Zeti said nothing, did nothing and view nothing

Something forgotten in the previous posting. Tan Sri Zeti Akhtar Aziz did say there will be no pegging. She said the same thing yesterday.

Zeti also said at a conference that Malaysia is not the weakest link in Asia, thus disputing Dato Nazir Abdul Razak's prophet of doom claim Malaysia's bond will turn into junk. Nazir was merely sabotaging the 30-year bond issue which he chicken out from. And, doing the same tantrum after demand for Minister of Finance position rejected. 

Extracting from NST below:

Malaysia is vulnerable given the weaker global growth outlook but it has a diversified economy which will enable it to weather the uncertainties said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.

But it is not a weak link in the region.

She dismissed a suggestion that neighbouring countries viewed the current weakness in the ringgit and placed Malaysia as the weak link in the region, raising the risk of a contagion (similar to the baht weakness before the Asian Financial Crisis).

TMI chose to highlight the Bond Market. Extract below:

Malaysia's bond market will not collapse as local funds will step in to fill the void and invest in the market, assures Bank Negara Malaysia (BNM) Governor Tan Sri Zeti Akhtar Aziz, amid concerns over the weakening ringgit and economic slowdown. 

Hmmm ... is that an answer? So was her comment on Ringgit.

Attacking Zeti attracts fair number of critics from her supporters as yesterday's posting did. Where we are not dabbling in the 1MDB issue but focus on Zeti's capability in managing the currency, they were tuned on politics and 1MDB.  

Casper Milquetoast chose to insult our posting as half clever and half baked analysis. In the first place, it is not an analysis. It is a perception of a trader that will determine the direction of their forex trade and subsequently determine the Ringgit direction. Read previous postings (plural).

But he asked what are the tools available for Zeti? Sorry, no time for elementary Foreign Exchange 101. Look up BNM Annual Reports and excellent papers written by Dato Dr Awang Adek in his days in BNM.

There are excuses like Zeti's hands are tied or sentiments but that is bull ...

Her job is clearly stated in the roles of Bank Negara Malaysia to manage the currency. It includes smoothen the trend and to curb and prevent excessive speculation. In another word, it is her job to manage the sentiment in which she did nothing but do a blame and a utopian request.

She is asking to solve the political crisis, in which 1MDB has become one, before the market can self-correct. In Malaysia, political issues exist in perpetuity but yet she is asking for a non existent no political issue senario. Admit it she did nothing that she is authorised and supposed to do.

NST report mentioned:

“They should assess what we look like and highlight what areas of vulnerability they think we are facing. We have surpluses in the current account, solid financial system and well developed bond market and our growth, although moderated, is still at favourable levels given the global outlook.”

If that is what Economist Zeti said, it means the sharp decline in Ringgit is not reflective of it's "true value". Then why is she doing nothing about it?

Someone commented she has stabilised the fundamental part. She got no business to manage neither the fiscal policies nor could influence trade balance.

It is also not her job to say local fund manager will mop up the bond market because she is not a Fund Manager. That is not the sort of remark someone clever would say. It implies local fund will be chasing bad money with good money. A decline in currency will forever be negative to Fund Manager, local or foreign and it supercede considerations for prices, yield and dividend. 

The Star report from Bernama highlighted certain flaws in her comment:

KUALA LUMPUR: There is still no need to peg the ringgit to the US dollar currently despite the continued downtrend of the local unit, says Bank Negara Malaysia (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz (pic).

"If you peg the currency, something else will adjust, either prices or demand conditions, and those might have greater effects on our economy?," she told reporters at the Malaysia-OECD High-Level Global Symposium on Financial Well-Being Wednesday.

COMMENT: She is saying she will let market determined the value of Ringgit and there will be no interventionist policy. In her opinion, pegging currency will have impact on prices or demand conditions.

This is Monetarist-speak! 

It is the reason she gets accolades by the international community. It is the reason she is leaving the nation's fate to the vagaries of the market. Monetarist believe in the power of money supply and will not intervene in the mechanism locally or internationally!

At this point of time, Zeti said, the Government was not envisaging any measures like capital control as Malaysia has the market mechanism that adjusted to certain economic situation.

"What we want to demonstrate is that when we have fundamentals that can allow us to adjust, then when the uncertainty subsides, our currency will regain its strength again," she said.

COMMENT:Does she really mean what she say about leaving it to market mechanism to adjust?

If so, will she allow Petronas and for major foreign exchange transaction like purchase of airplane by MAS or Air Asia to be transacted in the market by Banks.

Has she stopped the policy of major currency transaction be done direct to Bank Negara Malaysia? Will she allow corporations to transact foreign investment inflow without clearance and specific instruction and limit from Bank Negara?

Free market my touche...

Without that free flow of capital, Ringgit market cannot adjust by itself in accordance to the so-called fundamental.  

Zeti said the weakening of the ringgit was the result of many factors globally and BNM would ensure that the market would remain orderly.

COMMENT:Is the market now orderly?

Can the market correct or adjust itself without nudging? Experience say, never.

She did say Malaysia is not as bad as other Asian currency but Ringgit is performing beyond her perceived "economic fundamental". So, do nothing and blame others ...

"For the domestic environment, we need to try to resolve all the areas of vulnerability and uncertainties to provide confidence to Malaysian and non-residents who are participating in our economy and financial system.

"We need to be in the position to withstand this kind of period," she said.

COMMENT: There is also the issue of confidence in the ability of the Central Bank Governor to act under condition of crisis.

On one hand, she was worried about pegging affecting prices and demand condition but on the other hand, she is ignoring the impact of steep fall in Ringgit to the economy which include prices and demand.

Is she able to thing of a solution other than peg?Oh ... forgot. Do nothing and leave to the market.

On the possibility of the ringgit's downturn affecting imports, Zeti said, BNM has not yet detected any sign of relations between those two things.

"It is demand conditions that are more important in affecting our exports and imports but I'm sure there will be threshold levels where they might have begin to have an impact.

"We have to monitor them and see the incoming information. So far, our track records and experiences have shown that demand (global and domestic), have been the key factor in affecting exports and imports," she said.

COMMENT: So typical of bureaucrats and economist. Wait for further development. 

Why then is she not waiting for further development on the issue she is blaming? Why is she not commenting that the so-called foreign investigation is just a Tun Mahathir men's inspired psychological deception game [Read Bigdog here]?

On the ringgit forecast until year-end, Zeti said, it depended on what the development unfolded as there were a lot of uncertainty in the world currently, including when the US Federal Reserve Bank would exit from its zero-bound interest rate and energy and commodity prices.

"We have to demonstrate we can live under that uncertainties and survive. Even if there are any setbacks, we have shown time and again, that we are able to recover quite quickly," she said. - Bernama

COMMENT:There is always certainties all the time in the market place. It only shows she has no opinion!

To answer one earlier commentator, my Master is not Goebbel but government's critics and detractors is. They are not giving facts but doing propaganda. The techniques are obvious and for all to see. It should be an interesting posting.

One commentator said this blog is "accusing her of deliberately sabotaging the nation."We did not say so but you did!