Malaysian Economy In Really Deep Trouble Says The Wall Street Journal.

http://www.wsj.com/articles/malaysias-vulnerability-exposed-by-dollars-ascent-1481843998



This post has been edited by wu ming: Dec 18 2016, 07:02 PM

Following all these, the next catalyst would be when President Trump starts work on Friday, January 20th.. Hence, effects will be seen on the following Monday, January 23rd..

before that, bnm meeting on jan 19.

my bet is... do nothing, no change, very safe.

Why I see the Dollar strengthening at least in the Q1 of 2017


View of USD/MYR:

1. Trump's Power

A. Strengthening US position globally.
B. Tighter Securities.
C. Making Strategic Deals (with big companies) - Makes US seem strong well at least for the first yr of his presidency. His suggestions and actions taken may go wrong in the end but his ideas are definitely believed to attract investors.
D. Policies of Bringing Jobs Back to The States - Unemployment rate to further drop. However, this may increase the cost of companies as now they would have to pay higher wages when hiring US citizens rather than outsourcing their labour to countries such as China/India.


2. FED

A. Although the Fed acts independently, Yellen has been facing a serious degree of pressure from Trump as he has constantly argued that the Fed should start increasing rates by 100bps rather small 25bps hikes.



Internationally

A. Investors generally have a positive view towards the US economy and find them being the strongest among all countries although China and India's economy has been generally growing fast.

B. The Dollar being perceived to be the dominated trade currency, hence the demand for USD would be there unless some shit happens in the economy. Moreover, if US starts manufacturing good and services, companies/people abroad that wish to purchase the given goods from the States would eventually need USD which in return increases the demand of the Dollar.


What about the RM ?



A. Political scenarios has been messy - 1MDB (although its an old news, the after effects are still being observed)
B. Political Unrest between the Gov and the Oppositions (Don't think that I have to explain these as you guys should know)
C. Governments debt - How is the Gov managing it ? Is the debt still growing ? Can they still afford to payout BR1M ? When would they be declaring bankruptcy if it happens ? Who's funding the government in undertaking its operations apart from revenues collected from taxes, GST etc.
D. Oil Prices - Would OPEC and other member nations adhere to its agreement to cut supply or would they suddenly increase supply ?



What would I suggest a local investor to do ? Buy more USD well at least for the short-term.

This post has been edited by shankar_dass93: Dec 18 2016, 10:24 PM

Im interested to know too. But Aussie Dillar is still hanging at 3.325 at the moment. Not really weaking as said. Why would the aussie ar be weaking?

This post has been edited by TOMEI-R: Dec 19 2016, 09:11 AM

Morn bro,...

May not weaken too much against the RM, but noticeable effects against the SGD and the USD. The Parliamentary Mid-Year Review is today, and S&P is watching too. The review is expected to show negative news, and S&P will see. IF S&P lowers credit rating,... then got chance to buy the Aussie,...... But may not lower !!

Will monitor and see if Aud drops these few days. Usually during festive and and holiday season, MYR will strengten a bit.

Business leaders urge Coalition to boost infrastructure investment to ward off recession

The Coalition government is being urged to prioritise an ­increase in private and public ­investment and improve business and consumer confidence to stop the domestic economy slumping into recession next year.

Australian business leaders have called on the government to be more proactive fiscal policy managers and consider a stimulus package that centres on infrastructure investment to help ­support the country’s future ­productivity growth.

The mid-year economic and fiscal outlook to be delivered today by Scott Morrison is expected to maintain the Coalition’s promise that the federal government budget will return to surplus by 2021.

Finance minister Mathias ­Cormann yesterday said up to $22 billion worth of budget savings approved by the parliament over the past year would help the ­government’s fiscal management, while the current positive commodities outlook would provide a short-term revenue boost.

However, ratings agencies have warned Australia’s triple-A credit rating is under threat ­because of the ongoing structural budget deficit.

Business leaders have urged the government to spend more to ease the pressure for the Reserve Bank to cut the official cash rate from 1.5 per cent — a generational low.

Tony Shepherd, former Business Council of Australia president and former chairman of the National Commission of Audit, said the government’s budget ­surplus target was ambitious in the current economic climate.

The Australian economy ­contracted by 0.5 per cent in the September quarter and another quarter of negative growth would place it in official recession.

“The government needs to be absolutely open about the challenges Australia faces in both the economy and the budget, the two of them are inextricably linked,” Mr Shepherd said. “As the economy slows down as it has done then private investment reduces, company profits are going to go down, income tax won’t increase, neither will the GST revenue.

“Those factors make getting to a surplus and balancing the ­budget incredibly difficult.”

Andrew Liveris, the global business leader appointed by ­Donald Trump to head his administration’s new Manufacturing Council, last week said he supported greater global public sector investment and that “free markets do not equate with no government intervention”.

“Building integrated industrial sector as based on competitive inputs does need sound policy making in partnership with the private sector,” he told the The Australian.

Mr Shepherd, a key adviser to former prime minister Tony ­Abbott, said the Coalition faced a difficult position in negotiating with the Senate but needed to maintain pushing ahead with its budget savings measures.

“On the expenditure side, they have been tied up with by the opposition and some of the cross benchers in terms of genuine long-term reform,” he said. “Some measures have gone through, but others are waiting in the pipeline.

“If you look where the terms of trades are now, we have low or negative growth you would have to say that the picture … looks more negative than it was at the time of the budget in May.”

Charter Hall chief executive David Harrison said it was vital the government focus on infrastructure investment next year to maintain employment and help drive future productivity growth.

The property sector leader said the Reserve Bank of Australia should not be forced into carrying out all of the “heavy lifting” to keep the economy on track and the government must become more active fiscal managers.

“If we get another quarter of negative growth then technically we are going to be in a recession,” Mr Harrison said. “That could force the RBA to move ... when people see their house values not rising then there could be a need for some stimulatory impact from the RBA, but the government also needs to drive fiscal policy.

“The government needs to drive infrastructure investment which creates and provides jobs and keeps the economy active.”

Mr Harrison said he believed Australian businesses should start increasing current debt levels while interest rates were low to fund projects which would be ­beneficial in the future.

“Most corporate balance sheets are in very good shape; they need to use their capacity to borrow to make investments that will generate future activity,” he said.

“Corporate Australia, I would say, has been in a deliberate do-­little mode since the global financial crisis.

“The rest of the world has been spending but there’s no silver ­bullet here. If there was a simple answer everyone would be doing it.”

Credit ratings agencies have said the Coalition could know ­before the end of this week if the country’s sovereign rating was downgraded because of the ­ongoing budget deficit, which could be as high as $37 billion this financial year.

Mr Shepherd said a ratings downgrade could have costly economic implications, especially if interest rates started to rise in 2017.

“I don’t think for the economy, in the short-term, it would have much of an impact,” he said.

“But it will have a real effect on morale for business investment it’s a negative ... if rates start to go up then the cost of losing the rating is going to become very real.”

$ index down to 102.6x, profit taking.

RM still just under 4.48.

banks should be selling USD at >4.50 now.

money changer...?

USD at 4.475 now at money changers. MYR took a slight dip against foreign currencies this morning.

This post has been edited by TOMEI-R: Dec 19 2016, 11:07 AM

ah, well...

$ index up or down, RM same...

ok, we will live say 4.5 for now.

i see many prices at the stores already up, can expect more to come.

how to have happy festive holidays?

some more water cut for a week...

i guess that's what allow the market to work...people on opposing side of view complementing each other's need
and may we both prosper from the resulting "trade"
our view is inherently biased by our own position/action.
as long as we are aware of this bias, all will be fine.

do note that topglove's point of view is based on the rubber industry ownership - all his credible competitors are from malaysia.
what are his usd cost% and what will his approved hedging% be ? i see the their comment as leading to something.

https://www.bloomberg.com/news/articles/201...inancial-crisis

From Bloomberg


Ringgit Dips to Weakest Level Since 1998 Asia Financial Crisis

Malaysia’s ringgit touched the lowest level since the Asian financial crisis as investors continue to sell down emerging-market assets and after a crackdown on currency speculators last month exacerbated outflows.

The ringgit declined as much as 0.1 percent to 4.4805 per dollar, a level unseen since January 1998, according to prices from local banks compiled by Bloomberg, before paring losses to trade little changed at 4.48 at 9:52 a.m. in Kuala Lumpur.

The ringgit has lost more than 6 percent since the U.S. election, the biggest decline in emerging Asia, as expectations that incoming American president Donald Trump will stoke inflation with his fiscal policies spurred outflows from the region. Sentiment toward Malaysian assets has also been hurt by the central bank’s move in November to clamp down on trading of non-deliverable forwards even as it provided greater onshore hedging flexibility with revised regulations.
“It is a confluence of the relative decline in cash metric, high foreign holding of bonds sold off, investors’ trepidation about FX controls and the underlying political or headline risks,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore.

This post has been edited by ZZMsia: Dec 19 2016, 12:23 PM

bolded part says it all.

investors’ trepidation about FX controls and the underlying political or headline risks = high fear, low confidence.

our local banks, analysts and "experts" will only say... "speculators" or "oversold", "will return to 4.0".

the root causes and what needs to be rectified are never mentioned.

This post has been edited by AVFAN: Dec 19 2016, 12:39 PM

I checked CB TT rate, 4.5115. Highest so far for this year.

Well, life still goes on.

Frankly,... if BNM keeps sending more and more of her foreign reserves to defend and still the USD keep hammering,... what happens ??

Exporters must convert 75% back to MYR, that's the first step.

Second step ?

Surely cannot be just continue to defend until NO MORE reserves, right ?

Time to raise interest. Seems no other choices

Yeah. I remember they lowered interest rates in July because at that time nobody foresaw Trump would actually win and the USD-MYR was around 3.95. They should raise it back to the same rates at least.

no more?

that will be like burkina faso and zimbabwe.

i think the intervention will continue for a while.

but the time may come it may have to let go if the RMB shoots >7.0.

china is having big problems with capital outflows.


what next?

raise int rate will reduce gdp growth further, can't do.

cut int rate will push rm down further, can't do.

cut budget spending is surely no-no.

i see only one thing that will be done - raise GST and other taxes to shore up revenues to reduce new borrowings.


latest reads:

Ringgit will not crash.

An analysis of the ringgit pattern during every last quarter of the year exemplifies that even though the currency remains volatile and people become jittery, it is not going to crash, and will hardly be traded beyond 4.50 against the US dollar, an economist said.

I wonder if these 'experts' have vested interests in making such speculations or they are 'instructed' by higher ups to contain panic among the public?

This post has been edited by TOMEI-R: Dec 19 2016, 04:25 PM