Pogba Plays For Liverpool

What's up with the headline? My dua sen on the KT (UBS) mini-series.

Was it a difference in opinion? The answer is no. KT can't seem to understand the difference between current account deficit and fiscal deficit. OK granted, maybe KT failed first-year Econs, we don't know. Maybe he didn't even take Economics, I mean we have law graduates and even engineering graduates entering financial services and investment banking all the time.

For non-finance readers, the above views by KT is like a so-called football expert coming on TV commenting that Pogba played so bad for Liverpool. You as a football fan would CRINGE no end. That's probably how Tony Pua, Ong Kian Meng and most of the financial community felt.

I asked around my older friends in the industry, two who have worked with KT at Jardine (HK) before,  anecdotally their comments ended with "...an absolute xxx#### who never has anything good to say about Malaysia.." (or something to that effect). Not my words but those were the words I heard.

How the hell does UBS allow someone seemingly incompetent to rise so high? Well, it happens in MOST industries and to most people in high positions. Some people are just lucky, some were born to the right parents, some have relatives in high places, some have relatives who could hand them business on a silver platter, some just inherit the earth and all, some just so happened to attend the same school or were classmates to powerful people ....
... some because their gift of the gab is better than their IQ, most get to their positions based on the sales-ability (salesmanship)... whether you are CEO, Senior Manager, I don't care what industry they are in, a lot of selling is involved. You sell the products and services to clients, but more importantly, you have to sell yourself to the decision makers in your firm ...

 In the end, ask people at the most senior positions everywhere... be it Bursa, GLCs, the top 20 listed companies in KLSE ... their one hidden fear ... it is the same for all of us... "I HOPE NOBODY FINDS OUT HOW AVERAGE I AM"

https://www.theedgemarkets.com/article/ubs-remains-positive-malaysias-longterm-prospects?fbclid=IwAR0fNfd9gs7ew1IcrWfjgNuSBi-5q6Y5oN7UuhRkYgHb1xWctFC1WVd9yHE

KUALA LUMPUR (April 24): Swiss banking group UBS remains positive over Malaysia's long-term economic prospects, and has forecast economic growth of between 4.6% and 5% in 2020.

In a statement today, the Singapore branch of UBS said the Malaysian economy should start to see improvement in its exports alongside a stronger currency, since the Chinese economy is turning around.

“We have also recently upgraded our 3, 6 and 12-month forecast on the MYR (versus the USD) to 4.05, from 4.15 previously,” UBS said.

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In its statement, UBS also sought to clarify certain misunderstandings arising from a recent video interview featuring its regional chief investment officer Kelvin Tay, aired on Bloomberg TV on April 12.

“In the context of the interview question on the equity outlook for the region, Kelvin had inadvertently used some wrong terms given the short duration of the “live” interview and would like to clarify the following: He was referring to the Malaysian government’s projected “fiscal deficit” of 3.4%, and not “current account deficit”.

He was also referring to the government’s revenue and not GDP, when he mentioned that cancelling GST would result in a higher dependence on oil prices. He used the term “oil” to loosely refer to sectors that are closely correlated to oil price movements. In context of that discussion, he was referring to the fiscal deficit,” a UBS spokesperson said.

TONY PUA's article:

Current account surplus

Firstly, Tay argued that Malaysia had a current account deficit. This is quite scary as Malaysia has always prided itself as an economy with a current account surplus, with our value of exports well exceeding imports being one of the country’s key strengths. 

Any analyst worth his salt covering Malaysia should definitely know that.

For example, in 2018, Malaysia registered a current account surplus of 2.3 percent of the GDP. Given Malaysia’s very healthy trade surplus so far, the country’s current account balance will remain in surplus for 2019.

Malaysia does, however, have a moderate fiscal deficit which is typical of developing countries. For 2018, the deficit was 3.7 percent of GDP, while it is projected to fall to 3.4 percent this year. The finance minister has also projected the fiscal deficit to further decline to 3 percent for 2020 and less than 2.8 percent for 2021.

Malaysia is a diversified economy

Tay also claimed oil revenue made up 30 percent of Malaysia’s GDP.

This is completely incorrect. Malaysia is well-recognised by rating agencies and the investment community as having a fairly diversified economy with mining (including the oil and gas sector), manufacturing and services making up 7.9 percent, 23.0 percent and 55.5 percent of the 2018 GDP respectively.

Perhaps Tay was trying to highlight that oil and gas revenue is expected to contribute approximately 30.9 percent of 2019 government revenue. 

Even so, the UBS fund manager failed to highlight that the underlying contribution of oil and gas revenue as a percentage of government revenue is projected to be only 22.0 percent, after fully discounting the one-off special dividend from Petronas.

As announced by the finance minister in his budget speech, a one-off special dividend of RM30 billion is offered by Petronas with the specific intent of contributing to RM37 billion of GST and income tax refunds which were hidden and undisclosed by the previous regime.

In fact, oil and gas revenue as a percentage of the government’s total revenue has been declining over the years, with the peak being 44 percent in 2008.

Fiscal deficit target is intact, with pro-growth policy in place

As a direct result of Tay’s misguided understanding of Malaysia’s economy above, he went on to conclude that weak Brent crude oil prices – currently hovering at $71 per barrel – would negatively affect Malaysia’s growth since the Government was projecting Brent to average US$70 per barrel this year.

Tay failed to acknowledge the fact that every US$1 decline in crude prices will only affect approximately RM300 million of government revenue, and hence even with a US$10 decline, the overall revenue impact will only be RM3 billion.

Any such negative impact on government revenue as a result of weaker oil prices would be compensated by the new revenue measures which were announced by the finance minister in his budget speech, but has not been included in the government's official budget figures. The new measures are expected to raise an additional RM4 billion to RM5 billion of revenue for the government.

Government enjoys comfortable majority

Finally, Tay claimed a political paralysis in the country. This is untrue. On the contrary, most will certainly agree that Malaysia was paralysed by the 1MDB crisis before the change of government in May 2018.

However, with the change in power, Malaysia has now received a fresh renewal impetus, with the government pushing hard for greater transparency, improved governance, reduced corruption and increased competition. 

These reforms are difficult, will create short term headwinds and will take some time to demonstrate results. Nonetheless, the persistence of the new administration to carry out the reforms will certainly strengthen the country’s fundamentals to create continued economic growth when the global economy recovers its steam.

The new government commands a comfortable majority in the Parliament, controlling 63 percent of the seats in the Lower House. The fact the Malaysian government has successfully renegotiated the cost of multiple large high-profile infrastructure projects down proves there is no paralysis and indeed, the government is pressing on with various institutional reforms it promised to the Malaysian electorates.

Facts please

Bloomberg is a global media giant with humongous traction and audience. Tay’s ‘sensational’ interview with Bloomberg has been viralled widely on the social media to cast very negative aspersions of Malaysia. 

I would further like to state that we welcome fact-based criticisms and constructive commentaries. Malaysia, like any other country, isn’t perfect and is doing its best to recover from the damage caused by the previous kleptocratic administration.

Bloomberg, with the power it wields, certainly has a duty to fact-check information presented by their guests, especially when the mistakes were so elementary. If the information is outright false and damaging, they should be corrected.