After just enduring a two-and-a-half hour ordeal in what’s usually a 45 minute drive trying to get home tonight, through snarling traffic, heavy rain, and a closed SMART tunnel, I’m a convert.
How much is it? RM50 billion all in? Cheap for the price. When do they start?
The Ringgit has going form strength to strength, as this article asserts:
Malaysian ringgit expected to remain strong
Robust demand and credit growth may entice fresh foreign fundsKUALA LUMPUR: The ringgit, which temporarily broke to 3.08 level last week, is expected to remain strong.
“The market may hold up at this current level,” a dealer said, adding that robust domestic demand and credit growth were expected to entice fresh funds from foreign investors.
A forex dealer told Bernama that the ringgit might breach the 3.06 mark against the greenback in about two weeks, after hitting its strongest level since October 1997 at 3.0873.
The local unit rallied to new 13-year highs in four straight weeks amid speculation that rules would be further loosened to enable the local currency to be traded offshore…
…Yesterday, the local unit ended higher at 3.0900/0930 against the US dollar compared to Thursday’s closing of 3.0950/0980 after the local bourse managed to pare some of its earlier losses on bargain hunting activities.
Bloomberg reported that Barclays Capital Plc had raised its forecast for the local currency, predicting a 6.1% appreciation over the next 12 months as foreigners plow more funds into the nation’s assets.
FTSE Group, a global index provider, had also upgraded Malaysia to “advanced emerging market” status, a move that will attract as much as US$3bil of new inflows to the local stock market, Bloomberg quoted Barclays as saying.
I wrote about the economic indicators that are published by the Department of Statistics last year, and haven’t touched the subject since. Part of the reason has been that the indicators are published with a bit of a lag, probably because the IPI is a major component.
Now seems a good time to cover them again, since from last week’s report, the indicators are flashing warning signals:
After a busy weekend – open houses (if you’re not Malaysian, check this link for what this is all about), shopping and home improvement – I only had the chance to go over the weekend’s news feeds last night. There’s lots in the new about the ETP and some commentary over the minimum wage, which puts me behind in catching up…again. So there will be a slew of quick posts over today and tomorrow.
First up, last week’s employment and unemployment report from DOS. The unemployment rate has dropped to the low end of its year-long range, dipping to about 3.3%:
June’s subsidy cuts continued to affect the price level in August, and I suspect Ramadhan did as well. In any case, inflation for the month of August has accelerated:
The second piece of news over the last couple of weeks I want to over is the internationalisation of the Ringgit, which was brought up by the PM in an interview just after Eid. This prompted quite a bit of feedback, notably this broadside:
He’s right…and wrong of course (hit this link for the original article in The Star). Much as I respect our former PM, characterising what happened in 1997-98 purely as a result of speculative attacks on the Ringgit is shallow analysis and displays a victim mentality (one fine day, I’ll get around to posting about 1997). Or, in the words of the immortal Han Solo, “It’s not my fault!”. But he does have a point over the scale of forex flows relative to the Malaysian market (see this post for the real source of that info).
One of the downsides of having a long break is that you have to work double-time to catch up on everything when you get back – I’ve only just finished going through my news feeds for the past two weeks. There was quite a few items that I found worth commenting on, but they’re necessarily a little stale, but them’s the breaks.
Top of the list is that the minimum wage (due to be presented to cabinet in October) is again in the news with the Human Resource Minister outlining the bare outlines of the scheme (emphasis added):
I’ve just come back from the ETP open day. I’m sorry to say I didn’t spend much time there, so there won’t be much analysis of the content until the ETP is actually published next month – apparently it’s going to be issued after the federal government budget is tabled in parliament.
The response was pretty good as I saw plenty of interested people browsing through the exhibits – most no doubt from companies who are going to be affected by the ETP proposals (including mine). The free-flow of food probably helped as well :)
Just some quick hit thoughts on some of the things that struck me, reading some of the proposals (thoughts on the actual targets are here):
This is the longest break from blogging I’ve taken since the end of last year – I’ve barely been online since last week, travelling and seeing family during Eid. The only thing I’m aware of that’s been happening is the developing news of the Sosilawati murders, and even that’s been peripheral. But I’m getting back in the groove from today onwards, and first up is last week’s industrial production report.
It’s not very encouraging, with the main index falling for two consecutive months, and manufacturing falling for three (log annual and monthly changes; seasonally adjusted; 2000=100):
Kepada semua muslimin dan muslimah, Selamat Hari Raya Aidil Fitri, Maaf Zahir dan Batin.
Posts are going to be understandably a little sporadic over the next few days. If you’re travelling, drive safely.
Enjoy the holidays, and the time with your families. I know I am.
Back in 2008, when the Great Recession was just beginning, I told my staff not to label the financial problems facing the US and Europe as a “sub-prime” crisis. The default levels in the sub-prime mortgage market in the US weren’t actually much higher than they were in the previous US recession of 2000-2001. The big difference between then and now was the degree of securitisation – the problems arose because of structured derivatives built on sub-prime mortgage loans that were mispriced relative to their risk factors, not the sub-prime mortgage loans themselves. Calling it a “sub-prime” crisis risked causing people to misunderstand what the crisis was about, and what had to be done about it.
But two years on, the financial problems have spread far beyond asset-based securities as Scott Sumner discusses:
Which state had the most bank failures during 2008-10?
No, it’s not centers of sub-prime madness like Arizona or Nevada. Nor is it big states like California or Florida. It’s Georgia. And Illinois is second. Check out the graph in this link:
There is a good reason why most bank failures in 2009 did not occur in the sub-prime states; sub-prime loans were not the main problem. Indeed mortgages of all types were not the main problem. What was? According to
McNewspaperUSA Today it was construction loans, often for commercial real estate:
When the news broke a couple of months back about the dramatic fall in FDI to Malaysia in 2009, I thought most of the commentary was missing the point. The issue to me was poor investment as a whole over the past decade – low FDI was just symptomatic of a bigger problem. The Minister of International Trade and Industry is now signalling that the government recognises the real issues:
Foreign Direct Investments vs Domestic Investments
THE domestic debate on whether a country should focus on foreign direct investments (FDIs) or direct domestic investments (DDIs) is gaining traction as Malaysia moves towards increasing private investment under the 10th Malaysia Plan. Questions are being raised on the impact and contribution of FDIs versus domestic investments on the economy.
...Looking at these numbers, questions may be asked as to whether FDIs are necessary. Or can we ignore FDIs completely and depend only on domestic investments?
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