Malaysia wants to be a high income nation. Jolly good. But at what currency exchange level are we talking about? It is good if the income is high and the denomination is in USD. What is the point if it is denominated in Indonesian Rupee or the Vietnamese Dong.
High income can only be sustained if the productivity is improved or we have advanced to a higher technological level. This would result in higher growth and increased GDP. But, we are not going along this line. We are trying to be competitive by manipulating the exchange rate. We lowered our exchange rate so that our products are cheaper to importers. Workers may get a raise on the take home pay, but their purchasing power is not better off.
Malaysia has not done well in terms of its currency exchange rate. It used to be 1 RM to 10 Baht in the 80s. In the Asian Financial Crisis of the 90s, Thailand’s currency was badly battered. They have recovered. Even with their political instability and turmoil, they have done better than us. Today, the exchange rate is less than 10 Baht to 1 RM.
Monday, October 5, 2009
Thursday, June 4, 2009
Contrasting Forecasts
CIMB is very bullish on the Malaysian market. It is projecting a target of 1220 for the KLCI at year end. It cites the gradual reinvestment of institutional funds' spare cash and the "better than expected" 1Q results for the local companies as the reasons for its good feelings. Very well.
At about the same time, Maybank came out with a very bearish report. It is targeting the KLCI at 990 at year end. It cites the worse than expected 1Q GDP growth of -6.2% and the poor 1Q earnings (62% of its stock coverage of 72 companies reported lower profits) of the local companies as its reasons for the lousy feeling.
What a big contrast in the forecasts. I think I can be a stock market forcaster too. I bet that the KLCI will end the year at 1105 - the middle of the two forecasts. I am confident that I can beat at least one of the above investment banks. Just wait and see.
At about the same time, Maybank came out with a very bearish report. It is targeting the KLCI at 990 at year end. It cites the worse than expected 1Q GDP growth of -6.2% and the poor 1Q earnings (62% of its stock coverage of 72 companies reported lower profits) of the local companies as its reasons for the lousy feeling.
What a big contrast in the forecasts. I think I can be a stock market forcaster too. I bet that the KLCI will end the year at 1105 - the middle of the two forecasts. I am confident that I can beat at least one of the above investment banks. Just wait and see.
Tuesday, May 19, 2009
Talking Bull
The world's leading airlines are all buffeted by the double whammy of the economic recession and the influnza A flu. Singapore Airlines just reported a 92% plunge in its profit for the quarter ending March 2009. Cathay Pacific recorded a loss of more than a billion USD in 2008 and its revenue for the 1st quarter is down 22%. Japan Airlines reported a loss of 63.2 billion Yen for the year ended March 09 and is predicting negative results this year too. Qantas is forecasting its results for the year to June 09 will be less than half of that of last year.
Amidst all this gloom, there is one nascent airline that is very bullish. Air Asia X is talking about acquiring more planes and connecting to new destinations. It wants to increase its fleet from 4 to 8 planes and its destinations from 4 to 10. It is wishing for a revenue of 1 billion RM in 2010 and with a margin of 10 to 20% (very optimistic), is projecting itself to be among the top 100 companies on Bursa Malaysia. Its CEO is definitely very gung-ho and bullish. He is already counting the chickens even before the eggs are laid.
Amidst all this gloom, there is one nascent airline that is very bullish. Air Asia X is talking about acquiring more planes and connecting to new destinations. It wants to increase its fleet from 4 to 8 planes and its destinations from 4 to 10. It is wishing for a revenue of 1 billion RM in 2010 and with a margin of 10 to 20% (very optimistic), is projecting itself to be among the top 100 companies on Bursa Malaysia. Its CEO is definitely very gung-ho and bullish. He is already counting the chickens even before the eggs are laid.
Thursday, April 16, 2009
YTL Corp
This company is known for being very savvy with its funds. It builds up its war chest during good times. It and its CEO always claim that, in crisis times, they will emerge to buy up cut-price assets. They proclaim that to be the company's forte or signature.
Lets look at some of their recent investments in Singapore. First, they bought the Lake Front Collection in Sentosa Island for S$150 million. This consists of 18 bungalow lots and is done with a joint venture partner. Then, they bought the Sandy Island residential development consisting of 19 bungalow lots for S$135 million. The price for these purchases does not look dirt cheap.
Their foray into Singapore includes the en bloc purchase of Westwood Apartments for a record price of S$435 million. The land area is 62179 sq ft and at a plot ratio of 2.8, the land cost per gross development area is $2500/ft2. This price does not look cheap and with today's market condition, profits will hard to find.
They got a good deal in Macquarie Prime Reit. They paid S$285 for 26% of the reit company and also 50% of Prime Reit Management Holdings.
The big one came when its subsidiary, YTL Power, got hold of Power Seraya for S$3.8 billion. This was bought through and unsolicited bid after Temasek has called off its tender excercise. The offer price can, at best, only be described as fair. Temasak wouldn't have left off the power generator at a steal to YTL Power.
YTL Corp is purported to have a war chest of RM11 billlion. The above purchases more or less used up its available funds. They have little left for further acquisitions. So, did they moved too fast or has its CEO loss some of his Midas touch.
Wonder why they suddenly poured so much funds into Singapore. They did not really get fire sale prices. Safe haven?
Lets look at some of their recent investments in Singapore. First, they bought the Lake Front Collection in Sentosa Island for S$150 million. This consists of 18 bungalow lots and is done with a joint venture partner. Then, they bought the Sandy Island residential development consisting of 19 bungalow lots for S$135 million. The price for these purchases does not look dirt cheap.
Their foray into Singapore includes the en bloc purchase of Westwood Apartments for a record price of S$435 million. The land area is 62179 sq ft and at a plot ratio of 2.8, the land cost per gross development area is $2500/ft2. This price does not look cheap and with today's market condition, profits will hard to find.
They got a good deal in Macquarie Prime Reit. They paid S$285 for 26% of the reit company and also 50% of Prime Reit Management Holdings.
The big one came when its subsidiary, YTL Power, got hold of Power Seraya for S$3.8 billion. This was bought through and unsolicited bid after Temasek has called off its tender excercise. The offer price can, at best, only be described as fair. Temasak wouldn't have left off the power generator at a steal to YTL Power.
YTL Corp is purported to have a war chest of RM11 billlion. The above purchases more or less used up its available funds. They have little left for further acquisitions. So, did they moved too fast or has its CEO loss some of his Midas touch.
Wonder why they suddenly poured so much funds into Singapore. They did not really get fire sale prices. Safe haven?
Thursday, April 2, 2009
Why inflation now is good
Keynesian economics recommend that in an economic depression, the correct course of action should be to encourage spending and discourage saving. Governments should borrow money and boost demand by pushing the money into the economy. That's why countries like the US, UK, Japan, China, Malaysia and others are lauching huge stimulus packages for their conomies. Their aim is to stall any recessionary tendencies and hopefully set the economies on a growth path.
But what if the stimulus spendings don't work? Then, the country would go into recession, or worse, depression. The economy will slow down and jobs will be lost. In such a scenario, deflation may come into play. This means that price of goods and services will be lowered. Salaries too may drop.
However, debts such as home mortgages and business loans are in nominal trems (not adjusted for inflation). By this, it means that in a deflationary situation, your loans become more difficult to service. The instalment payment is a larger portion of your decreased salary. More people may default on their payments. This leads to more gloom in the economy.
But, if the extra injection of funds makes the economy sputter along and results in a modest inflation, then prices will move up. So too will your salary. Luckily, your loan remains the same. So, your instalment payment becomes slightly easier. This leaves you with more cash to spend which hopefully will boost the economy a bit. That's why it is important and good to have inflation in bad economic times.
But what if the stimulus spendings don't work? Then, the country would go into recession, or worse, depression. The economy will slow down and jobs will be lost. In such a scenario, deflation may come into play. This means that price of goods and services will be lowered. Salaries too may drop.
However, debts such as home mortgages and business loans are in nominal trems (not adjusted for inflation). By this, it means that in a deflationary situation, your loans become more difficult to service. The instalment payment is a larger portion of your decreased salary. More people may default on their payments. This leads to more gloom in the economy.
But, if the extra injection of funds makes the economy sputter along and results in a modest inflation, then prices will move up. So too will your salary. Luckily, your loan remains the same. So, your instalment payment becomes slightly easier. This leaves you with more cash to spend which hopefully will boost the economy a bit. That's why it is important and good to have inflation in bad economic times.
Monday, March 9, 2009
Temasek
She may have a 1st class honours from NUS and a Masters from Stanford both in Electrical Engineering, but she is no financial pundit. She worked as a civil servant and later as a corporate head in Singapore. She has no experience in international finance and has no foreign exposure. Yet, she is made head of an investment firm with a fund size of more than S$100 billion.
Worst still, she is not too risk-averse. So, what do you expect the results to be? She bought Shin Corp in 2006 and loss big. She has no experience in US dealing and wheeling and yet she spent billions buying Merrill Lynch. The firm has been absorbed by Bank of America and the price of BoA shares is in the dumps.
Temasek lost S$58 billions in the eight months from March to November 2008. The value of its portfolio declined by 31% from S$185 billion to S$127 billion. But the investment in Merril Lynch is close to being wipe off. Can you attribute this all to poor market timing? What about incompetency?
Worst still, she is not too risk-averse. So, what do you expect the results to be? She bought Shin Corp in 2006 and loss big. She has no experience in US dealing and wheeling and yet she spent billions buying Merrill Lynch. The firm has been absorbed by Bank of America and the price of BoA shares is in the dumps.
Temasek lost S$58 billions in the eight months from March to November 2008. The value of its portfolio declined by 31% from S$185 billion to S$127 billion. But the investment in Merril Lynch is close to being wipe off. Can you attribute this all to poor market timing? What about incompetency?
Monday, January 12, 2009
A disgruntled old man
This is an elderly statesman, who has relinquished power and who has biased and prejudiced views. But, he seems to be unable to accept the fact that he is no longer the ruling leader or the spokesman of the country. He still likes to make statements and comments on all sort of things. However, he lacks objectivity and fairness. As a result, his views are not taken seriously.
An example is his call for the boycott of US goods because of Isreal's invasion of the Palestinian controlled Gaza Strip. True, the Isreal aggression is cruel and brutal. But, he made no mention of the rockets fired at Isreal from the Gaza Strip. Also, his economic deliberations are no very sound. Hence, a lot of people, including the ruling leaders, don't agree with him.
Over the years, he has rattled a lot of biased and prejudiced views. Internationally, he is recognized more as a loose cannon than a credible statesman. As such, not much is taken for what he says.
An example is his call for the boycott of US goods because of Isreal's invasion of the Palestinian controlled Gaza Strip. True, the Isreal aggression is cruel and brutal. But, he made no mention of the rockets fired at Isreal from the Gaza Strip. Also, his economic deliberations are no very sound. Hence, a lot of people, including the ruling leaders, don't agree with him.
Over the years, he has rattled a lot of biased and prejudiced views. Internationally, he is recognized more as a loose cannon than a credible statesman. As such, not much is taken for what he says.
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