B) Cut spending SUBSTANTIALLY

Its too late to react now. If you haven't done anything to spread your risk previously, all you can do is just sit back and watch. And possibly just hope for the best.

Investment is about risk management. Not putting all eggs into 1 basket. It is a long term planning. Get your portfolio balanced in both your home country and overseas assets. So that currency fluctuation will offset each other 90% of the time. Also get your portfolio to involve across the industries so that sectorial effect (like oil price slump now) will not have substantial effect overall.

My only weakness is the distrust in precious metal. Maybe it is good time to look into gold as everyone is avoiding it. I have a feeling that if Russia is kept victimised by the West, they can just "slip" a nuclear weapon to the terrorist and get it detonated in 1 of the oil producing country. Then all hell break lose and oil will be in $150 region and gold hit $3000. Just my conspiracy theory on a Friday...

Shouldn't be too pessimistic about Malaysia ... Shall see the glimpse of light when crude price stabilizes ,Malaysia's fundamentals are not as bad as a decade ago , hope for a possible rebound after a bumpy ride

At 3.6-3.7 and oil at 40, how low further can it go ?

Our debt to gdp levels were far higher in the past:

Depends how we see it.
With a GTL plant in Bintulu, we are exporter.

Is break even if excluding LNG. They never disclose the LNG's volume sold. So you do the maths.
Crude oil = petroleum. LNG is hydrocarbon. Crude oil are composition of hydrocarbon.
Since you are talking about trade, now here's the catch :
Tapis, Bintulu, Labuan, Kidorong are some of the petroleum we are exporting out. In average, Tapis are at least 20% more expensive than Brent or WTI due to it is the sweetest in the world while others are at least 10% more expensive. Most of the petroleum dig out from Malaysian sea are sweet.
Petroleum from Middle East are at least 20% more cheaper than Brent or WTI but very high sulphur content, this is the rubbish we are buying and process it to products and sell to us. That's the reason why other countries already on Euro4 but we are still at Euro2.
So, we are exporting 90000t(example) and we import 95000t. By volume looks like we are "net" importer, but considering the money, we are exporter.

We are a crude oil exporter. Thus, when oil prices plummeted recently, there was a perception that export receipts will also decline drastically and result in a current account deficit.

Indeed, this perception is not correct. As a net crude oil exporter, we had a surplus of RM7.7bil from January to November 2014.However, we are an importer of petroleum products with a net import bill of RM8.9bil during the same period.

If we include both crude oil and petroleum products, we are actually a net importer with a deficit of RM1.2bil.

Therefore, the perception that Malaysia is a large oil producer is also not true.However, if we factor in exports and imports of crude oil, and nett out petroleum products, then Malaysia is a net importer of petroleum. This does not include LNG, for which Malaysia is a net exporter.
https://dinmerican.wordpress.com/2015/01/21...-budget-speech/

Najib's word can be trusted?

Okay I give up.. don't care if Malaysia is Net Importer or Exporter.. that's one gomen problem

Main Concern is Lower oil price bad for M'sia Gomen, Lower RM etc.  but good for rakyat bcoz lower retail fuel price..

bad thing about weaker RM is higher cost of doing Intl Trade  

The question now is, when oil price high and government's income are higher, do we get benefits from it?

KUALA LUMPUR: Rising newsprint prices resulting from the weakening ringgit appear to be the least of the media sector’s problems as falling circulation and advertising expenditure (adex) threaten a shakeup in some listed press groups. - See more at: http://www.theantdaily.com/Main/Media-grou...h.hw5THeMc.dpuf

On the long run this episode of low oil prices would be a good thing for Malaysia - because we'd be forced to not be so dependent on oil production as a country. This is a painful pill to swallow but the patient needs it badly.
We need to diversify and develop other industries as well.

just for the record...
today:
crude = usd44.50
usd = rm3.6375

just for the record, today: oil usd52, rm/usd = 3.564.

for the record... today usd1=rm3.60, again... oil usd50 going lower...

Of course there is a relation. If perception is that Malaysia is dependent on oil revenue, and oil prices drop, what does that say about the economy and other fundamentals of the country?
Think about it from an investor point of view. What are you going to do if a country you are investing in, potentially is heading down south and even risks of a sovereign rating cut from the rating agencies?
What happened to the Russia ruble?

Focus on the reason why you made that statement. The other posters are NOT wrong to say that the USDMYR is currently BROADLY co-related (with some deviations, but typically reasons of such would be available only to those in the industry) with oil prices.
When oil price is USD120 per barrel, from an exchange rate regime people just see that there's no issue relating to oil prices for foreign investors to start selling their MGS. If in that scenario, Malaysia handle the increased revenue well, economic data is good, foreign investors flock in thus strengthening MYR.
In short: Strength of the local currency is very much RELATED to oil prices.

The day to day pricing of USDMYR is rather interesting to say the least. Since the beginning of this year, it has been mostly volatile. Yes the 1MDB issues does cause some concerns, and it swings because of it. 1MDB loan about to blow up? MYR down. 1MDB repaid? MYR up (but also because AK did the repayment in USD, so there was a MASSIVE sell down of USD in the market. If oil prices come to 40-45, it's possible for it to head towards 3.73, a level seen during the financial crisis period (2009). Something to note: A big portion of the movement in USDMYR so far, is due to offshore funds, with huge amounts of $$$. What's driving the movement of USDMYR is not directly what you and me think about the economy with personal experience (unless you have hundreds of millions of $$$, not me definitely), it is those with money. You exit 1 mio USD? Not a dent in the rate. You exit 100 mio USDMYR? Market will react.

In general, though, the weakening of MYR is not entirely MYR's fault. USD itself has been strong, with hypes over them increasing interest rates in the 2nd half of this year. They are the current big block that is recovering together with the UK, while the rest is still on the south like Europe or Japan (and hence their massive QE). Buying EUR or JPY now, is cheaper then if you were to compare it against it a year ago.

On Indonesia, I'm still going towards hedging Rupiah receivable exposures for Malaysian-based corporate. I have been advising my customers as such for a while now, and still am. Short-term fluctuations are expected, but long term we have seen IDR dipping a whole lot against MYR. I'm lazy to open my Bloomberg now, so this will do.

http://www.xe.com/currencycharts/?from=IDR&to=MYR&view=10Y

Anyways, Happy CNY and Gong Xi Fa Cai all. Spent too much time then I'd like on this anyways. Facing this sort of discussions everyday with my corporate customers is not enough, no, I have to continue this in LYN.

3.73 is but a big psychological level in the mind of the market. It represents an invisible 'resistance' which if broken, would open the gateway to further rallying. Most of the factors you mentioned are economic data, and yes the interbank players do watch those, ESPECIALLY data from the US. Key events/data such as FOMC and NFP (Non-farm payroll as a proxy for unemployment) will move the market, typically how it works is this:

1) Market has an expectation before the event, and prices ahead of it
2) Actual data released
3) Market reacts to the data relative to the expectation. Also, to specific statements or keywords. E.g. Market first reacted when Janet Yellen used the word 'patient' when it comes to rate hike

If you do get access to a Bloomberg terminal, go to the page "ECO" to check out market expectations of each upcoming data release.

So let's talk about in Malaysia context. Just several months back analysts were gunning for a rate hike, but the situation has changed quite a bit.

From a broad, fundamental, qualitative perspective - I see rates as strongly neutral on rates (OPR), perhaps leaning towards a rate cut a little. The current oil situation creates a catch-22 for BNM. I increase rates, I kill my domestic spending. I cut rates, I encourage further outflow of funds from Malaysia, weakening MYR even further. The previous MPC in January didn't tell us much except 'continue to monitor the situation', so market is still rather neutral on this.

From a technical, quantitative perspective - MGS yields/Swap rates, KLIBOR, doesn't seem to indicate any consistent, potential rate changes yet [except for KLIBOR 3M, but that is a specific story why there was such a major increase last quarter 2014 but is now dropping. If you truly are interested in the financial world, see if you can google why or get it through your banking contacts]. So, nothing for the time being as well.

Little tip - look at Malaysia Interest Rate Swap rate against KLIBOR, and then look at US Interest Rate Swap rates against LIBOR. You will see a noticeable difference between the 2 sets of data, and that difference signifies the different level of rate expectations between the 2 countries.

Sure, take a look at recent news. http://www.thestar.com.my/Business/Busines...ared/?style=biz

See how they spoke off expectations again (estimated)? It actually applies to other aspects of life, not just financial markets. People buying ahead of GST, why, they expect prices to go up. Insurance premium being charged higher if you are older/smoke/drink etc., why, they expect a higher chance of you claiming.

I'm quite impressed you even noticed how FD rates were increasing and you could give me a keyword - liquidity. Many in my own industry don't even realise KLIBOR 3m and above has been inching up. Let's take it a step further, what was recently introduced in terms of banking compliance, all around the world?

That's okay, not having a background in finance/economics. It applies to all of us, day to day. The time will come where you will be having millions of dollars, and what to do with it will depend on your financial knowledge.

Little respite for the ringgit
Monday, 23 February 2015
BY: IZWAN IDRIS

PETALING JAYA: Cheap airfare is a boon for holidaymakers going overseas, but Malaysians can’t help but feel a little short-changed after a trip to money changers.

Take the Thai baht, which had advanced 13.2% over the past six months. At 8.93 last week, the baht is at its most expensive against the ringgit since 2007.

Jakarta would have been a cheaper destination, currency wise, as the rupiah performance was tempered by Bank Indonesia’s unexpected interest rate cut last Tuesday. At current exchange rate, you can get around 3,500 rupiah for one ringgit. Six months ago, one ringgit will buy you 3,650 rupiah.

Hong Kong, a favourite shopping destination for many Malaysian, has become 15% more expensive since August last year. The Hong Kong dollar is pegged to the US dollar, against which the ringgit had weakened to 3.647 on Wednesday, before the market closed for the Chinese New year holidays.

At that level, the ringgit was at a five-year low against the greenback. CIMB Research said the ringgit was likely to hold above 3.70 against the US dollar.

And unlike during the 1990’s financial crisis, Malaysia’s economy continues to be resilient, despite falling oil prices and a surge of foreign outflow.

Bank Negara will release its mid-monthly foreign exchange reserves report later this week, which would probably show another decline. But with more than US$100bil in foreign exchange stockpile, the central bank has the firepower to keep currency speculators at bay.

Analysts, however, expect little respite for the ringgit this year, as the US Federal Reserve moves ever closer towards raising interest rate for the first time in almost a decade.

Meanwhile, a growing number of central banks is cutting interest rates and watching their currencies fall against the strong US dollar.

Indonesia was the most recent among Asian countries to lower its domestic interest rate. Singapore in January loosen its monetary policy to keep its currency low.

China and India have already lowered their rates. Analysts believe Thailand might also jump on the easing bandwagon soon.

The baht, compared with the weak ringgit, had been surprisingly strong, easing just 1.3% against the US dollar over the same six month period.

It has been one of Asia’s best performing currencies, despite a military coup last year and weak growth that normally scare away investors. A factor that is helping the Thai economy is plunging crude oil prices.

This is a contrast compared with Malaysia, which is viewed as oil-based economy. Petroleum income makes up about a third of the Government’s annual budget revenue.

The Government, in January, was forced to review its spending for this year to keep the target of gradually reducing the country’s budget deficit intact, as the sliding crude oil hurt revenue.

As the ringgit performance is locked to oil prices, expect more volatility ahead.

As it is, the turmoil in the currency market has pushed up the cost of overseas holiday and the price of imported goods for Malaysians. But some economists reckon that the cheaper ringgit is not all that bad.

The weaker ringgit, driven largely by falling price of crude oil, might help buffer the economy from job losses and a slowdown in growth.

Palm oil producers, which are enjoying a relatively stable price of crude palm oil in the international market, are effectively given the boost from the weak ringgit.

Other exporters, like manufacturer of rubber gloves, are also prime beneficiaries.
http://www.thestar.com.my/Business/Busines...ggit/?style=biz

Ringgit under pressure over 1MDB debt
http://www.themalaysianinsider.com/busines...-over-1mdb-debt