Friday, September 26, 2008

Malaysia's Foreign Direct Investment Down!!!

What is a Foreign Direct Investment or known as FDI?

According to Investopedia,

FDI is 'an investment abroad, usually where the company being invested in is controlled by the foreign corporation'.

According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2008 released today,

In 2007 , outflow increased by 81.9% to RM38 billion.

In 2006, outflow was RM20.89 billion. A difference of RM8.99 billion!

As for the inflow increased by only 39% to RM29.07 billion versus RM20.91 billion in 2006.

Let's do the maths, outflow = RM38 billion, inflow = RM29.07 billion. Negative flow/Deficit = RM8.93 billion!!

Among the Asean countries, Malaysia is the only country to record a negative flow.

The interesting but strange development is that, as a whole, countries in ASEAN are experiencing highest ever FDI inflow - which jumped 81.1% to RM209.2 billion in 2007 from RM115.5 billion in 2006.

Did Malaysia miss the boat? In times when South East Asia is having high FDI inflows, Malaysia is looking at the reverse trend.

The government is not doing enough to attract foerign investors? or the investors are shying away?

Wednesday, September 24, 2008

World Oil Prices & Financial Markets

This is an update from CNNMoney

NEW YORK ( -- Oil prices fell Tuesday as investors wait for more developments concerning the government's proposed $700 billion bailout plan and the day after a record one-day surge.

Oil slipped $2.15 to $107.22 a barrel, after having traded as low as $106.07. The November contract, which as of Tuesday became the front-month contract, settled up $6.62 to $109.37 on Monday.

$700 billion bailout: On Saturday, President Bush asked Congress for the authority to spend as much as $700 billion to purchase debt from already struggling financial institutions in an effort to prevent the credit crisis from crippling the Wall Street.

Investors had hoped that the bailout plan would put the nation's economy on the fast track to recovery, helping demand for energy tick higher as well.

However, the unprecedented scope of the plan in combination with a lack of details as to how the plan will actually work left the stock market anxious on Monday, and the Dow ended the day 373 points lower. The oil market was hesitant on Tuesday as well, waiting for further information.

After the spike: The November contract's substantial $6 gain on Monday was overshadowed by the historic $16 surge in the October contract. Monday was the last day that the October contract was the front-month contract, and oil posted the largest one-day gain in dollar terms ever, settling up $16.37 at $120.92 a barrel.

Oil had risen as much as $25 to touch $130 a barrel. The late-session spike was due to investors having to make good on their orders before the October contract expired.

The $6.62 increase in the November contract Monday would be considered a substantial move, except for its comparison with the unprecedented move in the October contract.


1. What is the highest price the oil has risen to?

2. Do you think that there is a connection between oil price and the current financial rescue plan by the US government?

Sunday, September 21, 2008

Global Economic Uncertainty

With the recent financial turmoils affecting two large US companies namely Lehman Brothers and American International Group (AIG), the world economy is heading towards an economic uncertainty on a global scale.
The downturn in the U.S. economy has already affected industries and economies worldwide. If the U.S. economy enters a recession, what will the likely impacts be and how will these changes affect your business and markets?

We learn about Aggregate Demand and Aggregate Supply, how would these latest developments shift the curves?

Household consumption will fall amidst the negative expectation of the economy next year.
Firms will cut down the expansion plans, planned investment falls as a result Aggregate Demand of the economy shifts to the left.

How would this affect our Malaysian economy?

Saturday, September 06, 2008

Cavenzi Furniture's Basic Economic Problem

If we mentioned Designer Furniture, we would think that it will be expensive!

However, this company caters its market for the middle class buyers by charging reasonable prices. Like the basic economic problem of "For whom it is produced", the company is targeting a particular group of customers- MIDDLE CLASS!!

This is reported in the Star Online today

Cavenzi is a homegrown brand by Cavenzi Design Sdn Bhd that fits this profile.

The company, which started exporting furniture 21 years ago, today has 43 retail outlets nationwide and, according to superboss Allan Ho, what makes the company tick is that it provides designer furniture at affordable prices.

“We let our prices do the talking so that now everybody can have designer furniture,” he told StarBiz.

Cavenzi sofa set

The company sells sofas, mattresses, armchairs, “everyday furniture” such as bedroom and dining sets, and even room dividers.

“We cater to the middle and low-end market and provide good value,” he said.

Budget Deficit

Budget was announced last week. One of the interesting feature is that Malaysia is suffering from a budget deficit. The government spending is larger than the tax revenue collected. The deficit accounts for 3.2% to 4.8% of the country's GDP.

What are the impacts resulting from the deficit?

1) Government would have to use its reserves to finance the deficit
2) Greater accumulation of government debts if the deficit is financed by foreign funds
3) Depreciation of RM against major currencies

It is reported here in the local online newspaper

The ringgit extended declines against the US dollar yesterday, whacked by a bigger-than-expected budget deficit unveiled by the Government last week.

Some analysts have raised concerns that the falling crude oil price will add pressure to the economy, as Malaysia will earn less from lower oil export prices.

The ringgit was last traded at 3.4264 against the US dollar yesterday, the worst level since late September last year. The market was closed on Monday for the National Day holiday.

The US dollar advanced against almost all Asian currencies yesterday, Bloomberg data showed.

Friday, August 15, 2008

Taxi Drivers on Strike

Read this article from Washington Post

Washington cabdrivers upset about the switch from zones to meters yesterday launched the first in what might be a series of weekly strikes aimed at getting the attention of Mayor Adrian M. Fenty and the riding public.

The 7 a.m. to 7 p.m. strike left some early-morning passengers waiting outside Union Station and caused others to rethink their transportation plans. But hotels met the challenge with fleets of limousines and other hired cars, and officials reported that the strike caused few disruptions citywide. It was unclear how many drivers participated.

Some drivers demanded double the price of a taxi ride or more, leading to cross words from some people who refused to pay.

Thoughts and Questions

Now, how does that affect the supply of taxi services in the city of Washington D.C?

Will the supply curve shift? or will there be a movement along the supply curve?

Thursday, August 07, 2008