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Tuesday, 18 August 2015

Property prices will hold as ringgit falls to new low against USD and S$


PETALING JAYA: The depreciation of the ringgit will not lead to real estate prices crashing.

The Malaysian Institute of Estate Agents (MIEA) president Eric Kho said property remained a sound investment despite the current economic climate.

“Holding property is always better than holding cash,” he said.

Kho acknowledged that demand for primary or new developments had slowed but not as a result of weakening currency.

He said the slowdown was due to Bank Negara guidelines for banks to be more prudent when providing loans as well as increased construction cost due to the Goods and Service Tax (GST).

Kho said construction cost had increased by up to 15% and some developers were holding back on launching new properties.

He said developers who had launched projects were offering huge discounts to attract buyers.

Kho said there was also a slowdown in the secondary market and those looking to buy could expect to pay between 5 and 10% less, depending on location.

Kho, however, expected this situation to be temporary and said property would eventually appreciate.
- The Star/Asia News Network

Ringgit falls to a new low

PETALING JAYA: China’s central bank adjusted the yuan downwards for the second consecutive day, sending markets and currencies reeling.

The ringgit continued its fall against the US dollar, hitting a new low of RM4.0275, largely due to the devaluation of the yuan.

All currencies in the region also continued with their decline against the US dollar.

On a year-to-date basis, the ringgit is the worst performer among its Asian peers, and is down 13.33%. This is followed by the Indonesian rupiah, South Korean won and Thai baht at 9.88%, 8.35% and 6.99%, respectively.

Comparatively, the yuan is now down approximately 4.61%.

The impact on the ringgit is worse compared to other countries because Malaysia is viewed as a net exporter of energy and prices are depressed now – hovering below the US$50 per barrel mark.

Stock markets across the region fell with the Jakarta Composite Index leading the pack by falling 3.1% followed by Hong Kong’s Hang Seng Index which dropped 2.38%.

There was a “bloodbath” on Bursa Malaysia where about 90% of the 1,000-odd stocks listed closed lower.

The benchmark KLCI fell for the fifth consecutive day, shedding 26.8 points yesterday to close at 1609 points. Since last Thursday, the index has been down by 116 points.

On Tuesday, the People Bank of China (PBOC) moved the guiding rate for the yuan 2% downwards and yesterday it set it at 1.6% lower. The guiding rate is the band within which the yuan is allowed to trade.

The downward movement is viewed as a devaluation of the yuan and the biggest currency movement for the world’s second largest economy since 1994. Although China abandoned its currency peg in 2005, the central bank manages the yuan in a tight range.

The devaluation of the yuan has sparked concerns that China’s economic slowdown was more severe than anticipated and the central bank had to devalue the currency to export its way out of the situation.

Independent economist Lee Heng Guie said that the devaluation that has sparked a global currency war may end up with no winners.

The impact on depreciating ringgit is likely to be felt most by companies which import their raw materials, consumers and parents with children studying overseas.

BY RAHIMY RAHIM, RAZAK AHMAD, AND L. SUGANYA The Star/Asia News Network

Ringgit hits new record low of 2.9109 to Singdollar

Malaysia's ringgit hit a new record low against the Singapore dollar on Friday (Aug 14).PHOTO: AFP

SINGAPORE - Malaysia's ringgit hit a new record low against the Singapore dollar on Friday (Aug 14), after the Malaysian unit slumped to a fresh 17-year low versus the US dollar.

With the fall in oil prices increasing concerns over the country's exports, the ringgit lost as much as 2.6 per cent to 4.1180 per dollar, its weakest since Sept. 1 1998.

It recovered some ground to trade at 4.0660 to the US dollar at 2:04pm, bringing its loss this week to about 4.5 per cent.

Malaysia pegged the ringgit at 3.8000 in September 1998 and maintained it until 2005.

Against the Singapore dollar, the ringgit tumbled 1.55 per cent to 2.9109 as at 11:45am from its close of 2.8665 on Thursday. The ringgit pared its losses to trade at 2.8944 as at 2:04pm.

Better-than-expected economic data on Thursday failed to dispel the gloom with the benchmark stock index falling 1.5 per cent on Friday morning, heading for its lowest close since 2012. Fve-year government bond yield rose to 3.982 per cent, its highest since November 2008.

Oil prices fell with crude futures hitting six-and-a-half lows, exacerbating worries about Malaysia's exports. The country supplies liquefied natural gas and palm oil.

Malaysia has also had to draw heavily on its foreign exchange reserves to defend its currency amid a political scandal, a yuan devaluation and slumping oil prices. Bank Negara governor Zeti Akhtar Aziz said on Thursday the central bank will need to rebuild the reserves that have fallen below US$100 billion for the first time since 2010.

"Foreigners are still selling," said Ang Kok Heng, chief investment officer at Phillip Capital Management Bhd. in Kuala Lumpur, told Bloomberg News. "Unless the ringgit stops weakening, I don't know how long the selling will continue." - New Straits Time

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Wednesday, 12 August 2015

Chinese yuan extends fall, long-term depreciation unlikely, weakening is not devaluation


BEIJING, Aug. 12 (Xinhua) -- Chinese currency continued to fall on Wednesday after the central bank reformed the exchange rate formation system to better reflect the market.

The central parity rate of renminbi, or yuan, weakened by 1,008 basis points, or 1.6 percent, to 6.3306 against the U.S. dollar, narrowing from Tuesday's 2 percent, according to the China Foreign Exchange Trading System.

The People's Bank of China (PBOC), the central bank, changed the exchange rate formation system so that it takes into consideration the closing rate of the inter-bank foreign exchange market on the previous day, supply and demand in the market and price movement of major currencies.

The International Monetary Fund (IMF) described the central bank's move as "a welcome step" that allows market forces to have a greater role in determining the exchange rate.

"Greater exchange rate flexibility is important for China as it strives to give market-forces a decisive role in the economy and is rapidly integrating into global financial markets," an IMF spokesperson said in an email on Wednesday.

The IMF said it believes the country can achieve an effective floating exchange rate system within two or three years.

However, the move still surprised the market and prompted the lowest valuation of the yuan since October 2012.

Ma Jun, chief economist at the PBOC's research bureau, attributed the lower rate to a long-standing gap between the central parity rate and the previous day's closing rate on the inter-bank market.

In a latest statement released on Wednesday, the PBOC said the rate changes are normal, as it shows a more market-based system and the decisive role that the supply-demand relationship plays in determining the exchange rate.

"This may lead to potentially significant fluctuations in the short run but after a short period of adaptation the intra-day exchange rate movements and resulting central parity fluctuations will converge to a reasonably stable zone," the PBOC said.

Ma also said the shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation.

A relatively robust economy, current account surplus and the internationalization of the yuan will help the currency remain stable, the PBOC said.

Official data showed the Chinese economy maintained 7 percent growth in the first half of 2015 against challenges at home and abroad, creating sound conditions for the yuan to hold steady.

Surplus in goods trade reached 305.2 billion U.S. dollars in the first 7 months, a fundamental prop for the exchange rate.

An internationalized yuan and open financial sector have boosted the demand for the currency in recent years, which serves as momentum for the rate's stabilization, the PBOC said.

In addition, the PBOC also cited China's abundant foreign exchange reserves, stable fiscal condition and healthy financial system. The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said it will strive to further improve market-based exchange rate formation, maintain normal fluctuations and keep the rate basically stable at an adaptive and equilibrium level.
- Xinhuanet


Yuan weakening is not devaluation: central bank economist


Photo taken on March 16, 2014, shows yuan (central) and other currencies in the picture. [Photo/IC]

BEIJING, Aug. 11 (Xinhua) -- Allowing the Chinese yuan to weaken sharply against the U.S. dollar does not signify the beginning of a downward trend, a central bank economist said on Tuesday .

The yuan central parity rate announced by the China Foreign Exchange Trading System (CFETS) stood at 6.2298 against the greenback on Tuesday compared to 6.1162 on Monday, down nearly 2 percent, the lowest level since April, 2013.

The shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation, said Ma Jun, chief economist at the research bureau of the People's Bank of China (PBOC).

The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said Tuesday's lower rate resolved accumulated differences between the central parity rate and the market rate, and was part of improvements to the central parity rate formation system to make it more market-based.

Ma said a long-standing gap between the central parity rate and the previous day's closing rate on the inter-bank market led to the lower rate on Tuesday.

He said China's economic fundamentals support a "basically stable" yuan exchange rate. A central parity rate closer to the market rate will provide a more stable environment for macro-economic development.

The economy has shown signs steadying and recovery, with infrastructure investment accelerating and property sales improving. Compared with some economies under strong pressure to depreciate their currencies, China is better-off, with a current account surplus, huge foreign exchange reserves, low inflation and sound fiscal conditions, he explained.

From Tuesday, daily central parity quotes reported to CFETS before the market opens will be based on the previous day's closing rate on the inter-bank market, supply and demand and price movements of other major currencies, according to the PBOC.

In July 2005, the central bank unpegged the yuan against the U.S. dollar, allowing it to fluctuate against a basket of currencies.

Making formation of the central parity rate more market-based touches on the core of reform, compared with previous steps that mainly concerned how much the yuan can fluctuate, said Guan Tao, former head of the international payments department at the State Administration of Foreign Exchange.

The yuan was at first allowed to vary by 0.3 percent from the central parity rate each trading day and the trading band gradually expanded to 2 percent in March last year. The market expects it to expand to 3 percent in the near future.

The latest reform actually increases China's flexibility and independence in foreign exchange control, as a rigid exchange rate system is open to speculative attacks, Guan told China Business News.

Two-way fluctuations will become normal for the yuan in future, he said.

- Xinhuanet

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Sorry is the hardest word for Abe


The news that the "draft of Abe's statement contains an 'apology'" made the headlines all day on Japanese broadcaster NHK on Monday. According to the report, the statement to mark the 70th anniversary of the end of World War II by Japanese Prime Minister Shinzo Abe on Friday will also include key expressions used in the 1995 statement by then-prime minister Tomiichi Murayama, including "apology," "deep remorse," "aggression" and "colonial rule." This is so far the first report released saying that Abe's speech will cover this positive content.

Yet over the past few days, a number of Japanese media have been quoting a variety of inside information saying that Abe's remarks will not include terms like "apology." As the day that marks Japan's defeat in WWII approaches, how Abe will talk about it has been placed under global public scrutiny.

Abe's statement will reflect the future path of the country. If he only reflects on the wartime past but tries to blur the nature of the war by refusing to apologize, or avoiding mention of "aggression," the nation will face serious doubts over whether it is planning to ditch peaceful development, and means to reshape the political and historical pattern that formed after the war.

Abe has always been beating about the bush, trying to lower the world's anticipation of him echoing the spirit of the Murayama Statement. Not long ago, his cabinet voted through revisions of the country's security rules, which has triggered quite a few domestic protests. His domestic support rate has tumbled sharply, causing him unprecedented pressure since he assumed office as prime minister for the second time.

Abe might compromise, and add those key words from the 1995 Statement. Yet this is not as certain as a compromise to political pressure, rather than his own moral and political responsibility. His historical revisionism is known by all, and opportunism is universally considered as his main principle to adjust strategies over historical issues. Hence, there is a good chance that he may rewrite his statement draft at the last minute.

Accordingly, instead of the real historical recognition by Abe's administration, the speech will more likely mirror Abe's scheming and calculating among all the pros and cons in the power structure of the Asia-Pacific region.

Even so, a statement that can be accepted by the international community is still worth welcoming.

Abe's political logic is weird. He should realize that the US is Japan's biggest obstacle on the path toward becoming a "normal state." But he won't let go of the rivalry with China. Some suspect that Tokyo is eager to stay in the good graces of Washington, letting its guard down and seeking a chance to get rid of its control. However, Japan is unable to make that work.

Abe will find that his ability falls short of his wishes over his strategy in the Western Pacific. We hope he will make the right choice for his statement, whatever the reasons. And history will judge him fairly.

- Global Times

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