I have predicted some time back that Malaysia would face a deep contraction of its economy, looking at the external markets and the contractions of other economies in the last quarter of last year.
As a Malaysian, I was hoping that I could be proven wrong and that the country would be resilient enough to go down just 1or 2% , like what the government has announced earlier on.
Unfortunately, I was right.
The official figure for the first quarter has been announced and it is a -6.2% contraction in the first quarter. I would expect the second quarter to be around that. So far, we have not benefitted from the first stimulus package given out last year.
Looking at the other economies, and the trend of commodity prices ( Malaysia will benefit if commodities go up) ad consumer confidence (US Consumer confidence index hit 54% for May, a big jump),, I think the worse is over for the world. Most of the advanced economies are starting to bottom out, and since they have reached the bottom, there is only one way to go, and that is up. What is debatable is how fast will be the uptrend; in other words, how fast will be the recovery?And how long will they remain at the bottom?
Oil prices have gone up a bit to be past US60 per barrel now. When the developed economies of the world recover, the demand of oil will shoot up .
Will there be another round of escalating oil prices? If there is, then any recovery will be capped by this escalating oil prices, especailly if there is a perception that oil demand will exceed oil production. Speculative forces will push the oil prices up.
Malaysia should benefit from an oil surge, theoretically. But the last round , when oil prices went past US$140, the opposite happened when pump price was suddenly raised to RM 2.70. Almost everything went up. NO one in Malaysia (maybe with a few exceptions) really benefited from the surging oil price and that really puzzled my simple mind.
The trouble with these consumer product prices, they do not obey Newton’s laws. Normally what goes up should comes down. But prices of consumer products and food in Malaysia just like to defy Physics, and what have gone up have remained high there, even when the country is now in recession.
Perhaps now is the time, for those who have cashed out earlier, to look at investment opportunities and invest cautiously.
In February , when Aussie dollar went below RM2.40, I did advise some of my friends to look at the opportunity, predicting that it would go up once commodities prices go up since you need Australian dollars to buy those commodities.
If you have invested 10,000 Aussie dollar then in a foreign curency account , you would have made a very handsome profit. Yesterday, It touched RM 2.80. You would have made a profit of Rm4000 in just 3 months on a less than Rm 24000 capital. (with some crumbs as interest, too).
There are many other investment opportunities. But be cautious. Use only spare money and make sure you have enough cash to cover any emergency use.