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This is not a small blip - Felicity
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
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2 people like this. Showing 9 of 9 comments
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
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
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
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
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
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
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
BNM finally sound: http://www.theedgemalaysia.com/business-news/248633-dont-overreact-to-bonds-sell-off-says-zeti.html
2013-08-02 10:01
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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