theSun | TUESDAY DECEMBER 30 2008
Double A THANKS YOU
A roller-
coaster year
by Tan Siok Choo
THIS was the year the US
economy dominated headlines
worldwide. News reports about
stunning highs were later
overwhelmed by an expanding
litany of sobering lows. And
in December, press coverage
changed from dismal to dire.
On Dec 16, in its final meet-
ing for the year, the US Federal
Reserve stunned analysts by
reducing the Fed funds rate
– the rate at which banks lend
to each other – by 75 basis
points to a record low target
range from zero to 0.25%. More
important, the Fed also said it
would print as much money as
necessary to thaw the freeze in
US credit markets.
The Fed’s unprecedented
announcement underscores
the failure of previous interest
rate cuts to stymie a US reces-
sion that is shaping up to be the
worst since World War II.
One casualty of the US re-
cession was banks. Five major
US investment banks have dis-
appeared this year: Bear Sterns
was taken over by JPMorgan
Chase, the 158-year-old Leh-
man Brothers filed the biggest
bankruptcy in US history with
US$613 billion (RM2.1 trillion)
in debt, while Goldman Sachs,
Morgan Stanley and Merrill
Lynch turned themselves into
retail banks.
Additionally, 25 US banks
have failed this year, the Federal
Deposit Insurance Corporation
says. In the past eight years, 52
banks went belly up – more than
half this number collapsed in
the ongoing financial turmoil.
In October, the US Congress
approved a massive US$700 bil-
lion (RM2.4 trillion) bank bailout
plan. Although some funds have
been used to rescue ailing insur-
ance giant, AIG, this bailout plan
has failed to inspire confidence
in US financial institutions.
Another casualty was
Detroit’s Big Three. Crushed
by fierce competition from
Japanese carmakers, high wage
costs and hefty discounts to
purchasers while high petrol
prices prompted Americans to
end their love affair with De-
troit’s petrol-guzzling cars. US
automakers received an early
Christmas present when the
Bush administration proposed
a US$17.4 billion bailout for
Detroit. To qualify for aid, the
companies must demonstrate
their commercial viability.
For many countries in Asia
– including Malaysia – 2008 was
the year exports as an engine
of economic growth stalled. In
October, Malaysia’s exports fell
by 2.6% to RM53.5 billion from
a year earlier, the first decline in
15 months and a sharp reversal
from the 15.1% year-on-year
increase in September.
October’s contraction in
exports is likely to persist next
year. CIMB Research chief
economist Lee Heng Guie
predicts exports will shrink by
up to 3% next year – double the
government’s forecast of 1.5%.
The export figure suggests this
country’s manufacturing output
remains firmly tethered to the
US economy.
Bleak economic data
prompted the government
to propose last month a RM7
billion plan to boost growth.
However, many economists
fear this stimulus package is
insufficient to prevent Malaysia
from slipping into a recession.
Even more worrying, in its
East Asia Pacific Update, the
World Bank warned stimulus
measures announced so far by
China, South Korea, Malaysia
and Thailand can only “cushion”
their economies against the full
impact of a global economic
downturn but cannot com-
pensate fully for the collapse
in exports. Regional economies
like Hongkong, Singapore and
Taiwan are now in recession
while South Korea looks set to
join the trio next year. Although
Malaysia remains on track to
register 5% growth this year,
its prospects have dimmed
A chastening year for banks.
Year of highs and lows for palm oil.
considerably. Growth next year
could slow significantly to 3.5%
instead of the earlier forecast
of 5.4%.
This will be a year of quiet
satisfaction for our policy–
makers. Measures adopted by
Malaysia during the 1998 Asian
Financial Crisis – including cut-
ting interest rates, government
bailouts, suspending short sell-
ing – were heavily criticised a
decade ago but are now being
copied by US policymakers.
This was a roller-coaster year
for two major Malaysian com-
modity exports: oil and palm
oil. Prices of oil skyrocketed
to a record high of US$147.27
on July 11 and plummeted to
a four-and-a-half-year low of
US$33.87 on Dec 19 on fears
a recession in the US, major
European countries and Japan
will curb demand.
Similarly, the price of palm
oil hit a high of RM4,486 a tonne
in March and slid to a low of
RM1,390 a tonne in October.
News that China and India, two
major buyers of palm oil, were
unlikely to remain immune to
the US recession caused mar-
ket sentiment to turn bearish.
Meantime, the ringgit soared
21
RM120,000
6
to 3.1320 against the US dollar
on April 23, sparking hopes
that it could strengthen to less
than 3.00 this year. Instead, in
tandem with commodity prices,
the ringgit weakened to a low
of 3.64 on Dec 4.
Cash up for grab!
Volatility was the watchword
Weekly cash prizes await the winners!
for the Malaysian stock market.
The Kuala Lumpur Composite For every purchase of 5 reams of paper, you’ll Double A
Index hit an all-time high of qualify for one entry in this promotion. You can submit as many
1,516.22 on Jan 11 before entries as you like to enhance your chances of winning!
sliding to a low of 846.470 on
Dec 15 as hopes that Malaysia
would be insulated from the US
recession faded.
For companies like Malayan
Banking, this year has proved a
chastening experience. It was
criticised for buying a control-
ling stake in Bank Internasional
Indonesia (BII) for RM8.6 billion
or 4.6 times its book value,
a valuation many analysts
deemed excessive.
Although Maybank’s share
price has plummeted from
RM9 at the start of the year to
RM5.10 on Dec 15, there may
be considerable downside.
Research house CLSA Asia
values Maybank at RM3.60 a
share, the first institution to set
a target price at below the RM4
mark this year.
One positive stock market
development is more assertive
minority shareholders. At May-
WEEKLY PRIZES
RM 3,000 cash prize x 10 winners
How to participate
Step 1: Purchase 5 reams of Double A
paper. Step 3: Attach the proof of purchase (receipt/ invoice)
Step 2: Complete the contest form with a creative slogan. with the contest form.
Step 4: Submit through post.
It is as simple as that!!
BUY NOW
TO ENTER!
bank’s recent annual general CONTEST FORM
meeting, minority shareholders
were forthright in criticising
the BII deal. Furthermore, a Name: Age: Gender:  Male  Female
representative of the Employ-
ees Provident Fund warned
Company Name: Occupation:
Maybank directors they would
be accountable for any losses
suffered by shareholders. Address:
Amid the deepening gloom,
an audacious glimmer of hope
is US President-elect Barack
Obama’s inauguration on Jan
20. He has pledged to imple- NEW NRIC No.: Email (if applicable):
ment the biggest infrastruc-
ture-spending programme Tel / H/P: (O)
since the 1950s, totalling as
much as US$1 trillion (RM3.4
trillion) to be spent over the Double A A4 paper is environmental friendly because
next two years. (complete the slogan in not more than 20 words).
On the home front, Prime
Minister Datuk Seri Abdullah
Ahmad Badawi will step down
Send completed entry form to: Double A International Network (Malaysia) Sdn Bhd (747060-V)
T1-7-1, 7th Floor, Tower 1, Jaya 33, Lot 33, Jalan Semangat, Seksyen 14, 46100 Petaling Jaya, Selangor.
in March and Datuk Seri Najib
Abdul Razak is set to become
Malaysia’s first premier who is
an economist. For more information, please contact 03-7960 9988
Opinions expressed in this
or log on to www. DoubleApaper.com.my
article are the personal views * Promo ends 19 Jan 2009. Terms and conditions apply.
of the writer and should not be * Incomplete/improper submissions will be rejected. Decision of organizer is final.
attributed to any organisation * Proof of purchase is not proof of receipt. Organizer shall not be responsible for any lost or misdirected entries.
she is connected with. She * Winners will be notified by post, announced on website www. DoubleApaper.com.my and their names Double A plants Farmed Trees for paper making,
every ream of Double A paper reduces 3 kg CO2
can be contacted at schoo@ published in The Sun on 30 December 2008.
noordinsopiee.com