M'sia has strong fundamentals, ringgit undervalued: committee
This is particularly true as Malaysia’s economic fundamentals continue to be strong and the economic prospects are positive, it said.
The FMC was established by Bank Negara Malaysia (BNM) in May 2016 and comprises representatives from the central bank, financial institutions, corporations, financial service providers, and other institutions which have prominent roles or participation in the financial markets.
The committee convened today to...
Amid the continuing depreciation of the ringgit, the Financial Markets Committee (FMC) concurred that the current level of the ringgit is deemed undervalued.
This is particularly true as Malaysia’s economic fundamentals continue to be strong and the economic prospects are positive, it said.
The FMC was established by Bank Negara Malaysia (BNM) in May 2016 and comprises representatives from the central bank, financial institutions, corporations, financial service providers, and other institutions which have prominent roles or participation in the financial markets.
The committee convened today to discuss recent developments in the ringgit foreign exchange market.
In a statement later, the FMC welcomed Finance Minister II Amir Hamzah Azizan’s statement on the ringgit especially on intensified coordination between the government and BNM to encourage more inflows into the market.
“This includes stepping up coordination with government-linked companies (GLCs) and government-linked investment companies (GLICs) to encourage them to repatriate foreign investment income and convert that income into ringgit more consistently, playing their roles to support the ringgit amidst challenging global environment.”
The meeting noted that there has been an immediate impact on market flows and increased market interest in buying ringgit.
It said the potential for further conversion to ringgit could be high, given the prevailing level of foreign currency balances onshore.
“The FMC noted that BNM will enhance engagements with corporates and investors to further encourage conversions and strengthen market sentiment on the ringgit.”
Global investor confidence
The FMC also noted continued confidence by global investors in the Malaysian financial market.
“On a YTD basis, the KLCI rose 6.7 percent, supported by USD$422 million inflows from non-resident investors.
“Long-term government bond holdings by non-residents continued to be stable at around 22 percent while the FX market remains vibrant with a healthy daily turnover of US$15.3 billion.”
These will continue to facilitate efficient intermediation in the economy, it said.
FMC chairperson and BNM deputy governor Adnan Zaylani concluded that based on the insights shared, the prospect for the ringgit to strengthen is strong.
The statement also quoted Standard Chartered Bank Malaysia’s Head of Treasury Sylvia Wong as saying, “We have seen balanced flows from both corporates and institutional investors as the ringgit continues to be traded in an orderly manner.”
“External factors, namely US rate hike expectations, continue to dictate regional FX movements, including the ringgit. Once US rate cut visibility improves, bilateral exchange rates valuation against the US dollar should improve.”
Meanwhile, Allianz Malaysia Bhd’s Chief Investment Officer Wong Siew Lin also added, “The positive equity performance YTD has not been observed for a while and the rally has been evidently broad-based in nature.”
“In addition, the main market has outperformed the small-caps this year.”
The ringgit was slightly lower against the US dollar at today’s closing.
At 6pm, the ringgit fell to 4.7440/7480 against the greenback compared with yesterday’s close of 4.7400/7455.
