Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks, Islamic banks and other financial institutions).

Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work does not necessarily commensurate directly with the loan amount.

Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.

So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.  

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits, after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over thetenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonder whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.

Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from soft copy. The bank no longer need to print them and should not charge for such documents. Alas, this has been continuing till to date. Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty, if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Buyers Beware By Chang Kim Loong

Chang Kim Loong is the honorary secretary-general of the national House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

Related posts:

House buyers, learn your rights

Who is responsible: developer, contractor, local council or house-owner for the damages?

 

Who is responsible for slope management? Does the responsibility come with the property bought by the purchaser? THE collapse of a...

We need local councillors who can do the job 

Reponsible housing developers' traits and qualities expected

Traits of a responsible housing developer. KNOCK, knock! Any “good” housing developers out there? I am reluctant to use the words “good developers” as the words are not in my vocabulary. However, there are responsible ...

Is the weakening Malysian ringgit a similar to 1997/98 crisis?

Economic troubles ahead but most don’t think it will be as bad as back then

We don’t see a crisis brewing in emerging Asia. But that is not to say there aren’t risks. We believe those risks are going to be mitigated and managed. Despite some portfolio outflows, we believe there is still sufficient liquidity in the market for some trading ideas

The weakening ringgit has caused anxiety. But is the economy in a similar situation to Malaysia’s worst ever crisis 16 years ago?

MANY Malaysians will still remember the Asian financial crisis of 1997/98. Nearly 20 years ago, the then crisis was responsible for the greatest capital market crash in the country and forced many structural changes we see today in the financial markets.

It was a time of great turmoil, with people losing their investments on a scale never seen since. Companies for years bankrolled on easy credit were leveraged to the hilt and crumbled under the weight of their debts as business evaporated and the cost of credit soared.

Shares traded on the stock exchange mirrored the scale of the troubles. The benchmark stock market index plunged from a high of 1,271 points in February 1997 to 262 on Sept 1, 1998. Words such as tailspin and panic were common in the financial section of newspapers and the chatter among market players as people scrambled to take action.

“More people are talking about it with the fall in the ringgit,” says a fund manager who experienced the difficult times in the late 1990s.

Triggering the crisis back then was the fall in the regional currencies, starting with the Thai baht. Speculators then zeroed in on other countries in Asia and Russia as the waves of attack on the currencies back then saw many central banks spending vast amount of foreign exchange reserves to defend their currencies.

Exhausting their reserves, those central banks requested for credit help from the International Monetary Fund to replenish their coffers.

Attacks on the ringgit and many other currencies in Asia sent the ringgit into freefall as the currency capitulated from a previously overvalued zone against the US dollar.

The ringgit dived into uncharted territory to around RM4.20 to the dollar before capital controls were imposed and the ringgit was pegged at RM3.80 to the dollar. The ensuing troubles were seen from the capital market to the property sector. Corporate Malaysia was swimming in red ink and huge drops in profit.

The shock from that period was different than what the country had seen in previous recessions. The last economic recession prior to that was caused by a collapse in global commodity prices and during that pre-industrialisation period before factories mushroomed throughout the major centres of the country, unemployment soared. Unemployment was not a major issue in 1997/98 like it was in the prior recession but the crunch on company earnings meant wage cuts and employment freezes.

With the drop in crude oil and now with the resurgence of the US economy, the flight of money from the capital market has began.

Deja vu?

Most would argue that no two shocks or crisis are the same. There is always a trigger that is different from before. From the Asian financial crisis, the world has seen the collapse of the dotcom boom which crushed demand for IT products and services. Then there was the severe acute respiratory syndrome (SARS) crisis and the global financial crisis in 2008/09. There were periods of intermittent volatility in between those periods but there was nothing in Malaysia to suggest trouble ahead.

Shades of 1998 though have emerged in this latest wave of turmoil but the situation now is not the same as it was back then.

“We don’t see a crisis brewing in emerging Asia. But that is not to say there aren’t risks. We believe those risks are going to be mitigated and managed,” says World Bank country director for South-East Asia, Ulrich Zachau.

The fall in crude oil prices, which has been the trigger for Malaysia, has sent the currencies of oil-producing countries lower, affecting their revenues and budgets. In South-East Asia, pressure has been telling on the ringgit and the Indonesian rupiah.

Reminiscent of the gloom and doom of 1997/98, the Indonesian rupiah tanked against the dollar to levels last seen during that period.

Intervention by the Indonesian central bank addressed the decline, but the situation is also different today then it was back nearly two decades ago.

“Bank Negara is still mopping up liquidity today,” says another fund manager who started work in Malaysia in the early 1990s.

Although liquidity is plentiful in Malaysia, money has been coming out of the stock market. Foreign selling has been pronounced this year and the wave of selling has seen more money flow out of the stock market this year than what was put in to buy stocks last year.

Equities is just an aspect of it as the bigger worry is in Government bonds where foreigners hold more than 40% of issued government debt.

“The fear is capital flight and people are looking to lock in their gains,” says the fund manager.

“The worry will start when people get irrational.”

Times are different

While the selling that is taking place in the capital markets is a concern, Malaysia of today is vastly different than it was during the 1997/98 period.

For one, corporates in Malaysia are not as leveraged as they were back then. Corporate debt-to-gross domestic product (GDP) ratio is below 100% but it was above 130% in 1998. Furthermore, corporate profits are still steady although general expectations have been missed in the last earnings season.

Secondly, fund managers point out that the banking system is in far better health today, better capitalised and seeing the average loan-to-deposit ratio below 100%. That loan-to-deposit ratio was much higher than 100% during the 1997/98 period and and as loans turned bad, the banks got into trouble.

“Fundamentally, we are much stronger now. That was not the case back then,” says a corporate lawyer.

“The worry though is on perception and denials that there is no trouble.”

The one big worry, though, is household debt. That ratio to GDP is crawling towards the 90% level while it was not even an issue back in 1997/98.

Sensitivity analysis by Bank Negara which looks at several adverse scenarios, such as a 40% decline in the stock market and bad loans from corporates and households shooting up, indicate that the banking system can withstand a major shock.

“The scenario-based solvency stress test for the period 2014 to 2016 incorporated simultaneous shocks on revenue, funding, credit, market and insurance risk exposures, taking into account a series of tail-risk events and downside risks to the global economic outlook.

“The simulated spillovers on the domestic economy were used to assess the compounding year-on-year impact on income and operating expenses, balance sheet growth and capitalisation of financial institutions, disregarding any loss mitigation responses by financial institutions or policy intervention by the authorities,” says Bank Negara in its Financial Stability and Payment Systems Report.

“Even under the adverse scenario, the post-shock aggregate TCR (total capital ratio) and CET1 (common equity tier 1) capital ratio of the banking system were sustained at 10% and 7% respectively, remaining above the minimum regulatory requirement under Basel III based on the phase-in arrangements which are consistent with the global timeline,” it says in the report.

Government finances and the current account

The line in the sand for Government finances seems to be at the US$60 per barrel level for crude oil prices. A number of economists feel the Government will miss its fiscal target of a 3% deficit next year should the price of crude oil drop below that level.

With oil and gas being such a big component of the economy than what it was in 1997/98, the drop in the price of crude oil could also spell trouble for the current account and cause a deficit in the trade account.

Those concerns have been highlighted by local economists and yesterday, Fitch Ratings echoed that worry.

“Cheaper oil is positive for the terms of trade of most major Asian economies. But for Malaysia, which is the only net oil exporter among Fitch-rated emerging Asian sovereigns, the fall increases the risk of missing fiscal targets.

“The risk of a twin fiscal and external deficit, which could spark greater volatility in capital flows, has increased. Malaysia’s deep local capital markets have a downside in that they leave the country exposed to shifts in investor risk appetite. Malaysia’s foreign reserves dropped 6.8% between end-2013 and end-November 2014, the biggest decline in Fitch-rated emerging Asia,” it says in a statement yesterday.

Despite the softness in the property market and corporates getting worried about their profits, the general feeling is that Malaysia will not see a repeat of 1997/98. The drop in the ringgit and revenue for crude oil will mean a period of adjustment but the cheaper ringgit will make exports more competitive.

The difference between then and now

The ringgit vs the dollar ...

The ringgit’s steep decline against the dollar has made it one of the worst performing currencies of late. That decline, although steep and having caught the attention of the central bank, is more down to the link with the decline in crude oil than structural issues to be worried about.

Capital ratios of banks ...

Banks today are far better capitalised then they were during the 1997/98 crisis, which forced the local banking industry to consolidate for their own good. Stress tests by the central bank suggests then even under adverse conditions, banks in Malaysia wil be able to withstand the shock associated with it.

Loans-to-deposit ratio ...

The ratio of loans against the deposit of banks have been rising but it is no where at the level before the Asian financial crisis in 1997/98. Banks too are aware of making sure it does not cross 100% and the development of the bond market means leverage risk has been diversified from the banking sector.

Businesses not as leveraged ...

One of the reasons corporate Malaysia was in trouble in 1997/98 was down to its leverage, or debt levels. Today. corporates are not as geared as they were back then and although that level is rising, their financial position and better cash balances and generation means they are able to better withstand a shock to the economy.

Household debt to GDP ...

This is the biggest worry. As households are leveraged despite the financial assets backing it, that means any economic weakness or shock will affect the ability to service loans taken to buy those assets. As consumer demand has been a big driver to the economy, any changes the affects the ability of consumers to continue spending will impact on economy growth and have an impact on non-performing loans in the banking sector.

Dropping current account surplus ...

The decline in the current account surplus means that the domestic economy has been growing strongly. There were concerns earlier and the prioritisation of projects was able to smoothen imports to ensure a positive balance of trade. The drop in crude oil prices could mean a deficit in the current account in the first quarter of next year but the weaker ringgit should translate to better exports and a better current account balance thereafter.

By JAGDEV SINGH SIDHU Starbizweek

Related stories:

• A challenging time, but not a crisis
• Managing the downside risk of low oil prices is crucial for Malaysia, says World Bank

Related posts:

Oil & Gas lead to wealth crunch, Malaysian Ringgit beaten and dropped!

Oil enters a new era of low prices: Opec vs US shale, impacts, perils as Petronas cuts capex
Oil Enters New Era as OPEC Faces Off Against Shale; Who Blinks as Price Slides Toward $70? How Oil's Price Plunge Impacts Wall S...

Crude oil prices fall: subsidy needless, ringgit weaken, fiscal health affected

Malaysia's iconic Twin Towers are seen in the background of the Malaysian oil and gas company Petronas logo at a petrol station in Ku...

Malaysia's petrol price hike when global crude oil prices declined to 3 years low, a reflection of poor financial management!

Timing of latest fuel subsidy cut a surprise PETALING JAYA - The latest round of fuel subsidy rationalisation came as a surprise ...

HSBC Bank officer charged for stealing money from victims of missing flight MH370

KUALA LUMPUR: A couple pleaded not guilty in the Sessions Court to multiple charges involving theft from the bank accounts of four passengers aboard the missing Malaysia Airlines Flight MH370.

Bank officer Nur Shila Kanan and her mechanic husband Ba­­sheer Ahmad Maula Sahul Hameed, both 33, were accused of making illegal transfers and withdrawals, amounting to RM85,180 in total, from the accounts.

Nur Shila faces 12 principal charges in relation to transferring money from the HSBC Bank accounts to other bank accounts, theft, getting approval for a debit card and making a new Internet banking application with intent to cheat, and using forged documents at the HSBC branch in Lebuh Ampang from May 14 to July 14.

Basheer faces four main char­ges, including one for allegedly using a debit card and an ATM card to withdraw cash from the bank accounts.

He allegedly committed the offences at the bank’s ATM centre at Ampang Point here between May 15 and June 29.

Each of them also face four alternative charges of stealing from the HSBC Bank accounts.

The money was reported missing from the accounts of two Chinese nationals, Ju Kun and Tian Jun Wei, and Malaysians Hue Pui Peng and flight steward Tan Size Hiang.

Deputy Public Prosecutor Fadhli Mahmud applied to the court to set bail for each at RM20,000 in one surety and asked that the couple be made to surrender their passports to the court.

Lawyer Abdul Hakeem Aiman Mohd Affandi, who appeared for the couple, asked that bail be set at RM10,000 in one surety for each and said that they were willing to surrender their passports.

Judge Mat Ghani Abdullah set bail at RM12,000 in one surety for each and impounded their passports.

He fixed Aug 25 for the case to be brought before him again.

The Star/Asia News Network

MH370: Couple claim trial to illegal withdrawals

• 
• 
• 
• 

KUALA LUMPUR: A bank officer and her husband pleaded not guilty in the sessions court today to multiple charges involving illegal transfer and withdrawal of money, amounting to RM110,643, from the accounts of four passengers of the missing Malaysia Airlines flight MH370.

Nur Shila Kanan and her husband, Basheer Ahmad Maula Sahul Hameed, both 33, face multiple charges under the Computer Crimes Act, 1997, and Sections 379, 465 and 471 of the Penal Code.

Judge Mat Ghani Abdullah allowed them to be tried jointly. He set bail at RM12,000 each in one surety and ordered that their international passports be surrendered to the court.

Nur Shila faces 12 principal charges of illegal transfer of money from HSBC Bank, thefts, cheating and forging documents.

She also faces three alternative charges for theft, all of which she allegedly committed at HSBC Lebuh Ampang branch between May 14 and July 8.

Basheer faces four principal charges of using an ATM card and debit card to make illegal withdrawals and four alternative charges for theft, all of which had been allegedly committed at the HSBC ATM at Ampang Point between May 15 and June 29.

DPP Ahmad Fadli Mahmud asked the court to set bail at RM20,000 each in one surety.

Defence counsel Abdul Hakeem Aiman Mohd Affandi, however, requested for the bail to be reduced to RM10,000 on grounds that Nur Shila is a staff in HSBC earning RM3,000 a month, while Basheer, a mechanic, earns RM2,000 a month and have five people under their care, including three children aged between five years and six months old.

Mat Ghani fixed Aug 25 for mention before Judge Norsharidah Awang.

It was earlier reported that money had been missing from the bank accounts of four passengers of MH370 – Chinese nationals Ju Kun and Tian Jun Wei, and Malaysians Hue Pui Heng and flight steward Tan Size Hian.

Initial investigations reportedly revealed that the suspect had transferred funds from three passengers’ bank accounts into the account of a fourth passenger through Internet banking, and together with the fourth passenger’s account, the amount totalled RM110,643.

It was also reported that the missing money came to light on July 18 when a bank officer from a foreign bank detected a series of suspicious transactions and transfers from the four accounts.

Flight MH370 disappeared from radar screens on March 8 as it flew from Kuala Lumpur to Beijing with 227 passengers and 12 crew members on board. The plane has yet to be found, even after an exhaustive search in the southern Indian Ocean where it is believed to have gone down.

By Karen Arukesamy newsdesk@thesundaily.my

Related posts:

What the hack were they up to, MH370?

Hackers target information on MH370 probe The computers of high-ranking officials in agencies involved in the MH370 investigation were ha...

Malaysia's flight MH370 mistakes reflect stagnant politics; Bad apples in NZ sex crime..

Malaysia is poised to escape the middle-income trap, but also ready to fall back into it. Normally the middle-income trap refers to count...

Related articles:

• MH370: Couple plead not guilty to making fraudulent withdrawals
• Hunt for duo who siphoned money intensifies
• Mystery withdrawals from accounts of MH370 passengers
• Wife of crew member shocked over missing money
• MH370: Cops identify possible suspects in RM111,000 withdrawals from victims' accounts

• AG to get probe papers on missing money
• MH370: Two held for stealing RM110,643 from passengers
• Hisham condemns theft from bank accounts of MH370 victims
• Suspect in MH370 ATM scam identified
• Fugitive Pakistani still in country, says police

Malaysian banks raise Base Lending Rate (BLR) or Base Financing Rate (BFR) to 6.85% pa

In tandem: Public Bank, Hong Leong Bank and Maybank are among banks which have confirmed that they have either adjusted or will be adjusting to the new rates.

A number of banks raise their base lending rates (BLR) and base financing rates (BFR) in tandem with Bank Negara’s announcement to raise the overnight policy rate (OPR) by 25 basis points (bps) from 3% to 3.25% effective yesterday, today and tomorrow.

As a result, the BLR and BFR has adjusted to 6.85% from 6.6% per annum previously.

The banks that have confirmed that the new rates effective from 16 July 2014 include Malayan Banking Bhd (Maybank), Hong Leong Bank Bhd (HLBB), CIMB Group Holdings Bhd, Public Bank Bhd, Alliance Financial Group Bhd and OCBC Malaysia, HSBC Bank Malaysia; effective 17 July 2014 include Citibank, Standard Chartered Bank;  effective 18 July 2014: UOB

It is understood that some banks may announce the interest rate revision on a different date, as they are still considering the quantum of the deposit rates, which will impact their earnings eventually.

Bank Simpanan Nasional senior vice-president and head of distribution Akhsan Zaini told StarBiz: “ We are still studying the impact of the rate hike on our bank before we announce the adjustment next week, tentatively.”

He also said the bank had yet to decide on how much it would adjust for its deposit rates

CIMB Research expects the rate hike to enhance banks’ earnings by 1% to 2%, as their net interest margins (NIM) widen.

Maybank Investment Bank Research, on the other hand, anticipates NIM growth to be short-lived due to price competition.

The research unit had said in an earlier report: “Our forecasts already assume a 50-bps rate hike in 2014, and as a result, we are looking at a marginal four-bps aggregate NIM improvement in 2015 versus a seven-bps contraction in 2014.”

Some banks have also announced the revision of their deposit rates, but the quantum varies from one lender to another as well as the deposit tenure.

Among others, Maybank’s deposit rates will be revised upwards by up to 15 bps.

HLBB and Hong Leong Islamic Bank Bhd (HLISB) will increase their fixed-deposit and Term Deposit-I rates by up to 25 bps.

Following the revision, HLBB and HLISB’s new deposit rates for one, six and 12 months would be 3.05%, 3.2% and 3.3%, respectively.

Hong Leong Banking Group’s managing director Tan Kong Khoon said the group would continue to work closely with its customers to address their financing and savings needs. Meanwhile, OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd will be increasing their fixed-deposit and General Investment Account-i rates respectively by up to 20 bps, depending on tenures effective July 21.

In a statement, Maybank said: “The last revision in Maybank’s BLR and Maybank Islamic’s BFR was on May 11, 2011 when they were revised from 6.3% to 6.6% per annum.”

OCBC Bank’s mortgage lending rate, the alternative to using BLR for home loans, will also increase, to 5.7% compared with 5.45% previously.

JP Morgan Research noted that it was cautious on banks, as the combination of rate hikes and subsidy rationalisation would test the credit risk management of Malaysia’s consumer-led loan growth in the past five years.

It preferred liquid banks and upgraded HLBB and Maybank to “overweight” from “neutral”.

- By Ng Bei Shan/The Star/Asia News Network

Related post: 

Is timing right for Bank Negara Malaysia interest rate increased now!?

Bank Negara says going forward, the over all growth momentum is expected to be sustained. We are actually quite surprised that Bank...

Is timing right for Bank Negara Malaysia interest rate increased now!?

Bank Negara says going forward, the over all growth momentum is expected to be sustained.

We are actually quite surprised that Bank Negara chose to make this measure this month!

AFTER keeping interest rates low for the past three years to support economic growth, Bank Negara has finally decided that it is the time to “normalise” interest rates.

In response to firm growth prospects and expecting inflationary pressure to continue, the benchmark overnight policy rate (OPR) was raised by 25 basis points (bps) to 3.25% on Thursday.

This is the first hike since May 2011 and the reasons, although not spelled out, were broadly hinted towards containing inflation and curbing rising household debt.

Most economists are unperturbed with the move, as the central bank has hinted of an imminent hike in OPR after the Monetary Policy Committee (MPC) meeting in May.

According to a Bloomberg survey, 15 out of 21 economists estimated a hike.

“Amid firm growth prospects and with inflation remaining above its long-run average, the MPC decided to adjust the degree of monetary accommodation,” Bank Negara says in a statement.

The economy grew by 6.2% year-on-year in the first quarter with private consumption up 7.1% and private investment expanding by 14.1%.

The prolonged period of low interest rates in Malaysia has been supportive on the domestic economy, hence the recent rate hike has sparked the question whether the time is right for a hike amid a recovery in the global economy.

“Despite higher costs of living, stable income growth and favourable labour-market conditions are expected to buoy private consumption growth,” said CIMB Research in a report.

It expects the country’s economic growth to increase to 5.5% this year and 5.2% in 2015.

Bank Negara remained positive on Malaysia’s growth outlook, riding on the back of recovery in exports, robust investment activity and anchored by private consumption.

Financial imbalances

“Going forward, the overall growth momentum is expected to be sustained.

“Exports will continue to benefit from the recovery in the advanced economies and from regional demand. Investment activity is projected to remain robust, led by the private sector,” says Bank Negara.

There are a lot of factors that could derail the recovery in the world’s economy, including a risk in China’s growth slowing and a slower recovery in Europe and the United States.

“We are actually quite surprised that Bank Negara chose to make this measure this month. The fact that the latest normalisation drive would push the ringgit higher and that puzzles us as export momentum may decelerate in the next few months due to waning competitiveness,” says M&A Securities.

Nonetheless, it believes the economy is capable of absorbing the adjustment.

Prior to the 2008-09 Global Financial Crisis, Malaysia’s OPR stood at 3.5%. The country’s OPR was subsequently cut down to as low as 2% to support the domestic economy during the height of the global downturn in early 2009 before being raised gradually to the present level.

Between November 2008 and February 2009, Bank Negara had cut the OPR by 175 basis points in response to the global economic crisis. “The rise in OPR will likely to improve Malaysia’s attractiveness amongst foreign investors, leading a stronger capital inflows, lower bond yields and appreciating ringgit,” says AllianceDBS Research chief economist Manokaran Mottain in a report.

He says that since the previous MPC meeting in May, the market has been influenced by this expectation.

Year-to-date, the ringgit had rallied to RM3.172 per US dollar on July 9, registering a 2.06% gain. However, at the close yesterday, the ringgit closed lower at RM3.21 against the greenback.

The central bank also highlights that the increase in the OPR is to ease the risk of financial imbalances, which may effect the economy’s growth prospect.

“At the new level of the OPR, the stance of the monetary policy remains supportive of the economy,” Bank Negara says.

The OPR is an overnight interest rate set by Bank Negara. It is the interest rate at which a bank lends to another bank.

A rate hike would have an impact on businesses and consumers, as changes in the OPR would be passed on through changes in the base lending rate (BLR).

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz was reported as saying that signs of financial imbalances would also factor into policy decisions, because a prolonged period of accommodation could encourage investors to misprice risk and misallocate resources.

“Higher interest rates should help to ensure a positive real rate of return for deposit savings and deter households from turning to riskier investments,” says CIMB Research.

The low interest rate environment has resulted in rising household debt level, which reached a record of 86.8% of gross domestic product at the end of last year.

“Although the increase in the OPR will likely have some impact on consumer spending and business activities, it will help to moderate the increase in prices,” says RHB Research Institute.

It expects inflation to moderate but to remain high, hovering above 3%.

Most economists are expecting OPR to remain unchanged at 3.25% for the rest of the year, although price pressures are likely to remain.

They say Bank Negara may resume its interest rate normalisation only next year.

“The price pressure is likely to remain, in view of further subsidy rationalisation (another round of fuel-price hike this year),” CIMB Research says.

Muted impact

“Another 25bps hike will crimp domestic demand,” Manokaran opines, adding that there are other measures that may be taken if household debt continues to grow at a worrying pace.

Malaysia is the first country in the South-East Asia to increase its benchmark rate on the back of improve confidence in exports growth and robust investment activity.

According to CIMB Research, Malaysia’s equity market has already priced in an interest rate hike following the May MPC meeting.

The research house says while the is negative for equities, the impact on the stock market should be muted as the increase is minimal.

“Rate hikes are negative for cyclical sectors such as property and auto, as well as consumer stocks due to lower disposable income,” it says.

In the property sector, rising interest rates would increase mortgage payment and reduce affordability.

However, CIMB opines that the impact of a gradual rise in interest rates will be mitigated as the key drivers of property demand are the overall economy and the stock market.

“But the overall impact should be muted as net gearing for corporate Malaysia is less than 10%,” it adds.

CIMB notes that the banking sector will benefit from the rate hike due to a positive re-pricing gap between lending and deposit rates.

“We estimate that a 25bps rise in OPR could enhance banks’ earnings by 1% to 2%.

“This would outweigh any slowdown in loan growth in an environment of higher interest rates, while asset quality is expected to be unaffected,” it says.

Contributed by Intan Farhana Zainul/The Star/Asia News Network

No justification for interest rate hike: Kenanga

Investment bank research head cites expectations of softer economic growth in H2

 
Adib Rawi Yahya/theSun

KUALA LUMPUR: Kenanga Investment Bank Bhd has taken the contrarian view and believes that an interest rate hike is unlikely to materialise today, saying that it would be unjustified given jittery economic fundamentals that would not be able to take such a hike.

Most analysts opine that Bank Negara is likely to raise the overnight policy rate (OPR) for the first time since May 2011 today, even though they tend to differ on the quantum of increase, between 25 basis points (bps) and 50 bps. The OPR currently stands at 3%.

Bank Negara is scheduled to hold its latest monetary policy committee (MPC) meeting this evening.

Kenanga Investment Bank deputy head of research Wan Suhaimie Saidie (pix) opined that this is not the right time to raise interest rate as economic growth is expected to trend lower in the second half compared with the first half of the year.

"Due to softer external demand and slow down in other parts of the world, I don't think Bank Negara will raise interest rate, unless they revise the gross domestic product (GDP) higher," he told a media briefing here yesterday.

Wan Suhaimie said as Malaysia is an open economy, the interest rate outlook will be externally dependent, whereby it has been observed that Bank Negara would shift towards tightening mode when the global manufacturing PMI breaches 54.0.

"However, it may take at least another three to six months before the index breaches 54.0," he said, adding that there is little reason for Bank Negara to raise the OPR for the rest of the year.

Wan Suhaimie believes with the implementation of the goods and services tax (GST) next year, the local economy may even slow down for at least two quarters, making the case for an interest hike far from compelling.

Kenanga expects GDP in the first half to be close to 6%, while second half is projected to average by 5.2%, with a full year growth rate of 5.5%.

Wan Suhaimie said instead of raising the interest rate, Bank Negara could take additional macroprudential measures to address imbalances in the financial system, such as reducing the loan-to-value ratio and debt-to-income ratio.

According to data compiled by Kenanga, Bank Negara is one of the most conservative central banks in the world, with only 10 rate adjustments made over the past 10 years.

M&A Securities concurred with Kenanga on the unlikelihood of a hike in OPR today albeit for a different reason.

"Policy decisions would need to get the cabinet endorsement first. Being a caring government that would like to avoid political backlash, we think that the government would prefer Bank Negara Malaysia (BNM) to defer that to the September MPC meeting," it said in an economic report yesterday.

It explained that on the back of rising cost of living and the upcoming stress of the goods and services tax, the last thing BNM and hence, the government would want to see is the adjustment be a burden the people.

"As 55% to 60% of Malaysian population, as in the Muslims would be observing the month of Ramadan of which their spending would increase, the government would risk its reputation if it proceeds with a policy hike. There is a small chance that the government would execute this in our opinion," said M&A analyst Rosnani Rasul.

It said impact to the ringgit would also be more conducive if policy rates get adjusted in September and that an adjustment of 25 bps would suffice.

With no hike in the OPR, volatility in the market will continue and is likely to see the ringgit fall back to 3.20 to 3.30, Wan Suhaimie opined.

The ringgit has been rising lately, surging to as high as 3.1860 early this month in anticipation of an interest rate hike.

Contributed by Lee Weng Khuen sunbiz@thesundaily.com 10 July 2014

Related articles:

• GST and OPR will affect house prices
• Research houses see higher OPR in H2
• Bank rate hike on the cards
• Economists see Malaysia's key interest rate rising by 25 basis points
• Homing in on the real house price

• How OPR hike will affect borrowers
• OPR up 25 basis points, after 3 years at 3%
• Bank Negara OPR action as early as March?
• Hike in OPR, imminent by Bank Negara: Analysts
• Analyst: OPR hike inevitable

China surpasses US as world's top corporate borrower; Will the IMF headquarters move to Beijing?

China surpasses US as world's top corporate borrower

Corporate debtChinese corporate borrowers owed $14.2 trillion at the end of 2013 versus $13.1 trillion owed by U.S. corporations with the switch in ranking

The Chinese mainland has surpassed the US as the world's top corporate borrower, and higher debt risk in the world's second-largest economy may mean greater risk for the world, a report said on Monday.

However, Chinese economists noted that the debt risk in China's corporate sector is still well under control.

Nonfinancial corporate debt in the Chinese market was estimated at around $14.2 trillion by the end of 2013, overtaking the $13.1 trillion debt owed by the US corporations, a progress happening sooner than expected, said a report from the Standard & Poor's Ratings Services on Monday.

The report expects that by the end of 2018 debt needs of mainland companies will reach $23.9 trillion - around one-third of the almost $60 trillion of global refinancing and new debt needs.

"It [the mainland surpassing the US as the largest corporate borrower] is not surprising at all, as the [size of] mainland non-service sector has already surpassed that of the US," Tian Yun, an economist with the China Society of Macroeconomics under the National Development and Reform Commission, told the Global Times on Monday.

Cash flow and leverage at mainland corporations has worsened after 2009, and debt risks in the property and steel sectors remain a particular concern, the report said.

Private companies are facing more challenging financing conditions - highlighted by China's first corporate bond default case of Shanghai Chaori Solar Energy Science and Technology Co in March and another case of default of leading private steel maker Shanxi Haixin Iron and Steel Group.

"The capital market has been sluggish during the past few years, leading to the fast growth in corporate debts," Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times Monday.

Experts noted that the rapid growth in debt reflected some problems of the  Chinese economy, but the size of the debt is still in a safe range and will not cause major risks as the economy remains stable.

"The problems of the Chinese economy are institutional and structural," Tian said, "By addressing these issues, debt risks can be managed."

Tian further noted that most corporate debts in China are internal debts, thus debt problems in the country will have limited impact on the rest of the world.

The report also said a possible contraction in "shadowing banking" will be detrimental to businesses as general.

But Xu noted that China's tighter supervision of the "shadow banking" sector will make it more transparent and better-regulated, which will reduce the potential risks in the sector.


Local governments face massive debt repayment pressure

China's local governments are facing huge debt repayment pressure this year with 2.4 trillion yuan ($390 billion) of debts due in 2014, China Business News reported Monday.

From 2009 to 2013, China issued 94 local government bonds raising 850 billion yuan, the report said.

With another 400 billion yuan worth of bonds to be issued this year, the total financing since 2009 will reach 1.25 trillion yuan, according to the report.

However, the total local government debt is much higher than the amount raised through the bonds, the report said, noting that major debt came from bank loans.

Although the central government has stated several times that the overall debt risk is under control, the statistics from China's National Audit Office show that some local governments have a debt-asset ratio of more that 100 percent and are facing huge repayment pressure, the report said.

Market analysts hold the view that local governments may borrow new debts to pay for the old ones.

The central government allowed local authorities to raise funds since 2009 in the wake of the global financial crisis, while the central government also issued bonds and repaid debts on behalf of the local governments, a practice criticized by some as not conforming to market economy principles.

As the bond issuing backed by the central government is limited and could not fully meet the local needs, the local governments also turned to opaque financing channels including shadow banking activities, the report said.

Despite the big debt pileup, no local government default has so far taken place.

- By Liang Fei Source:Global Times Published: 2014-6-16 23:43:09 

Will the IMF headquarters move to Beijing?

The International Monetary Fund's headquarters may one day move from Washington to Beijing, aligning with China's growing influence in the world economy, the fund's managing director Christine Lagarde said early this month.

Attaching importance to China

Christine Lagarde made the statement at the London School of Economics and Political Science (LSE), saying that the IMF rules require that the institution should be headquartered in the country that is the biggest shareholder. This has always been the U.S. since the fund was formed.

"But the way things are going, I wouldn't be surprised if one of these days, the IMF was headquartered in Beijing," she said.

Lagarde remarked that the IMF had a good relationship with China, the world's second largest economy, and she praised the Chinese government's commitment to fighting corruption.

Lagarde added that she did not think the IMF should be controlled by Europeans in its first place. Since its establishment in 1945, the IMF headquarters has been headed by Europeans and located in Washington, while the World Bank has been headed by the Americans.

Not satisfied with the U.S.

Lagarde also pointed out that the U.S. government is an "outlier" among the G20 in refusing to approve IMF reform, and the IMF was trying to give emerging economies like China and Brazil a bigger voice through reform.

According to Lagarde, on the part of countries like China, Brazil, and India, there is frustration with the lack of progress in reforming the IMF by refusing to adopt the quota reform that would give emerging economies a bigger voice, a bigger vote, and a bigger share in the institution. “I share that frustration immensely,” she said.

She also claimed that the credibility and the importance of the IMF are closely related to proper representation among the membership. "We cannot have proper representation of the membership if China has a tiny share of quota and the voice, when it has grown to where it has grown," she said.

The IMF agreed to reform its management structure in 2010 so that emerging economies could play a bigger role, and made China the third largest member. The U.S. is the only member with control weight in the voting; meaning that any major reform must be approved by the United States.

Hello headquarters

Lagarde has no specific schedule for the headquarters' shift. However, this once again reminds China that there are few international organizations headquartered in its country, which is disproportionate to China's status as the world's second largest economy.

This article is edited and translated from 《IMF总部要搬北京？》，source:Beijing Youth Daily, author: Bu Xiaoming. (People's Daily Online)

Related:

China Inc borrows $14 trillion, overtakes US as top corporate bond: S&P

• China's economy close to overtaking USA in PPP measure this year 2014 but China don't read ranking

economictimes.indiatimes.com

Chinese corporate borrowers owed $14.2 trillion at the end of 2013 versus ...

Beware of Cheque scams, banks take responsibility

Senior citizens' cheques were intercepted and stampered with in separate incidents
 
PETALING JAYA: Two senior citizens nearly lost thousands of ringgit when their cheques were intercepted and tampered with in separate incidents.

In the first incident, a man who paid his utility bills through cheques sent via mail was shocked to find that the amount deducted from his account was 10 times what he had written on one of the cheques.

The foreign national, who only wanted to be known as Richard, owns a home in Malaysia.

He issued a cheque for RM200 to pay his electricity bill in November last year.

“When I received the bank statement, I was shocked to see that the amount deducted was more than RM2,000,” he said.

When the bank gave him a copy of the cheque that was deposited, he realised that the cheque had been replaced with a fake one.

“The cheque was a different one altogether and it was made to one Alan Lim @ Lim Sze Wei. Only the serial number was the same as the one I had issued and there was a forged version of my signature,” he said, adding that the design on the cheque was also different as he was still using an older version.

“I only issue cheques once or twice a month and have not changed the cheque book for years. The old version had the bank logo in the centre. The fake cheque had a completely different design without the logo in the centre,” said Richard, who is in his 80s. Richard then lodged a police report.

In the second case, an 87-year-old pensioner’s cheque was believed to be intercepted and the name of the payee and amount altered, said his daughter K.L. Wong.

She said her father routinely paid his insurance policy premiums by cheque sent via mail, which was what he did on Jan 31.

He wrote a cheque for RM169 payable to a bank’s card centre to pay for his policy and posted it the next day.

On Feb 13, Wong, who handles most her father’s accounts because he is wheelchair-bound, called the bank to check if the cheque had been cleared.

“I was told the card centre had not received it and there was no payment for the December and January premiums,” she said.

Upon checking the account balance, she discovered that RM4,600 had been deducted.

“At first, the bank thought the cheque might have been processed and paid to the wrong person.”

When she requested for a scanned image of the cheque from the bank, she discovered all the payment details had been altered.

“It was the same cheque but the original details were somehow ‘washed out’. Only my father’s signature remained. The cheque was altered to pay someone by the name of Lim Teng Yong,” she said, adding that the person was unknown to her father.

Wong said the bank admitted that it was not the first complaint it had received involving the same name being used to cash fraudulent cheques.

She added that the bank promised to investigate the matter and she lodged a police report the next day.

Richard and Wong’s father’s cheques were issued by the same bank. After internal investigations, the bank reimbursed both men.

“It was good the bank was willing to take responsibility but there is obviously a scam going on. The public should be aware of how cheques are being tampered with or forged,” said Wong.

The bank declined to comment.

- Contributed by Jastin Ahmad Tarmizi The Star/Asia News Network

Related:
1. Indus American Bank
2. Securing yourself against Fake Deposit Scams
3. CHCH – Your Superstation Buyer beware for fraudulent cheques

Malaysian Central Bank raises defence; weak currency

 

Malaysia banks told to set minimum CA ratio at 1.2% of total loans

PETALING JAYA: Banks have been told to have a minimum collective assessment (CA) ratio of 1.2% by the end of next year, sending a strong signal to the industry to improve its standards of prudence.

According to a circular from Bank Negara to financial institutions early last week, all banks are required to set aside a minimum of 1.2% of total loans effective Dec 31, 2015.

The requirement, effectively, will put a stop to the present situation where banks are left to set aside their CA ratio based on their own risk assessment of their asset profile.

“Most banks have maintained a CA ratio of lower than 1.2% because there is no minimum set by Bank Negara. This circular effectively sets the standard for a minimum requirement,” said a banker.

The CA ratio was previously known as the general provisions that all banks were required to adopt. The general provisions requirement was a minimum of 1.5% of total loans, a ratio set by the central bank.

However, after the introduction of the new accounting standards three years ago, the general provisions requirement was replaced with a CA ratio, with banks free to set their own ratio.

The central bank no longer set the minimum requirement for banks to comply with in regards to the provisions.

According to a research report by CIMB, banks that had a CA ratio of less than 1.2% as of September last year were Malayan Banking Bhd, Public Bank Bhd, Affin Bank Bhd and Alliance Bank Malaysia Bhd.

Bankers, when contacted, were divided on the impact that the requirement would have on their bottom lines.

According to one banker, the move to comply with the ruling will not impact profitability because the additional amount required to be set aside can be transferred from retained earnings.

“Funds out of retained earnings will not impact the profit and loss (P&L) account of banks. It’s not a P&L item,” he said.

However, it would affect the dividend payout ability of banks, added the banker.

Another banker said the financial institution was seeking clarification from Bank Negara on whether to set aside the provisions from its profits.

“If that were the case, then it would impact profitability,” said the banker.

OCBC Bank (M) Bhd country chief risk officer Choo Yee Kwan said the background to the new requirement was that Bank Negara wanted to ensure that impairment provisions could keep pace with strong credit growth.

“In addition, the regulator would like to promote consistency in practices in ensuring adequate rigour and data quality in arriving at the appropriate level of collective impairment and the factors that are considered by banking institutions.

“Adequate impairment provisions serve as necessary buffers against potential credit losses; hence, they can reduce the likelihood of systemic risk for the banking sector,” he said in an e-mail response to StarBiz.

He said the sector might witness an increase in the overall level of impairment provisions at the industry level.

“Nevertheless, this should be seen positively, as the higher credit buffers would now render the sector stronger,” he noted.

CIMB Research in a report stated that the proposed new guideline could have a negative impact on banks based on its theoretical analysis.

It pointed out that several banks would have to increase their CA provisions under the new ruling and this would lead to a rise in the banks’ overall credit costs.

“Those which do not meet the requirements would have to increase their CA (and ultimately credit cost) in 2014-2015, even if their asset quality is improving. For banks with a CA ratio of above 1.2%, the new ruling would limit the room for them to further reduce their CA ratios,” CIMB Research explained.

According to CIMB Research’s estimates, banks’ net profits could be lowered by around 0.5% (for Hong Leong Bank Bhd) to 11% (for Public Bank) in 2014 to 2015 if a minimum requirement of 1.2% for the CA ratio were implemented.

Another analyst, however, is of the view that the new requirement from Bank Negara would have a negligible impact on the operations and earnings of banks.

“We think it is not a major concern for most banks because, firstly, the grace period for the implementation of the new guideline is long. Secondly, the minimum ratio of 1.2% will not comprise of only the CA component alone, but is also a combination of the CA and the statutory or regulatory reserve.

“In general, we see the new guideline as a measure to standardise the way banks gauged their capital buffers.
“The bottom line is, we think the new guideline will only serve to further strengthen banks’ capital buffers,” the analyst added.

By Cecilia Kok and Daljit Dhesi StarBiz, Asia News Network

Silver lining in weak currency

Weaker currencies are a boon for Malaysia and Indonesia, helping to tip the balance of trade back in their favour, as exporters benefit from rising demand for goods and commodities from advanced economies, coupled with steady growth in China.

The favourable trade surplus, economists said, would ease the pressure on these emerging countries’ deteriorating external accounts, which is a major sore point for foreign investors.

They added that rising exports would provide the much-needed tailwind for Asian economies to sustain growth even as domestic demand moderated.

Malaysia on Friday reported a 2.4% growth in exports in 2013, backed by a 14.4% jump in December that exceeded the market’s expectation by a wide margin.

“We still maintain our long-term view of impending growth momentum in the coming quarters,” Alliance Research economists Manokaran Mottain and Khairul Anwar Md Nor said in a report.

They predicted exports in 2014 to grow at a faster pace of 5%, backed by steady but improving export demand from advanced economies.

While imports grew at a faster pace than exports in 2013, Malaysia continued to enjoy a strong trade surplus.

The favourable trade surplus combined with an anticipated smaller services deficit and transfer outflows would translate into a larger current account surplus of RM16.7bil or 6.6% of gross domestic product (GDP) in the last quarter of 2013.

“The cumulative current account surplus is estimated to reach RM37.8bil or 3.9% of GDP in 2013, helping to assuage fears of a current account deficit,’’ CIMB Research economist Lee Heng Guie said.

This, he said, was positive for the ringgit and the capital market.

The ringgit, along with other emerging Asian currencies, have been under pressure since June last year after the US Federal Reserve began talking and later started to reduce its quantitative easing (QE).

The US Fed first pared its monthly bond purchases programme from the original US$85 billion a month to $75 billion in January. This was cut further by $10 billion starting from February.

“Capital outflows from emerging markets are likely to continue in the months ahead as the Federal Reserve winds down its QE3 programme,” said Macquarie Bank Ltd’s Singapore-based head of strategy for fixed income and currencies Nizam Idris.

Fears about the US Fed tapering down the supply of cheap money to the market first surfaced in May last year and it triggered a huge sell-off on emerging market assets.

Countries such as Indonesia and India had seen their currencies depreciate the most in 2013, Both economies had wide current account deficits.

Last year, the Indian rupee plummeted the most in two decades, while rupiah depreciated by about 20% against the US dollar over the past 12 months.

Not helping emerging market currencies is the recovery in advanced economies, such as a rebound in economic growth in the US which rose by 3.2% in the fourth quarter of last year.

But if economic recovery in the US and eurozone were to stay on course, so would demand for cheaper emerging market exports. This, in turn, would help shrink the huge current account deficits that had hobbled countries such as Indonesia, India and Turkey.

For many emerging economies, 2014 had gotten off to a grim start.

Concern over the Chinese economy’s marked slowdown and the Argentine peso’s steep slide in January has brought upon renewed pressure on the currency market.

But the current market volatility does not portend weaker growth.

CIMB Research in Indonesia observed that the strains in the financial markets did not translate into a significant slowdown in the economy as the country’s real GDP growth accelerated to 5.7% in the last quarter of 2013.

Its exports surged in December, while imports slowed on the weaker rupiah. This helped to widen its trade surplus to $1.52 billion, the largest since November 2011.

The favourable trade numbers narrowed its current account deficit of $4.06 billion.

CIMB Research expects growth in Indonesia “to trough” in the first half of 2014 as the lagged effect of the rupiah depreciation and Bank Indonesia’s aggressive policy-tightening cycle in June-November 2013 works through the economy.

“Pre-election bounce in consumption should offset the weakness, allowing Indonesia to post 5.6% GDP growth in 2014,’’ it said.

Malaysia, too, is on track for sustained growth. CIMB Research projected GDP growth in the third quarter would probably expand by 5.3%, taking the full year growth rate to 4.7% for 2013. - The Star/ANN

Related posts:

1.  Asian central banks fix the mess created by their governments 

2.  Southeast Asia's Boom Is a Bubble-Driven Illusion?