BNM Further Liberalisation on Forex (Jan 2012)

As part of continuous efforts by Bank Negara Malaysia to enhance competitiveness in the economy and to develop the domestic financial markets, Bank Negara Malaysia wishes to announce the following liberalisation measures, with effect from 31 January 2012:

1. To further spur the domestic foreign exchange market through greater product innovation, licensed onshore banks are permitted to trade foreign currency against another foreign currency with a resident.
2. To further deepen the domestic interest rate derivatives market, a licensed onshore bank is allowed to offer ringgit-denominated interest rate derivatives to a non-bank non-resident.
3. Towards enhancing the asset liability management of residents, flexibility is permitted for a resident to convert their existing ringgit or foreign currency debt obligation into a debt obligation of another foreign currency.

The above measures which are in line with the broad thrust of the Financial Sector Blueprint will contribute towards increasing the liquidity, depth and participation of wider range of players in the domestic financial markets.

Frequently Asked Questions:

1. Can a resident buy and sell foreign currency against another foreign currency for any purpose?
• Yes. With this liberalisation, a resident is allowed to buy and sell foreign currency against another foreign currency for any purpose including for trading. However, such transactions shall only be undertaken with a licensed onshore bank.
2. Does the liberalisation include trading of foreign currency against ringgit?
• No. The liberalisation is only for transactions involving foreign currency against another foreign currency for any purpose.
3. What are the prevailing rules on investment in foreign currency assets?

4. Who are the licensed onshore banks?
• licensed commercial banks in Malaysia;
• licensed Islamic banks in Malaysia; and
• licensed investment banks in Malaysia.
5. What are the prevailing rules on foreign currency credit facilities obtained by a resident?

For further information and enquiries on the measures, members of the public may contact Bank Negara Malaysia via Toll free line : 1 300 88 5465 (BNMTELELINK)

Source: BNM website

Why ASEAN will failed to host World Cup?

It was reported that ASEAN, which comprises Brunei, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Thailand, Vietnam and Malaysia, is going big in World Cup. Since all of these countries did not manage to qualify on the pitch, they're going through back-doors.

ASEAN is going to bid for FIFA World Cup 2030 !!!

Wow... When I first heard about this news, I am very excited. But, after calming down and figured it out, I doubt ASEAN could succeed in bidding the world's most popular event because of the following reasons. Second surprise came, when Malaysia was said to lead the pack for the bidding. Malaysia, the unlikely team which became the winner of ASEAN cup recently, may found ourselves "syok sendiri".

Common Sense

• Our level is nowhere near the World Cup level. Although we still have plenty of time before 2030, ASEAN needs much efforts to up the level, at least on par with South Korea.
• To select a team who represents all the hosting countries, it would be very difficult. By then, the supposedly ASEAN team will became "rojak" team. Sure, there will be heated arguments on which players shortlisted and how many players from each countries.
• Each countries have their own identity and culture, which needs to be show casts to the world given the world wide coverage. Would Malaysia want to lose our color?

Economic Sense

• From the countries involved, who will be the chosen host? And, where will be the grand final? Because, that important locations would determine the profitability of the multi-billions event.
• Since ASEAN do not have a common currency regime, some countries may lose out to another due to different currency exchange rates.
• How much costs would each members shared?

Finance Malaysia suggests that Malaysia could bid for the World Cup by teaming up with Singapore. Two is better than the whole ASEAN. Of course, if can, we can host the entire event ourselves.

Related posts:

World Cup: 7 investment tips

Sports Betting: Kaki Bola to Kaki Judi?

Malaysia to curb capital inflows?

Due to weakening USD and record low-interest rate in the US, Europe and Japan, emerging markets have been a popular spot for excessive liquidity to park their money. Main reasons being:

1. Emerging markets are the fastest growing economies currently
2. Emerging countries are having higher interest rate
3. Banking system of emerging countries are stronger (safer)

While develop countries are facing a currency downfalls, emerging countries are experiencing continuous inflow of hot money. This in turn causing a chaotic in currency exchange market, where emerging countries' currencies are hitting years high against developed nations. The imbalance forex market prompt central banks around the world to act or to curb any excessive flows of money which could jeopardised a particular countries, like 1997 Asian financial crisis.

In the latest developments on this hot topic, Thailand announced a 15% withholding tax on interests and capital gains on Thai bonds. In the meantime, South Korea, Taiwan, and Indonesia has been using "quasi-capital" control, in which encouraging outflows of hot money.

The billion dollar question... Will Malaysia follow?

Ringgit is the 2nd BEST performing currency in Asia, behind Thai Bath. I think when Bank Negara started its "triple" hike in overnight policy rate (OPR) this year, they already foresee the side effect of capital inflows. Due to large chunk of it went to Malaysia Government Securities (MGS), coupled with strong and effective domestic financial systems, Malaysia can safely mitigate the effect currently. However, we must act soon because I expect more hot money would pour in from countries which had imposed capital controls moving forward. We can expect a much stronger Ringgit soon.