Monday, September 29, 2008

Malaysian economy going downwards .... Who cares?

The political crisis in Malaysia since March elections that humiliated the ruling coalition has stifled the stock market, deterred foreign investment and crimped growth forecasts.

And economic observers said that with Prime Minister Abdullah Ahmad Badawi still clinging to power despite mounting calls for a speedy departure, there is no end in sight to the uncertainty.

Abdullah has said he may not seek re-election as ruling party leader in internal polls next year, but the coalition also faces an unprecedented challenge from the opposition, which says it has the numbers to seize power.

The prospect of a messy change of government -- the first in the history of Malaysia, which has been ruled by the Barisan Nasional coalition since independence in 1957 -- is making investors very nervous.

The Kuala Lumpur Composite Index, which reached an all-time high of 1,524 points in January, dived to 1,157 shortly after the March elections that saw the government lose its two-thirds majority in parliament for the first time.

On September 18, the bourse plunged to a two-year low of 963, and ended last week at 1,020.53, in a malaise worsened by the stream of bad news from Wall Street.

"It has been on a downtrend since the general elections and we expect it to remain so as there are no signs that the political situation is easing," said Stephen Soo, a senior analyst at local brokerage TA Securities.

He said the political turmoil, combined with the turbulence in the US financial markets, offered "not much hope" for the market to revive before year-end.

"Investor sentiment is still weak and foreign funds have been pulling out of the market. The political scenario is definitely a deterrent to foreigners."

Citigroup chief economist for Singapore and Malaysia, Kit Wei Zheng, said the political situation has forced the government to resort to unsustainable policies that could widen the budget deficit.

"When you have an unstable political situation, you are forced to make populist promises needed to secure power," he told AFP.

Abdullah's 2009 budget offered tax cuts and sweeteners designed to restore support for the beleaguered coalition and spur growth in the face of a global slowdown.

Kit said the premier's flip-flop on petrol prices -- with two cuts that partly reversed a deeply unpopular 41 percent price hike in June -- "is not a good signal to foreign investors."

"As long as this political situation does not resolve itself, even if there is a global recovery, Malaysia might be passed by in favour of other destinations," he said.

Despite the gloom, the government's forecasts remain relatively rosy.

Deputy premier Najib Razak, who last week took over the finance portfolio from Abdullah as part of a succession plan, said the government still expected the economy to grow by 5.7 percent this year.

However, the Malaysian Institute of Economic Research -- a government think-tank -- has cut its 2008 growth projection to 4.6 percent, partly due to the domestic political turmoil.

"The government has been unable to respond to the economic crisis with even a basic plan of action," said Tengku Razaleigh Hamzah, a veteran figure in the ruling party and one of Abdullah's most vocal critics.

Saturday, September 27, 2008

The Great Depression of 2008? Not quite

A columnist says he does not think so, considering that the Great Depression had thousands of banks failing, 25 per cent unemployment and social unrest and tent cities of the poor

NEW YORK: There’s something about hundreds of billions of dollars vanishing overnight that begs a comparison to the 1929 market crash and the Great Depression. Almost — but not yet.

The United States has seen the destruction of some of its biggest names in finance, thousands of lost jobs and threats to the stability of the world banking system. All in one week.

The losses are staggering, more than US$1 trillion in taxpayer dollars pledged by the US government to mop up bad mortgage debt and prop up the financial system. The final tab could be far greater.

To put it in perspective for Wall Street and the world outside, news outlets have latched onto the 1929 crash and the subsequent Great Depression as their historical benchmarks.

Michelle Caruso-Cabrera, a reporter at business news cable network CNBC, told viewers it was “one of the most historic weeks in financial and American history.”

Hold on a minute, market veterans and scholars say. It’s serious, because it has been preceded by a 13-month credit crisis that has gotten worse despite government efforts to solve it. But it has yet to reach the cataclysmic scale of the Depression.

“I’ve lived through plenty of debacles. Each time you go through it, it seems like the worst since 1929,” said Theodore Weisberg, a New York Stock Exchange member for some 40 years.

“The nomenclature of the word ’crisis’ has cheapened,” said Roy Smith, a professor at New York University’s Stern School of Business and former partner at Goldman Sachs.

No one disputes that it is a profound crisis, but Depression-level may be overdoing it, said Allan Sloan, Washington Post and Fortune magazine columnist.

“I don’t think so, considering that the Great Depression had thousands of banks failing and people losing their life savings, 25 per cent unemployment and social unrest and tent cities of the poor,” Sloan said.


Financial earthquakes that have prompted fearful murmurings of the bad old days include the Asian financial crisis in the late 1990s and and the dot-com bust early in this decade that wiped trillions of dollars of paper wealth off the Nasdaq market.

Then there was October 1987, when stock markets around the world crashed. History books are spotted with numerous references to Black Mondays, Tuesdays and Thursdays.

It is clear that the current financial meltdown that killed Lehman Brothers, sold off Merrill Lynch and forced the US government to take over insurance provider American International Group could radically change nearly a century’s worth of financial policy.

Each faltered on debt and other interrelated, complex financial instruments that ensured a more rapid collapse than Wall Street and regulators could handle.

That is a key similarity to the crash 79 years ago, said Maury Klein, professor emeritus at the University of Rhode Island and author of “Rainbow’s End: The Crash of 1929.”

“What’s similar in each case is you have a situation where you’re starting to play in ever-larger stakes with things that you don’t understand,” he said. But today’s overall U.S. economic picture is quite different.

“With just 6 per cent unemployment, we are having a debate as to whether we are even in a recession,” said Richard Sylla, professor of the history of financial institutions and markets at New York University.


Prominent economic columnist Robert Samuelson wrote a piece in the Washington Post in July titled “A Depression? Hardly.” He said he would write the same column now, but “with less conviction.”

That is because there is no telling where the erosion will stop. The bad-bet loans made on homeowners during the recent US housing boom and shady trades could burrow deeper into the financial nervous system than anyone anticipated.

This can hurt regular people too. It may destroy their investments, further degrade home values and cost them their jobs. It may be hard, but not as hard as eating a loaf of bread as their sole daily meal before sleeping under the stars.

“The only question is whether the crisis is so deep that you can’t get at it at all,” said Columbia University professor and Council on Foreign Relations Senior Fellow Jagdish Bhagwati.

“We have instruments like the Federal Reserve coming in. Only the United States could do it in such a big way.”

The fear at the back of everyone’s mind is that the turmoil could spill into the real economy — “the factories where they actually make things and retail establishments and transportation providers,” said Robert Bruner, dean of the University of Virginia’s Darden School of Business.

Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Henry Paulson are determined to avoid the mistakes of 1929, said Brad DeLong, economics professor at the University of California, Berkeley. “They want to make their own, new mistakes.” - Reuters

Anwar better than Najib?

New poll shows Anwar will be better PM than Najib
By Debra Chong

KUALA LUMPUR, Sept 27 By a small margin, Malaysians think opposition leader Datuk Seri Anwar Ibrahim would make a better prime minister compared with Datuk Seri Najib Razak, according to a survey conducted recently by the independent Merdeka Centre.

In the same survey, Malaysians also appear more divided than ever over their support for the country's political leadership.

There are also sharp differences in preferences between the different races, with a majority of non-Malays supporting Anwar, while more Malays preferred Najib.

Between Sept 11 and 22, Merdeka Centre carried out a leadership performance perception on a cross section of 1,002 people of voting age from the three main ethnic communities in the country.

Among the questions asked was: "Between Najib Razak and Anwar Ibrahim, who do you think makes a better prime minister?"

Najib garnered a 33.8 per cent average total support among the three major races. Anwar edged him by a margin of less than six per cent he garnered an average total of 39.3 per cent.

The difference is more conspicuous when the show of support is broken down according to the ethnicity of those polled.

The split was apparent among racial lines, with Najib drawing as much as 47.3 per cent support from the Malay community. Anwar trailed with just 32.5 per cent.

The opposition leader gained greater support among non-Malays, receiving the support of 37.4 per cent of Chinese voters and a whopping 85 per cent from the Indians.

In comparison, Najib only won the approval of 18.4 per cent of Chinese voters and just five per cent of Indians thought he would make a better prime minister.

Of note was the high percentage of voters who remained non-commital. More than 40 per cent of Chinese voters polled expressed no preference.

Based on the poll results, Malay support for Najib is significantly stronger than that for Anwar.

Political analyst Tricia Yeoh says the party factor is a very strong featuring factor with the non-Malay communities.

"It is possible they view Najib as continuing to perpetuate the same kind of politics that has plagued Malaysia through Umno," she said.

"Anwar will need to fight for Malay support most prominently since Najib may continue to be seen as the final bastion of support for the Malay position," she added.

Another political analyst, Khoo Kay Peng, sees it differently.

"No doubt Najib commands higher support among the Malay community because of the status of Umno as a Malay party. It has been representing the Malays for a long time. But at 47.3 per cent, the support is not really very high for Najib. It's not much off Abdullah's support," he said.

Based on the same Merdeka Centre report, Abdullah still enjoys 50.7 per cent support from the Malays.

"The key is that Najib does not get much support from the Chinese and Indians. Najib is still seen as a Malay leader.

"If you want to be the prime minister, you must have support from across the board," he said.

"Anwar stands a much better chance because he gets support from over 30 per cent of the Chinese and the Indians, predominantly from the Indians, which is consistent with past reports," he pointed out.

In a toss up between who will become the next prime minister, he felt it would definitely be Anwar.

But for Khalid Samad, the Pas MP for Shah Alam and an ally of Anwar, the results are frightening for the Pakatan Rakyat alliance.

He said the results of the survey showed government media propaganda still held sway, especially among the rural Malays.

He is concerned that much of the Malay media has portrayed a negative impression of Anwar as being an "immoral guy" and being a stooge of the United States.

"Basically, Umno-Barisan Nasional has been quite successful in conning Malays into believing that Anwar is selling out the Malays and that is the reason for the low percentage of support for Anwar," said Khalid.

"These are not very encouraging results if it is representative of the entire population. It means there is a problem. Anwar will have to work harder.

"It's important he should have at least a 50-50 situation among Malays. That would suffice," he stressed.

But he does not think that the sample poll is a true reflection of the voting populace.

"I don't think that Anwar in the actual situation is that far behind Najib. I would expect 47 per cent for Najib and 45 per cent for Anwar.

"The difference, almost 15 per cent difference in support from Malays, gives the impression that if Pakatan Rakyat comes to power, the position of the Malays will be jeopardised.

"But no one race will lose out under Pakatan leadership," he said.

Monday, September 22, 2008

Why Malaysia is saved from global firestorm

KUALA LUMPUR, Sept 22 - Business at the offices of AIA Malaysia, a wholly owned subsidiary of the American International Group (AIG), was relatively calm last week, the solvency crisis facing the US company notwithstanding.

While policyholders in some countries rushed in near agitation to cash out their policies for fear that the giant insurer's problems would invariably impact its offices overseas, Malaysia's over a million AIA policyholders appeared less panicked.

Perhaps it had to do with AIA's quick assurances of its well-capitalised state and separate reserves in Malaysia. Over 96 per cent of its total assets are invested in the country, the locally incorporated entity stressed, and insurance policies underwritten by it are direct obligations of its regulated business, "which is subject to stringent local regulatory and capital requirements as prescribed by the Insurance Act and regulations under close supervision by Bank Negara".

But the lack of anxiety has more to do with the belief that Malaysian banks and other local entities are less exposed to the sub-prime implosion, having been less plugged in to global market activities over the past few years.

As CIMB chief Nazir Razak observed, for once, Malaysia's relative insulation, which followed after it imposed capital controls in 1998 to stem capital flight before gradually easing them, might have saved it from the firestorm engulfing international markets, especially the US market.

A lot of effort went into recapitalising weakened local banks and restructuring corporations after the Asian financial crisis, as well as strengthening regulations.

But over time, bits deemed too restrictive have been gradually loosened or liberalised to make the local capital markets more attractive. Investment rules have also been gradually relaxed in part to allow for greater diversity of returns.

For example, unit trust companies can now invest up to 50 per cent of their asset under management overseas. Total investments abroad last year increased by nearly 80 per cent to over RM15 billion, or some 10 per cent of assets under management.

As market regulars, Bank Negara and the Securities Commission probably have a better idea as to the current situation, such as what foreign securities these funds own, for example.

So rapidly has the local unit trust industry expanded in the past five years, Malaysia is said to be Asean's biggest, holding about 45 per cent of market share.

For now, Malaysian banks have denied exposure to sub-prime loans, Maybank being the exception, but its estimated US$35 million exposure is described as a drop in the ocean for Malaysia's largest bank.

As reassuring as it is, as the sub-prime crisis continues to unravel, revealing the many different and complex financial instruments that were used, diced and traded to manage the risks underlining the original inferior loans, the chances of getting caught in the global sticky web appear greater, if not totally inescapable.

Now that trillions of dollars have already been lost, the best-case scenario for Malaysia would be escaping relatively unscathed given the colossal possibilities out there.

If so, Malaysia's relative insularity would have been the unintended silver lining in the dark clouds of 10 years ago. - Singapore Business Times

Thursday, September 18, 2008

Utusan, Khir Toyo and Zaini Hassan..See you in the Court

At last, Teresa Kok was released.

We Malaysian will always support you and your defamation suit against Mohd Khir Toyo, Utusan Malaysia and Zaini Hassan.

Believe you will get your RM3 million easily......

Are you one of them in this financial turmoil?

Worst Crisis Since '30s, With No End Yet in Sight

The financial crisis that began 13 months ago has entered a new, far more serious phase.

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others firms. There's also a growing sense of wariness about the health of trading partners.

The consequences for companies and chief executives who tarry -- hoping for better times in which to raise capital, sell assets or acknowledge losses -- are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring intervention by the government that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.

Expectations for a quick end to the crisis are fading fast. "I think it's going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.

"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn't have during the Great Depression."

Spreading Disease

The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. The illness seems to be overwhelming the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied. Fed Chairman Bernanke and Treasury Secretary Henry Paulson, walking into a hastily arranged meeting with congressional leaders Tuesday night to brief them on the government's unprecedented rescue of AIG, looked like exhausted surgeons delivering grim news to the family.

Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

At least three things need to happen to bring the deleveraging process to an end, and they're hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.

But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets' prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms' share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a "financial accelerator."

"Many of the CEO types weren't take these losses, and say, 'I accept the fact that I'm selling these way below fundamental value,'" says Anil Kashyap, a University of Chicago Business School economics professor. "The ones that had the biggest exposure, they've all died."

Borrowing Slowdown

Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.

Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down $408 billion worth of assets and raised $367 billion worth of capital.

But that doesn't appear to be enough. Every time financial firms and investors suggest that they've written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit $636 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost goods and services each year.

"This is a deleveraging like nothing we've ever seen before," said Robert Glauber, now a professor of Harvard's government and law schools who came to the Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. "The S&L losses to the government were small compared to this."

Hedge funds could be among the next problem areas. Many rely on borrowed money to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many have taken out loans to make their investments and are finding it more difficult now to borrow.

That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.

History of Trauma

Debt-driven financial traumas have a long history, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers has easy solutions. Cutting interest rates and writing stimulus checks to families can help -- and may have prevented or delayed a deep recession. But, at least in this instance, they don't suffice.

In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong's free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange-traded fund and making money.

Today, Mr. Bernanke is taking out his playbook, said NYU economist Mr. Gertler, "and rewriting it as we go."

Merrill Lynch & Co.'s emergency sale to Bank of America Corp. last weekend was an example of the perniciousness and unpredictability of deleveraging. In the past year, Merrill has hired a new chief executive, written off $41.4 billion in assets and raised $21 billion in equity capital.

But Merrill couldn't keep up. The more it raised, the more it was forced to write off. When Merrill CEO John Thain attended a meeting with the New York Fed and other Wall Street executives last week, he saw that Merrill was the next most vulnerable brokerage firm. "We watched Bear and Lehman. We knew we could be next," said one Merrill executive. Fearful that its lenders would shut the firm off, he sold to Bank of America.

This crisis is complicated by innovative financial instruments that Wall Street created and distributed. They're making it harder for officials and Wall Street executives to know where the next set of risks is hiding and also contributing to the crisis's spreading impact.

Swaps Game

The latest trouble spot is an area called credit-default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall as market reassesses the risk that a company won't be able to honor its obligations. Firms use these instruments both as insurance -- to hedge their exposures to risk -- and to wager on the health of other companies. There are now credit-default swaps on more than $62 trillion in debt, up from about $144 billion a decade ago.

One of the big new players in the swaps game was AIG, the world's largest insurer and a major seller of credit-default swaps to financial institutions and companies. When the credit markets were booming, many firms bought these instruments from AIG, believing the insurance giant's strong credit ratings and large balance sheet could provide a shield against bond and loan defaults. AIG believed the risk of default was low on many securities it insured.

As of June 30, an AIG unit had written credit-default swaps on more than $446 billion in credit assets, including mortgage securities, corporate loans and complex structured products. Last year, when rising subprime-mortgage delinquencies damaged the value of many securities AIG had insured, the firm was forced to book large write-downs on its derivative positions. That spooked investors, who reacted by dumping its shares, making it harder for AIG to raise the capital it increasingly needed.

Credit default swaps "didn't cause the problem, but they certainly exacerbated the financial crisis," says Leslie Rahl, president of Capital Market Risk Advisors, a consulting firm in New York. The sheer volumes of outstanding CDS contracts -- and the fact that they trade directly between institutions, without centralized clearing -- intertwined the fates of many large banks and brokerages.

Few financial crises have been sorted out in modern times without massive government intervention. Increasingly, officials are coming to the conclusion that even more might be needed. A big problem: The Fed can and has provided short-term money to sound, but struggling, institutions that are out of favor. It can, and has, reduced the interest rates it influences to attempt to reduce borrowing costs through the economy and encourage investment and spending.

But it is ill-equipped to provide the capital that financial institutions now desperately need to shore up their finances and expand lending.

Resolution Trust Scenario

In normal times, capital-starved companies usually can raise money on their own. In the current crisis, a number of big Wall Street firms, including Citigroup, have turned to sovereign wealth funds, the government-controlled pools of money.

But both on Wall Street and in Washington, there is increasing expectation that U.S. taxpayers will either take the bad assets off the hands of financial institutions so they can raise capital, or put taxpayer capital into the companies, as the Treasury has agreed to do with mortgage giants Fannie Mae and Freddie Mac.

One proposal was raised by Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. Rep. Frank is looking at whether to create an analog to the Resolution Trust Corp., which took assets from failed banks and thrifts and found buyers over several years.

"When you have a big loss in the marketplace, there are only three people that can take the loss -- the bondholders, the shareholders and the government," said William Seidman, who led the RTC from 1989 to 1991. "That's the dance we're seeing right now. Are we going to shove this loss into the hands of the taxpayers?"

The RTC seemed controversial and ambitious at the time. Any analog today would be even more complex. The RTC dispensed mostly of commercial real estate. Today's troubled assets are complex debt securities -- many of which include pieces of other instruments, which in turn include pieces of others, many steps removed from the actual mortgages or consumer loans on which they are based. Unraveling these strands will be tedious and getting at the underlying collateral, difficult.

In the early stages of this crisis, regulators saw that their rules didn't fit the rapidly changing financial system they were asked to oversee. Investment banks, at the core of the crisis, weren't as closely monitored by the Securities and Exchange Commission as commercial banks were by their regulators.

The government has a system to close failed banks, created after the Great Depression in part to avoid sudden runs by depositors. Now, runs happen in spheres regulators may not fully understand, such as the repurchase agreement, or repo, market, in which investment banks fund their day-to-day operations. And regulators have no process for handling the failure of an investment bank like Lehman Brothers Holdings Inc. Insurers like AIG aren't even federally regulated.

Regulators have all but promised that more banks will fail in the coming months. The Federal Deposit Insurance Corp. is drawing up a plan to raise the premiums it charges banks so that it can rebuild the fund it uses to back deposits. Examiners are tightening their leash on banks across the country.

Pleasant Mystery

One pleasant mystery is why the crisis hasn't hit the economy harder -- at least so far. "This financial crisis hasn't yet translated into fewer...companies starting up, less research and development, less marketing," Ivan Seidenberg, chief executive of Verizon Communications, said Wednesday. "We haven't seen that yet. I'm sure every company is keeping their eyes on it."

At 6.1%, the unemployment rate remains well below the peak of 7.8% in 1992, amid the S&L crisis.

In part, that's because government has reacted aggressively. The Fed's classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn't repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.

In part, the broader economy has held mostly steady because exports have been so strong at just the right moment, a reminder of the global economy's importance to the U.S. And in part, it's because the U.S. economy is demonstrating impressive resilience, as information technology allows executives to react more quickly to emerging problems and -- to the discomfort of workers -- companies are quicker to adjust wages, hiring and work hours when the economy softens.

But the risk remains that Wall Street's woes will spread to Main Street, as credit tightens for consumers and business. Already, U.S. auto makers have been forced to tighten the terms on their leasing programs, or abandon writing leases themselves altogether, because of problems in their finance units. Goldman Sachs economists' optimistic scenario is a couple years of mild recession or painfully slow economy growth.

Aaron Lucchetti, Mark Whitehouse, Gregory Zuckerman and Sudeep Reddy contributed to this article.

Tuesday, September 16, 2008

After Lehman brothers, AIG the next Victim?

AIG in focus as financial meltdown spreads

Moody's Investors Service cut AIG's rating to A2 from Aa3, a two-notch downgrade. S&P lowered the rating to A-minus from AA-minus, a three-peg reduction, and Fitch Ratings reduced its standing to A from AA-minus, a two-notch cut.

AIG's ratings are still investment grade, although all three agencies said more downgrades could follow.

"AIG seems to be the next guy on the chopping block," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.

Again seeking a private solution to Wall Street's woes, the Fed had asked JPMorgan Chase & Co and Goldman Sachs Group Inc to explore arranging $70-$75 billion in loans to support AIG, among other financing options, another person familiar with the situation said.

AIG turned to the Fed late on Sunday after failed talks with several buyout firms and Warren Buffett's Berkshire Hathaway. The company has also said it was exploring asset sales.


Asian stocks tumbled across the board, with Tokyo down more than 5 percent at a three-year low. Japanese government bond futures jumped by their daily limit of three full points as investors fled to safe havens, while Japan's central bank said it would strive to maintain stability in financial markets.

Hong Kong's Hang Seng Index was off nearly 7 percent, while Seoul's main index dropped more than 6 percent.

Listen all Politicians.......

Raja Nazrin has sent out the message loud and clear ........

Will the politicians listen?

Tuesday September 16, 2008 MYT 1:16:56 PM

Stop quarrelling, Raja Nazrin urges leaders

IPOH: The Raja Muda of Perak, Raja Dr Nazrin Shah, on Tuesday called on the country’s leaders to stop quarrelling among themselves and to instead focus on developing the nation’s resources for the well-being of the people.

He said the world was now facing a gloomy economic climate with the prices of fuel and food at unprecedented levels.

“All efforts must be focused on easing the burden of the people. The country’s productivity must be raised, investors must be given confidence, new jobs must be created and essential items must be assured.

“This is a big challenge for any government. It will not be achieved through political rhetoric alone. It will not be achieved if the leaders, both within and outside the Government, continue to quarrel,” he said Tuesday at the 162nd Conference of the Perak Islamic Religious and Maly Customs Council here.

Raja Dr Nazrin said the country’s leaders, both within and outside the Government, must see the grim economic situation in the world as a challenge facing the country and people which needed their concerted thinking and efforts to do productive work.

Raja Dr Nazrin said that if this heavy challenge was not tackled, he feared that stability and order in the country would be affected and all the achievements of the last 51 years since independence would be wiped out.

He also said that the spirit of Ramadan, as the basis to mould noble morals, followed by the spirit of Syawal to build brotherhood, must be reflected in the daily activities of the family, society, government and nation.

”It is such a big blessing if unity is fostered, in fact the blessing will spill over to the people and country who are in harmony; on the other hand, friction will result in disunity and prosperity may not be achieved,” he said.

Raja Dr Nazrin, who is president of the Perak Islamic religious and Malay Customs Council, also called on the Muslim and Malay leaders to set a good example, spread the spirit of brotherhood, strengthen unity, stop disputes and concentrate on developing the well-being of the Muslims.

He said the differences in approach and method, ideologies and interpretetation should not be allowed to reach a level as to split the Malays and Muslims.

Earlier, at another function, Raja Dr Nazrin presented donations from the Sultan Azlan Shah Foundation to 59 voluntary organisations and charitable and welfare bodies run by various religious and ethnic groups in the state.

He said the Sultan Perak, Sultan Azlan Shah, had donated RM20,000 to each organisation and the total amounted to RM1.18mil.

He said each organisation would be asked to submit its statement of account six months from now to show how the donations had been spent so that the foundation’s secretariat could make an assessment before recommending future donations. - Bernama

Monday, September 15, 2008

Tighten your Seat Belt.................................

Not a pleasent news for Malaysia when the country which is currently hit by political turmoil has seen another international merchant bank downgrades the target price for Bursa Malaysia after CLSA and the warning that portfolio funds outflow will continue in Malaysia due to political turmoil and weakening Ringgit.........

When other countries have been fighting hard to improve their economy, our politicians still fighting hard in politics instead..................Is this what we call Malaysia Boleh?

15-09-2008: Deutshce Bank slashes KLCI target to 975 points.
(The Edge)

DEUTSHCE Bank slashed its estimates for the Malaysian equities' key barometer by some 8% to 975 points with an "Underweight" stance, a reflection of bearish sentiments in the country due to corporate earnings risk concerns amid political uncertainties, and a weakening ringgit.

But current valuations of the 100-company Kuala Lumpur Composite Index is still deemed not cheap enough compared with regional peers, according to the research firm which favours defensive stocks like Telekom Malaysia Bhd, KLCC Property Holdings Bhd, Berjaya Sports Toto Bhd & QL Resources Bhd.

"We believe the market will have limited 'tolerance' for stocks which are perceived to be politically-related, or are dependent on Government contracts in the near term.

"Also, avoid big cap sectors like banks (weakening demand for 'big ticket' consumption items like property and cars) and plantations (Indonesian palm oil supply acceleration concerns)," Deutsche Bank wrote in note last Friday (Sept 12).

The research house's KLCI target of 975 points implies price to earnings ratios of 11.3 times and 10.7 times for 2008 and 2009 respectively, a 10% discount to regional valuations. At present, the KLCI is trading at a 2% PER discount to the region at 12.3 times, besides a 1.9 times price to book value ratio.

Deutsche Bank said the local index should be trading at a wider discount considering inferior corporate earnings growth of 1.7% and 6.5% for 2008 and 2009 respectively versus the region's 6.8% and 17.8% expansion.

15-09-2008: Portfolio funds outflow to continue
(The Edge)

PETALING JAYA: The outflow of portfolio funds is expected to continue for the rest of the year in view of the political tension engulfing the country and the lack of support for regional currencies, including the ringgit.

“The recent shift in the flow of funds, especially out of the equity market, is not only confined to Malaysia but is a regional phenomenon as investors tend to return to the stable havens of the developed markets in volatile times,” HwangDBS Investment Management Bhd’s chief investment officer David Ng told The Edge Financial Daily.

He said HwangDBS would take the “look West” stance by parking some of its investments in stable and developed economies that provided potentially high-yielding returns, while it would also hold a considerably high level of cash as it moved into the remaining half of this year.

“We will continue to take this stance as we wait for positive cues in the local and regional markets, before seeking to deploy more funds into the equity markets as the weakening currencies make Asian equities to dollar investment less attractive and political instability may continue to deter foreign investments from our shores,” Ng said.

It has been reported that the second quarter of this year had suffered an unprecedented outflow of portfolio funds to the tune of RM32 billion, driven partly by unrelenting political tension since the March 8 general election and the broad selloff of the stock market.

The outflow from the commodity market and the downswing of CPO price were also caused by the weak crude oil price and improving supply prospects for global edible oils.

Last Thursday, the Kuala Lumpur Composite Index (KLCI) fell to a 22-month low at 1,041.07 as foreign funds continued to sell down on heavyweight plantation and finance stocks. The benchmark index rose 2.96 points to 1,044.03 the next day. The ringgit, meanwhile, fell to its 52-week low of 3.4710 per US dollar last Thursday, and also recovered slightly to 3.4525 per dollar the following day.

Nevertheless, Ng said in a bull market environment, emerging markets would tend to be the prime recipients of foreign capital inflows due to the obvious growth potential.

He would not dimiss the fact that Malaysian corporations with sound fundamentals such as those in the soft commodity space, namely crude palm oil (CPO), were beginning to emerge as an attractive asset class after its valuation recently took a beating from the slide in CPO prices.

“We believe that it will, in the long run, continue to benefit from strong demand in the emerging markets such as China and India due to increase use of biodiesel source of energy globally,” he said.

Analysts have said CPO price may rebound by year-end despite the European Union (EU) finally voting to lower the target for using biofuel in road transport to 6% last week.

Last Friday, CPO for November delivery on Bursa Derivatives rose RM71 to RM2,380. It was traded at a peak of RM4,486 per tonne on March 4, according to Bloomberg data.

Breaking news : Anwar has deferred the target date

According to the Reuters report, Anwar has deferred the 16.09 take over plan. However, he still targets the takeover plan to be completed by end of Sept 08......

Malaysia Anwar upbeat as PM faces mounting pressure

Mon Sep 15, 2008 12:38am EDT
By Jalil Hamid

KUALA LUMPUR, Sept 15 (Reuters) - Malaysian opposition leader Anwar Ibrahim will tell thousands of supporters at a rally on Monday that he is still confident of unseating the coalition that has ruled the country for over half a century.

The rally, expected to draw 30,000 supporters to a stadium in the opposition-held state of Selangor in central Malaysia, comes on the eve of Anwar's bid to lure 30 MPs from the ruling Barisan Nasional coalition to his opposition bloc.

"My personal target is within September," Anwar told the Asian Wall Street Journal in a interview published on Monday.

Anwar's aides will hand a letter to Prime Minister Abdullah Ahmad Badawi on Monday seeking a meeting with him for a "peaceful power transition" to the opposition Pakatan Rakyat alliance, one of his party officials said.

"I don't think the Sept. 16 plan is going to happen as he doesn't have enough numbers and some of the Barisan MPs have not returned from overseas," said one foreign diplomat. "The plan could be delayed to Sept. 20."

Sept. 20 was the date Anwar was arrested 10 years ago after falling out with the then Prime Minister Mahathir Mohamad.

Earlier last week, the government sent 50 of its 140 MPs on a study trip to Taiwan. Some have since returned home.