FTSE Russsell, the likes are just playing god

Malaysia has been given a 6-month respite to make a ‘Houdini’ and escape the watchlist before the next review

pic by TMR FILE

THE country was on the edge last Friday while waiting for a key financial announcement. It was almost like a husband who is waiting for his first born child in the delivery room with the wife who is screaming “don’t tell me you know how painful it is”. The announcement did arrive in the wee hours of the local time.

FTSE Russell retained Malaysian bonds on the World Government Bond Index (WGBI), but by the skin of our teeth. Malaysia failed to escape the watchlist of the flagship government bond index with a possible exclusion that continues to cast a dark cloud on the nation.

Malaysia has been given a six-month respite to make a “Houdini” and escape the watchlist before the next review. Malaysia has been listed in the WGBI since 2004.

China, the world’s second-largest economy also failed to win inclusion into the globally referred “A list for bonds”. It is now jumbled together with Malaysia in the watchlist.

It is all but extraordinary that China with the world’s largest foreignexchange reserves of US$3.11 trillion (RM13.02 trillion) has failed to be included into the index.

This is a country with so much cash reserves that it can buy a few poor countries and is left with some spare to even buy FTSE Russell.

FTSE Russell downgraded Malaysia into the watchlist six months ago over the accessibility of the country’s fixed income market.

The exclusion of Malaysia’s bonds from the index announcement was a major concern for the government. A drop from the list will spell disaster as billions of capital could again escape the country.

Capital worth billions of ringgit had already exited Malaysia when the country was put on the “surveillance” list. The ringgit had also suffered due to the capital flight.

Malaysia had introduced several initiatives to boost market accessibility, enhance liquidity and deepen the country’s onshore market since the April downgrade.

But it seems people at FTSE Russell were less than impressed with those initiatives and are demanding more.

The likelihood is FTSE Rusell and their highly skilled economists have a chip on their shoulders over the hedging of bond holdings or certain Malaysian policies that run contrary to their “belief” of free capital flow.

The standards organisations like FTSE slapped on governments are based on their understanding and accepted norms of global economics.

While they preach of global acceptance, anyone with a brain the size of a peanut can tell you it is all about maximum profit for their Western investors.

The creation of listings like the WGBI is solely to give credence that Western standards are the global norms. Likewise to make organisations like FTSE Russell relevant.

Capital flows, as we know it, are in the trillions. It is all about maximum profit. It is not about how small countries have to grapple during downturns, the protection of a nation’s bonds and equity markets, the shields to protect the nation against turbulences during a capital flight nor the thousands of jobs lost during an equity exodus.

A few months ago, Moody’s Investors Service downgraded Petroliam Nasional Bhd’s (Petronas) domestic issuer and foreign currency senior unsecured ratings to A2 from A1. The downgrade was due to the fact that the government owns the energy firm.

But the analyst must have missed the financial line about Petronas’ having RM150 billion in cash and cash equivalent in the audited results.

Agencies like FTSE Russell, Moody’s, S&P 500 Index, etc are just people in nice suits, working in some corner offices in some financial districts, crunching their formulas to make a profit and living on commissions.

At the same time, they are trying to play God. But God they are not. If anything they are just Excel experts in expensive suits. That is freedom of speech.

Mohamad Azlan Jaafar is the editor-in-chief of The Malaysian Reserve.