

The situation now, more like MNCs and large export corporate are benefiting from the lower RM, but SME who business mainly cater for domestic market is suffering the cost increment.

If RM keep on depreciating, soon or later import also will be plummeting as importers also will feel the pressure of increase in cost, while business out there is not brisk (in fact quite slow), so it is not so easy to pass the cost to consumer without a drop in sales volume.

So there is forseeable coming month that export may drop, while import also drop as well, just the matter which drop more than the other that affecting the trade balance figure.

A factory import a goods to manufacture and export further.
The raw material price in term of USD won't matter, as later on it will also being export in USD.
So the manufacturer is actually immune to the RM exchange rate.

While if the imported raw materials goods consist of 50% of its cost (considered high already), the rest cost component like wages, factory expenses are in RM denominated, then the factory actually won't suffer cost increase in materials (as mentioned immune to exchange rate), but benefit from the rest 50% cost related to RM, typically MNCs, that view from overseas.

Export goods are zero rated in GST, everything GST incurred is treated as input tax, which is claimable back. So no increase in cost for exporter.

GST is hitting hard on consumer, not manufacturers or factories, as they are merely tax collector or middleman.
GST is not a cost to manufacturers or factories. Just manufacturers suffer business downturn or poor volume due to poorer consumer sentiment as consumer need to pay more, not manufacturers.
While for export market, GST doesn't affect the cost of manufacturers.

The US unemployment figure suggests rate hike is on the card back, so USD is having strength again.
USD is up against everyone now.

So a lower rate with USD/RM is not something surprise.

USD/RM drop in tandem with other currency, you don't have much problem.

But if RM drop against all currencies alone or drop more significantly compared to other, then it is a problem.
This is the difference.

Against Sgd is not that worry, the more worry is depreciated against the like Aussie and Kiwi which should be the weakest among the major currencies.

Their fundamental are the weakest among all.
They have trade deficit, current account deficit, low commodities price, slow GDP growth, which are bearish factors for the currency.

So fundamental wise, RM is way better, but Rm still drops against them.

This post has been edited by cherroy: Sep 4 2015, 11:14 PM

You buy raw materials in USD, and sell and export in USD, whether the exchange rate of USD/RM fall to whatever level has no impact on the cost.
It has nothing to do with USD cash in hand or not, credit facilities, LC, hedging or whatever finance facilities are easily available.

The issue has no impact what we were discussing previously about, MNCs are not greatly affected by the exchange rate, in fact they are beneficiers.

Factories that closing down because of downsizing, business volume died down, profit margin died down or shift to a much cheaper wages countries.

Large corporate doing export, and MNCs have not cashflow problem generally,
GST claiming back is not time consuming. Our company have filed GST every months since the onset of GST, little issues.

The issues mentioned are only pronounced in SMEs, as until now I still see many still not quite understand how the GST works.

Yes, there is a hiccup in the claiming process for some. But I believe it soon will be ironed out.
GST is not a cost to business, the cashflow issue due to claiming process is not a bigger deal for large corporation, but SME may be hit harder.

SME that ceased operation because of razor sharp thin profit margin, and with GST implementation just induce them to close down, not because of GST issue alone, because GST is not a cost to business except for those non-GST registered.

Yes, business is not good out there, in fact our company suffer 30~40% drop in revenue compared to previous year, but this slowdown is worldwide currently, there is not much can be done, to be fair, although can be better.

The silverlining is stock becomes cheaper, and may present good opportunity to investors.
We are paying the price of aftermath of QE.

Every few year or decades, surely there will be a gloomiest period, no escape from it, part of economy cycle.

Factories and businesses are very simple, if they see revenue and profit is improving, they expand.
If not, status quo or sizing down to cut cost.

As mentioned before, RM depreciation poses the tough situation towards SME primary, not MNCs or large corporation.

Weak currency is like 2 edged sword, you get more business but on the other hand something need to give.
It is like cutting price to boost sales, you have better top line but at the expense of bottom line.
It is not a free lunch, a weak currency, purchasing power is sacrificed for potential more business in export (your price is cheaper than rival so you undercut them).

The suffering of SME in term of import will eventually mean trade import will be trending down, and with export status quo, we may see better trade surplus, if the currency is prolonged weak. This is the dynamic of how weak currency that result in better trade surplus.
We have experienced it before the aftermath of 1998, how a trade deficit quickly turn to surplus, after a big depreciation of RM during 1998 crisis.

No escape from it, this is a difficult period that we need to go through. Everyone knew business is tough out there currently.
Just recession and booming is cyclical, once is many years or decade, there is almost certainty got economy issue one.

The near future is gloomy, no doubt, but it is not the end of the world.

Too gloomy view, sometimes is not good for decision making, be it for business or investment, as in this kind of period, they may be opportunity as well.
Just like how 2008 financial crisis, everyone said, USD will become worthless, stock will plunge, but see what happening now, those invest and get into right business during that time are making decent gain after many years later.

Sometimes really don't know where people went already.
Keep on reading news graduate cannot get a job, but in actual situation for those running businesses, we tend to see employer always complain hiring is difficult. Almost everywhere see banner of hiring.

For sure, high wages, and goyang kaki job is not available.