Short Position: Ringgit rebound, PETRONAS earnings

Rise of the ringgit

THE recent rebound in the value of the ringgit has brought much relief to many Malaysians.

The trend has been taken by many as a sign that things are finally looking up for Malaysia with the formation of a “unity government”.

Undoubtedly, domestic political risks have abated. This has, in part, contributed to the return of some foreign funds into the country as investor sentiment improved.

In addition, the ringgit has also received a boost from the US Federal Reserve’s (Fed) indication that rate hikes in the world’s largest economy could slow from this month as well as Bank Negara’s moves to normalise the country’s interest rates through gradual hikes in the overnight policy rate.

The ringgit is hovering around 4.40 against the US dollar, as compared to around 4.74 exactly a month ago.

This means the local note has gained about 7.3% from last month.

This is in tandem with the weakening of the greenback, as evidenced by the sharp depreciation of the US dollar index by 7.4% to 104.60 points from a month ago, following the Fed’s dovish stance.

Is there further upside for the ringgit?

The answer is yes. There are many factors working in the favour of the local note including the relatively strong crude oil prices.

But for a more sustainable strengthening of the ringgit, it hinges on the unity government led by Datuk Seri Anwar Ibrahim, to work together and implement sound economic policies that could truly bring about a positive transformation to Malaysia’s economy and turn the country into a highly desirable investment destination for foreign direct investments.

Let’s hope the unveiling of the Cabinet line-up yesterday will be the start of the journey to make Malaysia great again.

More than profit

THE third quarter financial results of Petroliam Nasional Bhd (PETRONAS) showed just how the national oil company is in a sweet spot.

Profit for the nine-month period up to the third quarter jumped 120% to RM77.2bil while revenue rose 58.3% to RM271.3bil.

For the third quarter of PETRONAS financial year 2022, net profit rose 88.65% to RM30.76bil while revenue was 60.6% higher to RM99.2bil.

PETRONAS president and group CEO Datuk Tengku Muhammad Taufik, in his comments on the financial performance of PETRONAS, said the company remains fully determined to strengthen its resilience and seize new opportunities by staying true to prudent financial management and firm capital discipline in investing responsibly to sustainably deliver profitable growth.

That message carries many connotations.

Firstly, the entire global oil and gas industry is changing and it is no different for PETRONAS.

The focus on new energy sources, like hydrogen and even renewables such as solar will mean significant investment in the immediate future.

Such investments will need to continue alongside the continued exploration of oil and gas.

However, vast amounts of money must be committed towards the growth of businesses such as green hydrogen and even solar.That will mean that PETRONAS will have to prioritise its spending, and importantly also its dividend flow to the government.

There is no doubt that PETRONAS will still pay the monies needed by the government but the issue at heart is going to be the quantum in view of the need to grow its energy business.

Muhammad Taufik, in the statement, said PETRONAS would be resolute in accelerating growth with increased investments, particularly in future-proofing our portfolio in an environment that is increasingly uncertain and volatile.

“The group has taken a long-term strategic positioning in response to the energy transition with the launching of the PETRONAS NZCE 2050 Pathway.

“We are taking deliberate steps to unlock new value from our core portfolio with a focus on the decarbonisation of our operations and will pursue attractive opportunities in cleaner energy solutions.

“Anchored on our Statement of Purpose, PETRONAS remains fully committed to providing the world with the energy it needs to achieve our shared aspiration for a lower-carbon future in a just and responsible manner,” he said.

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