How my view toward Malaysia 2009 economy

How do we overcome the 2009 economy recession? As starting from US crash for sub-prime mortgage loan, the economy of US not seem not be a the positive move. But more and more bad news coming from US. For the collapse of Lehman Brother, Dow Jones Industries Average drop to the ten years low (i do not sure whether more than that), plenty of companies that need the US government to bail out.

US is one of the main export country for many countries, such as Japan, China, Germany, Euro countries, & etc. When the demand of US reduce, this country will first hit, as their export come down. All the countries can not stay alone, as we need to trade with other countries to boost our economy.

This issue is that, how will this recession affect us? Initially the Malaysia government mention that, we will not hit hard by the US economy recession, how far is true? Our export to US is around 15%, Singapore around 14%, China & Japan around 9%. As this countries also the major export for US. From the point of view, we can know whether we will be affect by US.

On 24 Nov 08, Malaysia Monetary Policy Committee (MPC) announce that Overnight Policy Rate (OPR) reduce to 3.25%. When there is rate cut, is mean that our economy been slow down and encourage for investment. Will this rate cut help us much on that?

Let me talk about the interest cut, are Malaysia follow the world trend to cut the interest rate? As we know, since the increase the petrol price in Malaysia, inflation been go up a lot, if we still cut the interest rate, will this affect those who retire and rely on interest as their income? Or the motive is to cut the interest rate is to reduce the borrowers cost of borrowing?

When the good time, those who borrows can enjoy the low interest rate, as Malaysia not increase the interest year few years ago although our economy go up from year to year. When there is recession, then the BNM MPC will cut the interest rate. From this it seem not so fair to those save money in the bank, they do not enjoy high interest while the good time, but need to accept lower interest in the bad time. Or the other way, the government seem encourage borrowing, will this a good scenario to Malaysia?

Can Malaysia have a sustain growth from 2008 to 2009?

1. Growth for domestic demand, private consumption, foreign direct investment(FDI)?
2. Are all the key sector industries growth going positive? Such as communication, transport, finance & etc.
3. Manufacturing industries register a steady growth? As electronics & electrical (E&E) one of the main contributors to Malaysia export.
   
4. Agriculture sector have the potential to grow further?
   
5. How about the construction sector?

As for the domestic demand and private consumption, let take the sales of vehicle as the benchmark, most of the car dealers mention that Q2 sales figure drop and forecast will further decline in the coming quarter.

For International Reserves of BNM as at 31 Dec 2007 is Rm335.7bil (equivalent to USD101.3bil at that time), as for 29 Aug 2008 is RM400.2bil (equivalent to USD 122.6bil at that time), as at 14 Nov 2008 is Rm343.8bil (equivalent to USD99.7bil). This show a down trend for Malaysia international reserve, will this boost the FDI, let us justify ourself but previous do not prove the future trend.

As for the key sector such as finance, are our banking growth still at the up trend? Recently I read a news, a of the foreign bank in Malaysia mention that they are seeing a "steady" loan growth in both Islamic and conventional financing, but she also mention that "in the event of economy slow down, then the loan growth will be slow down." The other issue we need to look into is the Non performance loan (NPL), if the recession keep on eventually the NPL will go up, will the NPL grow up will the banking sectors drag down?

Let look at the anchor banking shares price:

1. Maybank 02/01/2008 closing price around RM9.02, now around Rm5.00
2. Commerx 02/01/2008 closing price around Rm 10.70, now around 5.80
3. PBBank 02/01/2008 closing price around Rm 10.30, now around RM8.40

From this we can see how well the bank growth, you may not agree with me, the share price of the bank may different with the performance of the bank. Haha... But I think the market is the most sensitive to know what is the value of the bank now.

Local transport industry transport fees been increase due to last few month diesel price increase drastically, although they may have the fleet card system to buyer cheaper diesel. Today diesel price decrease, but the transport industry player refuse to cut price, they give excuse of spare part and wear & tear part price not been reduce. The others reason is, they diesel price they enjoy also not reduce, as they have the fleet-card system. The bus express companies even request for price hike. From this, I am confidence this will contribute to the inflation.

In the theory of economy, if the transport go up normally it indicate a positive sign, as the factory make the goods eventually it need to distribute out to the end consumers. But in Malaysia, can we see this sign?

Let me talk about marine transits, for global transport the cheapest definitely go to marine transit. As my knowledge to marine, I will look into Baltic Dry Index this is the measure of bulk-shipping rate. The BDI had been to a year high around $11,000 drop to below $800 now, drop of more than 90%. A news that I read before, the shipping companies that carry high liabilities will be in the hard time.

For the manufacturing industry such as E&E maybe slow down as the global demand for electronics reduce. With this it will indirectly decrease the export, as I mention E&E one of the main contributor to Malaysia export.

Agriculture sector in Malaysia in fact should be very good as the CPO price hit the all time high of around RM3,600. But recently around Rm1,600, this show a decline near to 55%. When they is good time, government impose wind-fall tax. But a couple of months when the government impose the tax, CPO crash to around RM1,400. From this we can know that, the government initially also believe that the CPO price may be sustainable.

When the CPO price is high, so the crude oil(CL) are high. In fact that time is the best time for Malaysia, we own a lot of palm oil plantation and we are the net export for CL. But at that time do Malaysia really appreciate that? If we keep money that time, I think we will be more comfortable at this point of time.

Construction and properties face the global liquidity crunch and falling in assets price, although the material price of construction decrease from the all the time high. Will the 2009 bring more development to Malaysia?

As conclusion, my opine toward Malaysia 2009 economy with a negative outlook. But who those who like investment when there is a tough time, there is the opportunity. I sincere hope that all Malaysian overcome this tough time together to make Malaysia a prosperity country.





References:
1. http://www.state.gov/r/pa/ei/bgn/2777.htm#econ
2. http://en.wikipedia.org/wiki/Baltic_Dry_Index