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?
GREECE REFERENDUM
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. :-
http://www.breitbart.com/…/currency-markets-react-to-greek…/
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.
