Economic Problems Felt, Umno Politics Takes Front Seat

Today‘s NST front page:

KL Composite Index loses 3.6% to 859.11 … analysts say the markets haven’t seen the worst yet … the Malaysian market is not an exception.  The shares are oversold.  They no longer reflect their values.  We now have plenty of cheap, quality and undervalued stocks … but expect it to fall further next week,” a local dealer said.

This 32.2 points down is the KLCI lowest in 4 years.  We don’t want to be duped and lulled into a dream that Malaysia is not in a problem state.  At the same time, we should not be doomsday prophets either.  We just need to be honest and do something about the economy NOW!

But is the Government SEEN to be doing much?  We’ve been hearing a lot about not to worry but economics is not requiring counselling.  The Malaysian economy requires definite strategies and actions.  But is there any?

The additional RM5b for Valuecap is a way the Government is using to prop up underperforming stocks in the Bursa Malaysia.

The government hopes the injection will offer much needed support for laggard blue-chip stocks in the local bourse. (MalaysianInsider here)

Nor Mohamed Yakcop assures that it’s a good investment and that it’s a loan from EPF to Valuecap.

A few questions beckons.

Who is Valuecap?

Valuecap is not a Government organization but a private institution.  According to Khazanah Nasional’s website (here), Valuecap is a private entity.

Valuecap (Valuecap Sdn Bhd)

Established in 2002, Valuecap is a fund management company which was created to invest specifically in the Malaysia equities market. Owned jointly by Khazanah, PNB and KWAP, Valuecap’s key mandate is to undertake investments in equities listed on Bursa Malaysia on a portfolio basis, based on superior fundamental investment research.

So, Minister of Finance Inc who owns Khazanah is leading the charge for the Government program using EPF funds.  And Valuecap is an instrument of Khazanah for executing Government policies for this economic action.

What will Valuecap be able to do?

The additional RM5b loan in total shores up about 1% of the KLCI market capitalization.  However, it’s also not a trivial amount and it can cause an impact if done in a timely and strategic basis.  The fear, of course, is that the fund is used to shore up politically connected counters with no regard to the overall effect of the original strategy.  There is nothing wrong with boosting the value of politically connected counters if those counters are critical to the success of that economic plan.  We should leave the politics aside and deal with this in an apolitical manner.

But can and will Valuecap act in this manner?  We will not be able to tell as we probably will never know how, where, what and why Valuecap will be using the funds.  Sadly, we have no accountability in this respect.

However, as this was declared publicly as a loan to Valuecap, we expect EPF to receive adequate returns for the loan to protect the contributors.  That’s probably all we can expect.  If EPF loses this loan and has to write it off, this will be a scandalous event.  And it will be construed as the Government taking EPF money and losing the contributors hard earned savings down the black hole.

Nobody knows how the market will react at this point in time.  It’s still too early to tell if the market is still reacting to the global scene and still on its way downwards.  For the past 3 days, KLCI has been sliding to a record low.  If Valuecap puts in another RM5b to prop up selected counters and the KLCI continues dipping, the effects will be negated totally.

This means that Valuecap is no longer an investor but a Government instrument to act to shore up the local stock market.  And along the way, EPF contributors money is being risked unnecessarily.  Our guess is that the Government is running out of financial options as Petronas profits no longer applies with the much lower oil price. The US$62 price of oil hovers merely US$2 above Petronas cost of oil.  There is no more extraordinary profits and the Budget 2009 is now based on unusable economic data.  Yet, nobody in the BN Government admits so.  No wonder we are planning budgets on outdated data where the financial assumptions are now all wrong.  Read it here.  Now if the price of oil goes down any further, we will be subsidizing exported oil.

No wonder there is so much opposition to the Government using EPF funds.  And EPF is not a Government kitty either where they can do what they want with it.  But it happens.

What else is the Government doing?

Nothing really.  Well, practically nothing because there is no one free to look into our economic business except to tell us not to worry and all is not as bad.  Of course, Mahathir is there to stir the doubts and to cast suspicion on the Badawi Administration.  As long as it’s Mahathir making the noise, nobody in the Government dares do anything to counter him.

At this time, Mahathir is accurate in his view on the Malaysian economy.  It’s in sync with the rest of the populace who is feeling all the pressures and stress of a strained wallet and slowing down businesses.  The Government continues to deny that we are in a slowdown.  In fact, we’ve been slowing down in business and stretching the wallets ever since the Badawi Government took over.  The frustration was shown in the recent General Elections.

If we all can remember right after that General Election in March, Pak Lah has come out to call for reforms again and to take firm charge of the economic challenges.  All the right things to say just as in the previous elections where he won a historical majority of votes, now he lost in the historical minority of votes.  So far after 7 months, nothing has changed in the economic strategy.  The world economic challenges have surfaced yet again and we keep ourselve on auto-pilot.

Who’s Doing Something About Our Country?

At this time, all of Umno is focused on the Division nominations as Pak Lah is not defending his Presidency of the party.  Najib is positioning for the takeover and he is busy ensuring that to happen.  He is beset by allegations linking him to Altantuya and the Eurocopter award.  Fighting fire while manovering into the Umno Presidency position gives Najib no time to look after the country’s financial position.

The IMF Director tells us that he sees an impending global recession.  Najib tells us that Malaysia is resilient and won’t be affected much.  Every country in the world is facing serious problems.  Our neighbor, Singapore, just recently declared they are in a technical recession.  Many of the 300,000 Malaysians working there may be affected.  Najib still tells us not to talk ourselves into a recession.  Counselling will not help the economy for sure and that’s all we have been hearing.

To deflect the blame, some of the BN leaders point to Anwar for his ambitious plan to take over the Government being the cause for the lack of foreign investments into the country.  They say that Anwar has scared away investors.  Anwar says that it’s because of the lack of fundamentals.  He says there is no transparency, rampant corruption and no judicial independence permeating the fabric of the country.  And the rest of the world knows the truth which happens not be be what Government leaders are saying.  But Pak Lah has promised to fix at least the judiciary and corruption through his reform agenda before he steps down, if he will step down at all.

All talk will not help us.  All talk will not boost the economy.  Playing with petrol prices will not bring down inflation.  The June petrol hike has done the damage and its permanent.  Pak Lah has appealed to the retail sector to bring down their prices.  That has gone down as a joke because nobody looked at the fundamentals of businesses where business costs have been severely impacted by that irrational price hike.

When the Umno Nominations are done

November 5 is round the corner.  Nominations will be closed and who will stand for elections will be known.  Then the lobbying for votes will start.  Initially, it was supposed to be until December but with the surprise compromise struck between Pak Lah and the Supreme Council, that will be till next March.  A few people has started to push for the Umno elections to be back in December and Pak Lah is under pressure to agree because it will be undue burden to all who are nominated to continuously lobby for votes until next March.  But what will that do to his position as PM?

So, nobody will be free even after the nominations are over.  The economy may not hold up that long as the Government so hopes.  One wonders for all those who can do something about the economy, who has ever gone down to the street to see, hear and feel the burdens faced by the people?  Today, we read that the Selangor MB, Khalid, held a Selangor Roundtable on Financial Crisis with with business representatives in Selangor which included manufacturers from around the world as well as banks.  That’s a first.  Read that here.  We hope all in power to listen to the businesses and on the streets.  Don’t dream in ivory towers.

For now, it’s only shadows at the helm and busy with the politics and nobody is activating any think tank, plans, strategies, etc that have a meaningful execution that can do something positive for the economy.

So far, it’s POLITICS taking the foreground of our leaders.  It’s the Umno elections on everybody’s mind except Pak Lah.  What he hasn’t and can’t do the past 5 years, can he do something now?

Sideline the Politics, It’s time to do something for the economy, the country

We don’t think the Opposition and BN Government can ever be bipartisan at this time to come out with something that’s workable.  We want to be wrong in this though.  If there’s any time that’s a good time to work together, it is NOW!

Suspicion abounds about whose ideas can work and whose can’t.  So far, we haven’t seen a peep of hope from the Badawi Administration yet.  Valuecap is the best so far and that’s not going to do much good for now.  Playing around with fuel prices is not working either.  It has complicated everybody’s lives.  We haven’t seen any strategic thinking from the present Government.  Somebody better wake up fast.

But can the Opposition do anything?  Do they have any good ideas?  Anwar has presented his alternative Budget.  DAP has just found a very capable economist as their economic advisor.  The Pakatan Rakyat might just have fresh ideas and strategies and they are not blindsighted by BN’s lack of vision.

If the Opposition has good ideas, would the BN Government dare to accept fearing that it may cast a shadow of doubt in their capabilities all along?  Politics, it just gets in the way of the Malaysian life, doesn’t it?  And when it matters most to get the best brains on this issue, Malaysia might just not get bipartisan like the US did when the Congress recent voted bipartisanly on rescuing the economy.

Read this article (here) written by Teik Lim Saw in Malaysiakini.  Very insightful, from our Malaysian commoner viewpoint.  We are living in the age where CNN, CNBC, BBC, Bloomberg, etc. are all accessible in our living rooms as well as from the Internet.  Malaysians are now much more knowledgeable of things that are happening around the world and how they impact other parts of the world.  And to hear they report on economies and markets around the world where they are hit most is most shocking.  Then to hear our own leaders say Malaysia is not a problem, we are all very appalled at how flippant our leaders are representing our own economy.

Today’s news with regards to our KLCI can’t be hidden anymore.  This may be the beginning of a long and bumpy ride but our hopes is that it mustn’t be worse than the 97 crisis.  With high inflation rate, impacts on property prices starting to crumble, businesses slowing down, stagnated salaries, and higher cost of living.

So, we do need our leaders to put aside their politics and focus on what matters most to us in the country.  Yes, political stability is crucial but so is our livelihood and the future of our children.  The country must act now and not get lost in party elections.

And stay out of our savings please!

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