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Ringgit Is Toast – Here’re Proof Malaysia The First Asian To Hit Recession



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Jun 12 2015
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Mahathir Mohamad is perhaps the luckiest person on planet Earth. Besides being the longest-serving Prime Minister of Malaysia, stretching from 1981 to 2003, he also had the luxury experiencing the country’s currency under attack by speculators during the infamous 1997/98 Asia Financial Crisis.

Mahathir Mohamad Staring

Ten years later, during his retirement, he had the second opportunity to see Thailand, the same country attacked in the 1997/98 crisis, being attacked by speculators again in 2006/07. Then, almost ten years later today, Mahathir is witnessing the country’s currency – Ringgitgoing up in smoke, once again.

 

During the climax of 1997/98 recession, the ringgit was traded as low as RM4.73 to USD1 dollar. If you can still remember, Mahathir was practically begging for speculators to stop attacking, when the ringgit lost close to 100% of its value – from RM2.50-USD1 to RM4.73-USD1. He desperately pegged the local currency at RM3.80-USD1 to save the day.

Mahathir Mohamad Meets George Soros - 1997 Asia Financial Crisis

At a ripe age of 89, the lucky devil Mahathir is now having fun seeing the local currency closing in to the RM3.80 to USD1 exchange rate, which he pegged about 16-years ago. And when that happen, he has every reason to celebrate with a lion dance Jho Low holding the lion’s head and Arul Kanda Kandasamy shaking the lion’s butt, while Najib beating the drum.

Malaysian Ringgit Toast - Najib Razak, Jho Low, Arul - 1MDB Scandal

That would be one heck of a celebration, with tons of firecrackers thrown in. It would be a marvellous sight, representing the real harmonious multiracial society in Malaysia. Who would have thought that the country’s biggest scandal, 1MDB’s RM42 billion debt, has actors made up of a Chinese, an Indian and a Malay, a nice mixture of villains (*grin*)?

 

About 8-months ago, we wrote how US dollar could wreck havoc in Asia, particularly Malaysia. Today, the writing is on the wall. Over a year and among the five major Asian countries, Malaysian Ringgit is the worst performer, depreciates as much as 16.47% against the US dollar. This follows by Indonesia Rupiah (-10.84%), Singapore Dollar (-7.79%), Thai Baht (-3.85%), Philippines Peso (-3.57%).

Currency Performance - 1 Year - Major Asian Currencies vs US Dollar

The burning question is this: why Malaysian Ringgit was being dumped in such a scale, despite the country having huge resources without natural disaster as compares to its neighbours? Does 1MDB scandal which has accumulated a whopping RM42 billion in debt somehow contributes to the pathetic currency depreciation in values against the greenback?

1MDB Scandal vs USD-Ringgit Currency Collapse

Sure, the strengthening of US dollar was across the globe, so the ringgit should not be singled out. But guess what – all the major Asian currencies – Singapore Dollar, Thai Bhat, Philippines Peso and even Rupiah – appreciate against Malaysian Ringgit for the same 1-year period. In short, the ringgit has turned into toilet papers even within Asian region itself.

 

Here’s a joke from a Malaysian tourist. This is the safest season for Malaysians to travel to China. No thieves would pick-pocket Malaysian tourists simply because the ringgit is guaranteed to drop in value overnight (*grin*). Amusingly, even the Chinese Renminbi has appreciates as much as 18% against the ringgit over the last 12-months.

Malaysian Ringgit Toast - Seller Counting Money

However, some might argue that a weak currency does not necessarily mean recession. Fair enough. There’re still other resources – palm oil, petroleum, rubber, tin and whatnot. Unfortunately, all these resources are toast as well. In fact, Felda Global Venture (KLSE: FGV, stock-code 5222), the supposedly world’s biggest crude palm oil (CPO) producer is so fucked up that it is secretly selling some assets.

 

Like it or not, Malaysia is not a premium investment destination anymore. To the investors, the risk of holding ringgit is skyrocketing partly due to 1MDB Scandal. If the prime minister himself was involved in a RM42 billion debt hanky-panky transactions, what guarantees are there that the laws, rules and regulations are still in place?

Malaysian Ringgit Toast - Najib Razak 1MDB Scandal

As long as the 1MDB scandal is not resolved, it’s a tough business convincing investors to pump money into the country. The fact that Minister Abdul Wahid Omar had to meet Fitch rating agency was enough proof that the country is in deep trouble under Najib administration. Mr Wahid can only do so much to delay international downgrades.

 

Fitch Ratings, Moody’s Investors Service and Standard & Poor’s are ever ready to push the button to downgrade ratings on Malaysia. Governor Zeti can screams till foam at mouth about how strong the economy is, and how undervalue ringgit is against its fundamental. That was precisely what Mahathir bitched everyday during the 1997/98 crisis.

Malaysian Ringgit Toast - Najib Razak and Zeti

Since central bank governor Dr Zeti Aktar Aziz’s job is at the mercy of the prime minister, she has to do everything to parrot her boss. She did practically nothing about 1MDB scandal. She played down the inflation effect of GST. She mentioned the weak ringgit was a short-term problem when it was RM3.45-USD1, and still says the same thing when it hits RM3.74-USD1 today.

 

The only thing Zeti can do is this – by hook or by crook, keep the ringgit below RM3.80 to a US dollar. That’s the psychology level. Once RM3.80 level is broken, all hell breaks loose. Now, where are those so-called genius economists who claimed that GST is good for the country? Where are they now when the country needs them the most?

Malaysian Ringgit Toast - Congratulations from Najib and Ministers

Najib administration can also do his part to entertain the public about the toasted ringgit. Get his half-past-six minister to tell all and sundry how fabulous it is to have weak ringgit. The country can export more and increase foreign investments. Weak ringgit also encourages tourists. That’s why Uganda, Madagascar, Siera Leone, Zimbabwe are such a paradise (*grin*).

 

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Comments

Najis (Opps..Najib) should be sacked if he still refuses to step down. WARNING: Malaysia will go to the dogs in 2 years time, if this kinda scandal continues.

if Malaysia ringgit drops to even usd1 = rm9.66,
life still goes on like usual. nothing harmful will happen.
thats how capitalist system works. there must be bottom tier nations and high tier nations. if Malaysia joins the lower ranking nations. depends how one dsires his life, if wealth if what he seeks, he need to search for jobs in higher tier nations

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