Video: A Look at Malaysia’s Savings Retirement Crisis

This video from BBC (via world news) attempts to explain why Malaysians have little savings and are at risk from a ‘retirement crisis’

Interesting but poignant remarks from BBC reporter Jennifer Pak:

Cars are expensive here but Malaysians are enticed to buy them with cheap loans that last up to nine 9 years. It’s one of the reasons household debt is more than 80% of GDP one of the highest in Asia. So it is hard for Malaysians to save… (1:47)

Referring to the mushrooming luxury condos relative to the angst of the middle class;

Malaysia’s middle class can’t afford to plan for the future. For some just getting to tomorrow is hard enough (2:28)

Why Malaysians can’t save? In a word, inflationism—overspending financed by overborrowing from zerobound rates, not only by the private sector but also by government as revealed by sustained deficits and ballooning external debt where both actions has been manifested by soaring money supply that has led to price inflation in assets (housing and stock market) and the real economy (CPI) or the shrinkage of purchasing power.

Since inflationism destabilize prices then ‘planning for the future’ has become murky process whether seen from households to businesses.

I have explained lately that Malaysia’s bubbly housing markets have recently been materially slowing down—where if sustained this will have a feedback loop between credit risks and growth.  

And once the balance sheet ailment known as overleveraging unravels (or the invisible wealth redistribution diminishes), the good news is that Malaysians will be saving again.

The Malaysia’s currency the ringgit has lately been thrashed. 

The USD-Malaysian chart from yahoo reveals of a breakout to a four and a half year high this week from a rounded bottom formation.

Given Malaysia’s highly levered economy, a weak ringgit will hardly be supportive of Malaysia’s asset markets.

Malaysia’s equity benchmark the FTSE KLSE which had been largely unscathed in 2013 taper tantrum and had been the first to break record high among ASEAN peers.

Today the KLSE has now been struggling as shown by the chart from yahoo which exposes a potential bearish head and shoulder formation that paradoxically comes in the face of booming stock markets led by the US—a curious divergence.

Of course, Malaysia’s predicament and risks should not be seen in isolation as the same fundamental economic maladjustments plague the region and the world.

And history likewise shares to us the insight that the unwinding of imbalances by any country in Asia tends to have a shared dynamic.