About 40% of portfolio inflows have been converted into longer term three- to five-year papers, said Bank Negara governor Tan Sri Zeti Akhtar Aziz.
People look at the fundamentals of the country,'' she told a press conference yesterday. Foreign direct investments are expected to be sustained this year.
There were steady inflows last year as investors viewed Malaysia's potential as a stable profit centre with plenty of opportunities.
The ringgit peg has not discouraged investments in the country,'' she said. In determining whether the ringgit peg should stay, she explained: We look at the long-term implications for the economy and if there are structural changes in the region and international economy.''
On whether Bank Negara would consider reducing its dollar holdings, Zeti said its holdings were highly diversified.
We are comfortable with the composition of reserves,'' she said. That composition is not disclosed but statistics on revaluation gains are released every quarter.
Zeti said interest rates were likely to be kept low, as there was also a need to promote economic growth.
Inflation is considered tolerable, and the tolerable range'' would still be kept at below 4%. She noted that many countries were bringing their interest rates up to neutral levels.
On the economic growth forecast of between 5% and 6% for this year, she said it would be closer to 6% if there was a potential recovery in the electronics cycle, interest rates kept at neutral levels and oil prices going below US$50 per barrel.
If conditions turned adverse, this year's economic growth could be lower, she said.
On the raising of interest rates by the US Federal Reserve, she noted that there were price pressures but the Fed had yet to indicate what their neutral interest rate level was.