Credit Suisse raises ring­git fore­casts

Cur­rency said to be un­der­val­ued, boosted by strong ex­ports

The Star Malaysia - StarBiz - - Front Page -

PE­TAL­ING JAYA: Credit Suisse has boosted its fore­cast for the ring­git, say­ing the cur­rency could ex­tend gains in view of the re­cov­ery in Malaysia’s ex­ports, im­prov­ing growth and its un­der­val­u­a­tion.

It raised its three-month tar­get to 4.0 per dol­lar from 4.10, and 12-month tar­get to 3.80 from 4.0, ac­cord­ing to a re­port by Bloomberg.

Credit Suisse noted that Bank Ne­gara was en­cour­ag­ing the rally and was poised to raise rates by 25 ba­sis points in the first quar­ter.

De­spite the ring­git’s re­cent gains, its real ef­fec­tive ex­change rate had only in­creased 3% from a record low in De­cem­ber 2016, an­a­lysts Ray Far­ris and Trang Thuy Le said.

They added that the cur­rency was still 7% un­der­val­ued, given that the global bench­mark Brent was trad­ing at around US$63 per bar­rel.

“The cheap ring­git has aided a re­cov­ery in Malaysia’s ex­ports and en­abled ship­ments to out­per­form most Asian peers,” they noted in the re­port.

Credit Suisse ex­pects the coun­try’s cur­rent ac­count sur­plus to widen to US$11.5bil (RM47­bil) next year from US$9.9bil this year, or 3% of GDP com- pared to 2.4% in 2016.

It fur­ther noted that the po­si­tion­ing in ring­git as­sets seemed mod­est and should im­prove, and for­eign equity in­vestors were still sig­nif­i­cantly un­der­weight.

The an­a­lysts added that the Malaysian gov­ern­ment and Bank Ne­gara may tol­er­ate ring­git strength head­ing into the up­com­ing gen­eral elec­tion as the cur­rency is seen as a gauge of con­fi­dence.

The risks to its fore­casts, it said, in­cluded the pas­sage of US tax re­forms and any out­flows if the gov­ern­ment eases curbs on do­mes­tic funds’ over­seas in­vest­ments fol­low­ing the ring­git’s sta­bil­ity.

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