KUALA LUMPUR (March 1): The Financial Markets Committee (FMC), at a meeting on Friday, concurred with the assessment that the ringgit at its current level is deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospect is positive.
The committee, which was established by Bank Negara Malaysia (BNM) in 2016, welcomed Finance Minister II Datuk Seri Amir Hamzah Azizan’s recent statement on the ringgit, especially on the intensified coordination between the government and BNM to encourage more inflows into the market, said the central bank in a statement.
"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 amidst challenging global environment," BNM noted.
According to the statement, the FMC meeting 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,” said the statement.
The FMC — which comprises representatives from BNM, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets — also noted global investors’ continued confidence in the Malaysian financial market.
The Kuala Lumpur Composite Index rose 6.7% year-to-date, supported by US$422 million (RM2 billion) inflows from non-resident investors, said the statement. "Long-term government bond holdings by non-residents continued to be stable at around 22% while the foreign exchange market remains vibrant with a healthy daily turnover of US$15.3 billion. These will continue to facilitate efficient intermediation in the economy," it added.
Meanwhile, Standard Chartered Bank Malaysia head of treasury Sylvia Wong was quoted as saying in the statement 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,” Wong said.
Allianz Malaysia Bhd’s chief investment officer Wong Siew Lin added: “The positive equity performance year-to-date has not been observed for a while and the rally has been evidently broad-based in nature. In addition, the Main Market has outperformed the small-caps this year."
The statement noted that FMC chairman and BNM deputy governor Adnan Zaylani described the FMC meeting as "good and informative". "Based on the insights shared, the prospect for the ringgit to strengthen from here is strong,” he said.