Last updated on 14/08/2014 - 11:29
14/08/2014 - 11:00
Ng Kee Seng
COMMENT: Bursa Malaysia’s recently released data showing RM13 billion in net outflows of foreign portfolio funds in 15 months is sending the chills down the spine of equity investors or players.
It is a sign of foreign investors, for whatever reasons, packing off to greener pastures, so to speak.
The highest outflow of RM6.8 billion was recorded in August last year for the period from May 2013 to July 2014.
And with banks raising fixed deposit (FD) rates to enhance liquidity amid concerns on rising loan-to-deposit ratios, where does that leave Malaysians socially and economically?
The raising of FD rates logically will mean more cash flowing into banks, thus curbing domestic spending.
This is bad news for retail businesses and will have negative domino effects on the country’s Gross Domestic Product (GDP).
Adding to Malaysia’s economic woes is its infamous mounting federal debt.
Remember the 1997 financial crisis when Thailand’s baht devaluation triggered a regional collapse in markets? This is the inherent fear of investors and equity players.
Asia’s markets are currently holding out to the pressures of:
Ø THE US Federal Reserve asset purchase cut programme which is scheduled to end purchases in October 2014, ending US$15 billion (RM48 billion) in monthly purchases of US Treasuries and mortgage-backed securities;
Ø A FEARED property bubble burst and economic crash in China due to mounting financial vulnerabilities; and
Ø RUNAWAY household debts.
Both rural and urban poor and the middle-income Malaysians are already struggling to make ends meet for their families amid rising costs of living.
Speculative media reports that the federal government will announce another round of oil price and electricity tariff hikes this year are worrisome to many.
If the speculated price hikes do come true, imagine the misery Malaysians will have to go through when the Goods and Services Tax (GST) is implemented next April.
With Malaysia’s federal debt at an all-time high of about RM800 billion, what can the government do to help ease the socio-economic woes of Malaysians?
Given both the current domestic and international economic outlook, clearly Malaysia and Asia are severely exposed to financial shocks and economic shifts that can only spell trouble to the populace.
Consider these factors:
Ø On July 10, Bank Negara announced the raising of the benchmark overnight policy rate (OPR) by 25 basis points (bps), or 0.25 percentage point, to 3.25 per cent. This is aimed at reducing the risks of economic and financial imbalances by curbing rising household debt;
Ø According to the latest US-based Global Financial Integrity (GFI) annual report, Malaysia lost more than US$370 billion to illicit outflows in the 10 years since 2002. In 2011 alone, the amount siphoned out was US$54 billion;
Ø On Jan 18, The Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) warned of Malaysia’s recovery being jeopardised by growing financial instability; and
Ø The Gini Index, used to measure the income gap between the poor and rich, currently ranks Malaysia as third in the Asia Pacific (Better off than Micronesia and Papua New Guinea but lagging the Philippines, Singapore, Qatar, Thailand, Israel, South Korea and Japan).
Amid such financial and economic pressures, what then can Malaysians do to ease the misery when the economic blade of the guillotine drops?
Just sit and expect help from the rich or the government?
It has been wisely stated, once too often, that the only way for a country to tackle and fight economic challenges effectively is for the government and people to raise productivity and efficiency.
Failing which, the only sane response for Malaysians is to brace themselves to face the misery as Malaysia has been described as among the “high-debt nations at risk of an economic catastrophe”.
- See more at: http://www.theantdaily.com/Main/M-sians-must-raise-productivity-and-efficiency-or-brace-for-economic-misery#sthash.nPxT4Fs7.dpuf