Given that we are still running a trade surplus, the reserves must have fallen due to capital flows.
Foreign investors had been leaving Malaysia. Data on the equity market is impossible to find, but debt market data shows foreign investors sold RM19.1bn of debt papers in Aug, accelerating from RM4.2bn in July. I’m sure the outflow continues, not helped by inflation at a 26-year high, the government saying the 2008 deficit will be worse at 4.8% (from 3.1% initially forecast) despite record high oil revenues and raising the 2009 budget deficit forecast to what many consider an optimistic 4.8% (previously 3.6%). Foreigners now hold just RM81.5bn of debt paper as at end Aug, down from RM100.6bn in July and the peak of RM126.5bn in April.
Perhaps locals too joined in the exodus. You would be worried if you could be arrested "for your own protection." The ringgit continued to plunge against the US$, down another 2.7% in Oct, after falling 7.3% in the 6 months ended Sept. Yes, it’s true investors have been exiting emerging markets generally, and the dollar is finding unexpected strength, but we are doing poorly even when compared to Thailand. Last month, a bank offered me 8.7 baht to the ringgit. I was shocked. Last year I got 10 baht. I had expected 11 or 12 baht this time because quite literally there was blood on the streets in Thailand.
What does this say for confidence in the ability of the Barisan Nasional government?