Najib’s ringgit call gets backing

August 21, 2015 | By | Reply More

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PUTRAJAYA: Economists have supported the call for Malaysia’s government-linked corporations (GLCs) and firms to repatriate liquid assets held overseas in order to support the ringgit.

They, however, cautioned that the move would only work if there was confidence that the ringgit stood a good chance to bounce back and strengthen vis-à-vis the US dollar in the future.

RHB Research Institute chief economist Lim Chee Sing described the move as “making sense”.

“It can benefit from the current US dollar/ringgit trade that is perceived to have overshot on the downside,” Lim said yesterday.

Prime Minister Datuk Seri Najib Razak yesterday urged GLCs and local firms to bring back liquid assets abroad and aid the country’s economic recovery.

Apart from boosting the domestic economy, Najib said the firms would enjoy a foreign exchange “surplus” due to the ringgit’s current value.

Over the past year, the ringgit has lost more than 20 per cent of its value against the US dollar and now hovers at around RM4.10 against the greenback.

Although the sharp drop was not unique as it was similarly observed in other commodities-driven countries such as Indonesia and Australia, Malaysia faces political uncertainties over the 1Malaysia Development Bhd issue.

Lim said the fall of the ringgit was evolving into a crisis of confidence.

“Fresh in our minds is the devaluation of the yuan and deepening commodity price slump, particularly oil and gas prices, where Malaysia is the only net oil and gas exporter in the region.

“There is renewed concern of the country’s fiscal position and the current account in the balance of payments.

“These, coupled with unresolved domestic issues and impending interest rate hike in the United States, suggest that the ringgit that have overshot in the downside may have a chance to overshoot even more in the near term,” he explained.

Lim said the current challenges were global in nature and not limited to Malaysia per se.

For example, Kazakhstan, the largest oil exporter in central Asia, recently decided to liberalise its tenge currency. When the tenge was allowed to float in the market, it collapsed more than 30 per cent against the strong US dollar. 

“I think there has to be a restoration of confidence in order for companies with surplus liquid assets overseas to divest and repatriate the proceeds back to Malaysia. Whether or not this can really translate to some positive impact and provide a support to stabilise the ringgit remains to be seen,” he said.

Malaysia University of Science and Technology School of Business Dean Dr Yeah Kim Leng agreed with Lim.

“ Yes, if GLCs were to sell off their liquid assets, it would have to be based on sound commercial decisions to leverage on currency translation gains.

“It would only make sense if the decision jives in with opportuned investments in Malaysia that can yield good returns in the future.”

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