In Malaysia, a classic credit, property bubble waiting to pop: Forbes

22
658

Over the past few years, many Malaysians have realised what business journal Forbes has now articulated: Malaysia’s economy, complete with high property prices, low interest rates, rising federal government and household indebtedness, shows all the signs of a classic credit and property bubble. When is it going to pop?

Siti Hajar Aladin’s letter to the PM in my earlier post is a cry from the people about their indebtedness and inability to keep up with the higher cost of living.

By now, most of us will be familiar with all the worrying trends and stastistics cited in this Forbes story.
Study the familiar charts in that story carefully.

The Forbes analyst makes an interesting observation:

Plans to build the tallest building in Southeast Asia, the 118-story Warisan Merkeka Tower, are a major Skyscraper Index red flag.

The Skyscraper Index theory suggests that many of the world’s tallest buildings were in the pipeline just before an economic slump; investments in such towers usually peaks when growth tapers off and the economy is poised to slump.

Still want to go ahead with those megalomaniacs’ Menara Warisan? This tower is classic Mahathirism, just as the Petronas Twin Towers were (on the eve of the East Asian Financial Crisis), and it could put Malaysia on the map for all the wrong reasons. (And now they are resurrecting another Mahathir administration mega project, that stupendous bridge to Sumatra.)

All this should indicate to us that Mahathir is back in the driving seat or his ideas are back in favour. But our elites have forgotten the East Asian Economic Crime in 1997 that spelt the beginning of the end of Mahathir’s grip on power. They have short memories, don’t they?

So when will the Malaysian bubble pop? Forbes says:

Malaysia’s bubble will most likely pop when China’s economic bubble pops and/or as global and local interest rates continue to rise, which are what caused the country’s credit and asset bubble in the first place. The resumption of the U.S. Federal Reserve’s QE taper plans may put pressure on Malaysia’s financial markets in the near future. Malaysia’s rapidly deteriorating current account surplus due to weaker exports is another worrisome development.

As I’ve been saying even before this summer’s EM panic, I expect the ultimate popping of the emerging markets bubble to cause another crisis that is similar to the 1997 Asian Financial Crisis, and there is a strong chance that it will be even worse this time due to the fact that more countries are involved (Latin America, China, and Africa), and because the global economy is in a far weaker state now than it was during the heady days of the late-1990s.

And, all the while the Najib administration milk (think of the cow-and-condo scandal!) the nations coffers for their mega projects and crony-driven feeding frenzies.

Fasten your seat-belts and pray to God (or whatever you prefer to call the Supreme Being!). We are going to need all the help we can get.

Do share your thoughts below.

Please help to support this blog if you can.

Read the commenting guidlelines for this blog.
Subscribe
Notify of
guest
22 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Andrew Ng

Property bubble in Malaysia narrated by Dr. Ernest Cheong. https://www.youtube.com/watch?v=WwC6ZEL8J3Y

grkumar

Whats referred o as the property bubble is in fact inflation in the property sector. It is typically driven by speculators as is the case in any “bubble”. For that the government must have in place strategies to combat speculative buying. Speculative buying and development often has at its foundation banking support. That too, irresponsible banking support in pursuit of the quick dollar. As long as you have a free market though, you will have speculators and bankers. It is endemic in such situations where a relatively small amount of capital can control a significantly large capital investment and asset… Read more »

Halimah binti Che Hassan

ISN’T RECESSION IS A GLOBAL THING WHICH AFFECT MANY COUNTRIES. THE MOST WISEST LIKE UNITED STATES AND CHINA ARE NOT SPARED. MALAYSIA IS A SMALL COUNTRY AND IS JUST ONE OF THE MANY COUNTRIES THAT WILL BE AFFECTED, WHOEVER IS THE RULER OF THE COUNTRY …AT LEAST AS LONG AS WE DEPEND ON BIG NATIONS AND US CURRENCY AS WORLD CURRENCY . FOR THIS DISCUSSION BETTER BE MORE ACADEMIC RATHER THAN POLITICAL

don anamalai

Malaysia’s denial that it faces an economic bubble that could burst if China’s economy stumbles will affect the Southeast Asian nation’s ability to detect problems and provide solutions, says financial analyst Jesse Colombo.

http://www.themalaysianinsider.com/malaysia/article/high-debt-rising-interest-rates-could-pop-malaysias-economic-bubble-says-an

Bing Chui seekers should take note of this:
“Car purchases and credit card debts are among the main reasons for bankruptcy in Malaysia. It’s the culture we live in. There’s a lot of emphasis on status and being ‘cool’ – but being cool costs money.”

abb

when the bubble burst, Malaysia will be free from umno parasites.
a new dawn awaits. so, there are blessings in disguise. without suffering, darkness prevails.

semuanya OK kot

Can we arrest Forbes for spreading rumours against Bolehland?

Yang

Its China investing openly in Penang.

Yang

Actually some of the m kutty projects are just idiotic and it is to starngle Singapore but in the end it was malaysia that got strangled. Take for example the Pasir Gudang port. Singapore reclaimed land on their sides and make ship harder to enter Pasir Gudang Airport. Then they give incentives to use the port and Singapore do likewise. Just like the Senai airport it fail. Then it tried to rebuilt the causeway but Singapore think otherwise and so Mudkutty meddle with the ideas of crooked bridge that failed and has to pay compensation up to a hundred millions.… Read more »

Batu Ferringhian

The highway that links Teluk Bahang/Batu Ferringhi to the “rest of the island” is something we need. Currently, it takes an ambulance between 45mins to an hour from Adventist to reach Batu Ferringhi.

The windy roads are not pedestrian/cyclist friendly. We need better roads here.

grkumarg

Your guess is as good as a mile. The world is interconnected. Economies are interconnected. If the US fails so too will most of the world. It has all happened before. Anyone making predictions about 5 years cycles are playing with themselves. We live in a cyclical economy which moves in cycles. Ups and downs.

Batu Ferringhian

you would think that governments would learn a thing or two from history but they don’t. it will happen, it’s a matter of time.

my guess is..maybe in the next 5 years

after which, pakatan (after forming the new government) will have a lot of cleaning up to do!

Proud of you too

Clean up means what? Clean up any remaining rainforest for fast-tracked condo projects? Or mega tunnels straight to China and Taiwan?

Proud of you

Still want to build Penang tunnels and highway?

grkumar

The Forbes index in this regard has about as much scientific relevance and credibility as the woman with an empty basket seen walking under a bridge before a famine theory. It is believable because one can connect the dots in any way one wishes to and to draw conclusions from it. The opposition and its followers like this blog have been espousing theories of doom and gloom long before the last election with dire consequences for their credibility. Many in the PKR camp have made claims to Malaysia being a “failed state like Zimbabwe”. yet John Kerry and Barack Obama… Read more »

Proud of you too

Excellent comment. Malaysia is still doing OK and BR1M 2014 is coming soon.

Club41 Oon

Those eliteputeras of UmnoBaru will support the argument of GRKumar.

Syahid

Like a typical MIC lapdog…

1hole

Investing in China, secretly or not, is still much much better than in India. In India, the rupee currency has fallen 15 percent against the dollar since the start of May, with a particularly sharp decline since the start of August. Investors have shed Indian government bonds, driving the nation’s 10-year interest rate up to around 9 percent, from just over 7 percent in May. A third of India’s big corporations are already busted or on the brink of insolvency, according to India’s Business Standard newspaper. And every point the rupee plunges makes their dollar debts that much more difficult… Read more »

grkumarg

The theme of this string is about Forbes comments about a classic property bubble. What on earth has it to do with investing in India? the Guan Eng government did not invest in India without open cabinet consent. But then again you must be an ethnic Chinese in Malaysia where everything is along racial lines.

Keep up wit your rants and keep missing the point. it augers well for others and the credibility of your argument.

najib manaukau

All the warlords from Umno are not in the least worried of the bursting of the bubble not to mention how they are able to come up with a plan to avoid it. As far as these morons are concerned they have stacked up more than enough for such an event. What do you think they were doing all these while and why do you think that the country’s coffer is in deficit ? Most of all why do you think there is a need for them to sell 30 billion ringgit bonds, needless to say the national coffer is… Read more »

Tan

They are still planning to build the longest bridge linking Malaysia & Indonesia. All these iconic projects will increase our national debts but greedy politicians don’t see it that way. They are blinded for the billions projects to enrich their appetite and pride at the expense of our economy. It is only when bitter lessons are learnt will they repent. By then perhaps it is already too late. Others had learnt their lessons and will soon reach our soil as warning bells had sounded.

Don Anamalai

MB Melaka said the bridge will help to export Proton cars to Sumatra.
I think it will ease the migration (legal or illegal) of Indons to Malaysia instead.