This will be a very short write-up (hope readers get the idea)

IMPACT OF DELEVERAGING

1.  China stock market dropped USD4.9T

2.  US stock market dropped USD2T

When stock market fall, the paper money just disappear.  Holding financial assets (paper assets) like stock, is like holding a piece of paper (some call it a proportion of biz).  The piece of paper today is say US80T, the next month it could be USD70T.

IMPACT TO BURSA STOCK MARKET

1.  KLCI dropped from RM1.7T to RM1.4T.  Overall, those who own shares is about RM300B poorer.  If we measure it with USD, since Jan 2015 (3.20), we dropped from USD531billion to today Sept3 (4.20), about USD333 billion.  Our share market in USD terms just dropped close to USD200B (RM840B).

2.  Yes, in past 8 months, about RM300B wipe out, just like that.  

3.  Have I not mentioned crude oil and palm oil?  How much do you think it contributes to our GDP?

4.  What about property, how much do you think it contribute to our GDP?

IMPACT ON MALAYSIA PROPERTIES

1.  in 2006, housing loan as a percentage over GDP is about 27% (RM160B)

2. In 2014, housing loan as a percentage over GDP is about 42% (RM440B)

3. Due to low interest loan (2006-2014), additional property loan is RM280B.

4.  What will happen to the RM280B properties that comes into the market?  Assume it takes 3 years to complete, each year, about RM30B-RM40B new properties added to the market.  

5.  What will happen when the economy contract? And when bank is not giving loan to property sector?

6.  Will property loan contribution to GDP drop?  How much do you think it will drop?

7.  What if the RM30B-40B, 50% are investors and cannot find buyer at the right price? Or cannot find tenants to repay their loan?

IMPACT ON BANKS

1.  If we look at it from the macro perspective, the BANKS are the major owner of the PROPERTIES.  Hence, the bank, plays a major role in contributing to the GDP.

2. When new properties come into the marke after completiont, and the investor/speculator unable to find new buyers or tenants (which is what happen today and next year or so), what will happen?

3.  Well, first thing is, bank will issue a letter of demand, then......? 

4.  Eventually, provisions in the bank must be made.  Earnings of banks going forward will......?

WHAT NEXT?

1.  Be defensive (in stock market).  As mentioned since 2014.

2.  Be diversify (in currency).  As mentioned in Oct 2014 (www.sosfinancialplanning.blogspot.com)

3.  Watch out for bank announced results (only tells you the past, not the current or future)

Have anyone asked what is the amount of debt of 1MDB today in RM?  The last I heard was about USD13billion @ 3.20 or RM42B as at 1 Jan 2015.  Assuming no repayment was paid, today, the debt is about RM54.6 billion @ 4.20 (give or take, about USD1-2b was repaid).