Category: Economics

Categories
Economics

[696] Of Proton to sell Lotus?

When I first heard that Proton was selling Agusta of Italy for €1, in my mind, it’s purely economics and it’s an acceptable immediate loss cutting step. Now, with this new cooperation with Volkswagen of Germany, it’s rumored that Proton might cut its ties with Lotus. For me, this is starting to go beyond economics. According to Business Times:

This was the second provision Proton made for the year after RM165 million set aside in the first quarter. “(The sale) may be a prelude to a tie-up with VW. The German carmaker may have stipulated the sell-off of loss-making non-core assets as a precondition to taking up a strategic stake in Proton,” Mayban Securities added.

The research house speculates that the next major non-core asset to be sold could be its Group Lotus plc unit, as it reckon VW has superior engineering expertise and experience in performance cars in the Lamborghini and Bugatti marques.

“Lotus would, therefore, be a duplication of resources. At this juncture, this view is purely speculative,” said the research house.

I first came across it here:

1316 [Dow Jones] STOCK CALL: Mayban Securities speculates Proton’s (5304.KU) sale of 57.8% Agusta stake “might be a prelude to a tie-up with Volkswagen”. Move also shows new Proton management prepared to bite bullet, make painful decisions so as to turn around Proton. Also speculates Proton may sell 100%-owned sports carmaker Lotus in run-up to VW tie-up. But admits, “at this juncture, this view is purely speculative.” Keeps Trading Buy call with MYR7 target price. Shares +2.4% at MYR6.30.(CAL)

I hope that Proton would hold on to Lotus. I hope, however the people inside Proton do the cost and benefit analysis, the result is that keeping Lotus brings on net benefit to Proton.

And if I weren’t an economics graduate, I would say, screw the German and keep Lotus.

Categories
Economics

[694] Of economic experiment: bartering

I’m kinda in a hurry. So, this will be a quickie.

My mom wanted to simply throw way this blender. It’s a little bit leaky down under.

Mohd Hafiz Noor Shams. Some rights reserved

I told her that she should recycle it but she said, it’s easier to simply throw it away. I, feeling guilty seeing that thing goes unrecycle, took it and am turning it into a little economic experiment . Bartering.

Inspired by one red paperclip, let’s see how a blander will do me good.

Here’s the deal: I want to do some bartering. If you for some reason that I don’t want to know, want or need to this blender, offer me something and if our wants or needs, mostly wants, coincide, we’ll trade. Simple. And no money please.

If you are interested, email me or simply leave behind a comment here. Aight?

Later.

Categories
Economics Science & technology

[692] Of Finance Ministry, lies, damn lies and statistics

Yesterday in the Malaysian Upper House, the Malaysian Finance Ministry Parliamentary Secretary was reported of saying that “ringgit is relatively stable compared with the currencies of Malaysia’s major trading partners after the government removed the ringgit peg on July 21.”

More:

Hilmi said that since the transition, where the ringgit exchange rate was determined by market forces, the local currency had risen compared with the euro by 11.9 percent, yen (9.7 percent) and between 0.2 percent to 7.7 percent compared with regional currencies.

“After the depeg and up to Nov 30, the ringgit has increased compared with the US dollar by 0.6 percent to RM3.7783,” he said in his reply to a question posed by Senator Datuk Seri Lam Kang Sang at the Dewan Negara sitting, here Tuesday.

Hilmi said that the ringgit also rose compared with the euro by 3.8 percent and yen by 6.7 percent and mixed against regional currencies.

The funny thing is, while what he said is true, somehow, I feel that he has conveniently omit what’s going on in December 2005. For this month, the ringgit is growing weaker against:

USD

Yahoo! Fair Use.

EUR

Yahoo! Fair Use.

JPY

Yahoo! Fair Use.

SGD

Yahoo! Fair Use.

United States, Japan and Singapore are the top three major Malaysian trading partners.

From the graphs, capital flight is apparent.

Earlier last month, I realized that Malaysia seems to have a negative real interest rate. Soon after, Bank Negara raised Malaysian nominal interest rate up to 3%. At 3%, I feel the real interest rate is still negative. Another rate hike is a must for Malaysia to have positive real interest rate given that inflation is above 3%. A positive real interest might stop and reverse this December’s run.

Unless the Bank Negara increases the rate and in turn, halts this gradual and minor capital outflow, I would hardly call ringgit as stable.

p/s – Chinese statisticians say: Whoops. We forgot to add USD280 billion into our 2004 GDP. With that corrected, we just want to say that we’re the sixth largest economy in the world.

Others: Ack! You forgot USD280 billion? (Malaysian estimated GDP for 2005 according to Wikipedia is USD290 billion)

pp/s – SuprNova.org, the site that I depended on many things fun before it was shut down, speaks.

Categories
Economics Environment Politics & government Science & technology

[691] Of worst floods, rice and climate change

Northern Malaysian states on the Malay Peninsula are suffering the worst flood in 30 years . It has been raining like crazy. Even in Kuala Lumpur, located hundreds of miles south, it’s been raining like cats and dogs. I’m surprised that the city hasn’t experience any flood.

The sky is starting to remind me of Ann Arbor; I could hardly see the sun everyday. Southern Thailand isn’t spared too. If borders are drawn with a huge pen, the floodwater would’ve erased them with ease. After all this, the weather still won’t relent.

The Weather Channel. Fair Use.

As you can see, it won’t end soon. Also, check out a current tropical storm that will hit Vietnam anytime soon today.The floodwater, among other things, affects rice harvest in Malaysia. Paddy fields are devastated by the overflowing water. This is especially bad considering that northeast Malaysian states are the main rice producers in Malaysia and that the fields are scheduled for harvest in this coming January. Looks like the rice industry will have to import more rice soon. I doubt local fields will be able to provide the share it usually offers to the market.

Worse, it isn’t just Malaysia that will suffer shortage of rice. Vietnam, which is one of the largest rice producers in Southeast Asia, suffers the same situation. Prices of rice in Southeast Asian markets should go up in the near future given that supply has been cut.

Digressing, price of chicken has gone up by 20 sen. Earlier, I had predicted a price decrease due to bird flu. Unfortunately, while playing around with the demand curve, I’d overlooked the supply function. The hike in chicken prices, ignoring inflation, could be due to the culling of chickens in Asia. With this flood, price could go up further, assuming demand curve is constant.

Though heavy raining this time of the year is typical in this part of the world, this year, the amount of rainfall is above average. Consider also the current situation in China and Japan – record breaking snowfall – and Vietnam – also record breaking rainfall. Finally, keep in mind that 2005 is, according to World Meteorological Organization, the second hottest year on reliable record.

Climate change? Too soon to ascertain but it’s good to keep the possibility in mind.

p/s – Kristof versus O’Reilly. Fight! This is the best yet since Bush versus Kerry.

Categories
Economics Politics & government Society

[690] Of Bolivia, coca and cocaine

Very soon, the Bush administration might have another source of headache. Bolivians have just elected a socialist and an ally of Venezuelan Chavez as President. Some have gone farther and declared that this is Washington’s nightmare.

Bolivia Elects a President Who Supports Coca Farming

By JUAN FORERO
Published: December 19, 2005

LA PAZ, Bolivia, Dec. 18 – Evo Morales, a candidate for president who has pledged to reverse a campaign financed by the United States to wipe out coca growing, scored a decisive victory in general elections in Bolivia on Sunday.

What interest me the most about Morales is that he’s a former coca farmer.

Coca could be processed into cocaine. During the US War on Drug, the US had aggressively conducted coca eradication in Bolivia. Coca eradication continues even today. But not for long it seems.

Furthermore, Morales’ party, Movement to Socialism – scary name by the way – has its origin as a coca interest group. Given the US hostility towards coca farming, it won’t take a rocket scientist to predict what Bolivia’s foreign policy will look like.

But what will happen to coca plantation? Will there be an expansion? If yes, would there be an increase of cocaine in the world market?

I think yes.

p/s – Boris tagged me but I’m being rather uncreative at the moment. But I’ve thought of one. I love old weird nationalistic songs. Currently, I can’t get Ca-na-da, a song popular in 1967 celebrating 100 years of confederation, out of my head. The song could be heard at Expo 67. Found it while looking for Malaysia Forever, another nationalistic song sung in 1963 in Malaysian Singapore if I’m not mistaken.

So, one down, four to go.