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There is no better time to blog about this post. After the plunge of KLCI yesterday, citing election risk, we came across an interesting research report by CLSA. As such, we would like to take this opportunity to share with you. By CLSA, An unexpected opposition Pakatan Rakyat (PR) coalition victory in the impending 13th General Election (13GE) would spark a broad sell-off in Ringgit assets . Changes of government are not uncommon in ASEAN. Looking at the experience of Indonesia, Thailand and the Philippines over the last decade, parliamentary control has seen significant shifts and governance has been possible despite the lack of a parliamentary majority. However, Malaysia has never experienced a change in government, meaning any change will come as a shock and with a host of uncertainties. From an equity and debt market perspective , Malaysia has always enjoyed a political premium for the stability in governance and policy-setting stemming from majority control of parliament...

As part of continuous efforts by Bank Negara Malaysia to enhance competitiveness in the economy and to develop the domestic financial markets, Bank Negara Malaysia wishes to announce the following liberalisation measures, with effect from 31 January 2012: To further spur the domestic foreign exchange market through greater product innovation, licensed onshore banks are permitted to trade foreign currency against another foreign currency with a resident. To further deepen the domestic interest rate derivatives market, a licensed onshore bank is allowed to offer ringgit-denominated interest rate derivatives to a non-bank non-resident. Towards enhancing the asset liability management of residents, flexibility is permitted for a resident to convert their existing ringgit or foreign currency debt obligation into a debt obligation of another foreign currency. The above measures which are in line with the broad thrust of the Financial Sector Blueprint will contribute towards increasing the...

Tenaga Nasional Bhd (TNB), the national power producer of Malaysia, would embark on nuclear power in the next few years. Given the sensitivity of such issue, Malaysia government has again hinted that there are plans to construct nuclear power plants in the country to fulfill boost up the electricity capacity. Example of Nuclear Power Plant According to theStar recently, Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Malaysia plans to build two nuclear power plants with a capacity of 1,000 megawatts (MW) each and commencement of operations in 2021-2022. This is part of the country's overall long-term plan to balance its electricity generation mix. The two nuclear plants would represent 9% of peninsular Malaysia's existing power generation capacity of 21,817 MW. This is necessary for the country given that the peninsula's power reserve margin will drop from 44% currently to below 20% by 2016 while the 1,600MW Bakun undersea cable project has been dis...

Yesterday, Adventa (Malaysia's 5th largest glove manufacturer) surprisingly reported 4Q10 net profit of RM11.8 million, up 50.8% year-on-year. According to RHB research, the results were above expectations, mainly because of of a deferred tax write back of RM5.6 million. Excluding the differed tax write back, FY10 net profit would have been RM30.2 million. Advent's range of products However, profit before tax was lower due to a time lag as only about 70%-80% of the higher costs incurred as a result of rising latex prices and the weakening of the USD against MYR were passed on to customers --- OSK research. To sweetened the announcement, Adventa also declared a final tax-exempt dividend of 7 sen, which translates into a net payout of 30% and net yield of 3.6%. Indicating a revival of Glove counters? As all of the glove counters are in the red this year, experiencing a whopping 30%-40% drops, Adventa's result sure will catch the eyes of investors again. But, Finance Malay...

Yesterday, China surprisingly raised its interest rate by 0.25%  as follows: - 1 year lending rate from 5.31% to 5.56% - 1 year deposit rate from 2.25% to 2.50% Why China raise interest rate? 1. To cool down the over-heating property sector. 2. Combat inflation 3. Low liquidity in the banking system While inflation was hovering around 3.5% currently, even though the deposit rate has been raised, the net real interest rate is still in negative territory (3.5% - 2.5% = -1.0%). This is one of the main reason why Chinese were going all out to invests, especially in real-estate, due to its low yield if sitting in the bank (even lower than Malaysia). However, China would be facing another problem... Raising interest rate would attract capital inflows , which could dampen the purpose of containing inflation. Foreign investors view Chinese renmimbi as undervalue , mainly due to interventions by Chinese government. The latest news could ignite a fresh round of thoughts,...

Due to weakening USD and record low-interest rate in the US, Europe and Japan, emerging markets have been a popular spot for excessive liquidity to park their money. Main reasons being: Emerging markets are the fastest growing economies currently Emerging countries are having  higher interest rate Banking system of emerging countries are stronger (safer) While develop countries are facing a currency downfalls, emerging countries are experiencing continuous inflow of hot money. This in turn causing a chaotic in currency exchange market, where emerging countries' currencies are hitting years high against developed nations. The imbalance forex market prompt central banks around the world to act or to curb any excessive flows of money which could jeopardised a particular countries, like 1997 Asian financial crisis. In the latest developments on this hot topic, Thailand announced a  15% withholding tax on interests and capital gains on Thai bonds. I...

Recently, I personally have a chance to met up with some businessman from different industries. When we chat about business, they said " very competitive la ". When we chat about economy, they said " still very uncertain eh ". When we chat about KL market, they said " why keeps going up ahhhh? ". While newspaper and media are reporting a slew of  news regarding Euro debts problems, US high unemployment, Japanese deflation, and China's scary property bubbles, our market charging ahead unobstructed. In contrast, Ringgit is heading to a fresh 13 -year high against USD, KLCI is trying to out-beat its highest ever level, surpassing the pre-crisis level now. Although our economy was not as good as pre-crisis, our KLCI did. Why? Malaysia to gain from world's liquidity... Taking a macro-economic view, this is all due to the liquidity that the world governments created to rejuvenate their economies out from the 2008 recession. Actually, we are one of the b...

Recently, many of my friends asking me why Ringgit suddenly is rising so fast in value? Well, this is not a bad question though for Malaysians. In contrast, for those who working overseas, and converting to Ringgit regularly, would become poorer as a result. In fact, many Malaysians working in Singapore especially, might think that RM is generally weakening against SGD over the long-term. It's TRUE if you are saying since "Dot-Com" burst.  Could this be a turning point now? From the graph above, it shows clearly that the trend of decreasing value of SGD against RM. Reasons being that optimism of Malayisan economy is going to grow faster than many predicted. This has whetted foreign investors' appetite for local assets, including stocks and bonds. World Bank recently raised its forecast for Malaysian economy to grow at a faster rate of 5.7% this year, compared with its earlier forecast of 4.1% made in November. As a result, local equity and bond markets are ...