About sunny.side.up

(Almost) daily cuppa of film photography, travelling muses, arts, music. etcetera etcetera etcetera

Japan again

I don’t know what is with Japan that keeps me coming back.


This was taken in April 2017. During cherry blossom festival @ Tokyo.




The State of the Economy, Post 2Q2016

Investments, be it bond, equity, multi-assets in foreign countries are exposed to special risks, including currency fluctuations, economic instability and political developments. In certain economies, however, the heightened risks are due to limited number of players in the market, lesser liquidity and lack of business or economic frameworks to support the market. Acknowledging that the investments are susceptible to these risks and uncertainties, therefore it is important to be aware of the happenings in the world.


No one has thought that Brexit would actually happened came morning of 23rd June, but happened it did. Now it’s the time for Britons to wake up and face the consequences.

Post Brexit we could see switching activities happening in the fixed income market, where investors sold their Euro/UK sovereign holdings and went down the credit curve hunting for EM bonds. This activity has indicated investors reaction towards uncertainties in the market and their search for higher yield but relatively safe investments. EM economies have fared better than 2015 due to slight rebound in commodities’ prices, currencies strengthening, and better economics numbers. Post Brexit we could also see that EM had experienced minimal volatility, signalling that the EM economies are sheltered from the downside risks imminent in the Eurozone and have thus far performing more in line with their economic fundamentals.

This is important, especially after disappointing returns since 2013, the investors are pondering the possibilities that the market is set for better EM returns over the next few years.

UK, with its stagnant economics, currently runs the highest current account deficits in the developed world. Now that there’s no turning back for UK, we could anticipate a breakup in the country via Scottish and Irish referenda. Market believes that there is a higher chance for BoE to further cut rates and ECB to extend its QE this year.

Question is, will there be a EU breakup?

Failed coup d’état

There was an attempt of coup in Turkey on 15th July and it has been thwarted and the Turkish government has had full control of the situation on Saturday. That said coup was not the first to Turkey as there have been multiple coup attempts in the past 60 years

As for sovereign risk, the event has sparked more downside risks to the government bond and credit ratings. The rating agency, Moody’s, will have its Turkish rating review on the 5th August, in which if they decide on a downgrade, it would then push the sovereign rating to junk, from the current Baa3/Negative. Both S&P and Fitch rated Turkey as BB+/Stable and BBB-/Stable.

Finally, a cut!

On the domestic front, there was an overnight policy rate cut, a first since July 2014. It was during the monetary policy committee meeting held on 13th July where the new central bank governor has decided to cut benchmark policy rate by 25bps to 3.00%. The cut happened post Brexit, where it was likely that the central bank took advantage from the delay in the Feds interest rate normalization policy.

However, this cut also came as a surprise for many, as economists predicted the cut to materialise in September or later, due to minimal forward guidance to indicate that such a hike was imminent.

Major indicative reasons for the cut; subdued inflation where it gives policy room for loosening, downtrend in consumer and business confidence as well as low and stable inflation in the environment of low global energy and commodity prices. Immediate impact post OPR cut could be seen on sovereign bond where the mid to long tenor had seen the biggest yield drop, resulted in bullish flattening of the yield curve. However the impact was not large per se, as the market has earlier priced in the possibility of rate cut, where yields have fallen by 30-60bps across the curve ytd. Ensuing this, the corporate bond’s behaviour may follow the fall in government bond yields.

Overall, adjustment to the OPR level is intended for the degree of monetary accommodativeness. After all, neighbouring countries in the region are also cutting the interest rates. Interesting thing to note that contrary to textbook theory, MYR has strengthened post cut. The reason could be due to inflows of foreign investments (mainly in the mid tenure of MGS) as the market is anticipating for further cuts in the following months.


Potential amidst slowdown

This is a classic case of a country that gains from another one that’s losing.

India has now become the investor’s emerging market darling, given the slowdown in the country’s closest competitor, China. Both countries form parts of BRIC grouping, that is Brazil, Russia, India and China. Given the slowdown and political risks permeating Brazil and Russia, the investors have shifted their investment focus to the remaining 2 countries. However, China has been experiencing economic slowdown, aided by reduction in demand as well as production growth, India seems likely as the next investment destination. For once, due to the plunge of oil price, India’s inflation has slowed and current account deficit has narrowed. India’s economic growth is outpacing that of all other large nations at around 7.5%. Meanwhile, the other members of BRIC have all lost momentum.

Half of India’s massive 1.25 billion population is 25 and under, implying a robust future workforce. According to IMF, Indian economy expands by 7.5%, beating China since 1999. It is also predicted that by 2030, its labor force may increase to 300 million, equal to countries like Germany, Spain, Italy and French combined.

The growth and development in India are largely dependent on president Narendra Modi’s vision, where he’s paving the way for growth by allowing foreign investment in railways and has also raised the limit for foreign ownership in defense and insurance industries. He’s also fond for telling the investors, “a red carpet, not red tape” awaits them.

demokrasi terpimpin

Soe Hok Gie, karakter dari filem Gie, lakonan Nicholas Saputra ada mengutarakan konsep demokrasi terpimpin, di mana filem itu menyerlahkan Gie, seorang demonstran, sebagai lancang mengkritik ideologi politik ini yang pertama kalinya diperkenalkan oleh bapak Presiden Sukarno. Menurutnya demokrasi terpimpin adalah sebagai topeng untuk menindas golongan bawahan, iaitu berdasarkan elemen autocracy di dalam konsep tersebut. Pada amatannya, sistem ini telah menggagalkan masyarakat, di mana rakyat hidup semakin melarat dengan kenaikan harga barang dan juga bahan api. Perlu diingat zaman Soe Hok Gie ini merupakan zaman parti komunis berleluasa di Indonesia.

He was famously quoted to say this about his teacher who failed him,  “Guru model begituan, yang tidak tahan dikritik boleh masuk keranjang sampah. Guru bukan dewa dan selalu benar. Dan murid bukan kerbau”.

I can resonate this statement with a number of situations. Especially where teachers who think they are right all the time and leave no room for constructive arguments/discussions. I can’t recall how many times I was shunned by the teachers for voicing out, disagreeing and at times even just by asking questions. But more on this in a separate post.

Berbalik kepada konsep demokrasi terpimpin. Coming across this concept has brought my memories back to this one time in Bali in September 2014 where I had the chance to befriend a local Balinese surfer. I asked him about the local projects being developed in Jakarta, including the MRT line. Told him that it’s good that Indonesians will soon be able to commute using rapid trains. His short reply was, korupsi semua itu.

Not that his opinion is profoundly mattered, knowing him, doubt that he reads or understands economic needs and nature of a country. But still, its interesting that he thinks of every development projects in Jakarta is corrupted.

Which brings to my next point, nationalism. Where art thou?

Mahasiswa yang terdahulu, baik dari negara Indonesia mahupun Malaysia, berjuang atas semangat nasionalisme, iaitu sayangkan negara. Masyarakat ketika itu sering berfikiran kritis dan radikal. Tindak tanduk perjuangan sering berlandaskan semangat cintakan negara, yang well at that time Indonesia and Malaysia were infested with communism.

Bagi aku kita perlu punya rasa takut, yakni takut akan hilangnya nilai perjuangan untuk mengangkat masyarakat dan negara kepada keadaan yang lebih baik. Apa yang aku elakkan ialah manusia sekeliling yang berfikiran jumud, for them are lazy dan selalu mengikut sahaja.

Masalahnya sekarang rakyat semakin kritis, sering mempersoalkan dan mengutuk tindak tanduk kerajaan / pemimpin. Namun atas dasar apa? Patriotisme atau sebaliknya? Jika dilihat apa sahaja tindakan kerajaan akan dikritik sepenuhnya oleh rakyat yang pada pengamatan aku tidak faham / malas untuk memahami dasar-dasar, terutamanya dasar ekonomi negara.

Early 2016 Market Update

The time has finally come for certain countries to adopt negative interest rate policy, moving further from zero interest rate policy. Japan has on 29 Jan announced a surprise deposit rate cut to negative, resulting in a benchmark rate of -0.1%. Initially this policy serves as an effort to weaken the yen in order to stimulate an investment shift to other asset classes. The JGB yields have fallen, which was expected as a result from the cut. However instead of weakening the yen, the currency rallied against USD, citing an impact from global slowdown and weak growth in China. BoJ still persistence in further cutting the interest rates as long as it is necessary to achieve an inflation target of 2%.

For central banks in the Eu and Japan, after years of ultra low and even negative rates as of now, its still unclear whether further easing is actually helpful to the economy.

China on the other hand, has eliminated quotas for foreign institutional investors in a bid to encourage local currency bond buying. This is considered as part of major deregulation process by the chinese government. At about USD 6 trillion, China bond market is the third largest in the world, but foreign investors only hold about 2% of the market. Opening of the bond market is also aligned with the PBoC’s effort to encourage Chinese companies to finance themselves in the local corporate bond market, where in turns to be less relying on China shadow banking system.

Besides that, PBoC has cut its reserve requirement by 50bps as to support growth. Malaysia’s central bank has also cut the statutory reserve requirement of 50bps to 3.5%, in an effort to stimulate liquidity in the market.

Rating downgrades for several countries, particularly Brazil, Bahrain, Oman, Saudi and Kazakhstan. Major reason cited by the rating agencies, among others, is the concern over the impact of extended low oil prices on the countries’ finances. Other than that, several commodity-related issuances also faced rating downgrades, particularly due to reason of high gearing level and also deteriorating cash flow debt protection level by the issuers.

From this, we predict for a sub trend global growth as our base case, low global GDP and inflation level, further slowdown in China and weak commodity prices. We havent seen the bottom of crude oil price yet. With the Iranian sanction being lifted-off, oil could depreciate further as supply increases.

sluggish times ahead?

The US Fed had its first rate hike in almost a decade in Dec 2015, which appears to be tightening very late into the economic cycle and amidst declining corporate earnings in the US. With strong Dollar and subdued inflation currently permeating the economy, it seems that now is the year of policy divergence, i.e the US is tightening while the rest of the world easing.

In contrast, ECB continues to enhance its QE program and Japan struggles to grow out of deflation. The regions currently are operating in a negative interest rate environment.

Commodity slump affecting emerging market economies, along with capital outflow, tightening liquidity and weak currencies. These factors ascertaining a challenging 2016 for Asian emerging market economies, particularly the countries that have built the economies to serve China commodities demand.

Asia GDP growth will continue to decelerate in 2016 as a result of high debt, excess industrial capacity and poor external demand. In some Asian countries, the debt levels have reached more than 150% of GDP. Japan for instance, its debt level has now reached near 400% of its GDP. Malaysia’s debt is now over 200% of GDP and surprisingly Indonesia is below 100% level.

Interesting updates have emerged beginning of 2016, where Malaysia’s central bank has cut the statutory reserve requirements (SRR) from 4% to 3.50%, as an effort to increase liquidity in the market and also serves as a credit creation measure. The market now anticipates further cuts throughout 2016, with a probable OPR cut towards the end of 2016. As of December 2015 the foreign holdings of the govt bonds including the t-bills was around 46%..

In an effort to pump money into the market, Japan BoJ has also cut its interest rate. In which it turns out to be a good news for emerging market economies, whereby investors could be seen shifting to EM in searching for higher yields. EM countries, particularly Indonesia, India and Mexico are leading in terms of foreign inflows in their government bonds so far in 2016. In Indonesia, the majority of foreign inflows occurred after Bank Indonesia reduced policy rates by 25bp in January 2016.

2016, as everyone predicts, will be another year of sluggish growth for the global economy as well as volatility in the bond market.

looking back to look forward

by the grace of the almighty god, i am still alive and got through the year 2015. healthy, alhamdulillah, with minor demam batuk flu asthma sikit-sikit tu normal la. major grateful there wasn’t any incidents like in 2014, terkoyak lutut, viral fever, etc. and no major bruises and heartaches like the years before that.

grateful i was able to change my job, albeit entering the industry in a poor market condition. a bit depressing juga, when your income target is far fetched. with 2016 looking very much dim as it was in 2015 (where brent crude oil has recently dipped below $30 level )..signs of hope went down the drain already. but, persevere we must. still, i am glad that i am no longer with that investment bank.

met people and lost some along the way. its part of life, i think. i have reached the age & the maturitylevel where I could no longer tolerate selfishness, especially from certain people, who only used u for i dont know..share her sorrows, provide shelters, etc.

dimwit men. i have met and ditched few of this kind. the kind of men that I initially tolerated cause i was trying to be nice. but after some time, i could no longer withstand their ‘stupidity’, if i could put it that way. there was this guy who had never been out of the country and could only sparsely converse in english. so tell me, how can i have a decent conversation about say, economics or other matters like movies, art, history, music, places of the world, etc with a close minded people like that? so painful i tell ya. melayu ni tau nak get high all the time saja. outcome, apa pun takda.

anyways, i’m hoping for a 2016 where the volatility is curbed, commodity price stabilised, higher country’s GDP growth, and market that are vibrant and prosperous. and mostly, for everyone to withstand all the possibilities.


the hyped-up 2016 movies

2016 will bring an influx of films that are based on the rather usual idea of good vs evil, superheroes vs villains etc. on top of that, the storylines will feature…gasp! what else? More explosions, cities destruction, mean machines, etc etc. Such refreshing ideas.

And when the Hollywood couldn’t think of new superhero ideas, they would then just combined 2 superheroes and make them fight and destroy each other, all in one film! How brilliant!

Thing is, I never was and never will be a fan of those hyped up superhero movies. There’s nothing wrong, though, in those exaggerated out of this world kind of movies..its just that these movies lack originality and meaningful storylines.

Still, there is The Revenant, which will be out in a week’s time. It has Leo in it and its based on true events. I know for sure this will be good.





Driving forces behind EM currencies

Much has been talked about the Malaysian Ringgit downward movement against the US Dollar. As to date MYR is the worst performing currency against USD in the Emerging Market (EM) space, comprising of countries in the regions of LATAM, Asia (Malaysia included) and MENA,

Therefore to understand such currency behaviour, I’d gather few notes hoping that’ll be able to clear the confusion on this

One reason explaining why EM currencies behaving dismally versus the USD is due to not a single EM central bank has engaged in quantitative easing (QE) practices, as done by other developed central banks, like the US, Europe and Japan. Similarly not a single developed central bank has bought EM assets as part of their QE programmes.Thus, EM assets along with their currencies, have in effect suffered in a state of benign neglect. Apart from that sentiment also mirrors the destination of QE flows, where the EM countries have experienced a slowdown in their share of financial flows – even outflows in some cases.

The strong USD has also pushed down commodity prices, which has benefitted the majority of EM countries, sans Malaysia, being an oil exporting country. However, in a market that rarely distinguishes between EM countries and tends to focus on the negative stories, even the lower commodity prices have reinforced the EM scepticism. USD rally was predicted based on the view that the US economy would grow faster and that the Fed would hike sooner than the other developed countries. Market has been expecting the hike since beginning of the year. However now the USD has became so strong that, at the margin, it is impending growth and influencing Fed policy in a dovish direction. When the Fed failed to hike the rate in September, of which citing the reason of slowdown in external markets, the USD has become the victim of its own success.

The reason as to why we haven’t seen a rally in EM currencies is due to no serious outright downward pressure on USD; where there is absent in US inflation and also due to volatility of EM FX.

Some positive news for EM currencies..

Firstly, EM currencies are cheap after four years of unrelenting depreciation. Secondly, if the USD now flat-lines, the expected annual depreciation of EM currencies will also be less, probably closer to zero per year than -10% per year of the past few years. Having said that, 2016 is still expected to be benign for EM currencies and bond market, where it is only forecasted to rebound in the year 2017 onwards.