KUALA LUMPUR, March 2 – The Financial Markets Committee (FMC) has concurred with the assessment that the ringgit’s current level is deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospects are positive.
The FMC is a committee established by Bank Negara Malaysia (BNM) in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions that have prominent roles or participation in the financial markets.
In a statement, BNM said the FMC convened Friday to discuss recent developments in the ringgit foreign exchange (forex) market.
The FMC welcomed Finance Minister II Datuk Seri Amir Hamzah Azizan’s statement on the ringgit, especially on the intensified coordination between the government and BNM to encourage more inflows into the market.
This includes stepping up coordination with government-linked companies and government-linked investment companies to encourage them to repatriate foreign investment income and convert that income into ringgit more consistently, playing their roles to support the ringgit amid a challenging global environment.
According to the statement, the FMC noted that there has been an immediate impact on market flows and increased market interest in buying ringgit.
“The potential for further conversion to ringgit could be high, given the prevailing level of foreign currency balances onshore. The FMC noted that BNM will enhance engagements with corporates and investors to further encourage conversions and strengthen market sentiment on the ringgit,” BNM said.
The FMC also noted global investors’ continued confidence in the Malaysian financial market.
On a year-to-date (YTD) basis, the FTSE Bursa Malaysia KLCI rose 6.7 per cent, supported by US$422 million inflows from non-resident investors.
Long-term government bond holdings by non-residents continued to be stable at around 22 per cent, while the forex market remains vibrant with a healthy daily turnover of US$15.3 billion.
“These will continue to facilitate efficient intermediation in the economy,” the central bank said.
Meanwhile, Standard Chartered Bank Malaysia head of treasury Sylvia Wong was quoted as saying that the bank has seen balanced flows from both corporates and institutional investors as the ringgit continues to be traded in an orderly manner.
“External factors, namely the US rate hike expectations, continue to dictate regional forex movements, including the ringgit. Once US rate cut visibility improves, bilateral exchange rates valuation against the US dollar should improve,” she said.
Allianz Malaysia Bhd chief investment officer Wong Siew Lin said: “The positive equity performance YTD has not been observed for a while and the rally has been broad-based. In addition, the main market has outperformed the small-caps this year.”
FMC chairman and Bank Negara Malaysia deputy governor Adnan Zaylani Mohamad Zahid said it was a good and informative meeting.
“Based on the insights shared, the prospect for the ringgit to strengthen from here is strong,” he said.
