No Reassurance for Markets
So how has Najib’s budget revision speech assured the market today? The crux of his speech seems to say that “Malaysia is OK”. I beg to differ. You can’t assure the market with this kind of talk. The market wants to see positive actions not denials and cosmetic cuts in the budget. What worries me most is there is no announcement of an economic action team.
Sending the right message is essential in a very jittery global market.
While the fundamentals; i.e. national reserves in US dollars at RM400 billion can cover the exit of Malaysian Government Securities (bonds) held by foreigners, now roughly RM130 billion, the rate of its depletion could trigger a panic sell-off by all, not just foreigners on all financial products, not just bonds.
Are we prepared for all eventualities? Najib must form an economic team now. Do what the Norwegians have been doing since November 2014.
In mid-1997, I was a young corporate lawyer having closed my first big acquisition deal six months earlier. Whilst I never bought stocks, like the rest of the country, I was feeling pretty invincible. The crazy stock market generated heaps of corporate deals.
The 1997 Asian Financial Crisis started in Thailand in May 1997. My Thai friend described the situation in Bangkok as a bloodbath. However in June, the corporate folks in KL were still immune to it. A former classmate of mine who worked for Goldman Sachs told me not to worry, the Malaysian fundamentals are strong! We are not as crazy as the Thais, he assured me.
To celebrate my big corporate deal, I decided to take 2 months off to trek and travel. In end June 1997, I took a week off to see the Hong Kong handover and to buy mountain trekking gears. In July, I blissfully took a month-long mountain trek in Pakistan. When we left KL for the mountains of Pakistan, the KLSE stood at 1,200 points, and in the deep mountains we had no telephone nor TV. When we finally emerged 25 days later from the mountains into civilization, the KLSE was at 800 points. I didn’t panic as I had no investments in the KLSE and went on to London for a week to see a friend. I was feeling a big smug not to have been suckered into the crazy KLSE stock market.
But in less than a year, in 1998, the full brunt of the crisis had hit home. All around businesses failed and there was no corporate work or need for young corporate lawyers. Personally, it took me until 2002 to see some small recovery. I dabbled in IT law.
I am a product of the Asian Financial Crisis. Even now, 1997 evokes strong yet vaporous memories. It chewed up 5 valuable years of my life. So, yes, I will always beg to differ to the views of a PM who is vague and clueless.