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Tuesday, August 18, 2015

RM Crashing, TNB Shares Crashing, KLCI Crashing. Hooray Gomen Is Happy

Thats what the gomen said. 
The crashing Ringgit is a good thing. 
I suppose they will say the crashing KLCI is also a good thing.  
TNB share prices crashing must also be a good thing.

Here is some news. It is not so good and I am worried as well :  

  • Foreign funds net sellers at RM1.47b in week ended Aug 14 
  • Monday, 17 August 2015
  • Foreign funds stepped their selling pressure on Malaysian equities 
  • week Aug 14 net selling surging to RM1.47bil
  • net foreign selling RM403.8mil on Friday
  • Friday, KLCI closed 24.80 points or 1.53% lower to 1,596.82 
  • heavy selling by foreign institutions
  • mainly on oil and gas and banking stocks
  • expect the local market to trend sideways with slight downside 
  • continuous selling by foreign investors
Here are some charts from today :


Today is Monday, the first trading day for this week. The Ringgit is still going down - RM4.109 to the US Dollar.

Here is the KLCI chart for today. It is down by another 24 points from Friday to hit 1,572 at closing today.


Tenaga Nasional's share price is really getting a beating. Closing price today was RM10.40, down by 18 sen.   



 Maybank share prices are also going down :closing was RM8.20 today.



This story is not yet over.  If there is an interest rate increase in America, the Ringgit will go down some more. 

If the Ringgit falls some more, the foreign fund managers will sell even more shares. The KLCI will crash some more. 

Some basics folks :  If the United States raises their interest rates, the Fixed Deposits and savings rates in US banks will increase, thereby attracting more foreign funds to flow into US banks, to earn higher interest. This will cause demand for the US Dollar to increase, automatically pushing the US Dollar higher against other currencies, including our Ringgit of course. 

When the Ringgit goes down, foreign fund managers earn less when they sell shares on the Bursa and convert the Ringgits into their currencies. Especially US Dollar fund managers.  To cut losses (or because of panic) foreign fund managers will dump their holdings of Malaysian shares. Hence the huge outflow of funds from the Bursa last week.  And it will continue.

I see other issues as well. Besides the weak Ringgit, the weak oil prices and the unstable political situation there are major weaknesses in the economy.

Our technological value added is decreasing. This is evidenced by that announcement by the Deputy Prime Minister that  1.5 million Bangla workers will be brought into the country.A huge majority of the Banglas will not know how to read or write. So they will not be adding any extra value to the economy. They will be displacing 1.5 million other workers.  Wow. What a clever move.

All this will have a net effect of dampening new growth in the economy. Especially value added technology based growth. There will be little of such things.  Basically we will be producing the same palm oil, the same rubber, the same brick laying at thr construction sites at lower Bangla wage costs. 

The total selling prices will remain the same (cos little or no new value added) while the plantation owners and building contractors can maintain their profits.

It will be like this : if one cow produces 10 litres of milk then five cows will produce 50 litres. So we need 5 Banglas to milk five cows. There is no such thing as a new supercow producing 50 litres of milk, handled by only one Bangla who can operate a high tech milking machine. 

So I think this time, the KLCI is going to go down a bit further. So will the Ringgit. 

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