Fitch Ratings said that Malaysia is weakened by the downtrend in international reserves which have declined by 12 percent (US$16 billion) between August and December 2014. In other words, the outflow is far greater than the inflow of funds into Malaysia. We can see this in the weakening Ringgit as well as the dropping Bursa. This would be what it call a ‘rating sensitivity’. This meant Malaysia may be downgraded the next time they release another rating on Malaysia. We are currently still rated A- by Fitch ratings. A- may seem like a bad rating but this is still considered an Investment Grade rating. Standard and Poors also rated us at A- currently.
Fitch said that eventhough Malaysia continues to enjoy an account surplus but this surplus itself is under threat. In fact, Malaysia’s revision for a higher deficit for 2015 meant that the country remains very dependent on petroleum-linked revenues. That’s an issue as oil prices remain weak and there are no signs of it bouncing back soon. Thus, with all these, it may be tough for the government to achieve a balanced budget by 2020. As usual, the rating may drop but it will only be potentially downgraded within the next 12-18 moths. Next full review is end July 2015. Do note that for 2014, our growth remain healthy and effects to the economy for the whole of 2015 is still not clear. That’s why Fitch said, 12-18 months. In other words, unless situations deteriorated even further, A- should remain till 2016. That’s a relief? Well, yes and no. Yes where ratings are concerned but not where sentiments are concerned. Sentiments remain negative.
Today (21 Jan), it was reported that the Chinese Yuan is leading drop in all Asian currencies. Dropping against which currency? US$ is the gainer. This current superpower is showing good signs of good growth, thus many are more confident and thus it’s currency is enjoying a very good spell currently. US$ is a world currency. During times of volatility, it will always enjoy a higher value as it is considered a much safer safe haven compared to any Asian currencies or even AUD$ which is even more affected by commodities and it does not need to be just oil prices. The most important thing everyone must keep an eye on is this, are there investments which I can make today which is considered safe moving forward? Buying a luxury villa in Sentosa? Nope. Keeping all money in FD? Hmm… Buy stocks in a company which has weathered the last two crisis and is still going strong? Hey, this might be one. Buying a secondary property which is 20% down today versus a year ago and rental can still cover mortgage? Yes….. this might be another one. Are there others? Of course there are. Remember those words of ‘be brave when others are fearful and be fearful when others are greedy?’ Happy seeing through all the many negatives and can somehow pick up something usable.
written on 21 Jan 2015
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