Malaysia GDP grew only .1 percent in the fourth quarter

From the Herald Tribune:

Malaysia's trade-driven economy grew a dismal 0.1 percent in the fourth quarter of 2008 from a year earlier, bringing full-year growth to 4.6 percent, the government said Friday.

The manufacturing sector was badly hit, contracting by 8.8 percent in the October-December period after having recorded positive growth for the previous 26 quarters, the Department of Statistics said in a statement.

"The downturn in the global economic activity has the spillover effect on our local economy," the statement said. Third-quarter gross domestic product growth had been 4.7 percent.

Falling foreign demand caused double-digit declines in the fourth quarter for some manufacturing industries, including electrical and electronic goods and metal products.

The construction and mining sectors also suffered negative growth, but the services sector — which includes retail trade, insurance and transport — recorded a 5.6 percent modest rise to be the main contributor to economic growth.

Don't be fooled by the headline numbers that compared to other countries Malaysia didn't fall year over year as much. While that is true, even Singapore was still able to grow at 1.1%. This number is absolutely dismal. Furthermore, Singapore had much higher exposure to the recession due to their well developed financial industry and were still able to grow more than Malaysia, which has "much less" exposure apparently.

Stimulus doesn't have a target yet

From The Star:

KUALA LUMPUR: It is more important to have a targeted and focused second fiscal stimulus package instead of offering a rushed version.

“It is not a question of timing alone, but what kind of package, the size of it, and more importantly, whether it is targeted and focused in the right areas.

“That requires a bit of time to work on,” said Deputy Prime Minister Datuk Seri Najib Tun Razak.

He added that there were countries which had announced fiscal stimulus packages which had yet to produce results.

Najib said the Government refused to be rushed into introducing the second budget stimulus, dubbed the mini budget, because it wanted to ensure the package worked effectively.

30 billion wants to be spent without any idea where the money is going to yet. I know where some of that money will go to for sure, without a question it will go to "administration" fees.

No Property bubble, but doesn't mean prices won't go down.

From The Edge Daily:

PETALING JAYA: The local property market would be able to escape a bubble, such as the one affecting neighbouring countries, several industry experts said.

They said the local property market would be resilient in facing the current downturn as it was mainly driven by domestic demand.

A roundtable discussion on Corporate Real Estate Investment Opportunities organised by Zerin Properties that was posted on its website www.zerinproperties.com yesterday, the panellists agreed that the real estate market, particularly the residential sub-sector in well-located areas in the Klang Valley, continued to be attractive to both local and foreign investors.

According to International Real Estate Federation (FIABCI) Malaysia president Datuk Richard Fong, the property market did experience a “slight bubble” in the high-end sector in Kuala Lumpur, particularly in KLCC, Mont’Kiara and Hartamas where property prices had doubled over the last three to five years.

Fong said there were good deals to be had in the condominium market in Kuala Lumpur city centre, especially those priced between RM800 and RM1,000 psf. “One should grab when you find sellers looking to cash out at a 30% discount from the property’s peak price,” he advised.

The argument du jour (of the day) is we aren't in as bad a situation, therefore we should not suffer as much is as big a bunch of baloney as I've seen. Housing is such an elastic type of good because Malaysians spend a lot of their income on housing. Obviously, if Malaysians choose to cut down spending on housing, they could very well take it out of their budget if they really wanted by doubling down, moving in with their families, etc.

While there might not be a "property bubble," if people lose their jobs a la retrenchment, housing for sure will suffer, for the obvious reason that the jobless can't support their housing situation any longer. It's the most obvious event that will happen, yet the "experts" dont' see this happening. Ludicrous.

On retraining workers from retrenchment

From The Edge Daily:

“Rather than we impose the minimum wage, we let the industry regulate appropriate wages set. We need to retain Malaysians and the way forward is to increase their salary,” he added.

He also reminded employers that Malaysia could no longer depend on cheap labour to attract foreign investors. There are about 12 million working Malaysians in the country as well as about 3.5 million foreign workers, of which two million are registered and the other 1.5 million illegal.

He said Malaysia currently did not have 15 million job opportunities. Subramaniam said foreign workers had suppressed wages, prompting skilled workers to leave the country to seek better paying jobs.

Amazing, another case of the government knowing what they should be doing, but will never end up doing it. It takes a major recession for them to make this statement!

TM extremely confident?

From Bloomberg:

Telekom Malaysia Bhd., the nation’s state-owned fixed-line phone company, jumped the most in 10 months on the Kuala Lumpur stock exchange after saying it will return 3.5 billion ringgit ($955 million) to shareholders.

The stock rose 6.6 percent to 3.56 ringgit at the close, the biggest gain since Telekom split from its mobile-phone unit in April. Investors will receive 98 sen for each share they own.

Telekom is compensating shareholders after spinning off its faster-growing international cellular unit, TM International Bhd. Now faced with slowing growth as it sells fixed-line phone and Web connections at home, the company needs to return excess cash to shareholders or risk losing them in a worldwide slowdown.

As you all know, I made a comment earlier about how Green Packet's WiMax project might overextend itself. As hyped up as WiMax is as an alternative to Telekom's streamyx, I believe it'll be a bit of a bust. At most, it will compete with cellular companies 3g and hsdpa broadband. It's also only a matter of time until the cellular companies here go to LTE which offers wimax bandwidth capability.

Plus wireless broadband is inferior in some cases to landlines in that the connection can be erratic and unreliable. People want landlines for stability. They will not be able to compete with Telekom at all, and I think Telekom knows this. They will be competing for the same piece of the pie that Celcom, Maxis, and Digi are scrounging for.

Besides that, they offer the dual package of phone line plus broadband. In the US, some of the cable providers had very strong competitive advantages when they were able to offer phone+broadband+cable television and whooped the competition. Seeing as how TM is currently working on the HSBB project that will enable it to become a triple play provider, they may prove hard to compete against with in the future. Perhaps even Astro might be in trouble as well. But we are talking much into the future.

Maybank plan to offer RM5-6 billion Rights Issue

From The Edge:

KUALA LUMPUR: Malayan Banking Bhd (Maybank) plans to raise RM5 billion to RM6 billion (US$1.36 billion to US$1.63 billion) in a rights issue in April, the Wall Street Journal reported on Feb 24, citing people familiar with the situation.

If it goes ahead, Maybank’s rights issue would be the second largest in Asia Pacific ex-Japan this year, the WSJ report from Hong Kong said, citing data from Thomson Reuters. The largest cash call in 2009 so far is Australian conglomerate Wesfarmers Ltd’s US$1.9 billion offering in January. Some US$2.99 billion had been raised in 45 rights issue year-to-date, with the year being two month old.

Did someone say our financial sector is holding up just fine? cough....cough.

Bank Negara cuts rate to 2 percent

From Bloomberg:

Feb. 24 (Bloomberg) -- Malaysia’s central bank lowered its benchmark interest rate for a third straight meeting to bolster an economy that policy makers say faces an increasing risk of contracting this year.

Bank Negara Malaysia cut its overnight policy rate to 2 percent and reduced the amount of money lenders need to set aside as reserves, according to a statement today in Kuala Lumpur. The half-point reduction was predicted by 6 of 15 economists surveyed by Bloomberg News.

“The downside risks to the global economic outlook have increased significantly,” the central bank said. “While this has raised the risk of an economic contraction in 2009, the prospects remain intact for an economic recovery once global conditions stabilize.”

Governor Zeti Akhtar Aziz, who cut borrowing costs by the most in more than a decade last month as the global recession deepened, said Feb. 11 the reduction had been “frontloaded.” Reports since then showed inflation eased further in January and exports fell the most in almost seven years in December.

“Given the gloomy outlook for Malaysia, a more assertive and immediate set of policy responses will be required to prevent the economy from slipping into a fully fledged recession,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore, who had expected a half-point cut today.

You heard it here, half a percent cut. They could very well go another half a percent but after that it will be getting dangerously bad for the ringgit. I say the stimulus is a waste of money and will help deplete foreign reserves.

Events this week: Rate cut decision and GDP numbers

From Bloomberg:

Economists are divided on whether Malaysia’s central bank will lower its benchmark interest rate for a third straight meeting to bolster an economy that probably expanded at the slowest pace in seven years last quarter.

Bank Negara Malaysia may keep its overnight policy rate unchanged at 2.5 percent today, according to 8 of 15 economists surveyed by Bloomberg News. Six expect a half-point cut and one predicts a quarter-point reduction in the decision due at 6 p.m.

Governor Zeti Akhtar Aziz, who cut borrowing costs by the most in more than a decade last month as the global recession deepened, said Feb. 11 the reduction had been “frontloaded” and that the current rate would hold pending further developments. Reports since then show that inflation has eased further and exports fell the most in almost seven years.

“It would be unreasonable for another rate cut this soon,” said Patricia Oh, an economist at TA Securities Holdings Bhd. in Kuala Lumpur. “Ample liquidity and accessibility to loan financing is more crucial at this point of time."

I'd rather have a rate cut than a wasteful stimulus. The more the government gets on spending money, the less chance we have on seeing it. Rate cuts do in fact help by increasing the disposable income by a significant amount.

But the effect is muted due to only recently implementing rate cuts at 3.5%. Another half a percent would more or less raise income by a significant amount. It may be enough to encourage refinancing. A 1.5% percent interest rate cut to 2% for a person with a RM300,000 mortgage on a RM50,000 a year salary is equivalent to a 9% pay increase.

But seeing as how the country is small, and prone to exchange rate risk, any rate cuts will further exacerbate the weakness of the ringgit. The central bank does need to be wary of the value of the ringgit, less we see our savings go downhill. Overall, the world needs to save in order to get out of this mess. If we erode our savings, we will have less powder for growth once the world does get back on its feet.

After saving, only then can we have the capital to make investments once again.

Malaysian exports to drop this year. (by a ton)

From Yahoo biz (AP):

Malaysia is bracing for a possible 4 percent drop in its exports this year, the trade minister said Monday, acknowledging that the export-driven economy cannot be immune to the global economic crisis.

Anyone want to bet the amount will be more? 4 percent is the "worse case scenario." Insanity.

Electrical and electronics goods constitute 38.3 percent of the country's total exports, followed by palm oil, crude oil, liquefied natural gas and chemicals.

Which export categories are affected by the global crisis? Check each one. Now if only we were producing gold.

Property Prices yet to fall

From the Business Times:

THE latest cut in interest rates by banks will encourage more homeowners to refinance their loans, a trend that should become visible in the market in the next three to six months.

Rahim & Co executive chairman Datuk Abdul Rahim Rahman expects the property market in the country to feel the full impact of the global financial crisis in the coming months and to recover in two years.

"Before it starts recovering, we have to face the worst. The property market is usually slower to recover than the economy," he told reporters in Kuala Lumpur yesterday.

Property prices have dropped by between 10 per cent and 15 per cent since late last year as prospective buyers adopt a wait-and-see attitude in committing towards purchases and banks become more cautious in extending loans.

"The situation today is definitely not as bad as during the 1997 Asian financial crisis when it took at least five years for the property market to recover," Abdul Rahim said.

He attributed this to the country's more sound economic situation and the RM7 billion economic stimulus package.

Property prices have only not come down so much because the retrenchments have been relatively mild so far. But its only a matter of time. Industrial companies lag as they are further away from the epicenter of the financial crisis.

From the Sun on February 19, 2008:

To be fair, there have been no reported closures of factories this year. Toy manufacturer Nikko had shut down in the middle of last year. There is speculation about the fate of Dell’s two plants after the American computer giant announced it wanted to sell its factories worldwide. Intel recently announced it would close two of its plants in the state by the year-end but was quick to stress that the 1,000-odd workers there would be redeployed to plants in Kulim, Kedah, and Penang.

The state government has insisted that the number of workers who have lost their jobs is not as bad as what had happened in the financial crisis of 1998. But the authorities are bracing for a worst-case scenario. One major local factory in Bayan Lepas, a subcontractor for electronics multinationals, has sent back about 600 of its foreign workers.

Massive lay-offs have not happened yet. But once they happen, expect property prices to come down hard. Half price condos. It's not unforeseeable.

30 billion stimulus

From The Malaysia Insider:

The government is expected to announce a stimulus package worth more than RM30 billion next month, Sin Chew Daily, the country’s leading Chinese-language newspaper reported today.

The newspaper quoted deputy finance minister Datuk Kong Cho Ha as disclosing “the minis-budget will be worth more than RM30 billion and will benefit most sectors of the economy.”

RM30 billion is just more waste. We're just trying to dig ourselves out of a hole. What happened to riding out the waves a la 1997 financial crisis style or hunkering down for a long tough recovery?

The Malaysian Insider understands that some RM5 billion of the RM7 billion stimulus package was disbursed by the Finance Ministry to individual ministries in January but much of it has been trapped by officialdom and suffocating red tape.

As a result, very few pump-priming projects identified under the stimulus package have taken off.

Wow...incompetency. Doesn't surprise me. Did the 30 billion stimulus assume the first stimulus would also get jammed up in the system? I hope so.

Malaysia tourism, an inferior good?

From Bernama:

MELBOURNE, Feb 21 (Bernama) -- Malaysia has started the year with an impressive 47,228 Australian tourist arrivals in January, a 21.5 percent increase compared with the same period last year.

This follows the 33.3 percent jump in Australian arrivals in 2008 to 427,076 from the previous year.

Tourism Malaysia Sydney director Shahrin Mokhtar said, Australia remained among Malaysia's top 10 tourist generating markets.

"Our performance in this lucrative market is reflected in the double digit growth in tourist arrivals from Australia to Malaysia over the past year," Shahrin said.

"Australians recognise the excellent value for money they get from visiting Malaysia," he added.

Inferior goods have an inverse effect in response to income. When times are tough, people trade down to inferior goods. Malaysia is seen as quite a reasonable destination to recession hit countries. Furthermore, we are relatively unscathed politically compared to certain neighbors (Thailand...cough).

Speculating with foreign currencies

From The Edge Daily:

Revenue was RM3.72 billion compared with RM3.45 billion. Earnings per share (EPS) was 2.86 sen compared with 9.71 sen. It declared a dividend of three sen per share compared with seven sen a year ago.

It said the weaker 2Q earnings were due to a lower operating profit of RM527.8 million from the plantation segment, which was 7% lower than the previous quarter due mainly to declining CPO prices.

The property segment reported a 10% or RM7 million decline due mainly to the soft property market which resulted in lower sales.

Amazing how revenue can go up while profits go down. That's what happens when you speculate in foreign currencies! Earnings go down!

Green Packet's Wimax folly?

I'm looking at this article.

Of course, WiMax is turning out to be anything but cheap. Consider Clearwire's challenge in Portland. WiMax works best in flat landscapes where a single communications tower can beam a signal for miles.

To deliver service in Portland, with its hills and tree-lined streets, Clearwire had to outfit 300 transmission towers at about $150,000 each, bringing the price tag to about $45 million

If what the article says is true, rolling out WiMax in places such as KL could be very costly, much more than originally thought.

KL compared to Portland is about 2/3 the size, so about 200 towers is probably needed to cover the entire city at a minimum. KL is actually much more mountainous compared to Portland and would probably need more towers.

A report by InsiderAsia analyst quoted Green Packet's investment in WiMax towers for 2008 at RM 171 million with 181 sites running, which would translate into a cost of around 1 million per tower or about USD250,000 per tower.

Green Packet plans to roll out 600 towers nation wide. That can barely cover 3 cities the size of KL. I don't see how they can do nationwide coverage with only 600 towers.

Furthermore, in this The Edge Daily article, they estimate RM 80 million in expenditure to cover the whole of Klang Valley. It roughly works out to be about 80 towers at 1 million per tower. I don't see how 80 towers can cover the entire Klang valley if it won't even cover half of KL.

It looks like someone extremely underestimated the number of towers needed to implement Wimax nationwide.