This Week at a Glance…

i) MIDF: Ringgit to appreciate to RM4.30 by year end - The research firm foresees no further rate hikes by the US Federal Reserve in November and December.

ii) What income is enough in Malaysia - EPF’s Belanjawanku study estimates that RM2,600 per month is the minimum required to live a sustainable and meaningful life.

iii) Thinking Clearly - Understanding the different types of biases and fallacies that are negatively affecting your finances.

Scroll down to read the details.

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Better Times for the Ringgit Ahead?

MIDF Research expects the ringgit to strengthen in the coming weeks, with a year-end target of RM4.30 against the US dollar.

The research firm also foresees a strong recovery in the Malaysian market, as the FBMKLCI has been trading in undervalued territory.

If realized, the local equity market could see an 8.45% upside in the next few weeks, while the ringgit will jump 10% from RM4.724 to RM4.30.

MIDF believes that the Fed’s aggressive rate hikes, which have been the main driver to the dollar’s strength, are nearing an end.

“We also expect the BNM to not raise the OPR from its current level of 3.00%,” it stated.

Hence, the policy rate differential (or difference of interest rates) between the US and Malaysia is unlikely to widen further.

The ringgit is also in a good position strengthen due to the resilient domestic economy and improving trade from elevated commodity prices (crude petroleum, LNG, and palm oil).

The stronger ringgit is expected to attract foreign inflows into the local equity market. MIDF believes that this correlation will lead to a positive momentum in the FBMKLCI by the end of year.

But is it too optimistic?

Hann Liew, the founder and ex-CEO of RinggitPlus, says this is entirely possible.

“Not saying it will happen, but I think if you look at the last 12-15 months you will see 3 separate occasions where a 10% move in USDMYR has occurred within 1 quarter or so,” he explained.

Rolling back the USDMYR chart, you’ll see that this is indeed true.

In November last year, the ringgit gained over 10% against the greenback in less than a quarter.

Coincidentally, the beginning of the rally was when Anwar got elected, leading fans to believe that it is due to the "Anwar" effect.

It’s not to say that MIDF’s prediction is likely, but optimism and pessimism aside, this movement has clearly occurred a few times in the past.

What Income is Enough in Malaysia?

According to the Belanjawanku study supported by EPF, single people in the Klang Valley require at least RM2,600 per month to live a sustainable and meaningful life.

If you’re a public transport user, the monthly expenses fall to RM1,930, with housing and food making up a large part of your spending.

Different regions, different incomes.

The table below is a breakdown of the minimum expenses projected by the study for people living in different regions.

Alor Setar is the cheapest city to live in, requiring only RM1,530 per month for public transport users.

Are the numbers really sufficient to live with?

No.

Obviously, living in KL with RM2,600 these days is not nearly enough, so the numbers should be taken with a grain of salt.

When looking at specific categories, the study indicates that single people spend only RM370 per month to rent a room. Where in KL can you find a room at such a price?

Even if we assume that these figures are sufficient, we run into another problem: Malaysia’s wage crisis.

According to DOSM, the median salary of formal employees was RM2,600 as of March.

This means that 50% of the population earned more than RM2.6k, while the remaining 50% earned less.

82% of workers have a salary of less than RM5,000, while a staggering 35% of the population earn less than RM2,000.

This highlights the dire state of Malaysia’s wage crisis and the urgent need to implement a progressive wage system.

Think Clearer by understanding Financial Fallacies and Biases

Here are a few types of mental mistakes that are negatively affecting your finances:

i) Hindsight Bias

Predicting the outcome of an event after the event itself. Known as the “I told you so” phenomenon.

• A spectator claiming, “I knew they were going to win!” after the game was over.

• An investor thinking, “I knew that stock was going to go up!” after the stock had already increased in value.

Lesson: The future (especially markets) is often unpredictable.

No one knows an outcome’s certainty until it happens. Keep track of predictions made by others, but always take them with a grain of salt.

Do your own research, and never tell anyone, “I told you so.”

ii) Sunk-Cost Fallacy

The tendency to continue investing in something because of the resources invested, even if the purpose is a lost cause.

• An overworked accountant telling herself, “I’ve been staying with this company for almost a year! Let me stay a bit longer. Things will get better.”

• An investor thinking, “I’ve lost so much money with this stock. I can’t sell now.”

• A person in a toxic relationship thinking, “I’ve been with him for three years. If I breakup with him, I will waste everything.”

Lesson: There are good reasons to continue investing in something. But don’t don’t let the resources or time invested become the reason to carry on.

When you see the ship sinking, jump. Don’t sink with it.

iii) Liking Bias

Helping or agreeing with someone because you like them. You ignore faults and comply with the wishes of these people, including strangers like salespersons.

• Nadia listens to her best friend Sofia and invests in ScamFx, because Sofia says her entire family has invested in it.

• Buying a shampoo at 2-3 times the original cost from a friend to “help” them.

Lesson: Judge a product objectively, regardless of who is selling it, be it a close friend or family.

Remove the salespeople from your mind, or better yet, pretend you don’t like them.

iv) Gambler’s Fallacy

You believe that there is a self-correcting force in the universe, that a random event is less or more likely to happen based on the outcome of previous events.

• Flipping a coin heads 10 times a row and betting on the next flip being tails.

• If stocks have been going up for a week, then they will probably go up next week as well.

Lesson: Random events that are independent from one another can’t influence the outcome of the next event.

There’s no self-correcting force. Luck is luck.

*I posted about these fallacies and biases recently in Instagram. Refer here to read more:

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice. The opinions of this newsletter are solely that of the publisher.

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