Malaysian Ringgit drops to three-year low !

 

The ringgit tends to move more significantly lately because of domestic factors such as the fiscal situation, Says Saktiandi Supaat of Maybank in Singapore

KUALA LUMPUR: The ringgit dropped to a three-year low ahead of data that may signal the US recovery is gaining traction, bolstering the case for policymakers to pare stimulus that has fuelled inflows to emerging market assets.

Reports this week may show retail sales, manufacturing and housing starts increased last month in the world’s largest economy, according to Bloomberg surveys. Four Federal Reserve officials indicated greater willingness last week to begin tapering the central bank’s bond-buying programme.

Fitch Ratings cut Malaysia’s credit outlook in July, citing concerns over the country’s public finances.

“The general expectation is that these US numbers are going to be quite strong,” said Saktiandi Supaat, head of foreign exchange research at Malayan Banking Bhd in Singapore. “The ringgit tends to move more significantly lately because of domestic factors such as the fiscal situation.”

The ringgit depreciated 0.3% to 3.2595 per dollar as of 4.27pm in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.2613, the weakest level since July 1, 2010.

The one-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed six basis points to 7.89%, halting an eight-day losing streak.

Malaysia’s five-year government bonds were little-changed.

The yield on the 3.26% notes due March 2018 held at 3.50%, according to data compiled by Bloomberg.
The rate on 10-year securities fell by two basis points to 3.86%, the lowest level this month. — Bloomberg

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Malaysian currency weaken as foreign capital outflow

Foreign capital outflow a trend in emerging markets these days

The ringgit, which has been described as being in a tight spot, has fallen 6.6% since May 22, when the Fed first raised the spectre of an early stimulus withdrawal, reports the Singapore Business Times.

THE outflow of foreign capital from emerging markets is the trend these days.

The ringgit, which has been described as being in a tight spot, has fallen 6.6% since May 22, when the Fed first raised the spectre of an early stimulus withdrawal, reports the Singapore Business Times.

The ringgit has been trading at three-year lows against the US dollar, and month-long selling has pushed 10-year Malaysian government bond yields to their highest in 2½ years, says the report.

The reason is “an exodus of foreign capital, as investors reassess emerging markets most at risk from a withdrawal of US easy money policy,” it adds.

The Indian rupee has dropped more severely by 8.5% since May 22.

India has been described as being “caught in the middle”, as the United States ponders tapering off its quantitative easing policy, causing volatility in emerging markets, as investors pull money out.

India was enjoying a growth rate of 9% just two years ago. Now, the Reserve Bank of India is forecasting growth at 5.5% for the fiscal year ending next March, says the SBT.

Reliance on foreign capital has always been a dangerous game, and the authorities are well aware of that.

In some quarters, it is a known fact that foreign capital is not really welcome, as it wreaks havoc with its large movements.

Economies in South-East Asia, especially, have to be very cautious of foreign capital, as the impact can be severe once they withdraw their funds.

Fund flows are usually tracked by central banks, which will have an indication of the inflows and outflows.
The economy itself should be fundamentlly strong and able to withstand the shock of any outflow.

High economic growth is not really the objective in this case, but rather steady, resilient and broad-based growth.

Investors in emerging markets should be prepared for such a phenomenon and get ready with their asset allocation strategies.

Mark Mobius, the executive chairman of Templeton EM Group, was quoted by The Economic Times of India as saying that funds were expected to flow back into emerging markets.

“We think there will be a bounce-back because there has been too much negativity and that has pushed prices down to levels where there is a chance of an upsurge again,” he is quoted as saying.

The Australian central bank has cut rates for the eighth time in less than two years in a bid to improve sluggish growth, as a boom in mining investment over the past decade comes to an end, says the International Herald Tribune (IHT).

The Reserve Bank of Australia lowered its benchmark cash rate by a quarter of a percentage point to a record low of 2.5%, bringing the total cuts since November 2011 to 2.25 percentage points.

The Australian currency, which is closely watched by investors and parents with children studying in that country, has fallen about 15% against the US dollar since mid-April.

However, the currency remains well above where it has been for much of the past two decades, says the IHT.

The Australian dollar has rallied lately on positive economic data from China.

As new resource investments peter out, the Australian government is seeking to rebalance its economy, with strength in sectors such as tourism and manufacturing.

There are diverging trends in the Australian economy, where unemployment has edged up, with “signs of increased demand for finance by households”.

However, the pace of borrowing has remained “relatively subdued”.

It will be interesting to watch how the Australian dollar performs over the next few months and assess whether it is timely to invest in it.

Plain Speaking By Yap Leng Kuen contributed to this post.
Columnist Yap Leng Kuen sees a lot of investment opportunities in emerging markets.

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A new dawn in world economy?

Review by Thomas Lee tomlee48@gmail.com

A new dawn in world economy?
Title: Uprising
Will Emerging Markets Shape or Shake the World Economy?
Author: George Magnus
Publisher: John Wiley & Sons Ltd

At first glance, the title Uprising gives one the impression that the book is concerned about rebellion or revolt, or matters related to violent political conflicts involving armed resistance.

However, after reading its small-print sub-title Will Emerging Markets Shape or Shake the World Economy? and a quick browsing through its content, one realises that the book is actually an in-depth analysis of the contemporary global economy, in particular the influence and impact of the new emerging markets with the focus on the shift of economic power from the West to the Orient, especially China.

Its author George Magnus is a prominent investment banker and global economist, who has been acknowledged as the key analyst who had predicted the recent world financial crisis in early 2007. He is a senior economic adviser at the UBS Investment Bank in London, and had held similar posts at the Union Bank of Switzerland and SG Warnurg.

Magnus is also a popular and respected public commentator on world financial matters, contributing frequently to the Financial Times of London, the BBC, Bloomberg, the CNBC and several other prominent economic, business or financial publications. He is also author of the 2008 definitive international economic analytical book The Age of Aging: How Demographics are Changing the Global Economy and Our World. 

Hence, Uprising is not simply any ordinary run-of-the-mill book, but a major authoritative book which anyone concerned with the contemporary global economy and the direction it is moving should read and reflect deeply on. What Magnus said in his book should not be treated lightly as he is no false prophet when it comes to matters of international economic wheeling and dealing.



Magnus begins his book with an incisive narration and analysis of the world events building up from the first year of the new 21st century to the current global economic scenario. He gives a sharp observation, and penetrating and critical analysis of events in China, including the implications of a world sporting event like the August 2008 China Olympic Games, which took place sandwiched between the May 2008 Great Sichuan Earthquake which claimed nearly 70,000 lives, and the October 2008 world financial earthquake following the collapse of the US investment bank Lehman Brothers, which, as Magnus puts it, “brought the world economy to the brink of an economic Armageddon, unrivalled since the Great Depression of the 1930s”.

In his 358-page book, Magnus sets out to explain the impact and effect that the 2008 financial crisis has on the major emerging markets, and why the rich developed Western nations is going all out to challenge and curb their increasing threats, especially of China and India, in the global economic order.

A major theme of the book as Magnus puts it, is that “the West’s financial crisis sparked a major change in the structure of the world economy, and that China’s capacity to also embark on structural change voluntarily is weak, unless it is specially geared to the long-run interests of the Communist Party’s grip on power”.

This authoritative definitive book examines the two major economic powers and leading emerging markets in Asia – China and India – and several minor but significant markets in Eastern Europe, and also Turkey.
Currently, the emerging markets are headline news. And the question uppermost in the minds of political and business leaders in all these emerging markets of the world is what will happen following the 2008 world financial crisis and what does the future mean and hold for global finance, trade and commerce.

Magnus provides significant suggestions and pragmatic guidelines to resolve this global economic dilemma.

He presents a persuasive and cogent perspective on China and the other emerging markets from a post-financial crisis situation, urging those with economic potency to seriously reconsider their attitude and approach to the emerging new world economic order. A fundamental matter to critically and analytically examine is the question of what economic reforms are needed to meet the new global goals.

Magnus should most be appreciated for offering a convincing critical analysis of what the future global economy may look like – not merely for the emerging markets, but for policy-makers, businesses, financiers, investors, economists, and even ordinary citizens concerned with the economic well-being of their nation and the world.

Magnus deals with matters such as climate change, commodity prices, and world demographic trends, and gives valuable insights into the implications of these issues for the world economy.

One significant question Magnus deals with is whether the 21st century belongs to China. The Communist nation operating on enterprise capitalism for the last 30 years is now all set to regain what Magnus has pointed out in his book as its premier economic power it held from ancient times till the early part of the 19th century.

For all intent and purpose, China is set for an economic renaissance. It will soon regain its ancient mantle as a world economic power it lost when its reticent conservative bureaucracy forced it into international relation isolation while Europe moved economically forward with an industrial revolution in the 19th century.

The Uprising by the plucky economic seer Magnus is certainly essential reading for anyone who wants to understand and care about the future of the global economy.

Understanding the context, content and challenges of the world economic scenario during the first decade of this century is certainly vital for those responsible for making policies, plans and programmes to chart the direction, set the trend, and strive for vigorous economic success in their nations.

Thanks to Magnus, his book has provided the seeds for the planting, growing and harvesting of serious objective thinking, critical pragmatic evaluation, constructive practical ideas, and effective and efficient creative implementation of economic policies, plans and programmes.

Understanding The Rise Of China [VIDEO]

http://www.dump.com/2011/01/25/understanding-the-rise-of-china-video/