Monday, March 09, 2009

Kenanga Has Its Own Economics Textbook!!!

I have cited the Citi's economic piece which hints at a possible downgrade in Malaysia's sovereign ratings if the Second Stimulus Plan is too large. It also stated that a large plan could result in a large issuance of MGS which might not be that easily digestible. Kenanga Economics came out with a kind of counter point, but one paragraph looked suspiciously troubling:

"Financing ability. Having the luxury of sizable external reserves of about 44.5% GDP ... the Government could stomach two consecutive years of fiscal deficits..."

Errr, excuse me but the foreign reserves of $91.6bn is in a totally separate account and has nothing to do with fiscal deficit spending. I am not sure which economics textbook Kenanga has but that is not how it is done. You can cite Petronas's RM72bn cash reserves and ask the government to be issued a special dividend to cover the SSP, but bloody hell, the foreign reserves is not there to be tapped. It is so mind blowing!!! I am so embarrassed for you.


Jasonred79 said...

hmmm... so, Kenanga thinks that Malaysian government could just take our foreign reserves and use it for for our Budget allocation?

... Well, in theory, we could, I guess...

It's a MORONIC idea though...

... now we know where our government gets it's stupid ideas like "reducing the compulsory EPF contribution will give the rakyat a windfall gain, which will increase consumption spending"


Or nonsense like "Malaysia relies heavily on exports and foreign trade for it's GDP. All our major trading partners are either going into severe recession or severe growth slowdown. ... We expect malaysia to grow 3.5% in 2009!"

... Malaysian economists are useless. sigh.

Jasonred79 said...

Not only that, Dali... our bloody foreign reserves fell from 125billion in July 2008, to the current 91b.

So I don't think that 91b is such a comforting number after all...

yok hoong said...

its the same damn idiotic investment house that value a company with a patchy track record for more than 100 million based on "plug from the air" assumptions.

never forgive them for their valuation exercise which effectively dman the minority shareholders of YLI! and I have written electronically to SC and all I have is a reply-"acknowledge receipt" and thats the end of it till now. And I am proven right with YLI, from a cash rich company, to one with considerable debts, and is now incurring losses after the acquisition and thats before writing off massive goodwill.

I guess it pays when the vendor is in some form a beneficiary from the king of water in Selangor, aint it. Untouchables?

I should have listen to my friend. I thought he was being racist when he said "Never invest in a cash rich company owned by xxx. You are just waiting to be screwed." I have learned my lesson and a costly one too.

Datuk said...

Frankly speaking, i'm extremely disappointed with our ecomimists for their inability unnuetralise stand and too conservative approach when comes to economy forecasting. Thus, the proposals for counter measures given by them are not pragmatic, out dated and a laughing topic in coffe shop!

Worst still, the value of their research reports were worth 2 cents, seriously, not better than the report written by my child!

Having said that, there are still few good economists around in the country. Among them Dr YY Chua and Dr.ES Hu whom have rightly pointed out the current fate of Malaysia economy: negative growth in 2009-2010. Their projection were 2 months earlier than the Beijing games in August 2008.

In the final analysis,the inteligence investor need to:

i)Inculcate an independent mind.

ii) Build up effective network for becoming circle of competence in the said industry.

iii) Emotional inteligence.

Dear Yok Hong,

I understood of your frustration on YLI. However, things may not as bad as what you think.

Obviously, the price paid by YLI for the acqusition was too high but market will penalise the company. That is the reason for YLI to go down to the ranges of RM0.50-RM0.60.

The business of YLI will have to incur operating loss in last qtr as the key raw material cost scrap iron went down to earth and the utilitise cost increased substantially. Hence, even without the bad acquisition, YLI has to be running at loss.

All these events are good for potential new investor like me who have no position in this company...

Can you see that ?

Good Day.

yj said...

i think the author use it as a comparison for fiscal flexibility.

Gamelion said...

Some of this so-called experts are in self denial mode and really dont get it. The writing is on the wall that our economy which r so much depend on the international exporting market demand has collapsed. It even worse than 98's Asian crisis!!!

hishamh said...

I must admit, I did a double take when I read the statement. It doesn't do the economics profession any good to see analysis like this (yes, I'm an economist).

TBH, I think I know the guy in charge at Kenanga - he's a nice guy, but I don't think he's experienced enough or has the required academic credentials.

For that matter, I've never trusted broker reports on economics or the market - the probability is too high of "capture" i.e. lack of independence from the sales side of broker firms.

Jasonred79: The loss of reserves can be directly attributed to the withdrawal of portfolio funds in 3Q (RM50 billion plus) and 4Q (my guesstimate at RM70 billion plus). Also, the impact of net exports (i.e. exports-imports) on GDP growth is actually fairly minor. The main channel for the slowdown in growth came as exporters responded to the fall in demand by cutting production and investment (falling gross capital formation in the national accounts), as well as a sharp slowdown in consumption as both companies and consumers reacted to the bad news.

I think the key thing that misled most analysts and the government was that exports held up despite manufactured exports being essentially dead since mid-2006. Export income was only supported by the commodity bubble, which went bust after July 2008.

Datuk: Please don't tar all of us with the same brush. Many economists that I know were expecting a downturn in 2008, but we expected the bust to emanate from China, not the US. Secondly, the speed of the collapse in the global economy is unprecedented.

Salvatore_Dali: The Petronas idea is good and would probably be cheaper for the government, but won't make much difference in terms of the impact on the money supply. It still requires a withdrawal of funds from the banking system to the government, and may force BNM to inject further liquidity into the market to maintain the current monetary policy stance.