This week, The Edge analyses
the impact of the shift in fund flows and the imbalances of the global economy
on Malaysia and Malaysians.
The aggressive policy
measures by the US, Europe and Japan has resulted in massive liquidity finding
its way to the emerging markets in search for better returns as the bond yields
in US and Europe declined sharply.
Emerging markets have
attracted foreign capital due to its higher yields, stronger economic growth
and as such, better appreciation prospects for a wide range of asset
classes. Like other emerging markets,
Malaysia has enjoyed the benefits of these foreign fund inflows which boosted
the prices of local assets including stocks, properties, bonds and the Ringgit.
This is however, not without
cost. Bank Negara Malaysia’s balance sheet has expanded substantially with the rising
cost of sterilization. Keeping interest rates artificially low has resulted in
negative real interest rates. This encourages consumption and discourages
savings which in the longer term can weaken the Country’s current account. It
also creates asset bubbles.
Read the full article in The
Edge this week.
Next week, we will discuss how
this party can end and what the consequences are to the stock market, bond
market, property market and the Ringgit.
For years, economists try to find the best way to find the best solution for balance growth. However, in reality, it is unlikely. The cycle of gloom, boom, doom is always right. It is a matter of time only, smart capitalists infect like this cycle. The world wealth is only enjoy by 1%, it will remain unless it go back to communist system.
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