1) US interest rates are expected to continue rising due to high inflation and full employment in the US economy. This will likely lead to capital outflows from other countries and currency fluctuations globally. 2) Malaysia's ringgit currency is susceptible to speculation due to its free-floating exchange rate regime. However, Malaysia's economic fundamentals remain strong, with high growth potential and moderate debt levels. 3) Investors are advised to take a long term view of at least 5-10 years when investing in Malaysia, as political instability and currency volatility may persist in the short term. Malaysia's assets remain relatively attractive for long term investment.

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US Interest Rates and Ringgit outlook
Paul Ho – 9782 8606 (Save my number)
By Paul HO
MBA.Macq, B.Eng(Hons)
www.iCompareLoan.com
Contact: 9782-8606 (sms)
6100-0608

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What is iCompareLoan.com
•The talk will review macro level economic view of the world’s economics, US interest rates, how
inter-related funds will flow and what that will mean for the Ringgit and regional currencies.
There will be a short update of oil prices and global economic outlook and how to steer a safe
path in this volatile economic environment.
Synopsis

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What is iCompareLoan.com – a FinTech Company that does…
•www.iCompareLoan.com is a Loan Portal and a Mortgage & Loan broker, helping property
buyers and home owners to get the best fit home loan and business owners obtain Business
loans for business expansion.
•Home Loan Report ™ is Singapore’s first Cloud based Home Loan Report ™ platform to be used
by Property agents, financial advisors as well as other Mortgage brokers to prepare reports for
their customers.
•Home Loan Report ™ - Enterprise allows a property agent’s website to immediately add a loan
section. Improve your Google Ranking, let’s viewers increase Time-on-site. Property or Finance
sites that deployed Home Loan Report ™ - Enterprise loan section sees viewers stay on their site
longer by between 30% to 350% after 4 to 8 weeks of installing the Embedded Loan Plugins.
What is iCompareLoan.com

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About Paul HO
•Paul holds an a B.Eng(Hons) Aberdeen University (UK) and a Masters of Business Administration
(MBA) from a Macquarie Graduate School of Business (MGSM) Australia and has distinctions in
finance and economics. He also serves as current President of Macquarie University Alumni
Association of Singapore and is former Hon-Sec of British Alumni.
•He is founder of www.iCompareLoan.com, his articles have been syndicated/featured on
STproperty, SRX, iProperty, BTInvest, TheEdgeProperty, Propwise, Propquest, Yahoo and
TheOnlineCitizen amongst many other sites. He has also been quoted in XinMin, Hk’s South China
Morning post.
•He has also given speeches, trainings and/or seminars at NUH Lunch time talk, iProperty, David
Poh and Associates, Propnex Commercial Elite, Getty Goh’s Ascendant Asset class, NTU (Guest
Lecture on SEO), Panel discussions at GPS Alliance, C&H, Skillup just to name a few.
•He is passionate about helping people enhance their wealth and in making money work harder
for them.
•Copyright © - www.iCompareLoan.com
About Paul Ho

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US Interest Rates and Ringgit outlook

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What do countries manage and why?
Managing the Holy Trinity
Free Capital Flow
Sovereign Monetary policy
(setting Interest rates,
printing money)
Free
Exchange Rates
Can only choose
Max 2 of 3

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Managing Interest Rate & Money Supply
Managing the Holy Trinity
Free Capital
Flow
A interest rate = 5%,
B SETS interest rate =
2%
Free
Exchange
Rates
AA
BB
AA
BB
BB AA
B lose capital
to A
BB
AA
B Currency
loses value
BB
AA
A Currency
Gains value

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Managing Exchange Rate
Managing the Holy Trinity
Free Capital
Flow
B interest rate DROPS
A interest rate rises
Managed
Exchange
Rates
AABB
AABB BB
AA
A loses capital
to B
BB AA
Managed appreciation of
B Against A currency
BB
AA
AA
BB

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Where is US interest rate heading?

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Source: TradingEconomics, iCompareLoan.com
US Interest Rate
Peak employment
High Interest rate Approaching Peak
Employment???
Rising Interest rate?

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Source: TradingEconomics, iCompareLoan.com
US Interest Rate
Federal Reserve Target Inflation 2%
Exceeds 2% target rate

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Source: CNBC, Getty Images
US Interest Rate

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Source: Worldbank, iCompareLoan.com
US Interest Rate
Does the US really care about foreign markets?
Does the US care about the rest of the world? A little, maybe.
Trade is only a small part of the US economy

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How does US manage its policy?
•Interest Rates & Money supply (M1, M2, M3) is used as a lever.
What Affects US interest rates?
•Inflation affects interest rates. FED targets an inflation rate of 2%.
•Fuller Employment is one of the contributing factors to inflation. (Domestic
consumption accounts for almost 70% of GDP).
Does the US really care about foreign markets?
•Maybe very little. The US probably care about the STOCK markets rout causing an
adverse effect on domestic economy.
US Interest rates

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Snapshot of the world’s economy

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Snapshot of the TOP 4 economies – Part 1
Snapshot of the world’s economy
Source: Worldbank, TradingEconomics, central bank of selected countries, iCompareLoan.com

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Snapshot of the TOP 4 economies – Part 2
Snapshot of the world’s economy
Source: Worldbank, TradingEconomics, central bank of selected countries, iCompareLoan.com

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Snapshot of Other selected Economies – Part 1
Snapshot of the world’s economy
Source: Worldbank, TradingEconomics, central bank of selected countries, iCompareLoan.com

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Snapshot of Other selected Economies – Part 2
Snapshot of the world’s economy
Source: Worldbank, TradingEconomics, central bank of selected countries, iCompareLoan.com

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Inflation in selected economies – Collated by Worldbank, iCompareLoan
Snapshot of the world’s economy
Source: Worldbank, iCompareLoan.com
Rising Inflation: US, Malaysia, HK, Philippines,
Cambodia
Decreasing Inflation: EU, Japan, China, Vietnam, SGP

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Snapshot of the world’s economy
Interest Rates in Selected Countries
Source: iEconomics, iCompareLoan.com

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Snapshot of the world’s economy
Debt-to-GDP ratio of selected economies
On a Macro basis, Malaysia’s
Debt is NOT that bad
Source: Worldbank, iCompareLoan.com

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Outlook for Ringgit and SGD

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What is Currency strength based on?
Outlook for Ringgit and SGP
ConfidenceConfidencePersonal
Safety
Personal
Safety
EconomicsEconomics
Legal
Framework
Legal
Framework
EnvironmentalEnvironmental
GDPGDP ReservesReserves
Technology and
Innovation
Technology and
Innovation
MilitaryMilitary
CultureCulture
Productive
capacity
Productive
capacity
Debt-to-
GDP
Debt-to-
GDP
BudgetBudget
Currency
Exchange
Currency
Exchange
Balance of
Trade
Balance of
Trade
Capital
Controls
Capital
Controls
Monetary policy
(Interest, supply)
Monetary policy
(Interest, supply)
Political and
governance
Political and
governance

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Malaysia - Areas of Concern – Orange, Positives – Green.
Outlook for Ringgit and SGP
ConfidenceConfidencePersonal
Safety
Personal
Safety
EconomicsEconomics
Legal
Framework
Legal
Framework
EnvironmentalEnvironmental
GDPGDP ReservesReserves
Technology and
Innovation
Technology and
Innovation
MilitaryMilitary
CultureCulture
Productive
capacity
Productive
capacity
Debt-to-
GDP
Debt-to-
GDP
BudgetBudget
Currency
Exchange
Currency
Exchange
Balance of
Trade
Balance of
Trade
Capital
Controls
Capital
Controls
Monetary policy
(Interest, supply)
Monetary policy
(Interest, supply)
Political and
governance
Political and
governance

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Low crude Oil prices will kill Malaysia?
Outlook for Ringgit and SGP
Source: Centre of International Development, Harvard
Malaysia’s Exports, 2014 Malaysia’s Imports, 2014
Low reliance on Crude Oil exports. Lower
revenues from Crude Oil offset by
Imports of Mineral Fuels, etc.
However, Lower Crude oil means lower
revenues from Petronas’ contribution to
revenues. (Impact on budget)

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High Household Debt a Concern
Outlook for Ringgit and SGP
Source: McKinsey Global Institute
>10% increase in household Debt,
~60% Increase in Prices.
10+% increase

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Malaysia’s Holy Trinity
Outlook for Ringgit and SGP
Monetary – Bank Negara
•Slight raise in interest to
mitigate funds outflow.
Exchange
Rates
No Capital ControlsRM weaken against
USD and SGD,
SGD weaken against USD
Source: Bank Negara, TradingEconomics
Source: Oanda
Exchange is done
On-shore
Stock market is one
Place where portfolio
Funds keep their
capital.
Source: FTSC KLSI, TradingEconomics
Susceptible to
SHORTING by
speculators, leading to
Exit of Ringgit.
Higher US Interest
Rate = Funds outflow

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Summary and key take-away

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Speculators – Hedge funds are Major Culprits
Summary and Key take-away
“The fixing of the ringgit against the US
dollar is currently done onshore through
a spot fixing mechanism monitored by
Bank Negara. The mechanism of fixing
the rate onshore or in the domestic
market removes certain elements of
arbitrage and speculation.” TheStar,
Suresh Ramanathan, 08 Aug 2015.
There is another mechanism to
speculate the Ringgit, offshore away
from Malaysia. This is the Non-
Deliverable Forward (NDF), which are
traded in Singapore, London and New
York. Currencies are deemed over-
valued or undervalued against the USD
using the implied NDF yield spread.
(TheStar, iCompareLoan)
“Bottom-line, it’s not the macro view ala top-down that affects the ringgit. It’s the
trading arbitrade in the currency that truly plays a significant role for the ringgit’s
current predicament.” (The Star, Suresh Ramanathan, 8 Aug, 2015)
In Short, it’s Speculation that is Hurting Malaysia, not fundamentals.

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Political instability is a wildcard. Take a 5 to 10 years outlook
•If Malaysia comes under intense speculative attacks, some form of capital controls
may be introduced. (Reference to 1997/1998) Be prepared to hold longer term.
•Malaysia has not become less competitive. Fundamentals have not changed yet.
•Malaysia has solid infrastructure and personal safety index is way higher than many
countries, despite the occasional robbery.
•Assets look relatively cheaper, though property prices are elevated.
•Investors can consider buying hard assets such as plantations, or farm land, selective
good properties.
•Can even invest in Malaysia or set up offices here.
Summary and Key take-away

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