June 29, 2015
The Ringgit down to a 10 -Year Low
The MSCI Asia Pacific Index declined for a fourth day as Greece imposed capital controls and shut lenders Monday to avert the collapse of its financial system. Fitch, which ranks Malaysia at A- with a negative outlook, the fourth-lowest investment grade, will review its assessment before the end of June, Andrew Colquhoun, head of Asia Pacific sovereign ratings in Hong Kong, said last week. The country is “more than 50 percent likely” to be downgraded, he said in March.
“Concern’s over Fitch’s action continues to weigh on sentiment,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd in Singapore. “The external risk-off environment sparked by Greece also doesn’t help.”
The ringgit dropped 0.4 percent to 3.7830 a dollar as of 9.13am in Kuala Lumpur, data compiled by Bloomberg show. It fell to 3.7843 earlier, the weakest since July 2005, and has lost 7.5 percent this year in Asia’s worst performance.
Fitch’s Colquhoun cited Malaysia’s worsening trade balance and concern about the ability of 1Malaysia Development Bhd, a state investment company, to meet its debt obligations, when he warned of a downgrade in March. Exports fell 9 percent in May from a year earlier, following a 8.8 percent decline in April, according to a Bloomberg survey before data due July 3.
Malaysia’s government bonds fell. The yield on the five- year notes rose two basis points to 3.65 percent, while that on the 10-year securities was steady at 4.04 percent, according to data compiled by Bloomberg.
– Bloomberg
Din Merican: the Malaysian DJ Blogger 
Najib has to go. He has brought this country down badly.
Hishamh,
What is happening, my friend? No confidence in Najib’s economic management. Or is our economy still has strong economic fundamentals.–Din Merican
Is the worst yet to come?18 years ago George Sorros was the scapegoat for the ringgit fall. Who will it be this time?
In theory, when a country’s currency falls, its exports should go up, because now they are cheaper. But the article says that Malaysia’s exports actually fell 9 percent in May from a year earlier, and they also suffered a 8.8 percent decline in April.
A cheaper currency also should make the country more attractive to foreign investors. I wonder what is happening to foreign investment in Malaysia?
__________________
No confidence in Najib’s management of the economy and his politics. We are heading in the direction of Greece. Even the Bank Negara Governor is silent; she is no longer saying that the Malaysian economy has strong fundamentals. There you are, Ambassador Malott, my simple answer to your question.–Din Merican
Malaysia have 2 Ministers of Finance and 2 Deputy Ministers of Finance, yet not a squeek from any one of them. Perhaps we need to add more Minister of Finance.
Even the celebrated Governor of Bank Negara is silent. What happened here? Suddenly have closed jaw disease after the Foot in Mouth disease? Foot and mouth disease cattle are culled, maybe thats what we need to do to these Ministers.
Asking the rakyat to tanam own vegetables to avoid the price increase. So rakyat can only eat vegetables. How about those that lives in flats, where to tanam jagong?
I recall the days when the ringgit was at par with the Singapore dollar. When I went to work in Brunei Darussalam in 1986, it was Rm1.14 to the B$1, and then the Rm began sliding down to its present low level. Everything that was once good
in Malaysia seems to have gone down while prices of almost everything has gone
up. The Government should realise that this is not good for the country’s economy, Perhaps, it is time for Malaysia to change its financial aldvisers and fund managers. Chung Tat Lim..
Ghee … we sure have some slimeballs for leaders.
Why so surprised, or worse, angry?
Tanah Air is where it should be.
Those who can, do. Those who can’t, teach. Those who can’t even teach, join UMNO, MCA, MIC, etc, and run the country.
So, I ask again, why so surprised?
Most of our manufacturing industries have to import raw materials to export finished good. That is why one of the finance ministers said that when your currency falls your exports will increase. But currency go down export no going up. This is all confusing and we need explanation by the consultants that we have employed. I do not know about others but they say devaluation is good for us and I agree. I still do not know why export is not going up.
Malott,
But then most machinery and imports are bought in US dollars. Ah so, it is not really true that even in theoretical term, exports would really go up. One good reference would be Pound devaluation in the 60s. It did not boost british exports
And Jim Callaghan was far more competent chancellor of exchequer than that Jibby
Balance of trade remains positive but exports are hamstrung by low commodity prices and lower overall exports to PRC and Taiwan.
http://www.tradingeconomics.com/malaysia/balance-of-trade; and
http://www.matrade.gov.my/en/malaysia-exporters-section/235-trade-performance-2015/4009-trade-performance-april-2015-and-january-april-2015
The picture ain’t rosy and trade surplus will decrease further as the ringgit breaches the 3.80/USD mark. Bank Negara, EPU, EC and other agencies are now hankering for the NEC (National Export Council) to work some miracles. Can be done, but it needs political will – which we don’t have in spades. Melayu this and that aren’t contributing to flexibility nor rationality.
Very soon (i.e tomorrow) Jibs will make an announcement on the direction we are headed – but he’s a crass politico instead of a hands on practitioner. Cakap tak bikin.
It would be easy to blame the Greeks (Grexit) and US rates etc, but the flaws are quite fundamental and political will to change is nonexistent. Corruption and selective law enforcement-prosecution will do us in.
That means the rest of the world don’t look at Malaysia with much confidence.
The green termites is back. Pray our governor has enough insecticides to stop the rot.
Hello, Hilmi.
U want to know. Blame me. Everything settled down.
Our leadership is suffering from a deficit not just in credibility and integrity but also in terms of economic strategies. They have spent and gorged on national resources and reserves; and have now placed the nation at the precipice of an economic disaster. As to why our exports are not increasing even with lower Ringgit, the answer lies in whether the importing countries have the demand and the capacity to pay…..there is a general slowdown or downturn in many parts of the world. Severe structural changes are expected along with political upheavals. Syed Kamil
Currencies high or low… but against what? And unless we look at the “what” we shall be groping in the dark.
The economics on the planet are in an inverted form. What should be up can be made down etc… Takes only a few clicks…
/// Most of our manufacturing industries have to import raw materials to export finished good. That is why one of the finance ministers said that when your currency falls your exports will increase. But currency go down export no going up. ///
True and false. We have 2 finance ministers, yet both can even tell the difference between B/S, P&L, and cash flow as seen in the 1MDB debacle (note – B/S refers to balance sheet and not bull shit which they are very well-versed in).
If there is one country with lots of natural resources, it is Malaysia. So, the point about needing imports in USD is self inflicted. Most countries’ imports are in USD, except when Malaysia decided to do barter trade with the Russians for the fighter jets. The problem is that Mahathir decided to go for the glamour projects like steel and car industry when Malaysia has neither the comparative nor competitive advantage. Most of the inputs are imported. If Malaysia can exploit its natural resources – rubber, tin, bauxite, petroleum, palm oil, and go upstream into derivatives and research & development. Instead it goes for the car industry where more than 90% of the components are imported. And what’s next? Space industry since we have sent a taxi-naut to space.
If there is one country which depends tremendously on import, it is Singapore. Yet despite the SGD appreciating 180% since parity with the MYR (from 1:1 to 1:2.8), Singapore’s exports are still competitive. And this despite most of its inputs coming from imports in USD.
More significant reasons for MYR depreciation are the theft of billions by the kleptos, flight of capital by business men and billionaires and the financial and economic mismanagement by those in charge.
Good piece THE…
The Third World is in need of leaders who can double GDP in every 15 years. And in this fast moving internet age they need leaders who have the ability to initiate policies related to development that will transport, translate and transcend this mechanised world. More and more middle level jobs will be made redundant by the computer and robots. Just imagine the middle level jobs taken away by the computer in the fields of secretarial services. And this is multiplied over and over again in almost all fields when it comes to jobs at the middle level. Third World Leaders must have the capacity to take their citizens from here to a place they have never been before in a positive sense. Even in countries where the leaders have successfully done that this effort is still a work in progress because population is growing with very little help from government.
Fitch has not downgraded Bolehland yet and it should remain at stable AA- okay. That’s a breather.
Say what you want, but Bank Negara is doing their job despite their restrictions and TS Zeti still manning the fort – just. Otherwise we’d dead duck with all that pilfering, pillaging and plundering.
Btw, The, is it downstream or upstream? Commodity rich countries like us should be going downstream, i thought? Like Oleochemicals, Organochemicals, Electro-Photonics, Nanotech besides the whole host of Biotech stuff? Oh, i forgot – our brightest kids are in the lil Dot south or else loafing anywhere but here.. And our most advanced research is currently about ‘Birthing Pants’ and Anti-Hysteria Magic kits.. What about Camelizing (Not caramelizing) TRX?
CLF – I think you are right. What I meant is going up the value chain. Maybe that’s why I said upstream instead of downstream.