Summarise from Bank Negara Malaysia Press Statement release on 30 Dec 2008

Monetary and Financial Developments November 2008 Highlights of the Press Release

1) Commercial Bank lowered the fixed deposit (FD) rates for tenures between 1 and 12 months were within the range of 3.02% to 3.53% and the base lending rates (BLR) in response to the reduction in the Overnight Policy Rate (OPR). The average lending rate (ALR) decreased to 5.98% in November (6.01% in October).

2) On gross terms, however, financing raised by the private sector was slightly lower at RM53.1 billion. Total loans outstanding expanded at an annual growth rate of 10.7% as at end-November.

3) During the period 1 November to 26 December 2008, the ringgit appreciated by 2.4% against the US dollar. The ringgit, along with most regional currencies, had earlier depreciated in November due to portfolio outflows caused by the global de-leveraging process and heightened risk aversion amid the global financial turmoil.

4) The ringgit appreciated against the pound sterling (13.6%), but depreciated against the euro (-6.3%) and the Japanese yen (-6.1%). Against regional currencies, the ringgit depreciated against the Philippine peso (-0.5%) and Singapore dollar (-0.2%), but appreciated against other regional currencies in the range of 2.2% to 3.6%.

5) Investor trimmed their long position in US dollar following the reduction in the Fed Funds rate to 0% - 0.25% on 17 December 2008.

6) Inflation 5.7% in November 2008.

7) Broad money, or M3, expanded at a faster annual rate of 12.5% in November or increased by RM8.8 billion,reflecting the higher provision of credit to the private sector and expansionary Government operations.

8) Net non-performing loans (NPLs) of the banking system at 2.4% of total net loans.

9) Banking system capitalisation remained strong with a risk-weighted capital ratio (RWCR) of 12.5%.

10) The international reserves of Bank Negara Malaysia amounted to RM336.4 billion (equivalent to USD97.7 billion) as at 28 November 2008. As at 15 December 2008, the international reserves amounted to RM330.4 billion (equivalent to USD96 billion). The reserves position is sufficient to finance 7.8months of retained imports and is 3.4 times the short-term external debt.

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Comment :

Lower FD will affect the return for the deposit holders; for those retire and rely on interest rate they may receive lower income but need to bear the higher expenditure for their daily life. The inflation is at 5.7% base on BNM information. In reality it might be higher, depend on the person spending or expenses.

As November financing by private sector still at a stable level, with the global recession, do the Malaysia bank still will continue provide loan at double digit growth? Loans outstanding expanded at an annual growth rate of 10.7% as at end-November.

Although MYR appreciate 2.4% against USD, but if we compare with Dec 07, MYR actually depreciate around -5% against US. MYR depreciate roughly -23.2% against Japenese Yen from Dec 07. And compare with our neighbor country Singapore’s SGD we depreciate around -4.9% from Dec 07.

Inflation may come down, but the other issue is do we have the purchasing power? The rural area people is highly rely on plantation, nowadays Crude Palm Oil (CPO) and rubber commodity price coming down a lot, to maintain their daily expenses also a problem.

On November Broad money, or M3 still at the stage of expand, but BNM Malaysia also mention that foreign outflows continued to exert a contractionary impact on M3 and for the Nov 08 net foreign assets outflows around 12.1 billion from Oct 08 22.7 billion.

Malaysia international reserves also decrease starting from this few months, as this may indicate more outflows money. Do these mean the foreign investors’ lack of confidence to us? Why they would like to outflow the money? Where do they put the money?