Malaysia Matters Podcast

It is interesting to note that a couple of Anwar’s victories this year also mark points of downward spiral in the Malaysian economy. 

… the cost of insuring Malaysian bonds against default has risen sharply since Anwar’s coalition took a over a third of the seats in Malaysia’s election in March, increasing political risk. The 5-year CDS stood at 140.96 basis points on Monday, up from 91.85 on March 7, the day before the election.

That means it costs almost $141,000 to insure $10 million of Malaysian bonds against default.

According to Bank Negara’s latest statistics, some US$1.1bn (about RM3.8bn) of foreign funds exited from the country during the period Aug 15-29.

The exodus of foreign funds have plagued the weakening ringgit. Besides, a stronger greenback has also contributed to the departure of foreign funds.

Since the dollar began its upward trend in late July, the ringgit has been steadily on the slide. With the local currency going downhill, coupled with the lacklustre performances of the local markets, it is natural for profit-minded foreign investors to move their money elsewhere.

The ringgit has depreciated by about 6% since late July, from RM3.25 to RM3.45 to the dollar, with short-term prospects less than optimistic.

The highly unpredictable domestic politics and sluggish growth have gloomed the outlook of local markets among foreign investors, while the central bank’s decision not to increase the interest rates in late July has further consolidated their determination to withdraw from the country.