If US raise their rate, then USD/RM will reverse the trend. Watch this space.

Xuzen

A few points missed out,

1. BNM never want to prop up RM. Recent intervention was just to reduce the drastic move or too much volatility, to prevent unnecessary fear and chaotic. 
BNM never want to fix RM at whatever level, which has just been stated by Zeti during recent press conference.

2. Short term debt, mean debt matured soon, it doesn't mean those debt cannot be refinanced, especially if it is RM denominated. Liquidity still ample.
Also those short term debt may not all constituted by gov debt.
It could be corporate, banking borrowing, which normally can be refinanced easily, and not necessary those money must be outflowing.

3. Increase interest rate won't help to counter the outflow, if foreign investors already decided to flee.
A 25 basis or even 50 basis points won't make too much a difference. Capital flee away and back to USD is everywhere, the aftermath remedy of QE ended.
Emerging market has been "enjoying" the QE by Fed since 2010 to 2014, now pay back time. 
So current situation is not about interest rate.

The bolded statement is wrong also.
In fact, existing bond holder hurt more by the rate hike and could accelerate the bond flee.
As when interest rate is rising, bond become less attractive.

The currency war between emerging market that many talked about is regarding who depreciate the most for emerging market, everyone want their currency to be lower, not higher.
So their "depreciating" currency is not a "defeat".

Malaysia has a “history of draconian policy responses” and that may be spurring the flow of funds from the country as the currency weakens, said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management Ltd., which oversees about $112 billion. Global funds held 32% of Malaysian sovereign bonds in July, compared with 17% for Thailand, according to the latest available central bank data. There’s “fear in the market that they would impose macro-prudential measures to limit outflows,” said Anthony Chan, Asian sovereign strategist at AllianceBernstein LP, which oversees US$485 billion globally. -

See more at: http://www.themalaysianinsider.com/malaysi...h.ZTCKWzTY.dpuf

c) To hopefully limit the MYR drop.

prophetjul,

THE GOVERNMENT is running a budget deficit of  40 to 50 billions per year.  So, THE GOVERNMENT has to borrow money.  EPF cannot supply enough money.  So, THE GOVERNMENT has to borrow from FOREIGNER.  It has NO CHOICE. 

Or else, it will have to

A) Cut government's budget

or

B) Stop paying the debt aka default

Dreamer

They are career politicians. They plan to be back again and again. They must look like they are working. Either that or they don't know better.

prophetjul,

A) Okay.  That can be done.  But, it is still not enough.

GST of 6% ~ 20 to 30 billions.  Petrol subsidy is only 20 billions.

B) It is a cash flow problem.  There is not enough annual cash in from EPF to finance THE GOVERNMENT's budget.  Please note that EPF is only 500 to 600 billions.  THE GOVERNMENT's annual budget is 250 to 300 billions per year.

Dreamer

Increasing tax will further depress economic activity and we don't need that.

Best thing to do perhaps is to default on their external debt. Greece has done it many times in the past and they are still around.

Check out what's going on with Puerto Rico and Greece now. Default is their way out. That might also be our solution.

prophetjul,

To stay in power, THE GOVERNMENT need to spend and borrow more.  Raise interest rate will make many people bankrupt.  But, THE GOVERNMENT will have more money to spend and stay in power.

Dreamer

High tax means high cost of doing business, less economic activity and less foreign investment. And in this economic climate will speedily result in a dead goose anyway.

Wanna see high tax in action? Greece. That is why the eu system is scavenging their assets. Instead of increasing taxes and further have more of their assets strip they are better off to default and leave the eu.

Malaysia can do without higher tax too. The end is a dead goose too with higher taxes.

Malaysia economy is plague by a lot of negative factor, it’s a matter of time we will crumble to the pressure unless something is being done.
1) fundamentally we do not have a strong economy despite what is painted by our brilliant politician compares to some of the neighbouring countries like sg and vn which they keep on moving forward. Since the last decades the emphasis in how to keep holding on in power instead of strengthening the economy.
2) the gloomy world and china economy outlook.
3) falling crude oil price , where we are heavily reliant on PETRONAS for revenue.
4)high debt in terms of bonds help by foreigner
5)political and corruption scandal
6) depleting coffer , e.g. foreign reserves and especially now they are trying to dig into the pencen fund, pilgrimage fund, epf and etc
7) US. Interest hike
And I hope that the GST system also will not crumbles as I heard from several sources that currently there is some businesses that are unable to claim back the input and output tax diff from gov for many months. Some business only have working capital for few months, if this is being tied up they will need to close shop.  If this is seriously true we are in big trouble.

They need to hike interest rate or else their states will go bankrupt trying to pay for pensions. Its a catch 22,  benefit themselves or benefit the world.

USA mistake was they did not raise back interest rate after the 2007 crisis. As a result all emerging country borrowed heavily in USD.

A solution to an old problem not lifted becomes another problem down the line.

It's a definite that most of the emerging countries are going to default as the USD gets higher. They will receive the margin call from hell itself. Malaysia is also on the chopping block too

Their mistake for not raising interest rate has only recently started to show its ugly face... the rise of the USD. Capital world wide are now heading to USA prepping up USD and sending USA into a recession. Irony at its finest