Today, the website My Stock 118 jubilantly proclaims, "WE TOLD YOU SO"
We told you so – Ringgit Will Hit RM3.90 against the Dollar, As the 10 year MGS falls to best level in 52 weeks Our Reporter | March 31, 2016
Kuala Lumpur : We told you so that the Ringgit will hit RM3.90 against the US dollar. True enough the Ringgit touched RM3.90 against the dollar today, before being pushed up back to RM3.92 against the greenback.
More importantly, the risk on Malaysian assets have fallen drastically and dramatically. As it is, the ten year government debt securities yield with a ten year tenure, commonly known as the 10 year MGS (Malaysian Government Securities) now stands at 3.818 per cent.
This is the lowest the yield is at over a 52 week period. A lower yield means that, the risk of holding Malaysian debts have fallen.
http://www.mystock118.com/2016/03/31/we-told-you-so-ringgit-will-hit-rm3-90-against-the-dollar-as-the-10-year-mgs-falls-to-best-level-in-52-weeks/
Also, just yesterday evening at the Multimedia Super Corridor Project Management Professional (MSCPMP) Circle Forum #1/2006, entitled 2016 Outlook: A race to the bottom?, one of the speakers, Mr. Phua Lee Kerk, CFA, Chief Strategist with Phillip Capital, said that the contention over the 1MDB soveriegn fund is coming to an end and that he predicts that the ringgit will rise to RM3.80 to the US dollar later this year. Phua also told the audience that the Goods and Services Tax (GST) could be raised from the current 6% to 8% at the end of this year.
He also predicted that pending the outcome of the Sarawak State elections in April, the Prime Minister Dato' Sri Najib Tun Razak may well call a snap general election around June this year.
Another speaker, Soon Hoh Sing, an author, columnist and commentator from Klang, told me on the sidelines, that the Democratic Action Party (DAP) which gained some seats in the last Sarawak State elections, could well lose a few seats in the upcoming one, since some Chinese businessmen in Sarawak were angry with the former Sarawak Chief Minister Taib Mahmud, whose business interests allegedly were encroaching into those of these Chinese businessmen, but the current Sarawak Chief Minister Adenan Satem is more accommodating of other ethnicities, so it is quite likely that this segment of formerly aggrieved Chinese would vote for the ruling coalition again, since being pragmatic, they would not want to lose out on whatever opportunities there are available to them.
Now it may not please coffee and tea shop politicians that contrary to popular misconception, based upon whatever personal prejudices or biases - the ringgit's exchange rate has closely followed the price of oil, which began it plunge from US60 a barrel around June 2015 to below US$40 per barrel since November 2015.
* For those who are unfamiliar, the expression "coffee shop politician" refers to ordinary citizens who sit for hours in coffee shops (or pubs), sharing whatever snippet of political scandal or opinion, credible or incredible, informed or more often ill-informed, which they had heard from someone, who heard it from someone else, who heard it from someone else, who read it on some newspaper, website, blog, Facebook, Twitter, WhatsApp or whatever. In fact, I first heard the expression from my late mother back in the 1960s. She's Thai, so perhaps that's a Thai expression , though I'll have to ask my Thai friends and relations as to the origins of the expression.
The problem with this of course, is that people tend to believe what they want to believe, despite all the evidence on the contrary. Like if they insist on believing that the ringgit weakens whenever Najib farts, they will believe that whatever proof to the contrary you present them with.
Anyway, the two embedded charts below speak for themselves. (Allow viewing images in your e-mail client if you cannot see them.)
First the ringgit to dollar exchange rate over the past 12 months when went from a high of around RM3.50 to the US dollar to a low of almost RM4.46 to the US dollar in the last quarter of 2015
You can check out the exchange rate for yourself over here.
http://www.xe.com/
Now the crude oil prices - i.e. West Texas Intermediate and Brent
You can check that out for yourself over here
http://www.oil-price.net/
Looking at the above two charts, I'm sure that you can see a fairly close correlation between the ringgit-dollar exchange rate and the oil price.
However, the question remains as to whether the oil price will continue its rise from a low around the middle of this Q1 2016 - ending today 31 March, or is this rebound just a dead cat bounce, after which the oil price will fall again?
After all, both WTI and Brent crude prices have pulled back from slightly above US$40 per barrel to slightly below US$40 per barrel right now.
Well, Oil-Price.net is confident that the oil price will rise to US44 per barrel within the next 12 months.
Now, the lesson to be learned here is that Malaysia must move away from too much dependence on oil revenue and diversify our economy more, so that we will not be so adversely impacted by the price of this one commodity.
The implications
A weak ringgit versus other major and regional currencies negatively impacts upon the price of essential goods and to some extent services, since Malaysia imports much of our foodstuffs, including rice and the ingredients which go into processed foods and these are usually priced in US dollars.
Also, Malaysian manufacturers quite often import much of the raw materials, modules and component parts which go into their final products which they manufacture domestically, and these imports are priced in US dollars.
So, a weaker ringgit has a direct impact upon the cost of living for us ordinary folk, whilst hopefully, a stronger ringgit would result in lower prices on the shelves, provided the producers and suppliers will lower their prices accordingly.
Also, a lower cost of living will work favourably for the ruling Barisan Nasional coalition, especially for UMNO (United Malaysia National Organisation), its strongest member in Peninsular Malaysia, since a lower economic burden upon the rural and semi-rural folks, as well as the urban lower income group, will tend to favour the ruling coalition in terms of seats in parliament, especially since it's the rural and semi-rural constituencies which deliver the seats in parliament for the ruling coalition.
However, if the GST is raised to 8%, it could well negate the benefits of a stronger ringgit on us ordinary folk, so that's something the ruling coalition should think about, if it wants to remain in power, that is.
As for the opposition Pakatan Harapan, you better think of ways and means to address the concerns of us ordinary urban, rural and semi-rural folk as well, in real terms that is, not just well-worn and cliched platitudes such as "transparency, accountability, integrity", and so forth, if you want to become the next federal government.
Issues such as 1MDB, RM2.6 billion donation (or "donation"), Rosmah's ring, Altantuya, Scopene submarine, who had sex with whom through the front or back, Guan Eng's RM2.8 million bungalow, Mahthir versus Najib, etc. etc. etc. may provide much entertainment value for coffee shop politicians with too much time on their hands but these do not hit ordinary folk directly in the pocket where it hurts and will not deliver the majority of seats needed to win.
And to you Selangor Chief Minister Azmin Ali, re-route the DASH (Damansara-Shah Alam) Highway away from Damansara Perdana and Mutiara Damansara as their residents demand, and also do not let it run through the forest reserve land. These residents are not saying not to build the highway which will ease the traffic congestion for many but do not run it past their apartments and businesses and this is a reasonable demand.
Oh yes. Also don't allow a revival of the KiDEX highway which will run past my area.
Yours truly
Charles F. Moreira
http://aidmap227.blogspot.my/
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