Wahid Says Ringgit Too Weak as Malaysian Growth Improves The ringgit has weakened too much for an economy that’s set to perform better in the coming months, Malaysia’s planning minister said as a regional markets rout pushed the currency to a three-year low this week. “Fundamentally, the ringgit shouldn’t be at this level,” Abdul Wahid Omar, minister in the Prime Minister’s Department in charge of economic planning, said in an interview in Kuala Lumpur yesterday. Southeast Asia’s No. 3 economy experienced a “slightly better” environment last quarter than the previous period and should do better in the second half, he said. Malaysia’s gross domestic product probably gained 4.7 percent in the three months through June from a year earlier, according to the median of 22 estimates in a Bloomberg survey before data due at 6 p.m. today. While that would be faster than the first quarter, all but three expect growth to stay below 5 percent in the weakest six-month performance since 2009. The country was swept along in the regional turmoil this week, as the prospect of reduced U.S. monetary stimulus and Asia’s faltering growth outlook fuels a selloff of emerging-market stocks and currencies. Malaysia and Thailand may be the most vulnerable after India and Indonesia, with the former facing a deteriorating current-account balance and elevated foreign ownership of its debt, Credit Suisse Group AG said. Markets Plunge “While their fundamental situation is not as soft as Indonesia, Malaysia and Thailand have enough similarities in terms of high foreign-bond ownership, either softening or slowing current-account surplus or in Thailand’s case a deficit,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp. (WBC) “Those are the types of things that the market is really not looking on very favorably.” The ringgit fell to as low as 3.3020 a dollar yesterday, the weakest since June 2010. The currency traded at 3.2940 as of 10:19 a.m. in Kuala Lumpur today. The benchmark FTSE Bursa Malaysia KLCI Index fell 0.1 percent after sliding 1.9 percent yesterday, the biggest drop since January. Markets have plunged across the region this week, with the Indian rupee dropping to a record low and Indonesia’s rupiah reaching the lowest level since 2009. “It wasn’t expected to come down to this level,” Abdul Wahid, 49, said. “We need to make sure that we address the concerns that the market will have.” Analysts at Barclays Plc are recommending bond investors hold underweight positions in Malaysia, Thailand and Indonesia, citing slowing growth and policy uncertainty in Thailand, and weak public finances in Malaysia. Thailand’s economy entered a recession in the three months through June. Shrinking Surplus Malaysia’s current-account surplus probably shrank to 900 million ringgit ($274 million) in the second quarter, according to the median estimate of five economists surveyed by Bloomberg News. That would be the smallest since at least 1999, according to data compiled by Bloomberg. There is a real risk that the current account could slip into a deficit for the first time since the fourth quarter of 1997, Macquarie Group Ltd. analysts said in a report this month. “We are aware of this situation and we are aware of some of the measures to be undertaken to make sure that Malaysia remains in a surplus position,” Abdul Wahid said, without elaborating on the steps. “It is still a surplus and we are managing it.” The surplus is narrowing on increased overseas investment and property buying, higher imports for infrastructure projects, lower palm oil and rubber export prices and the acquisition of new aircraft by Malaysian Airline System Bhd., the minister said. Rating Concerns Malaysia will need to address concerns raised by Fitch Ratings and Moody’s Investors Service over the budget deficit and “rationalize” state subsidies while broadening the nation’s tax base, Abdul Wahid said. Prime Minister Najib Razak, who is also finance minister, will unveil initiatives to ensure the government meets its target of cutting the shortfall to 3 percent of GDP in 2015, the minister said. The prime minister will give his 2014 budget address on Oct. 25 The implementation of a goods and services tax “will have to come on the agenda,” said Abdul Wahid, who also sits on an Economic Council chaired by Najib, along with central bank Governor Zeti Akhtar Aziz...
Posted on: Wed, 04 Sep 2013 13:15:24 +0000
Trending Topics
Recently Viewed Topics
© 2015