My 2 sen opinion: Raja Petra is quite selective in his writing about the govt and the ways the govt manages the economy. If you put things out of context, the term "hot money" suddenly becoming very alarming. I guest the term "hot money " is used to represent the liquid funds used specifically for speculative purposes. It will bring a lot of profit if the luck is on your side but it also brings a lot of losses if the luck is not on your side.
These foreigners who were flushed with liquid funds or its more exotic term, "hot money" parked their money here in Malaysia as they thought the time was ripe for the govt to uplift the pegging of RM to USD. They thought the time was ripe because they saw the economy was and still fundamentally steady and strong and our economic base was quite broad compared to the size of our economy. i.e. we have vibrant manufacturing and services sectors as well as very significant oil industry and it related sub-sectors plus big money earners in the form of tourism and agriculture and plantations. So they might thought it was in the advantage of Malaysia to do the unpegging because the RM would not weaken against other currencies as a results of our strong economy. By contrast they also saw that it was not beneficial for RM to be pegged with USD because USD is currently depreciating continuosly compared to to other currencies. And they did not see why RM should be continuosly pegged. So in anticipation of RM being de-pegged, they parked their money here so that when the govt unpegged the RM, they would exchange their strong RM to a relatively weaken USD, so they would get more USD in the process. That could explain prediction of an exodus of capital from the local scene. However that prediction did not materialise because the govt resorted to a thing called "managed float" i.e some like a free float but still still have some attachement with the float in the form of a range of a band of currencies index or something like that. As a layman I imagine it to be something like you let your dog out of the house but with a longer leash attached to the dog. It is not really free but it is not really pegged either. This policy somehow is bad for the foreign managers with the hot money. They had probably promised the heaven to their investors. But, now the unpegging of RM now turned out to an anti-climax for them. Kesian dia orang. Tapi nak buat macam mana? Lebih baik dia orang suffer daripada rakyat suffer. Tak ke gitu!! Tabik pada Bank Negara Malaysia. >>> Amir Hamzah 27/07/2005 10:50:35 >>> 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 -- Posted by Raja Petra Kamarudin to MT-news at 7/27/2005 08:33:00 AM Parti keADILan Rakyat website http://www.keadilanrakyat.org/ Parti keADILan Rakyat network http://www.keadilan-rakyat.com/ --------------------------------- YAHOO! GROUPS LINKS Visit your group "keadilan_eberita" on the web. To unsubscribe from this group, send an email to: mailto:[EMAIL PROTECTED] Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service. --------------------------------- --------------------------------- How much free photo storage do you get? Store your holiday snaps for FREE with Yahoo! Photos. Get Yahoo! Photos DISCLAIMER: This e-mail (including any attachments) may contain confidential information. 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