It was 1998. I was taking the module of ‘International Business in Emerging Markets’ for my first degree in Bristol when the lecturer asked the class what do we think about Malaysia’s capital control. In brief, I replied that capital control allows breathing space for some measures to be implemented. Then, the lecturer said that he believe it will be hard for Malaysia to recover as fast as countries which asked for IMF’s assistance. In fact from an economist’s point of view, capital control is never good. I think majority of the students agreed with him but I said, I do not and we would know in a few years time. I think the capital control has helped Malaysia weather the many uncertainties and with a more stable environment, things can move again. After 1998, Malaysia’s capital control became case studies in many universities. In fact, today, capital control is no longer considered no-no but is in fact recommended for some countries but it should not be used unless circumstances forces it.
Towards final few months of 2014, RM as well as Bursa has been under lots of volatility. Mostly down. Recently, when asked if Malaysia would try capital control again, Bank Negara Malaysia (BNM) said no. In fact Malaysia has ‘moved on’ from using controls to manage capital flows. Capital controls are only for extreme periods and we are not experiencing extreme periods currently. Besides, the current banking sector is much stronger than previously after the many liberalisation and enhancement of its competitiveness. As at today, Malaysia is still growing steadily and unemployment remain low.
To those who believe that 1998 is coming back, I think you should have or must take steps to prepare for it. Cash, lots of it. Unwind and sell everything that you have today and get ready, if you truly believe 1998 is coming back. However, if you do not think so, then at least stop spreading false and negative rumours. Until today, irregardless of research houses or banks, the growth for Malaysia is projected to continue and worst case estimation has been that for 2016, our growth may be slightly below 5%. The property market is also on a downtrend in terms of transactions thus far but if the developers are willing to sell lower and more affordable units come into the market, the total transaction numbers for primary market is likely to hold steady or increasing again. Of course, if you are buying at RM800psf today and hopes for RM1,000psf in a few years time, I can only wish you good luck. Always understand that the growth of the country or the lack of would be a major determinant of the property market. Low unemployment meant a lot of people have potential to buy but final decision is based on affordability. Happy understanding.
written on 16 Jan 2015
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