Good Articles to Share

This is not a small blip - Felicity

Tan KW
Publish date: Wed, 31 Jul 2013, 02:30 PM
Tan KW
0 458,082
Good.
Following Message

When Fitch comes out and downgrade our sovereign rating from stable to negative, this should be looked at it entirely and is serious. Few times, I have highlighted the danger of over lending by the banks, but little did I mention about the government's debt.


With that downgrade in rating, it seems that we have a dual problem, i.e. not just on the overly high consumption debt among the people, but it includes national debt which if not kept in check may turn out into a problem to the country. With the negative outlook, our borrowings cost may just go up. If you have noticed, we have gone more overseas to get our funding although a large portion of our national borrowings still come from within i.e. from EPF, KWAP etc.

Besides the published national debt, another cause of concern is the off balance sheet debt where it seems that many people do not even know the extent of the off balance sheet debt. Frankly, if the off balance sheet debt is not kept in check, the government itself may not even know the quantum of the guarantees and other contingent liabilities that may have already been in place.

I think with the extent of the downgrade, it would be good for any investors to reposition their investment portfolio to assets which are not too overexposed to the consumption, government awarded projects or rather who are dependent on those projects. In fact, concentration should be focused on companies which are export led and companies where the assets are located overseas rather than those which are fully dependent on local consumption. 
 
http://www.intellecpoint.com/2013/07/this-is-not-small-blip.html
More articles on Good Articles to Share
Some investors demand change at LVMH after probe into Dior contractors

Created by Tan KW | Jul 23, 2024

NXP heads for biggest slide in four years on weak outlook

Created by Tan KW | Jul 23, 2024

US existing home sales slump in June; median price hits record high

Created by Tan KW | Jul 23, 2024

US spot ether ETFs make market debut in another win for crypto industry

Created by Tan KW | Jul 23, 2024

Nasdaq, S&P rise as spotlight turns on tech results; UPS plunges

Created by Tan KW | Jul 23, 2024

French leftists announce legislative steps to scrap Macron's pension reform

Created by Tan KW | Jul 23, 2024

Estonia will support Ukraine 'until victory', new PM says

Created by Tan KW | Jul 23, 2024

Kenya police fire tear gas to stop scuffles between pro and anti-government groups

Created by Tan KW | Jul 23, 2024

Some investors demand change at LVMH after probe into Dior contractors

Created by Tan KW | Jul 23, 2024

Coca-Cola lifts annual forecasts as price hikes fail to dampen soda demand

Created by Tan KW | Jul 23, 2024

Discussions
2 people like this. Showing 9 of 9 comments

Ooi Teik Bee

It is very important for a government to be prudent in spending money. It is the same as our current account, we cannot survive on Overdraft. We must have money in our account before we issue cheque.

2013-07-31 15:34

iafx

it's about balance, Fitch sees M'sia shown sign of loosing balance, e.g. as PETRONAS div make up 30% of gov income but: http://www.reuters.com/article/2013/07/31/fitch-revises-outlook-on-petronass-lc-id-idUSFit66566420130731

has Fitch overstated? let's c soon how PM and BNM response to this.

2013-07-31 15:40

Buy & Sell Sell & Buy

our gov will always short of monies. How to get good rating frm Fitch??? Sooner than later, our gov will make GST compulsory to get more monies frm rakyat. Bcos gov will never has enough monies.

2013-07-31 18:21

Jonathan Keung

BNM will not react to Fitch's downgrade. BNM is only answerable to the government (not to Fitch). with Petronas we are still OK compare to other countries without natural resources. Malaysia is a country of abundance but but somehow where does all our exports (eg. crude oil, CPO, rubber ) money goes to. you need to find the answer yourself

2013-07-31 18:23

KC Loh

The Govt is spending. That is keynesian! And its taking domestic loans instead of external ones in an effort to insulate our economy from capital flight and more so speculators. This we can thank the 1998 Asian Crisis. So, nothing strange with Fitch's current rating! If indeed anything, GST will be made possible because of this! Im not saying I like it, but its necessary!
I can only see post-GE hangover from some comments! Those who do not remember history, are condemned to repeat it!

2013-07-31 18:53

iafx

well commented guys! juz to add that corruption remains as 1 of the top issue draining our economy, only today macc reported shortage of diesel is cause by ganging up of suppliers, distributors, retailers & corrupted gov agencies in stealing subsidied diesel for huge profit in black market!!

2013-07-31 19:56

yktay1

To all the doomsayers out there, do you think the foreign investors do not already know what Fitch just reiterated? When doing a top down analysis of Malaysia, which I think most funds do, they already know what they are getting themselves into. Debt to GDP, shadow banking, government guarantees, personal loans, high corporate borrowings, etc. They already take these into consideration when investing, a report by Fitch downgrading Malaysia's outlook is no surprise. It only gives them a chance to invest more. Plus, the Ringgit is cheaper too. Now, let's see what Bernanke does!

2013-07-31 21:23

Frank Soweto

yep agreed with what yktay1 said above - when US was downgraded sometime back and the knee jerk reaction was a SELL and now where is the US Market :) - u fellas here always complaining of high prices - no more cheap shares and now this sell down is an opportunity to look for some good counters that has been beaten down the past 3 days :)

2013-08-01 00:33

iafx

BNM finally sound: http://www.theedgemalaysia.com/business-news/248633-dont-overreact-to-bonds-sell-off-says-zeti.html

2013-08-02 10:01

Post a Comment