Increasing liquidity and maintaining rates

After Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 3.25 percent and reduced the Statutory Reserve Requirement from 4.00 to 3.5 percent, the market sort of turned positive. Well, according to Credit Suisse, BNM is ‘treading a thin line.’ It’s economist Michael Wan said said that if the market interest rate structure is too low, it could result in further capital flows. Due to the anticipation of a slower growth for 2016, BNM actually does not have many options. Reduce rates, it may force capital outflow. Increase rates, that may mean the end of growth with all those with debts currently becoming worse off.

My personal thoughts from these assessments would be that BNM is still doing the right thing currently and all these potential outflows just have to be calculated in. Besides, I personally think this is better than increasing rates. Seriously, with the current market sentiment, even if the rates are increased do we believe Ringgit will appreciate to a level we are comfortable with? I personally rate anything below US$1 to RM4 as comfortable for now. Accommodative stance is needed today. Actually, if we look at the market today, there are already many companies which are more wiling to take in lower margins.

From white coffee to clothes and even new property launches. It’s a good time for consumers. In case no one noticed, the typical pack of white coffee of 15 packs x 36-40gms would be around RM14.50 (all major brands). Today, these major brands are selling at RM12.50 and many times, special offers at below RM11. The not-so-major brands? Well, many are already below RM10. I know because in my office drawer, I have over 22 brands of 3 in 1 coffee for sharing with my colleagues. Yes, I think I have more options than many small supermarkets.

To those who buy polo t-shirts often, the prices are normally RM69,90 or higher. Depending on brand and quality, it can be higher. These days, even the major brands would have special discounts of buy one free one for RM79.90 or even lower. For the non-major brands, it’s even lower. I recently bought two new polo t-shirts for just RM59. For some in-house brands, with their ‘clearance’ sales, a new polo t-shirt can be as cheap as RM24, after 50% discount. RM24 to be worn for 2 years, it’s worth every cent.

For new property launches, there’s no need to start about the special rebates, the renovation packages, the last few units under-market value prices and more. Those in the market for primary properties would know better than me.   The good news for these potential buyers is that with the cut in SRR, the banks would immediately have more funds to lend out. Recently, many banks were offering special Fixed Deposit rates too. All these measures share one common theme; availability of funds for those who needs to borrow and qualified for one.

Of course, for goods which are imports, the prices needed to be adjusted upwards because the ringgit has indeed depreciated so much that we are the worst performing currency last year, even against the Rupiah or the Baht. Hold on, the ride may still get rougher but if we are in the ride, it meant that after the lows, then the ups will come. The worst thing is that we are not in the ride yet and have no idea when we should board the ride. Happy deciding and remember, read more and follow your own analysis as it may be better than majority of the analysts out there.

written on 24 Jan 2016

Next suggested article: Ringgit is undervalued. I agree.  

 

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