Zeti Says Ringgit Significantly Undervalued Amid Growth
2015-11-12 04:23:35.185 GMT
The Malaysian ringgit remains "significantly
undervalued" and risks to economic expansion are unlikely to
materialize with exports still strong, central bank Governor
Zeti Akhtar Aziz said.
The ringgit doesn’t reflect fundamentals with the nation’s
current account in surplus, unemployment at about 3 percent and
inflation within Malaysia’s long-term average, Zeti said in an
interview in Kuwait City on Wednesday. The currency may recover
when the U.S. Federal Reserve normalizes interest rates and as
"domestic issues" in Malaysia are resolved, she said.
Malaysian policy makers have been struggling to boost
confidence in its economy and finances since oil prices started
to fall last year and as allegations of financial irregularities
at a state investment company hurt sentiment. While the ringgit
recovered alongside emerging market currencies in October, it’s
still down about 20 percent this year, the worst performer in
the Asia Pacific region.
"Our export growth remains fairly strong, it has not
moderated to the extent that we expected," Zeti said. Malaysian
exports and industrial production beat economists’ estimates in
September.
On expectations of a Fed rate increase, “investors have
already anticipated this and have already priced it in, so we
have already seen, we believe, most of the outflows," she said.
Investor Withdrawal
Global funds have pulled 17.4 billion ringgit ($4 billion)
from Malaysian equities and 16.2 billion ringgit from debt in
2015. Still, sentiment may be changing with MIDF Amanah
Investment Bank saying foreign funds were net buyers of
Malaysian stocks for four of the last five weeks, while central
bank data showed global investors raised holdings of Malaysian
debt for a second month in October.
"We believe investors, after they reassess their investment
portfolios, will still gravitate toward growth areas and we are
one of those growth areas," Zeti said. “When all this is
resolved, we believe that the currency will reflect the
fundamentals," she said, citing rate differentials with the U.S.
and the perception Malaysia is primarily an oil producer -- even
as 80 percent of its economy is manufacturing- and services-
based -- among factors that are affecting the ringgit.
The central bank left rates unchanged for an eighth meeting
this month, even as Malaysia’s biggest trading partners of China
and Singapore both eased monetary policy in recent weeks. While
Zeti said officials have priced in the slowdown in China, Trade
Minister Mustapa Mohamed said last week easing growth in the
North Asian nation and the impact on orders for Malaysian goods
means the government won’t be able to meet its trade targets
this year.
Gross domestic product probably increased 4.7 percent last
quarter from a year earlier after expanding 4.9 percent in the
three months through June, according to the median estimate in a
Bloomberg News survey of economists before data due Friday. At
that rate, it would be the slowest in more than two years.
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