New measures not capital control — BNM

KUALA LUMPUR: Bank Negara Malaysia (BNM) says several measures that come into effect on Monday is not capital control, but intended to further broaden and deepen, as well as tackle the imbalance in the onshore foreign exchange market.

“Investors are still free to move in or out of their investments. In fact, there is flexibility (now) for them in managing exposure.

“In our view, it is certainly a liberalisation,”AssistantGovernor, Adnan Zaylani Mohamad Zahid said, when asked if the measures are a form of capital control to stem the decline in the ringgit.

At 6 pm yesterday, the ringgit was quoted at 4.4500/4550 against the US dollar from 4.4610/4660 on Thursday. Last Friday, it closed at 4.4530/4600.

After announcing the new measures here yesterday, Adnan Zaylani said it was also about deregulating parts of Malaysia’s foreign exchange market.

The measures includes allowing residents, including resident fund managers, to freely and actively hedge their US Dollars and Chinese Renminbi with an exposure of up to a limit of RM6 million per client per bank.

Residents with domestic ringgit borrowing, are free to invest in foreign currency assets both onshore and abroad, up to the prudential limit of RM50 million for corporates and RM1 million for individuals.

Another measure taking effect on Monday is also allowing exporters to retain only up to 25 per cent of export proceeds in foreign currency as compared with 100 per cent previously. The remaining 75 per cent has to be ringgit denominated.

“Over the long term, all these measures will help reduce volatility in terms of rebalancing demand for both foreign currencies and the ringgit. But, it will take time (for it to bear fruit) as it is a prospective policy,” Adnan Zaylani explained.

He said the imbalance in the onshore foreign exchange market had worsened.

“Malaysia’s trade account during 2006-2010 saw foreign exchange converted to ringgit average 28 per cent, but from 2011-2015, it was merely one per cent.

“Conversion of the accumulated surplus to ringgit has declined significantly in recent years,” he added.

Adnan Zaylani said he expects the new measures introduced to help increase it to 75 per cent. — Bernama