DO not assume that foreigners will pull out their money from the domestic capital markets after the ringgit is either re-pegged or de-pegged, said Danny Quant, director, investment consulting South Asia, at Watson Wyatt.
Speaking at the conference, Quant said foreign investors would have to decide just what to do with their funds, and where to invest their money should the ringgit peg change.
“They have to ask whether there is a better place to put it in,” he said.
Quant said there were still huge returns to be made, even though foreign funds in the country would experience a big one-off capital gain from any appreciation of the ringgit against the US dollar following a change in the ringgit peg.
It is widely assumed that the ringgit would go up in value against the greenback should there be a peg change, given the US dollar's fall against most currencies.
“Mainly, the money here will simply stay put and see paper gains in US dollar terms,” he said.
One of the reasons for such an assumption is the attractiveness of emerging markets to global investors. A record amount of money left the US last year in search of higher returns around the world.
Meanwhile, RHB Asset Management chief investment officer Abdul Razak Ahmad said he believed that Malaysian capital market authorities realised that controlled short-selling might be acceptable.
“The difficulty is finding a mechanism; and as fund managers, we can have new products for our clients,” he said on the possible introduction of regulated short selling.