A Panadol 2009 Budget!

Politically, we already struggling and that would not need much introduction. I thought the government would be serious enough to set things right in the 2009 Budget, at least to shield its people in this period of 'exceptional uncertainty', politically, economically and socially. I have been reading Badawi's budget speech at least two times over the last weekend, but am still struggling to find good words to make peace with my angry soul. With minor tax cuts, higher spending allocation to long-neglected Sabah and Sarawak coupled with bigger amount of welfare assistance including a month bonus to civil servants, this is no more than a 'panadol' solution to a far more serious illness that need far serious efforts to fix it. Are they run out of options, or they are just checking the IQ of fellow Malaysians?

It seems that words like sustainable job creations, income growth and business opportunity are definitely not part of the vocabulary of the 2009 Budget! If the projected 5.4% real GDP growth in 2009 is realizable, then the foundation is not build to take even a shock of Ritcher Scale 3.

The whole spending program is premised on contribution of oil income (around two fifths of total revenues). As such, the biggest concern is that wider deficit takes risks with the government's finances in the event of lower oil prices. This means the rest of the economy benefits from government spending is estimated at around 30% of GDP, in return only have to pay the government tax and other revenues of around 14% of GDP in revenues.

If that situation panned out, Malaysian government may have to rely more on bond sales to finance the book. In 2009, the government is projected to sell some RM60bn worth of papers (RM54.1bn in 2007) – the highest in a decade. That said, it is no doubt a bad news for bond market, especially if I view it together with the present setting of monetary policy. While many people thinks that the risk to policy rates (overnight policy rate) is to the upside in Malaysia, the recent BNM rethoric still suggest otherwise, despite a much looser fiscal policy settings.

By implication, Ringgit Malaysia will continue to be under downward pressure, until either the government is seriously putting its thinking cap to solve our structural concern, or alternatively is ready to find better usage of our strong current account surplus.

Full Fledged Recession in the Making!

I am no global macro expert, but I find the survey done by RGE Monitor can be interesting point of reference. For that, I summarized their point of view for all to digest:-

Central Eastern Europe, Baltics, South East Europe, Russia

• Growth in Eastern Europe looks set to slow in line with core Europe.
• While inflation remains above target, central banks in Czech Republic, Hungary and Poland are paying more attention to slowing growth.
• Baltic states have said bye-bye to double digit growth, after booming over the last 7 years.
• A weaker Rouble, heightened political risk, and lower commodity prices have contributed to outflows as many Rouble long bets have been closed.

Middle East and North & South Africa

• In North Africa, record growth rates come along with risk of higher inflation and monetary tightening. Slowing commodity prices and weaker European markets are among key challenges for the region.
• GCC countries will continue to lead the region, supported by large FX reserves and fiscal expansion. Despite various subsidies and price controls, annual inflation is in the double digits even for Saudi Arabia, where inflation has historically ranged from 1-2%.
• South Africa is suffering from rising interest rates and widening in current account deficit – the widest in 26 years and high reliance on portfolio equity flows. The Rand continues to weaken.

Asia

• Growth forecast on downward revision and rising inflation brings down real interest rates into negative territory.
• Exports have taken a hit since mid-2008 as the economic slowdown is spreading from US to other G-7 export markets.
• India, which known to be a domestic demand driven economy, is dealing with twin deficits – fiscal and trade, hence exerting downward pressure on the Rupee. Corporate earnings are at risk due to rising production costs and lending rates.
• China is decelerating for the last four quarters. The authority is selectively stepping away from its monetary tightening, loosening loan curbs and limiting RMB appreciation, and might instead rely on a stimulus package.

Latin America

• The leading economies in the region – Brazil, Mexico, Argentina, Chile, Peru and Colombia are performing well, supported by large current account surpluses.
• The key risk is growth cycle may have peaked with the decrease in commodity prices and the US slowdown.
• The central banks are not done with hiking interest rates and regional conflict between Mexico and Venezuela could fare up again.

Is 268-event lead to true democracy?

In the next few days, this country will be celebrating the 51^st Merdeka.

The spread of democratic ideals and practice have many times been explained by Barisan Nasional leaders on the assumption that democracy or personal liberty are ideals that is foreign to us - an assumption at least as old as Herodotus¹. But event of Permatang Pauh has shown otherwise that people in this country can have a lively interest in democracy as something relevant to their own situation. I think the old assumption deserves to be re-examined with a thumping 15,671 majority given to Anwar Ibrahim two days ago.

Is Malaysia really a democracy and are we committed to a price of a just and equitable rule for all citizens in this multi-ethnic and multi linguistic country? I have a first hand experience of how the nonviolent agitations are put down with brutal force in this country. It will not be too far fetched to assume that limit to democracy for minorities, in terms of economic discrimination and cultural-linguistic domination, could potentially lead to more social disobedience like ones in India and China.

Some say Anwar’s victory in recent election at Permatang Pauh is akin to People Power in the Philippines and the aftermath of Trisakti in Indonesia. To them, his victory is the culmination of a long resistance by the people against the 50-year running authoritarian by corrupt governance of Barisan Nasional government. In the event leading to the assassination of Ninoy Aquino in 1983, the country was bankrupt, the government plunged further into debt and economy contracted. In the case of Indonesia, I have seen change of three presidents from Habibie, Wahid, and Megawati before some early signs of stability are spotted in SBY’s administration. The fall of Suharto marked the beginning of a difficult and multi-layered transition process. During these periods, economy was growing a subsistence level and there were number of regions were in grip of communal frenzy, never witnessed before.

While I am sure that the restoration cost can be high, the rebuild of democratic institutions after fifty years of authoritarian rule is critical for political and social actors to challenge the entrenched political clans and bring Malaysia democracy to the next level.

I am not sure if Anwar is really committed for true democracy or not, but the motion of fairer democracy has started and cannot be stop. Anwar looks promising to lead, but it doesn’t stop the rest of 26 million Malaysians from contesting.

The train motion for better democracy is no turning back! The new democracy will be built based upon a shared value system, which is identifiable and distinct and which transcends national, religious and ideological differences.

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¹. See for example Herodotus, The Histories 7. 135, rev. ed. (Harmondsworth, 1972), p. 485: the famous reply of the Spartan emissaries to the Persian general Hydarnes

Short Lived Recession in Japan but Tough Time for Fukuda

Japan is in recession, but the pain is likely to be far less painful than its US and Europe counterparts. Lack of excesses in terms of capacity, labour and inventories will mitigate the downturn. In spite of the sharp drop in corporate profits and the associated softening corporate sentiment, capex has fared relatively well at around flat yoy for the past two quarters. The continuously strong demand for replacement capital investment will limit the downside. Compared to past downturns in Japan, this recession should be less severe.

I expect a longer pause before policy tightening to resume, perhaps into the later part of 1QCY2010. With the current recessionary environment, clearly the Bank of Japan will not raise rates. It will only begin the normalization process upon that the global economy emerges into a clearer recovery phase. Rates cut, however, are unlikely as negative qoq growth should be contained to just two quarters.

I, however, expect a tough time ahead for the newly formed Fukuda Cabinet. Tax revenue is shrinking in the face of a slowing economy and mounting social security expenses. Until we see a clearer picture on the macro front, it remains a key challenge for this new cabinet to raise the consumption tax. The earliest time possible for a rise in consumption tax by about 2-3% is likely from Q4CY2009.

The Cabinet Office released its revised fiscal and economic forecasts on 22 July 2008 and according to that, the primary balance in FY2011 is expected to be in deficit. This latest numbers suggest that the government target of a positive primary balance is impossible without any new stable revenue sources. Worsening corporate profits were the main background to the FY2007 tax revenue shortfall and I expect the trend to continue into FY08 revenues on the back of deterioration in FY08 corporate profit outlook in Q2 Tankan.

The shortfall, according to some estimates, which is nearly equivalent to a 1-1.5% consumption tax hikes will increase pressure for further bond issuance.

Opportunity to Accumulate Plantation Stocks

The massive sold down in plantation stock is an opportunity to accumulate. Since beginning of July, CPO prices have dropped by an average 30-40%. Concern over mounting fear on CPO price down-cycle, weakness in Chinese demand and issue of sustainability of renewable energy, perhaps may have short-term pressure on share prices, but I see this an opportunity as good buying opportunity on further dips.

Unless crude oil prices to drop far below US$75 per barrel, the direct link of high crude oil prices to higher palm oil prices will keep the latter at a reasonably high level due to its usage as biodiesel raw material. Moreover, rhetoric by OPEC to cut production at its next meeting on September 9 supported commodity prices as well. According to my discussion with senior management of Kuala Lumpur Kepong two weeks ago, they are expecting a floor price of RM3,000/mt level and 2009 prices in the range of RM3,200/mt and RM3,700/mt respectively. The leading industry analyst Dorab Mistry says that crude palm oil futures need not go lower than 2,200 ringgit per tonne in the next few weeks if oil prices stabilise around $100 a barrel with a 10 percent range.

Furthermore, demand from China remains strong, especially as successive years of yield declines have forced more imports of both grains and oil seeds. Coupled with rising middle class, this has raised consumption per capita for this commodity and I believe this is unlikely to drop drastically anytime soon. The recent slowdown in Chinaʼs CPO demand was mainly due to the release of inventory to counter inflation.

Bioethanol has already made an imprint in the US gasoline demand. Last year, Americans purchased more than 75 million gallons of such fuels, triple the amount in 2004, according to the National Biodiesel Board. The plan by Indonesian government to implement a nationwide mandatory 2.5% palm biodiesel blend, starting in September 2008 would be another supporting factor for palm oil prices.

In short, tight supply and high demand fundamentals support the bull case for commodities while speculation amplifies price trends. Based on the current P/E, some plantation stocks are already near their low cycle PE. With a production cost of less than RM1,000 per tonne, the profit margin is still attractive, in my view.

A Case for Ringgit Malaysia to find its Fair Value!

Last weekend, I re-run my quantitative models on various Asian currencies, guided by a set of fundamental economic variables determining these internal and external equilibriums. For those that want to pursue this matter, please read MacDonald, R. (2004), ‘The Long Run Real Effective Exchange Rate of Singapore: A Behavioural Approach’ Monetary Authority of Singapore Staff Paper No. 36.

On average, Asian currencies are at least 9% undervalued against the USD based on 2Q08 data. The mostly undervalued currencies are PHP, THB, MYR, and KRW in the range of 12-15% respectively despite the fact that these countries have shown quite significant improvement in both output and current account gaps over the years. On the other hand, my results show that INR, SGD, TWD, and HKD – are the ones with smaller degree of undervaluation.

Compared to the period in the first half of this decade, it is obvious that we have a good case of a much undervaluation of Asian currencies now.

China has placed its currency under a managed float recently, and given the fact that China has the world’s largest trade surplus and FX reserves, the FX direction is definitely one-way. It has also loosened controls in the capital market by allowing Chinese companies to retain FX income in designated financial institutions. At the same time, companies are allowed off-shore forex holding, whereas before these had to be remitted home. There is also greater flexibility for Chinese companies and individuals to invest directly overseas and to issue and trade overseas securities and derivatives. Similarly, foreign companies and individuals can also issue and trade Chinese securities and derivatives. In short, China is making a good progress to be more integrated with the global economy.

Perhaps, this could a step closer for the internationalization of Ringgit Malaysia (RM), and if it is happening, it will at a time when we most need our currency to be a stronger one. Malaysia banned offshore trading of the RM in 1998 and pegged the currency to the dollar as regional currencies collapsed during the Asian financial crisis. The offshore trading ban is the last remnant of those controls. I believe that removing the last capital controls would be the latest measure to attract investment that includes tax breaks and easing of race-based rules for foreign companies in some parts of the country.

Don’t Catch A Falling Knife!

The US leading indicators have now been negative for nine out of the last twelve months due to the beleaguered housing market and sputtering stock market. The acceleration in the downtrend in leading indicators suggests an even greater risk to the global economy in the months ahead. Question about the viability of Fannie Mae and Freddie Mac are keeping mortgage rates higher than they should be, hence putting additional strain on home sales.

The first tidbits from the Fed’s annual retreat last weekend in Jackson Hole, Wyoming suggests that the financial storm has not yet subsided and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment.

The Ifo index of business sentiment, which is fairly correlated with industrial production growth, has dropped sharply in recent months. The Ifo index for August, which goes print on Tuesday, will give investors some insights into the current state of the German economy. Despite signs of slower growth in the Euro-zone, the ECB has been reluctant cut rates due to sharp rise in CPI inflation this year.

The Japanese economy contracted at an annualized rate of 2.4% in the 2Q due in part of the 3.3% drop that occurred in industrial production during the quarter. In my view, the Japanese economy has slipped into a mild recession already. The BoJ has confirmed no easing bias, but the economic slump should keep alive market speculation of a rate cut.

In my view, the USD is overbought, with the 15-day RSI jumping above the 80 threshold for the first time since the Asian currency crisis in August 1997. Risk reduction played a major role at that time, but the risk was emanating from Asia, not from the US as it is today. In this context, recent USD gains continue to appear at risk, perhaps increasingly so. the Russia-Georgia dispute, which appeared to be winding down a week ago, has lingered longer than initially anticipated. The uncertainty the dispute has brought to the geopolitical arena could be partly responsible for extending USD gains in recent weeks, also reflected in the out-performance of the JPY versus most European currencies in recent weeks. In this context, EUR/USD and EUR/JPY are likely to continue to reflect the political uncertainties in that region which is crucial for European energy supplies.

Growth Takes Priority!

As the global economy decelerating at the pace faster-than-expected and domestic demand is just not ready to take up the slack. As such, I think no one should blame central banks to shift their attention from inflation to downside risks for the economy. More and more central banks are acknowledging that downside risks are materializing.

With commodity prices in correction mode, we see scope for Bank Negara Malaysia (BNM) to possibly cut rate, if situation worsens further from here, as inflation falls back to target by mid-2009. Judging from the Monetary Policy statement, I believe that BNM does not see reasons to respond to the rise in inflation by hiking rates.

As we are beginning to see, slower exports reduce income for households and businesses and this translates to slower domestic demand as well. US consumers face one of the most challenging economic environments in decades, with a sluggish employment market, high energy prices and tightening credit conditions. We are in a very confusing atmosphere.

In Malaysia, sluggish income growth makes it much more difficult for consumers to deal with high energy prices and consumers have responded by driving less and by increasingly trading in big engine machines, MPVs for smaller, more fuel-efficient cars like Kancil and Kelisa.

Benjamin Graham says that the stock market is a voting machine in the short run and a weighing machine in the long run. Trailing as reported 12-month Malaysian corporate profits peaked in the 2Q07 and as the economy began to run into trouble, nearly every major forecast are taking a major revision. Stocks are in a bear market. After peaking above $1,000/oz, gold is back below $800. Silver has declined by 40% in just five months. The USD/MYR pairing rose past the 3.340 mark, though this was partly due to USD rebounds. Industrial production grew at the slowest pace in 10 months in June08 as it rose 2%yoy.

According to the National Credit Counseling and Debt Management Agency CEO Mohamed Akwal, most of 7,4732 people who sough help from 5 June to 12 August cited the sharp rise in fuel and food prices as ‘the double blow that turned their financial stability haywire’. What is of concern is that most of those affected are from a vulnerable group of young families with net monthly income below RM3,000 respectively. The Malaysian Economic Council, which chaired by PM Abdullah Badawi, is entertaining the thought that the current crisis could be more serious than the recent one in the 1997/98.

I continue to believe that by the end of this bear market, money – what or whichever of it survives – will be king. With stocks and commodities falling and the credit market contracting, it seems that deflationary force may have finally taken hold. But until the KLCI fall below 950 level, I cannot be sure of it. My sense is that we probably are not even past the halfway point of this recession. It would be very tough for me to buy in that we have reached anything close to a fundamental low. Until this direction changes, plenty of economic contraction is lying ahead of us.

Are we decoupled from US debacle?

The old mantra that if US sneezed, we would catch a cold. Now, many economists, analysts, and market watchers argue that was then. They see China, Europe’s new and growing market and rising intra-Asian trade are starting to provide a consumer base for the world.

As we were assured last year, our economy would not suffer much from problems in the US. Arguably, the importance of US dropped quite considerably from a quarter of the exports a decade ago to less than 15% in recent months. However, evidence suggests that this might not be quite the case. Perhaps, we may have been a little too optimistic.

Last week, I was attending a talk by Prof. Nolbert Walter, chief economist of Deutsche Bank, who argues that the bear market would not last possibly until 1Q09. Comparing the experience of the bear market of 2000/01 might not be something that is extremely to ponder about.

To be blunt, I wouldn’t want to stand in front of a bear market train. To suggest consumer spending is slowing is a kind word, but I am suggesting that consumer spending will be slower to rebound, as many still not fully digesting the impact of the potential spending cut in favour of higher savings. Earnings are continuously under pressure and earnings are what drive the stock market in medium and long term.

I think market is going to test a new low and then to watch market go lower as the market gets disappointed in the earnings from the 3Q08 onwards. We are in for an extended period of muddle through, while we wait from the global housing market to find bottom and the credit crisis to abate.

The world economy is having a simultaneous recession and in many of them elevated inflation as well. The Bank of England is forecasting a zero percent GDP over the next year with an inflation of 5%. Real GDP declined 0.6% in the 2Q in Japan and Chinese stocks are already down more than 54% this year and 60% since the peak last year. Inflation is at 12.4% in India – a 16 year high.

By the time, until the back to back negative growth seen in the early 1990s, guess what, the Nikkei had already plunged 50%, the 10 year and the JGB yield rallied 300 basis points.

In short, we are not decoupled, instead is more closely intertwined due to rising global financial integration. Until a full functioning banking system is back to operation, it would not be too hard to argue for a secular bear. The best ever investment advice for everyone is to look for absolute return types of investing.

KLCI at 20 month low – what next?

An extended selling pressure is seen into this week. A severe selling in the KL futures hampered further the already weak sentiment and the political situation could deteriorate significantly. Foreign favored stocks, like Gamuda, some banking stocks closed sharply lower and market breath stayed negative as losers topped gainers by a wide margin.

The KLCI is retesting the next downside of 1,050 (Tuesday’s closing at 1,069), and I am fairly sure that it might dive further on follow through selling momentum with likely poor volume participation. The next support level is at 975-980. The immediate thing to watch now is the DJIA, which has dropped from the upper band of the downtrend channel. It might encounter another round of selldown, if the index failed to return above the 21-day SMA in coming sessions.

More downside is expected to come from the plantation and banking sector, which take up more than 35% of the KLCI weighthing. The steep correction over the past 5 weeks suggests that there is still room for correction and any price recovery effort would be good opportunities to go ‘SHORT’.

The Ringgit is weaker as the USD is broadly firmer against major currencies and I still prefer holding cash, as the next best investment alternatives. Wall Street fell sharply for a second straight session Tuesday after a hefty jump in wholesale inflation and a drop in new home construction gave investors more reason to believe an economic recovery is far off. Oil prices rebounded, jumping back above $114 barrel after the dollar weakened against the euro and a rally in heating oil pulled new buyers into energy markets. Oil Minister Rafael Ramirez said in a statement Tuesday that if prices continue to ease, "Venezuela would have to analyze the possibility of a production cut," a move that would likely send prices higher.

KLCI below 1,000 level sooner!

Market sentiments remain weak and likely to be weaker and much volatile. Since its all time high of 1,524 in Jan 2008, the KLCI fell to a recent low of 1,089 on 21 Jul 2008, and it would be a surprise if the index to test below 1,000 level.

The political front doesn’t help, and if that being taken into consideration based on the experience of Thailand and Indonesia, the market P/E could hit a low of 9-10x versus the historical average of 11-12x. It is almost with a great certainty that the pre-Budget 2009 rally will not happen as current political development – the tussle in between members of Pakatan Rakyat, and Barisan Nasional is causing greater uncertainties over economic policies.

Despite the Fed leaving the rate steady, the Dow Jones Industrial Average (DJIA) did not move much. It stayed below the long term key resistance of 11,750. The pace of retail sales has slowed with the effects of stimulus fading and real personal consumption expenditures to contract in 2H08. Consumers continue to pull back on big ticket discretionary items like auto and furniture.

In the KLCI run up from 970 points to its all time high of 1,524.7, it was primarily driven by foreign hedge funds that were funded by Yen-carry trades. And the corresponding drop in recent months can be due to outflows of these funds and the Ringgit’s weakness.

Until we see greater commitment by the authority to support stronger Ringgit, this direction will remain irreversible. The newly formed council by economic advisers, headed by PM Badawi pointed out that the current slowing economic growth has the potential to be most severe downturn in decades – perhaps even exceeding the 1997/98 Asian financial crisis. The Selangor Restaurant Keeper’s Association with 1,770 members has seen falling sales in recent months as patronage has declined, especially in mid-high end restaurants. Revenues are down by as much as 30-40% yoy.

The downside risk for 2H08 and possibly 1Q09 earnings are concentrated in certain sectors – banks, energy, construction, property and utilities. Bank could see a weaker result due to weaker non-interest income from weaker capital markets and mark-to-market losses on securities. Energy services sector continue to see margin pressure from higher costs. Revenue growth assumptions for construction and property stocks continue to be optimistic and uncertainty over the IPP windfall tax and rising fuel cost has affected utilities stock performance, in my opinion.

Still too early to pass the FX baton to USD!

There have been quite discussions in the market that the weak USD days are over. The argument goes like this - as the global slowdown broadens and commodities begin to crack, the new dawn will come as the ECB and Bank of England are probably curting rates and the US prepares to tighten.

I have no issue with this logic. But, I am damn sure that this will not happen in the next 6 months. Beyond that, it is a function of the rate of de-leveraging US financial market, a capitulating US housing market, commodity cycle and issue of twin-deficits in the US.

As we are not having a perfect 20/20 vision for anything beyond next 6 months, else, it is would be pure academic to discuss in times far ahead of us.

I however, stick rigorously to the view that slower European growth will be more challenging and Pound Sterling is still a sell given the mounting evidence of an economy not so much on the cusp but more over the edge and into a sharper economic slowdown.

As the bullish USD can be founded on a combination of worsening European fundamentals and on much bigger picture long term valuation type criteria, I argue that this has been a ‘slow burner’ move with Major FXs to be generally range-bound. USD fundamentals remain poor but Euro fundamentals are worsening slightly faster through the turn of the year.

I anticipate 2009 will be a sell Euro year and without a significant monetary tightening on the other side of Atlantic, the EUR/USD likely to trade in the mid range of 1.40-1.46 and closer to long term fair-value of 1.15-1.25. One, however, should not ignore the possibility that the ECB is still capable of raising rates in the context of fast slowing economy, pre-occupied still with the concern of inflation expectations.

Globally, all central banks remain somewhat ‘handcuffed’ in terms of policy as it faces deteriorating domestic economic conditions but also persistent food and energy prices, which are threatening price stability. Even though, the CRB index has dropped by more than 11% in July and the front-end Nymex oil futures contract was lower by 11%, it remains a far from conclusive that we are at the end of the current commodity cycle.

I continue to target Reminbi (RMB) appreciation of at least 10% p.a, even though weaker external demand has raised speculation that the appreciation will slow in 2H08. It would take a more marked deceleration in export and commodity prices to slow the pace of appreciation markedly. The Indian Rupee (INR) remains strong on a faster pace of monetary tightening, intervention in FX market and more recently, an improvement in sentiment due to the re-constitution of the ruling coalition government. Korean policy makers have clearly stated that they are determined to support the currency, even though this would entail significant FX reserves losses going forward.

Ringgit Malaysia – Key to Inflation Fight!

Source: www.exchange-rates.org

Ringgit Malaysia (RM) is still very much undervalued. It makes absolute sense for a strengthening RM, especially when cost-push inflation is hammering hard our standard of living.

It helps bringing down inflation rate, which now at 26 year highs, boosting ailing Bursa Malaysia, especially those badly battled plantation, property and those companies with US dollar denominated debts and costs. As at March 31, 2008, Telekom Malaysia’s US dollar borrowings totaled RM6.17 bilion, Tenaga of RM6.03billion and Telekom Malaysia International of RM2.65 billion. Consumer companies, like telcos, and retailers would also be better-off as the stronger RM leads to improving purchasing power and consumption. Likewise, for companies with a diversified geographical concentration, as demand from the non-US market continues to be strong.

In my previous comment, the commodity cycle is yet from over. Commodity market is experiencing a seasonality adjustment, and the uptrend will resume thereafter. The 17-year up-cycle remains intact.

It would not be a surprise, if our political situation improved in the later part of the year, the RM may hit a low of RM3.00/USD. Bank Negara, like other central banks in Thailand, IndiaSouth Korea, to step into market to pro-actively supporting RM from a rallying dollar and foreign capital outflow, spurred by worries over inflation. and

Fighting inflation by allowing RM strengthening is no longer a luxury. Otherwise, Malaysia may see the rising risk of a sovereign ratings downgrade by major rating agencies, of which the collateral damages can be very real. Benchmark borrowing and saving rates are lower than the rate of inflation, and stronger RM tends to have compensating effects to our fellow Malaysians.

Perhaps, this is also the right time to allow Ringgit to be internationalized. The offshore trading of the RM is part of parcel for a greater height of trade, investment and financial and capital markets development. We should not be in denial that an offshore non-deliverable forward (NDF) market on the ringgit, ringgit forward and interest rate swaps are already developing rapidly in recent months, and if we are not engaging markets in a more effective and efficient ways, Malaysia is facing a greater risk of marginalization!

Opposition is Not Strong, Barisan is Too Weak!

Finding right time to step down in politics for always a no-no for all politicians. As the history goes, more often than not, politicians are good at finding excuses why they are needed for the jobs.

Merdeka Centre poll revealed only 28% are satisfied with current state of affairs; 62% think cronies would benefit from projects funded by money saved from paying subsidies and less than half satisfied with BN federal government.

About 57% of the people surveyed are satisfied with opposition state government. The study also suggests that more than half of public do not believe in the allegations of sexual misconduct against Anwar Ibrahim. It added that 66% of public believe it is politically motivated to disrupt the former’s political career.

The survey found that Abdullah's popularity had plunged to below 50% for the first time in his premiership, from a record high of 91% in late 2004 after he won his first term as Prime Minister. Among other highlights of the survey was the question whether Deputy Prime Minister Najib Abdul Razak would make a good prime minister, with almost half saying no.

The message is this – Pak Lah should leave office sooner rather than later. PM Badawi is treading water and until he does the Malaysian themselves have no chance to move on. He is not the man in control of thing and should not be in-charge of our destiny. His hanging on is not doing any good for Malaysia. People feel that the Malaysian government is totally rudderless. I can easily think of many departments that are totally without direction. I think a lot of people will look back on the last 4 years or so, of dashed hopes and big disappointments, of so much promised so little delivered.

There is no guarantee of political normalcy upon removal of Pak Lah from the scene, but I am pretty sure we are getting rid at least one of the major political over-hang currently.

Bottom line – Opposition is not strong, but Barisan Nasional is too weak!