Fitch ratings upgraded our outlook from Negative to Stable last week. bursa and Ringgit reacted by going up at least 1%, which is good.
Today, Moody rating responded to queries by REUTERS , stating 1MDB doesn't post systematic risk to our country's financial well being. And I quote you the article here :-
"Moody's: Malaysia 1MDB does not pose systemic risk to government finances
ReutersMonday, Jul 06, 2015
HONG KONG - Malaysia's economy, its banking system and government finances are not under systemic risk from developments at state fund 1MDB, rating agency Moody's said on Monday.
Moody's said the rise in political friction has not affected the government's stance on fiscal reforms.
Moody's said in an emailed response to Reuters that developments related to 1MDB would affect the country's A3 rating only if they materially affected the trend of fiscal consolidation that supports its positive outlook.
The agency also added that last week's media reports were not specific with regards to their sources and "not much different from a lot of the developments related to 1MDB over the past year."
Suffice to say, two of the International Credit Ratings Agencies earnestly chided off allegations that 1MDB issues have any bearings to our economical and financial well being. As opposed to some Blogs, and also some news papers where sentiment and fear mongering were their modus operandi, International Credit Agencies adopt scientific measures to assess a country's financial well being. After their assessment done in due diligence, they were positive about Malaysia's wellbeing.
What then causes the Ringgit value to further deteriorates?
Malaysia is not the only one affected with currency drop, in light of Greece recent unfortunate Referendum Outcome which rejects IMF and EURO bail out packages without certainty in future policies endeavour. :-
The Euro lost 1.1 per cent to $1.0992 by 6:12 a.m. Tokyo time, its weakest level since 29 June, also slipping 1.7 per cent against the yen and 1 per cent versus the pound. The Aussie fell 0.9 per cent to 74.52 U.S. cents, the first time it’s broken 75 cents since 2009, and New Zealand’s dollar slipped 0.6 per cent.
U.S. INTEREST RATE ADJUSTMENT
“The hiking of (USA) Federal interest rates has a clear impact on emerging markets,” said Nizam Idris, Singapore-based head of foreign exchange and fixed-income strategy at Macquarie Bank Ltd. “As the Fed hikes rates,” the attraction of Malaysia’s yields will decrease, he said."
See more at: http://m.themalaymailonline.com/…/ringgit-drops-to-six-year…
In lay terms, as U.S. Fed adjusted their Interest rate upwards, cost of investment becomes higher oversea hence reduced, and demand for ringgit decreased driving our value down.
Those with strong financial background can assist in explaining the technicalities of this, and all you have to do is just to ask them.
CRUDE OIL PRICE DROP
like it our not, our country has a 29% dependency on Oil Revenue. Recent sharp drop in Crude Pricing will result in the weakening of ringgit :- price per barrel become so much cheaper and demand for ringgit to purchase or oil will be lower. This will cause our ringgit to fall too.
BAD DEPICTION OF OUR COUNTRY : POLITICAL INSTABILITY
Mind you, that your friendly neighborhood investors are not as passionate as you are in "changing your government" or "pulling down a regime". While you see these as progressive way of practicing your democratic right, hence posting negative statuses demeaning your country's leadership enthusiastically, they are busy consulting business management consultant who runs sentiment reading in sophisticated tools, telling them the utter state of instability that Malaysia is facing.
That is to say that you made them fear that investing in Malaysia will result in loss due to possible political changes/volatility (one like Thailand), thus encouraging them not to continue investing in our economy. As they pull out their money, they dump our ringgit and moved on, causing ringgit value to fall even further.
CONCLUSION
While our economic fundamentals are solid as per Fitch and Moody, the U.S. Interest rate hike, fall in crude price, Greece referendum, China's economic slowdown, and also your bad mouthing of your country contributed to the downfall of ringgit.
Unlike Tun Mahathir's time, no boogie man like Soros can be blamed this time, especially where it was the Rakyat ourselves who've contributed to it in a way.
For that, I congratulate you to create this self-fulfilling prophecy and successfully catalyzed the materializations of it.
Sekian.
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