(March 18): Malaysia’s ringgit has been one of emerging Asia’s best performers this month, giving investors another reason to buy the nation’s bonds.

The currency has strengthened about 0.5% in March after the central bank said it was encouraging state-linked firms to repatriate and convert their overseas earnings. Among other bond positives are improving exports and a relatively stable inflation rate.

“Malaysia government bonds are a key element of our investment strategy, and we currently maintain a moderately overweight position,” said Peerampa Janjumratsang, a fund manager for Asia fixed income at M&G Investments in Singapore. That’s based on the “potential for the ringgit’s outperformance, supported by the country’s strong consumption and stable inflation profile,” she said.

Malaysia’s local-currency sovereign bonds have returned 1.1% to dollar-based investors this month, compared with a gain of just 0.2% for emerging Asian debt as a whole, according to indexes compiled by Bloomberg.

Part of their recent outperformance can be put down to the ringgit, which bounced back from a 26-year low set last month as the government and central bank stepped up efforts to support it. The currency is undervalued and should be stronger given the nation’s positive economic outlook, central bank governor Datuk Abdul Rasheed Ghaffour said in late February.

The ringgit’s recent gain “motivates exporters and local investors to favor ringgit deposits and investments over the US dollar, countering fears of further ringgit depreciation,” M&G’s Janjumratsang said.

An extension of foreign bond inflows will be supportive of the ringgit, as overseas investors bought a net US$119 million (RM561.8 million) of Malaysia’s conventional government bonds in February, according to central-bank data. In comparison, Thailand and Indonesia both saw net outflows.

Malaysian exports jumped by 8.7% in January from a year earlier, ending 10 straight months of annual declines, the government said Feb 20. Shipments abroad pulled back a mild 0.8% in February, a report showed Monday.

“We continue to recommend staying tactically FX-unhedged in Malaysian bond positions as the ringgit tends to outperform regional currencies when the regulator steps up support following an extended period of weakness,” said Winson Phoon, head of fixed-income research at Maybank Securities Pte in Singapore.

The ringgit was at 4.7210 per dollar Monday, having strengthened from the level of 4.75 on March 4 when Phoon made his trade call.