Reading through this posting, I was rather 'awed' at the term 'hot money' used towards the end. Honestly, I do not have an inkling of what it meant. It may be one of the jargons used by those in the industry relating to a commodity very highly in demand. Then again, my mind being what it is...
The very word 'hot', could imply a contraband or illegal item. If such term is indeed used here, this could - bearing in mind that I used the word 'imply' - that Malaysia is a heaven for money laundering. Now if this scenario is true, what kind of economy are living on?
If you'd think this scenario is far fetched, I beg you to reconsider; remember the VIP who was caught by the Australian authorities with more than RM1 million of cash in a hand luggage? Remember the BMF Scandal where much of the stash is still not found?
Raja Petra Kamarudin <[EMAIL PROTECTED]> wrote:
Malaysia risks a massive outflow of capital after allowing its currency to strengthen, Morgan Stanley said yesterday. It estimated up to US$10-US$15 billion could flee if speculators give up on the ringgit.
But the investment bank said that the central bank was managing expectations well so far since the managed float of the ringgit has introduced trading risk for the foreign exchange market and kept hot money bullish on Malaysia's currency and assets.
'This management style is ideal, in our view, as Malaysia does not want its asset markets and financial system to be overly 'traumatised' by the float,' Morgan Stanley said in a research note.
'The fact that it keeps emphasising that the ringgit is quite fairly valued at the old 3.8 peg level also serves to keep hot money relatively 'bullish' as regards exchange rate expectations as it limits the likelihood of a mass exodus.'
A sudden jump in value could trigger an avalanche of profit-taking by speculators which could damage the economy.
'We estimate that the hot money that has entered Malaysia since June 2003 could be in the region of US$10-US$15 billion,' the bank's economist Daniel Lian said. 'A massive exodus of such hot money could be a serious financial and economic management challenge for the Malaysian authorities.'
Dealers say the central bank has intervened in markets to limit the rise in the currency to just 1.3 per cent, which economists say still undervalues the unit, since the seven-year-old peg of 3.8 ringgit per US dollar was scrapped last week. Hot money inflows and private consumption growth are dominant features of Malaysia's current economic upswing, the report said. - Reuters, AFP
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Posted by Raja Petra Kamarudin to MT-news at 7/27/2005 08:33:00 AM
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