Hike interest rate? But why …

First, I hope the U.S Federal Reserve would CONTINUE to hike the up the rates, slowly and continuously. It would mean that their economy is doing well enough and thus warranting an increase. Yes, I do believe every time the investors anticipate this potential change, they may prefer to drop their holdings here in Asia, including Malaysia and buy into the U.S instead. Let’s hope some would decide that perhaps investments into this part of the world is better; diversification mah. Second, I do not agree with the thinking that our Bank Negara should increase the rates. Well, not until we really show solid growths for the whole year and the world shows a recovery too. This is especially for those who link the rate increase with the ringgit’s appreciation or depreciation. Ringgit should rise or fall due to trade, due to higher surpluses or if deficits, then the value should drop. It’s time to be ‘economical’ about this. There’s too many messy theories already.
Malaysia is a top 25 trading nation in the world. Here’s an article about our aspiration to be within the top 20. Based on just the population alone, we are already punching above what we should. However, we remain to be a small nation by GDP and it’s easy to overlook us for much bigger nations. Oil and Gas production is only 10 percent in terms of contribution to the GDP. This is what Nomura senior economist for Southeast Asia, Euben Paracuelles says about the oil price today in terms of effects to the Malaysian economy. “Low Brent crude oil prices no longer have a prominent fiscal effect on the Malaysian economy.” Full article in TheEdgeMarkets here.  Hope everyone noted that oil price up a lot should also not affect Malaysia too much in future, okay. Do not link oil price to the ringgit every time there’s a fall in-tandem for example. Yes, I do think that an accommodative stance is better too for the economy. 
Some other reports about Malaysia’s economy. S&P affirms its investment grade rating for Malaysia.  This is a good news since any downgrade would already mean we are out of investment grade. Exports continue to grow robustly. Whether it is due to ringgit or because we are more competitive productively, as long as exports are growing it means surpluses are continuing. Ringgit is meanwhile facing a different pressure altogether compared to the 1998 crisis. Confidence could not yet be regained confidently. My investments are only in Malaysia, except for some unit trust which is focused on Indonesia. (Yes, I am an ASEAN supporter)  I also hope Thailand’s economy to do even better once the Prime Minister has more sincere economic advisers. As for Singapore, the goal is easy. Leverage on Iskandar’s resources to continue diversifying and encouraging more SMEs. I reiterate, I hope rates are maintained for as long as possible. I think property investors may be happier with my suggestion. Cheers.
written on 5 July 2017
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