Malaysia joins ‘rocky markets’ on inflation fears, weak ringgit….sigh.
Malaysian households are hit hard as the cost of basic necessities rise in the face of a weakening ringgit. The market is also rattled by such negative sentiments. – The Malaysian Insider pic, January 30, 2014.Malaysia, once an “investors’ darling”, joins other rocky markets in Southeast Asia, as investors continued to abandon emerging markets, the Wall Street Journal reported today.
The report said with its currency at the weakest in more than three years this week, Malaysia was now “vulnerable” to global fund managers, already jittery about emerging markets, should they decide to pull back further.
After sliding 2% this year, the ringgit is the worst performer in Asia after the Korean won and Philippine peso.
WSJ said the fear among businesses was reflected in the increase in foreign currency accounts of Malaysian banks – up 0.19% in the two months between September and November 2013 – as local investors sought to protect themselves from the brunt of weaker currency.
“There seems to be a growing trend for residents to convert part of their local currency savings and deposits into foreign currency, as they get more worried about depreciation in their currencies,” the paper quoted Sameer Goel, who is attached with Deutsche Bank in Singapore.
It also spoke to an investment manager who manages US$$778.7 billion for Invesco in Singapore as saying that local exporters were delaying converting dollars into ringgit as the dollar continued its upward trend.
“It’s been a defensive market when there is a jittery outlook on the other markets,” Jalil Rasheed told WSJ.
The report further attributed the current stand taken by investors to the price increases and Putrajaya’s subsidy removals on essential items, as part of efforts by Putrajaya to plug its budget deficit.
It noted that yields on benchmark government debt were at the highest since 2010, and that the share of government debts owned by foreign funds was the highest in Asia.
“There’s a lot of cautiousness and uncertainty in terms of who owns this foreign portion of government bonds, what would trigger them to go out, what’s the impact on the market if they go out,” WSJ quoted Elsie Tham, of Manulife Asset Management, who is in charge of RM2 billion.
But not all have joined the exodus, with some staying put amid rising export and government efforts to plug the continued deficit, it added. – January 30, 2014.