WILL MALAYSIA ENCOUNTER ASSET BUBBLE? - AN 'ANALYSIS' BY NIK ZAFRI

Today, I am not going to write about Sub Prime Mortgage Crisis, REIT, Commercial Property Bubble etc as I've written enough. But today, I'm going to share some good articles that worth looking into.

I read Jagdev Singh Sidhu's brilliant article in the Star Thursday September 9, 2010 entitled

"Diffuse the property bubble before it is too late - Making a Point - By Jagdev Singh Sidhu"

(Nik Zafri's notes : I pray that we're not too late)

THE subject of property prices and financing has gathered momentum ever since news broke that Bank Negara is assessing the situation to determine if new measures should be instituted to cool down fast escalating property prices.

Lobby groups for the industry have been busy making their case heard, saying that any move to impose higher downpayments for houses would hurt the property market.

Their concerns come at a time as a growing number of people have complained that prices of houses, especially in the hotspots in the country such as the Klang Valley and Penang, are spiralling beyond affordability.

The last thing everybody needs is such speculation spreading to other areas where for the moment, speculative activity appears to be contained for the moment in the hotspots as 94% of houses sold in the country are priced below half a million ringgit and 85% of houses launched in the past nine months cost below RM500,000.

Dealing with speculation is tough and the last thing anyone should do is to make genuine buyers suffer, especially first time buyers.

Suggestions that houses costing below RM500,000 should not be subject to the new higher downpayment requirement makes sense.

Also first-time house buyers or owner occupied houses should be given the most ease of financing to allow them to fulfil the dream of owning a home.

It’s also hard to clamp down on speculative activity as the wealth creation process is an allure that developers, banks and policy makers might find hard to turn away.

After all, the money generated from flipping houses adds to the bottomlines of companies and the money in the hands of people could well filter down to other consumption activity that would go a long way to help spur economic activity.

But the profit from speculating activity, this time driven largely by cheap and ready financing, is unsustainable and history is full of examples of the dire consequences of a property bubble gone burst.

It’s then not surprising that the authorities in other countries in the region, where a property bubble has formed, are working hard to manage and diffuse the situation. Rules introduced in China, Hong Kong and Singapore are far more drastic that what the authorities here are reported to be contemplating.

In fact the new rules that are talked about are tame compared with what has been done in the past. In 1995, reports said that Bank Negara imposed a maximum 60% loan for residential properties priced above RM150,000 to put the brakes on the then fast rising house prices.

Furthermore, a real property gains tax of 30% was imposed on foreigners selling their properties irrespective of the holding period of the property.

Those measures were met with a huge hue and cry from the lobby groups, and developers who claimed that such draconian measures would maim the market. A couple of years later Malaysia entered its worst-ever recession, and as they say the rest is history.

The point is, just as the saying goes, those that fail to learn from history are doomed to repeat it, and for Malaysia, failing to deal with any property speculative bubble would spell trouble for the banks that have grown to rely more and more on households to drive their lending activity.

In the interest of financial stability and common sense, the move to act should be made soon.

Deputy news editor Jagdev Singh Sidhu is amazed just how much his house is “worth” in the secondary market.

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(Nik Zafri : Here's another from United States (It's old but the REIT players...you can consider the points GLG is making (but obviously it was a bit late) – BUT we in Malaysia can change it! Take Preventive Actions now!) :

if you like subprime, you'll love the commercial property bubble

August 29, 2007

• Analysis by: GLG Expert Contributor

• Analysis of: Commercial Real Estate, Come On Down

• Published at: www.washingtonpost.com

Summary

It's fine to talk about gloom and doom, but it's an ill wind that blows no good. Counter cyclical investment is worth thinking about.

Analysis

If you like subprime...you'll just LOVE the commercial property bubble! Every day we hear about a new record price for commercial property. Great news... if you're selling.

Alright, you say, here comes another gloom and doom prophecy. Nothing new about that. But let me regale you with some ancient history.

There once was a gentleman by the name of Knuppe. He pioneered mini-storage. His rule of thumb was, 'Build to yield 12% on hard cost. Sell at a capitalization rate of 10%.'

Well a few years ago I bought a self-storage REIT to yield 8%. Considering I was paying for management and getting liquidity, thought that 8% was pretty fair.

Hoped to get some increase of value with increasing rents. Well, from time to time I checked in on the stock. When I had more than doubled my money and the yield was down to 4%, wondered what the upside could be. Maybe the yield could go down to 3%? I sold. At the time that Mr. Knuppe was in his prime, normal commercial vacancy rates were on the order of 5% and capitalization rates something like 10%.

At about that time there was a very smart gentleman by the name of Michael Young. He asked what made real estate so special that investment in it got such a premium over, say, bonds or equities. Then he proceeded to figure a way to parse out credit leases like a bond strip, selling periodic payments to one buyer and reversion of the property to another. Today the ratios are just about opposite, 10% vacancy and 5% cap rate, except you might have a hard time buying to yield 5%. Capitalization rates are trying to go down to half that. What happened? Briefly, finance discovered real estate

Recommended reading: "A Demon of Our Own Design" by Bookstaber, "The Black Swan" by Taleb and "The (Mis)Behavior of Markets" by Mandelbrot.

(Nik Zafri : here comes the best part!....read on...)

Some fairly smart folks figured ways to package and sell "asset based" products without a firm understanding of the underlying assets or their markets. It is fairly well accepted that at the moment the global economy has been awash in liquidity.

As most people in normal times would rather put money to work rather than stick it in the mattress, that means that various investments are likely to receive the bounty.

The problem, as always, is that supply being roughly equal, more money being bid means higher prices. This has trickled down to real estate through various investment vehicles.

Real estate investment trusts (REITs) are an old one. Mortgage backed securities (MBS) and collateralized debt obligations (CDOs) are newer. This doesn't mention synthetic leases, which are, at least priced, a lot like bonds, or Mr. Young's "lease strips".

At one time in the Paleolithic of real estate, forty or so years ago, a debate was current as to whether the tax advantaged status of limited partnerships inflated apartment prices. More recently there has been discussion of the inflationary aspects of tax advantaged, "1031", property exchanges.

Today, however, we are talking about REAL money, that which is under management in pension and other investment funds. If the fund managers can't find a way to invest, they don't make their bonuses. Every picture tells a story. The office complex in the aerial photo (http://www.charlesbwarren.com/aerial%20services.html) is of PacificShores.

Touted as being 2/3 leased before ground was broken in late 1999, its tenants evaporated in the dot-com meltdown the following spring. For years it represented a substantial part of the office vacancy in San MateoCounty. The picture was taken mid-day, midweek in Fall, 2004.

Recently it sold for upwards of $500 per square foot. It is now reported to be 91% leased. The parking lot is a bit more full than pictured, but not 91%.

At a ULI workshop in 2006 one of the speakers opined, "The fun is gone out of this cycle. A few years ago you could buy based on capitalization rate. Then you could justify an investment based on discounted cash flow. Now the only reason to buy is price per pound."

I think that price per pound for existing property is now getting high enough to "justify" new construction... if your expectation of investment returns is low, very low. So what? How does this help? Maybe I get "told-you-so" points in a few years?

If you are just a thrill seeker, invest on the momentum and hope to get out before the roller coaster goes over the top of the hill. Or maybe you sit on your money. Earn 5% short term. When the bubble pops maybe at least some real estate might get interesting again.

Otherwise, if you're adventurous, you might try shorting REITs. Charles B. Warren, ASA urban real property San Francisco http://www.charlesbwarren.com/

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.

This author consults with leading institutions through GLG

This is one of the 'wake-up' call article.

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The Sun Makin Sens Section - by Tan Siok Choo

East Asia - no longer a follower?

THAT the US appears to be sliding into a recession cannot be denied. What is uncertain is whether East Asia in general, and Malaysia in particular, can avoid following in its wake. While it may be premature to offer a definitive answer to this question, three separate indicators underscore export-dependent East Asia’s growing resilience.

First, a recent article by Bloomberg suggests Japan may escape the recession that appears to be engulfing the US. As one of the world’s largest financial news and data provider notes, since 1970, Japan has followed the US into all five recessions. In 1970, the US accounted for 30% of Japan’s exports. Today, that figure has fallen to only 20%.

Japan’s reduced economic dependence on the US is largely due to the success of manufacturing companies like Toyota in capitalising on buoyant markets, particularly in China and other countries. In the past two years, Japan’s exports to China jumped by 45% while those to Russia doubled.

Additionally, a 5.6% drop in US vehicle sales didn’t stop Toyota’s total unit sales from rising in the first quarter. Furthermore, Toyota is poised to overtake the US-based General Motors as the world’s largest auto company in terms of sales.

Last month, two usually bearish brokers on Japan – Goldman Sachs and Morgan Stanley – backed off from predictions that the world’s second largest economy will go into a recession this year. The catalyst for both brokers’ changed view was because revised industrial production figures for February showed output rose to a record rather than fell, the Bloomberg article says.

Even though exports could slow down, corporate Japan is now financially stronger than when its stock and property bubble burst in the late 1980s. The average ratio of corporate liabilities to assets has dropped to about 65%, the lowest level since 1955 from about 80% in the mid-1990s, the Merrill Lynch report says.

Moreover, Japanese companies have soaked up excess production capacity. Reduced debt and streamlined production will enhance corporate Japan’s capability to withstand a slump in the US, Bloomberg notes.

Second, the price of oil has continued its inexorable climb to a record high, even though its biggest market appears to be softening. Last in electronic trading last Friday, US crude futures for June delivery hit an intra-day record of US$126.20 (RM403.84) a barrel.

Admittedly, the escalating price of oil this year may be prompted by concern about possible disruptions in continued supply in countries like Nigeria and Venezuela. That prices continue to skyrocket despite sharply declining demand from the US, the world’s largest consumer of oil, is unusual. In February this year, US demand for oil fell to 19.7 million barrels of oil a day, down by one million barrels from last year’s average.

The International Energy Agency (IEA) says oil use worldwide will increase 2% this year because of growing demand in emerging markets. For the first time this year, emerging markets will consume more crude oil than the US, the IEA notes. Emerging markets will consume 20.67 million barrels of oil a day, an increase of 4.4%. In contrast, demand in the US will contract by 2% to 20.38 million barrels daily.

"The US recession will be a footnote as far as the oil market is concerned. Supply isn’t growing and demand is growing robustly in the developing world," says Jeffrey Rubin, chief economist at CIBC World Markets in Toronto who has correctly forecast higher oil prices since 2000.

Third, shipments of personal computers (PC) grew at a double-digit pace worldwide in the first quarter despite anaemic growth in the US, technology research firm, IDC says. Indeed, global figures for the first quarter exceeded its forecast.

Although growth in US sales slowed to around 3%, overseas gains boosted global first quarter PC shipments 14.6%, IDC notes. That’s because the US accounted for 23% of global shipments in the first quarter compared with 25% a year ago.

"Even if there is a particularly bad US market, it is becoming a smaller piece of the global puzzle," IDC vice-president Bob O’Donnell points out.

Despite these positive indicators, East Asia’s growing resilience cannot be equated with total independence from the US economy.

For a start, if the US economy is in recession, it may take months before the impact is transmitted to East Asia. Additionally, in an increasingly interlinked global economy – particularly in financial markets – it is inconceivable that what happens in the US can be ring-fenced from other emerging economies.

But if the inconceivable does happen – if the US sinks into recession and if East Asia succeeds in decoupling from the world’s largest economy – then a new era in global economic history may have begun.

A good article from The Globalist Dot Com where I'm one of the subscriber.

Nik
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Acknowledging China By Jianxiong Zhang | Thursday, February 28, 2008

China's economic boom of the last three decades has raised concerns about resource scarcity, pollution and trade. While China's development has made it one of the world's largest economies, hundreds of millions still live in poverty. Jianxiong Zhang argues that the United States and the European Union must acknowledge China's efforts to address climate change and trade disputes.

In the context of globalization, the economy increasingly influences international relations. This is because strengthening interdependence and intensifying frictions between economies tend to go hand-in-hand. As a result, it is no wonder China is worried about the impacts on its relations with the United States and the European Union.

The scale of China's growth

It is well-known that China's economy has been growing at an average rate over 9% for 27 years now. And, in the past five years, its annual growth rate exceeded 10%.

In 2006, China’s GDP reached $2.6 trillion (in purchasing power terms), or 5% of the world total — ranking fourth in the world.

Growth and poverty

China’s development is as an evolutionary stage, rather than an obstacle to its relations with the United States and European Union.

China has reached the top ranks of economies in the world by GDP — but it still lags behind 109 other countries in terms of per capita income.

China needs to further develop, so as to improve the living standards of its citizens, allowing them to enjoy a life comparable to that in medium-developed countries.

This is their right — and indeed one of their fundamental human rights.

Supporting the world economy

The continual growth in China makes significant contributions to the world economy. Firstly, China’s economy contributed 13.8% of the global GDP growth during the 2003-2005 period.

The rate is second only to that of the United States. That is to say, with China’s continued growth, the world economy will not substantially slide down even if the U.S. economy falls into recession.

Benefits from China

China needs to further develop, so as to improve the living standards of its citizens. This is their right — and indeed one of their fundamental human rights.

Second, cheap goods exported from China are helpful to prevent inflation in its trading partners. Third, the fruits of economic growth in China are shared by industrialized countries in general — and in the United States and the European Union in particular.

They receive a great deal of profits from their place in the international division of labor, and gain significant returns from their financial services, foreign direct investment and patent income from China.

For example, about 20% of revenues from each mobile phone, 30% from each computer and 30-40% from numerically controlled machine tools made in China go to investors or patent owners in the United States, the European Union or other countries.

Concerns from abroad

Kind-hearted people in the rest of the world are happy to see and hail the economic progress in China, for it helps millions of people there escape from poverty. Thus, it brings new impetus to economic growth globally.

However, the United States and Europe are very concerned about the consequences of China’s development. Apart from positive expectations, they wonder what negative impacts China’s development will have on them.

Managing growth

Kind-hearted people in the rest of the world hail the economic progress in China, for it helps millions of people there escape from poverty.

For instance, they wonder whether China will compete for natural resources, energy and markets with them

— and to what extent China’s development will lead to pollution and climate change. A more extreme observation even views China’s development as a “threat.”

As regards climate change, it should be noted that Beijing has already set about tackling the problem.

The Chinese government pursues a policy of “scientific development” and carries out programs to build China into a resource-conserving society, which contain a series of measures to save resources and energy.

Resources in historical perspective

From 1990 to 2005, the energy consumption per thousand dollars of GDP was cut from 2.19 to 1.17 tons of coal equivalent, with an annual reduction rate of 4.1%. This figure, however, as well as greenhouse gases emissions per unit of GDP in China, is still higher than those in the United States and the European Union.

This is largely because the United States and the European Union have been in the post-industrialized stage (where more than 70% of GDP is contributed by service sectors), while China is still in the industrializing stage (where almost half of GDP comes from the industrial sector). This can be changed only by further development — and the change is under way at an accelerating pace.

Tackling climate change

Between close trading partners, disputes are a normal phenomenon. This should not be a factor to undermine relations between them.

The Chinese government set the targets of bringing down energy consumption per unit of GDP by 20%, cutting the total discharge of major pollutants by 10% and increasing forest cover from 18.2% to 20% between the end of 2005 and 2010.

The National Program on Tackling Climate Change released in May 2007 formulates that, by 2010, China will cut CO2 emissions by one billion tons through improving technologies and replacing fossil fuels with renewable energies.

If international cooperation in developing greenhouse gas zero-discharge technologies can be accelerated, the impacts of China’s development on climate change will be further minimized.

The rights of the poor

As for the equitable distribution of energy, as well as natural resources and markets, this matter requires bilateral or multilateral consultations. Such consultations must be carried out on an equal basis.

In this process, two issues should be considered. One is the development right of poor countries. There are quite a few countries in the world where people live a life far below the living standards of industrialized countries.

A sense of equity

If international cooperation in developing greenhouse gas zero-discharge technologies can be accelerated, the impacts of China’s development on climate change will be further minimized.

When distributing the world's resources, rich countries should give more considerations to the interests and rights of poor countries. Up to now, the per capita income in China is just equal to 4.5% of that in the United States, 5% of that Japan, 5.8% of that in the eurozone and 10% of that in South Korea.

There are still 135 million people in China who live on less than $1 per day. There are 750 million such people in the world, of which China accounts for 18%.

The other issue is the principle of equality. According to the World Bank, the 2000 per capita consumption of energy was 3.8 tons of oil in the euro zone, 8.2 tons in the United States — while just 0.9 ton in China. The per capita consumption of energy in the United States is nine times that in China.

Measuring China's growth

At the same time, the per capita rate of CO2 emissions in China was two tons, compared with eight tons in the eurozone and 21 tons in the United States. In 2004, the per capita CO2 emissions in China increased to four tons.

This figure, however, was only 87% of the world average — and 33% of the OECD average.

Accepting disputes, improving relations

Along with China’s development, the trade disputes between it and the United States as well as the European Union are on the rise. Between close trading partners, disputes are a normal phenomenon. This should not undermine relations between them.

The economic structure of China can be changed only by further development — this is happening at an accelerating pace.

Trade disputes occur between the United States and the European Union, the United States and Japan, as well as the European Union and Japan. Since its inception, the WTO dispute settlement mechanism has been mostly used to deal with disputes between the United States and the European Union. The disputes, however, have never undermined the bilateral relationship.

In short, the contributions of China’s development are a net plus — even in light of its negative influences on the rest of the world. The negative effects brought about by development are controllable.

China’s development should be taken as an evolutionary process, rather than an obstacle to its relations with the United States and European Union.
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Here's something better from China Daily

China is not decoupling from US Economy
(Agencies)
Updated: 2008-01-21 10:14

BEIJING - China's central bank on Sunday poured cold water on the idea that the country's economy can decouple from the United States.

China's exports will be badly hit if US consumption weakens, Zhang Tao, deputy head of the international department of the People's Bank of China, told a financial forum.

Figures due this week are expected to show that China's gross domestic product grew more than 11 percent in the fourth quarter of 2007 from a year earlier, despite a deepening US credit crunch.

But Zhang said he saw mounting risks to US consumer demand. He noted that retail sales unexpectedly fell 0.4 percent in December, while property prices were falling and rising petrol prices were crimping disposable incomes.

"If US consumption really comes down, that's bad news for us," Zhang said. "That will have a pretty severe impact on our exports."

Wang Jian, head of the China Society of Macroeconomics, agreed that China's growing trade with Europe was unlikely to insulate it from a drop in exports to the United States.

If US demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said.

"Global demand is ultimately driven by the United States," he said.

More US interest rate cuts or a further fall in the dollar in response to a weakening economy would have an impact on Chinese monetary policy, Zhang said without elaborating.

He said the subprime crisis would not divert China from the path of financial innovation.

"It will not change our general direction. However, it serves as a warning that we need to pay attention to risk controls and launch new businesses in a steady, orderly way," he said.

Dai Genyou, director of the central bank's credit bureau department, said higher Chinese interest rates would have little impact on the ability of companies to service their debts. Nor would they derail corporate investment plans, Dai said.

nikzafri wrote:

I'm not really worried about what this news is telling us - but I'm 'a bit' concerned on the USD performance - read the news about USD currency - not conventional economics. Why am I worried? Read my original post here. If something is not done on USD current performance, then other currencies will be effected, when others are effected, then the pricing of everything will be effected, when pricing is effected, then economy will somehow be effected and of course all of us will feel it. Hedging can be one of the cause and the mortgage crisis may also become another - when lenders want to play too safe and not taking any risk.

nikzafri wrote:

Ask a forex trader (those who trade using USD) or a banker (esp. international banks) or local company linked (investment wise) to the US, they'll tell you how this subprime mortgage crisis effects the stock markets all over the world! It would start with the USD value getting hurt due to the too much dependance on subprime sector and housing market. The USD will start declining further as such as the lenders starting to charge higher and more borrowers couldn't afford to pay the loans and risk facing legal charges even the lenders promised refinancing (be careful, you could end up in more trouble if you refinance esp. Predatory Lenders)

nikzafri wrote:

Yes, it doesn't (the relationship between Malaysia stock market performance and the US economy) - because stock prices are a determinant of several factors operating on a given day - it's still about supply and demand. Thus it is technically wrong to assume it's due to one factor that is - concerns over US subprime market. So, we're quite clear that the market current underperformance has; in principle; nothing to do directly with sub-prime mortgate crisis in the United States. But why it is still effected? Why the concerns? Coincidence? No..it can't be as the WORLD stock markets are encountering the same thing.

It gets better....

The Star Business - 10/12/07 - Monday

US dollar woes far from over

IN PERSPECTIVE
By BALJEET GREWAL

CONSIDER this – 2000 years ago, Rome was running a trade shortfall equivalent to 3% of its total economy, one of the many factors that led to the empire’s eventual downfall.

Fifty years ago, Brazil had a massive trade deficit, which were critical to its decline – the currency was battered over and over again.

Eight years ago, the tiger economies of Asia were plunged into a currency crisis, due to big domestic and over-reliance on foreign capital.

Today, international bodies assert that if a country’s trade deficit exceeds 4.5% of its gross deficit product (GDP), it’s a sign of real and present economic danger.

And yet the US economy continues to flaunt history and economics. At 6.4% of GDP (US$58.9bil), US trade deficits are perilous and significantly exceed those of Rome, Brazil or any Asian country one decade ago.

With the recent decline of the US dollar, there are good reasons to expect its slide to continue. Weak economic numbers triggered the fall of the greenback against slower housing starts, sluggish durable goods orders and lethargic consumer confidence – all point to a correction in the economy.

Compounding this is the US’ current account and budget deficit (3.5% of GDP) as well as the narrowing interest rate differential between the US and regional Asian countries. The impact of the subprime market and the widespread repercussions on consumer and corporate consumption exacerbates the dollar woes. All these factors combined offer the possibility of a prolonged economic malaise which continues to weigh down the dollar.

On the contrary, improved economic fundamentals in Asia (reduced external debt and budget deficits, higher international reserves, potential sovereign ratings upgrades and sizeable portfolio capital flows into Asia) have further supported regional currencies.

Further appreciation is on the cards, driven by dwindling US macro dynamics and slower growth expectations. Year-to-date 2006, the Malaysian ringgit has appreciated 5.52% against the greenback, the Singapore dollar at 5.97% and the Thai baht at 16.96%. More telling will be a likely renminbi appreciation fuelling regional currencies given China’s imminent economic reforms and move towards a flexible mechanism. Increasingly, the fortunes of economies in the region are being lifted, driven in many cases by demand from China.

While a weak dollar has seen currencies rally against a weary US economy, a significant correction in US macro data and serious negatives from a bourgeoning current account deficit may flip dynamics if left unchecked. The largest threat globally remains an unruly adjustment of the US dollar which could send regional markets into a downward spiral premised on a sell off in US dollar assets. The tumbling dollar will not only halt export growth but also see a flight away from capital markets. The US is still the single largest trading partner of most East Asian economies, and the Achilles heel of emerging Asia.

To offset this, East Asian countries will need to ensure that their currencies appreciate in unison and do not fluctuate sharply in value relative to one another given the weightage of trade. East Asian economies can withstand about 20% decline in the trade-weighted value of the dollar provided their currencies appreciate together – consensus show that the US dollar will need to decline by 30% in trade weightage terms for trade deficit to look palatable.

Collectively, Asian central banks hold about US$3.2 trillion in foreign exchange reserves, most of it in dollars, and their large purchases of US dollar leading to 2006 have played a crucial role in curtailing the dollar's decline. If the US dollar is certain to fall further, central banks will sell dollar reserves or switch into other reserve currencies, which will exacerbate the dollar’s fall.

On the contrary, if Asian economies try to prevent their currencies from rising against the dollar to preserve export competitiveness, then the result could be broadbased weakness in Asian currencies and a rapid accumulation of currency reserves. Delicate balancing of foreign exchange reserves in this instance is crucial, especially given the trade impact; hence a communal appreciation will thwart any potential regional imbalance.

So, does a falling US dollar spell disaster for Asia? Not necessarily. Asian economies today are characterised by current account surpluses, large foreign exchange reserves and high rates of domestic savings. Equity markets across the region have been breaching all-time highs, reflecting the underlying strength of economies across the region and the perception that Asian stocks represent the best growth prospects at reasonable risk premium.

Thanks in part to the de-linking of Asia's capital markets from the US (more visible in the bond market), and a greater reliance in intra-regional trade (particularly with China), Asian markets seem well-placed to withstand the slowdown in the US that is expected in 2007.

These improved economic fundamentals will serve the region well over the next few years as the global economy slows and investors become more risk-averse. Nevertheless, the dip in Asian capital markets and a slide in Asian currencies against the US dollar in August this year, from the fallout of the subprime crisis serve as a reminder that the region is not immune to a change in global investor sentiment.

Meanwhile, positive overtures from an appreciating ringgit will continue to buoy domestic markets. The ringgit surged to its highest level post de-pegging, closing at 3.3177 (Nov 9) to the US dollar in line with strengthening regional currencies. The broadbased impact from a stronger ringgit is positive in general; especially in sectors which derive ringgit revenue with USD denominated costs.

Note: The author is group chief economist at Kuwait Finance House, Malaysia (KFH). KFH is one of the largest Islamic banks in the world and the first Islamic Bank with an Economic & Investment Research team.

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Since the author said "Not necessarily", this may also serves to mean as 'depends'.

Here are my personal hypotheses :

Despite it is understandable that trade surpluses could be the solution for future economic growth i.e. by means of amending policies not to be overdependent on foreign trade (only recently done), it may only work if country like US decide to run the corresponding trade deficit.

I may be wrong, but what if US decides to reduce the deficit?

Will it not create some 'not so nice' repercussions?

I'm not really being devil advocate here, but the gap of surpluses and deficits are not getting any smaller as we speak and it is foreseeable that the next issue will be misalignments in USD adjustment and definitely some 'not so nice' impact on global growth.

Of course, I'm neither suggesting that we should be adjusting exchange rates in Asian surplus counter nor pushing down demand and growth in deficit countries but rather I was kinda HOPING that Asian should assume a much bigger function in expanding their domestic demands and head towards becoming the catalyst to global growth (as soon as possible)

I am also yet to see two things : (anyone, please correct, I might have missed it)

a) EU coming in although much have been said by them and

b) adjustments on worldwide macroeconomic policies

When we deal with global financial management, we need a state-of-the art multilateral approaches to ensure a more predictable trading environment.

In global economy, every nation should not be left behind (or be put in the dark wondering what would be the future or what's next?) and they all deserve a more fair/equal treatment. IMF and UNCTAD should play more transparent roles rather than be seen as 'being used' to determine monetary policies and exchange rates.

The whole world is on the way towards interdependency, nobody should be ignored. Asia should no longer limit itself by merely quoting China as a benchmark of Asian or world growth, but other Asian nations as well.