CIMB’s Nazir says stock market won’t crash

Nazir Razak says not only are Malaysia’s reserves strong, the banks are also on a sound footing, having learnt lessons from the 1987 financial crisis.

KUALA LUMPUR: CIMB Group Holdings Bhd chairman Nazir Razak does not expect the stock market to crash, despite some ongoing turmoil in the global market.

This was because Malaysia’s reserves are strong and local banks’ balance sheets are robust, he told The Edge Weekly in an interview.

The Dow Jones Industrial Average recently tumbled 500 points in intraday trading, leading to a selldown on most Asian markets.

Asked if he had any concern about the 10-year stock market cycle crash in Asean, Nazir said: “I think we need to remember that we learnt very hard lessons from the 1997 Asian financial crisis.

“You look at our nation’s reserves and the balance sheets of the banks now — they are much stronger and pretty robust actually.

“You know with crises, they never come exactly the same way. But at the core of it are the banks. Can they withstand big losses, volatility and so on?

“And I think today, Asean banks are extremely strong.”

He said he did not know why every 10 years, people felt that the market would crash.

“If you look at the data today, this normalisation of interest rates … we’re still at the early phase of it.

“If you look at the US long bond yields and CDS (credit default swap) spreads, they suggest that the markets have not properly adjusted to what’s coming with interest rates.

“So, as markets adjust, my only worry is that there could be people who are unprepared or some things that could be disrupted because of a misreading of where rates are going to go. But I don’t see a crash.”

On how the normalisation of interest rates, after a long period of low interest rate, would affect Malaysia’s debt market, he said: “Higher rates will have consequences for how you discount future earnings.

“So today, for instance, if markets are really misreading the rate at which interest rates will increase, they could be too bullish, right?

“Then, when the cost of money is not so cheap any more, it may not be so easy for fintechs to raise money as they used to. So, things will change.

“You know when the cost of money is zero, people tend to throw money around.”

Some countries, for instance, had negative interest rates and they would have been happy to give their money to businesses.

“But now they say, ‘Actually I can just keep my money passive and get a good yield’,” he added.

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