Aug 27 2015, 01:29 PM
QUOTE(prophetjul @ Aug 27 2015, 07:27 AM)
Some questions here
a) How much of our national debt is foreigner held? It is said if there is a short term run on our bonds, the national reserves of &96 is unable to cover
b) Next, while foreigners may sell, there are others who maybe attracted to the yields, Bear in mind, the rating agencies have not down graded Msia yet.
c) Why should Bank Negara raise the BR while the country is not doing well?
"The ratio of reserves to short-term debt: the most widely used metric for reserve adequacy is the Greenspan-Guidotti rule of 100% coverage of short-term debt. The rationale is that countries should have enough reserves to resist a significant withdrawal of short-term foreign capital. The level of Malaysia's short-term debt is equivalent to the level of FX reserves.a) How much of our national debt is foreigner held? It is said if there is a short term run on our bonds, the national reserves of &96 is unable to cover
b) Next, while foreigners may sell, there are others who maybe attracted to the yields, Bear in mind, the rating agencies have not down graded Msia yet.
c) Why should Bank Negara raise the BR while the country is not doing well?
The ratio of reserves to broad money is less frequently used a measure of adequate FX reserves. This metric is designed to capture the risk of capital flight, in particular outflows of deposits of domestic residents. The upper limit of a prudent range for reserve holdings is 20%. Reserves in China and Korea do not cover 20% of broad money (they only cover 18% of broad money), but everywhere else the coverage is well above 20%.
Broadly, Asian FX reserves can be judged to be adequate, with the exception of Malaysia, where FX reserves now barely cover short-term debt"
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