‘RM4.10 POS­SI­BLE BE­FORE H1 2018’

Sup­port­ive fac­tors have been in place for some time, says Stan­dard Char­tered Bank

New Straits Times - - Business -

THE chance for the ring­git to re­turn to a fair value of around RM4.10 ver­sus the US dol­lar has in­creased and may hap­pen sooner than the tar­geted first half of next year, says Stan­dard Char­tered Bank.

Its Asia FX strate­gist Divya Devesh de­scribed the ring­git as the best-per­form­ing cur­rency in Asia ex­cept Japan in the sec­ond quar­ter so far, hav­ing gained some 2.5 per cent ver­sus the green­back.

“Ring­git-sup­port­ive fac­tors have been in place for some time now — ex­cep­tion­ally at­trac­tive val­u­a­tions, un­der­weight for­eign in­vestor po­si­tion­ing and im­prov­ing ex­ter­nal bal­ances.

“The key hur­dle has been weak sen­ti­ment, which now seems to be im­prov­ing,” she said.

This im­proved sen­ti­ment and flow has been a re­sult of do­mes­tic fac­tors (al­low­ing for­eign in­vestors to hedge up to 100 per cent of ring­git ex­po­sure with­out doc­u­men­tary ev­i­dence) as well as global fac­tors (con­tin­ued in­flows to emerg­ing mar­kets lead­ing to stretched val­u­a­tions else­where).

For­eign in­vestors have been net buy­ers of Malaysian eq­ui­ties for four straight months, with net in­flows of US$2.2 bil­lion (RM9.54 bil­lion) year-to-date.

For­eign in­vestors also turned into net buy­ers of Malaysian debt in April.

“Given the scale of port­fo­lio out­flows in the past four years, there is sig­nif­i­cant room to catch up, which should sup­port fur­ther ring­git gains,” she said.

While a stronger ring­git might be seen as a sign of con­fi­dence in the do­mes­tic econ­omy, Divya said Bank Ne­gara Malaysia may aim to re­build its for­eign re­serves more de­ter­minedly at some point.

Malaysia’s FX re­serves are cur­rently at their low­est in 11 years, af­ter ac­count­ing for the cen­tral bank’s po­si­tion in the for­ward book of net short US$ 17.7 bil­lion (as of end-March).

The ring­git has been de­scribed as the best-per­form­ing cur­rency in Asia ex­cept Japan.

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