Off­shore ring­git fu­tures may ham­per ef­forts to deepen on­shore mart

New Straits Times - - Business -

KUALA LUMPUR: Off­shore trad­ing of ring­git fu­tures, such as the one in­tro­duced by the Sin­ga­pore Stock Ex­change (SGX), poses a threat to Bank Ne­gara Malaysia’s ef­forts to deepen the on­shore ring­git mar­ket, say econ­o­mists.

Sin­ga­pore should re­spect the vi­sion and strate­gic in­ter­est of its neigh­bour­ing coun­tries, they said.

“While Sin­ga­pore has ev­ery right to in­tro­duce the ring­git fu­tures, there are some jus­ti­fi­able ar­gu­ments that should be con­sid­ered, such as vi­sions of sov­er­eign na­tions, in order not to dis­rupt the im­pair­ment of the econ­omy,” said Sun­way Univer­sity Busi­ness School pro­fes­sor of eco­nom­ics, Dr Yeah Kim Leng.

“That is why the con­cern has been raised. The in­tro­duc­tion of ring­git fu­tures off­shore could dis­rupt Malaysia’s pol­icy di­rec­tion,” he added.

Yeah was com­ment­ing on Bank Ne­gara’s state­ment on Wed­nes­day, which hit out at Sin­ga­pore for its move to in­tro­duce the trad­ing of ring­git fu­tures.

The cen­tral bank said the in­tro­duc­tion of ring­git fu­tures at SGX and the In­ter­con­ti­nen­tal Ex­change was against Malaysia’s for­eign ex­change ad­min­is­tra­tion (FEA) pol­icy.

A con­tra­ven­tion of the FEA is an of­fence un­der the Fi­nan­cial Ser­vices Act 2013 and Is­lamic Fi­nan­cial Ser­vices Act 2013.

MIDF Amanah In­vest­ment Bank Bhd chief econ­o­mist Dr Ka­marud­din Mohd Nor said as ring­git was a non-in­ter­na­tion­alised cur­rency, mar­ket par­tic­i­pants should only ac­cess it via the on­shore for­eign ex­change (forex) mar­ket to meet their fi­nan­cial needs.

“Bank Ne­gara’s stance on ring­git de­riv­a­tives prod­ucts in the off­shore mar­ket is crys­tal clear.

“The in­tro­duc­tion of ring­git fu­tures at SGX is in­deed against and in­con­sis­tence with our FEA pol­icy,” he told NST Busi­ness yes­ter­day.

Bank Is­lam Malaysia Bhd chief econ­o­mist Dr Mohd Afzanizam Ab­dul Rashid raised his con­cern on ex­ces­sive spec­u­la­tive ac­tiv­i­ties from such off­shore trad­ing.

He said the essence of fu­tures mar­kets was for hedg­ing mech­a­nism and the pres­ence of spec­u­la­tors was part and par­cel of it in order to pro­vide liq­uid­ity to the mar­kets.

Along the way, there are also ar­bi­trageurs that would gain from the in­con­sis­ten­cies be­tween the spot and fu­tures mar­kets.

“There­fore, the con­cern is on the pos­si­bil­ity of ex­ces­sive spec­u­la­tive ac­tiv­i­ties that may have bear­ing on the on­shore ring­git mar­kets.

“So, the sit­u­a­tion could be sim­i­lar to the non-de­liv­er­able for­ward (NDF) mar­kets, in which Bank Ne­gara has taken sev­eral mea­sures, in con­sul­ta­tion with the mar­ket play­ers, to re­store the sta­bil­ity of the ring­git,” he said.

As part of Bank Ne­gara’s ef­fort to curb the in­flu­ence of the NDF mar­ket, it has di­rected lo­cal and for­eign banks to re­frain from deal­ing in ring­git in trade set­tle­ments done in the NDF mar­ket abroad. Farah Adila


As ring­git is a non-in­ter­na­tion­alised cur­rency, traders should only ac­cess it via the on­shore for­eign ex­change mar­ket.

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