junior's toks

Dollar and Cents

I like to talk about the Ringgit issue. Because I think it is a subject with no answer. So, there is no right or wrong. No matter what I write, as long as I write it in English, people will think that I am very smart because I am commenting on MACRO issue. Even my cat (Mao-mi is her name, remember?) has her own view on currency:-

MALAYSIA may abandon its currency’s peg to a falling dollar in the first half of 2005 amid speculation that China will adjust its fixed exchange rate, said UBS AG. China’s buying power in Asia may rise, and the competitiveness of its exports drop, should the country allow its currency, known both as the yuan and the renminbi, to rise. Asian nations then may have less need to depress their currencies to support exports. ..........The ringgit was pegged at 3.8 to the dollar in September 1998 to stem capital flight during Asia’s financial crisis. The move gave Bank Negara room to cut interest rates to a record, helping the economy recover from its worst recession in 41 years. The “fair value” of the Malaysian currency is around 3.39 ringgit to the dollar, Mathur wrote. “A managed float should be the preferred exchange rate regime as it offers the best compromise between predictability and flexibility.” The peg is “no longer relevant,” Mathur said in a phone interview in which he confirmed the details of the report.

The first thing that caught my eyes was the fair value of Ringgit. WOW, 3.39 to a US$......after working in one of the foodcourts in Signapore for years, I have saved some Singapore Dollar. I MUST FIND THE RIGHT TIME TO CONVERT ALL MY SINGAPORE DOLLAR TO RM..........

Why? Because it is cheap to enter or invest in Malaysia now, and when the currency appreciate, I have a double RETURNS i.e appreciation in currency plus my investment returns!

So, I am going to Tao Payoh this afternoon to convert all my S$235.85 into Ringgit and buy er......er.......er..........er.........what can I buy in KLSE ha?

You see, this is my view and my cat's view. If we are thinking like that, ALL THE OTHER CORPORATIONS WOULD THINK OF A SIMILAR LINE. I am bloody sure that this is one of the reasons (ie. upside on currency gain) why GIC or Temasek is looking to invest in Malaysia. VALUE BUY la.....

The Asian Development Bank also commented a few months ago that even though the FOREX reserve of China and Malaysia government has gone up substantially since crisis, this is actually NOT A GOOD SIGN because some could be SPECULATIVE MONEY.

So we have to deal with 2 issues:- We are selling our assets too cheaply due to undervalued currency AND some of the buyer could be speculative.

Our friends in Bank Negara are scratching thier head (and their balls??) what to do next....

Anyway, a lot of speculations have surfaced recently because of the Renminbi (RMB) appreciation pressure. ALMOST all economists have predicted that the Chinese Government will re-peg the Yuan or RMB. This is self fulfilling prophesy. Or, when you tell a lie 100 times, the lie will become a fact.

I have one question to ask. If you are Chinese Government, who has invested BILLIONS of US$ in the US Treasury Bill or Notes, WOULD YOU BLOODY HELL GO AND REVALUE YOUR OWN CURRENCY UPWARD and SUFFER A LOSS IN YOUR OVERSEA INVESTMENTS STRAIGHT AWAY???

I plan to ask Siao Hong when I go to Shanghai next month. Siao Hong is the pretties girl in the Tian Sang Ren Jiang KTV in the Huai Hai Road. I am sure she can give me a satisfactory answer..... :D

Junior

posted by Junior @ 1:43 PM