Malaysian Ringgits And Stock Boards Inside RHB Investment Bank
KUALA LUMPUR: Bank Negara has reiterated that the ringgit is currently undervalued and will appreciate over time as the economy improves.
Deputy governor Datuk Marzunisham Omar said: “It will strengthen. We don’t comment on what the level is but we are confident that with all the good prospects and the reforms, these will contribute to the strengthening of the ringgit.”
He was speaking to reporters after a media event, titled “Bank Negara Governor’s Address on the Malaysian Economy and Panel Discussion,” yesterday.
Marzunisham added that the central bank had models to estimate the fair value of the ringgit.
“All of our models consistently show that the ringgit is undervalued.
“It is mainly driven by the sentiments, which we believe ignore the fact that Malaysia has positive growth prospects, moderate inflation and with the reforms that we are going to implement, the competitiveness of our economy will improve.
“All these are real economic factors that will support the strengthening of the ringgit.”
Last week, Prime Minister Datuk Seri Anwar Ibrahim said the government and Bank Negara will continue to intensify engagement with corporates, including exporters, importers, government-linked investment companies and government-linked companies to encourage fund flows into the foreign exchange market.
He highlighted that since the joint operation began, the ringgit’s value has strengthened by 1.4% to 4.7135 as at March 21 from 4.7773 on Feb 23, 2024.
The ringgit rebounded to close firmer yesterday against the US dollar as risk appetite improved. The ringgit rose to 4.7205/7270 against the greenback from Friday’s close of 4.7340/7390.
Marzunisham added that the government was not imposing any capital controls on corporations in its efforts to strengthen the local currency.
“These are the realised incomes that they will bring back to the country. It is not about asking them to sell off their investments. We are not asking them to liquidate their investments abroad.
“As part of their investment strategy, they do what they want where they buy and sell. And when they do, they realise their investments and we are asking them to bring back their realised income and convert.
“Similarly, exporters are already bringing back funds to the country. We are encouraging them to take the opportunity to convert their money to ringgit. It has nothing to do with capital flow management or restricting capital going out of the country.”
He believed that the ringgit is being weighed down by short term factors such as less-than-positive sentiments, interest rate differentials, safe haven in terms of the dollar and geopolitical tensions.
However, he said the local currency will strengthen as the economy is expected to recover from 3.7% last year to around 4% to 5% this year.
“The factors are recovery in global trade, which will be supported by tourism activities and technology upcycle.
“These will have a spillover on the Malaysian economy. Private consumption will remain the key driver of growth with a favourable labour market, where wages will continue to improve and this will provide support to household spending,” he added.Marzunisham pointed out that investments into the country are picking up again, adding that this will augur well for the overall economic growth.
“For inflation, we forecast a growth of between 2% to 3.5%. The broader range is because we have taken into account some form of subsidy rationalisation that the government plans to implement.
“With this kind of positive growth outlook and moderate inflation, we do believe that it represents a window of opportunity for us to start implementing the structural reforms that the government has laid out in terms of implementing our new investment master plan, structural reforms in the labour market as well as the continuation of fiscal reforms.
“These reforms will help to improve the productive capacity of the economy and would help to improve its competitiveness and support our growth over the longer term, as well as improve the standard of living of Malaysians,” he explained.
