‘Malaysia needs to diversify export markets’
KUALA LUMPUR: Oil price volatility, escalating Middle East geopolitical risks and trade war have made it necessary for Malaysia to diversify its export markets, said economists.
Inter-Pacific Research head of research Pong Teng Siew said Malaysia must find more or less risky trade partners to mitigate the economic downturn and depreciation of the ringgit.
“The ringgit has weakened than it should be, dragged by the yuan’s depreciation as a result of the ongoing trade tensions between China and the United States,” he told NST Business yesterday.
Pong said Malaysia was one of the largest China’s trade partners in Asean, mainly exporting electronics components, palm oil and crude oil.
He said the ringgit would be able to strengthen against the US dollar and yuan by establishing trade partnerships beyond the affected countries.
“We are too dependent on China and India for exports as their currencies are weakening,” he said.
Pong said the ringgit was undervalued and traded below its fair value of 4.14 against the dollar, adding that the local currency was behaving like semi-pegged against the yuan.
Meanwhile, OANDA head of trading for Asia Pacific Stephen Innes said the ringgit would continue to trade with a defensive posture.
“Uncertain global risks, slippery oil prices and pre-budget Malaysia have traders for the most part sidelined (from the local market),” he said.
Innes said China and the US trade negotiation hopes were fading, with both sides now looking set to dig in for the long haul.
AmBank group chief economist and head of research Dr Anthony Dass expects the ringgit to trade between its support level of 4.1571 and 4.1589, with resistance at 4.1619 and 4.1638 level.
“The focus will be on Malaysia’s September inflation. We project it to hover around 0.9 per cent, largely due to the implementation of the Sales and Services Tax,” he said.