Malaysian Ringgit drops to three-year low !

 

The ringgit tends to move more significantly lately because of domestic factors such as the fiscal situation, Says Saktiandi Supaat of Maybank in Singapore

KUALA LUMPUR: The ringgit dropped to a three-year low ahead of data that may signal the US recovery is gaining traction, bolstering the case for policymakers to pare stimulus that has fuelled inflows to emerging market assets.

Reports this week may show retail sales, manufacturing and housing starts increased last month in the world’s largest economy, according to Bloomberg surveys. Four Federal Reserve officials indicated greater willingness last week to begin tapering the central bank’s bond-buying programme.

Fitch Ratings cut Malaysia’s credit outlook in July, citing concerns over the country’s public finances.

“The general expectation is that these US numbers are going to be quite strong,” said Saktiandi Supaat, head of foreign exchange research at Malayan Banking Bhd in Singapore. “The ringgit tends to move more significantly lately because of domestic factors such as the fiscal situation.”

The ringgit depreciated 0.3% to 3.2595 per dollar as of 4.27pm in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.2613, the weakest level since July 1, 2010.

The one-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed six basis points to 7.89%, halting an eight-day losing streak.

Malaysia’s five-year government bonds were little-changed.

The yield on the 3.26% notes due March 2018 held at 3.50%, according to data compiled by Bloomberg.
The rate on 10-year securities fell by two basis points to 3.86%, the lowest level this month. — Bloomberg

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Malaysian currency weaken as foreign capital outflow

Foreign capital outflow a trend in emerging markets these days

The ringgit, which has been described as being in a tight spot, has fallen 6.6% since May 22, when the Fed first raised the spectre of an early stimulus withdrawal, reports the Singapore Business Times.

THE outflow of foreign capital from emerging markets is the trend these days.

The ringgit, which has been described as being in a tight spot, has fallen 6.6% since May 22, when the Fed first raised the spectre of an early stimulus withdrawal, reports the Singapore Business Times.

The ringgit has been trading at three-year lows against the US dollar, and month-long selling has pushed 10-year Malaysian government bond yields to their highest in 2½ years, says the report.

The reason is “an exodus of foreign capital, as investors reassess emerging markets most at risk from a withdrawal of US easy money policy,” it adds.

The Indian rupee has dropped more severely by 8.5% since May 22.

India has been described as being “caught in the middle”, as the United States ponders tapering off its quantitative easing policy, causing volatility in emerging markets, as investors pull money out.

India was enjoying a growth rate of 9% just two years ago. Now, the Reserve Bank of India is forecasting growth at 5.5% for the fiscal year ending next March, says the SBT.

Reliance on foreign capital has always been a dangerous game, and the authorities are well aware of that.

In some quarters, it is a known fact that foreign capital is not really welcome, as it wreaks havoc with its large movements.

Economies in South-East Asia, especially, have to be very cautious of foreign capital, as the impact can be severe once they withdraw their funds.

Fund flows are usually tracked by central banks, which will have an indication of the inflows and outflows.
The economy itself should be fundamentlly strong and able to withstand the shock of any outflow.

High economic growth is not really the objective in this case, but rather steady, resilient and broad-based growth.

Investors in emerging markets should be prepared for such a phenomenon and get ready with their asset allocation strategies.

Mark Mobius, the executive chairman of Templeton EM Group, was quoted by The Economic Times of India as saying that funds were expected to flow back into emerging markets.

“We think there will be a bounce-back because there has been too much negativity and that has pushed prices down to levels where there is a chance of an upsurge again,” he is quoted as saying.

The Australian central bank has cut rates for the eighth time in less than two years in a bid to improve sluggish growth, as a boom in mining investment over the past decade comes to an end, says the International Herald Tribune (IHT).

The Reserve Bank of Australia lowered its benchmark cash rate by a quarter of a percentage point to a record low of 2.5%, bringing the total cuts since November 2011 to 2.25 percentage points.

The Australian currency, which is closely watched by investors and parents with children studying in that country, has fallen about 15% against the US dollar since mid-April.

However, the currency remains well above where it has been for much of the past two decades, says the IHT.

The Australian dollar has rallied lately on positive economic data from China.

As new resource investments peter out, the Australian government is seeking to rebalance its economy, with strength in sectors such as tourism and manufacturing.

There are diverging trends in the Australian economy, where unemployment has edged up, with “signs of increased demand for finance by households”.

However, the pace of borrowing has remained “relatively subdued”.

It will be interesting to watch how the Australian dollar performs over the next few months and assess whether it is timely to invest in it.

Plain Speaking By Yap Leng Kuen contributed to this post.
Columnist Yap Leng Kuen sees a lot of investment opportunities in emerging markets.

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Market closes mixed, lower liners likely to hog the limelight

Regional bourses remained on a mixed trend with Japan's Nikkei 225 surging 292.93 points to 10,688.11 while Hong Kong's Hang Seng dropped 67.51 points to 23,331.09. Singapore's Straits Times eased one point to 3,223.80.

On the local front, the Industrial Index rose 19.44 points to 2,814.34, the Plantation Index improved 23.44 points to 8,255.19 and the Finance Index edged up 5.56 points to 15,341.36.

The FBM Emas Index increased 5.78 points to 11,485.90, the FBMT100 rose 2.71 points to 11,340.65, the FBM Mid 70 Index improved 17.33 points to 12,439.6 and the FBM Ace Index advanced 33.06 points to 4,259.77.

Total volume increased to 1.256 billion units valued at RM1.688bil compared with Thursday's close of 1.128 billion shares worth RM1.825bil. - Bernama

Lower liners likely to hog the limelight

REVIEW: Bursa Malaysia kicked off the last day of 2012 on the negative side, with the FBM Kuala Lumpur Composite Index (FBM KLCI) shedding 2.93 points to 1,678.40, as profit-taking activity set in following a series of uptrend.

The overall market sentiment was pretty cautious, depressed by an extended fall in Wall Street overnight, as the White House and US lawmakers closed in on the “fiscal cliff” deadline with no deal in sight.

A pullback in most major Asian markets on profit-taking activity during the holiday season lull added to the downbeat note.

Given the dearth of fresh market-stimulating leads on the horizon, the local bourse succumbed to light liquidation to flirt in the red zones, but within a narrow range.

And that was the trend from the opening bell until the last minute, where buying in select heavyweights emerged suddenly to help the market reversed early weaknesses to end 2012 at a new record of 1,688.95, up 7.62 points on Monday.

World markets including Bursa Malaysia were shut on Tuesday for the New Year. While all of us were enjoying the holiday, optimism about the immediate direction of risky assets grew stronger, because a settlement in the “fiscal cliff” crisis in the US fuelled bullish sentiment across markets.

As expected, stocks in the region resumed business on solid grounds, with major Hang Seng Index leading the way, up nearly 3%.

Usually, the local bourse would mirror the offshore pattern, but in an unprecedented move, blue-chip counters reversed trend, as local institutional players opted to book profit from recent spikes.

Unlike the quality issues, non index-linked companies were mostly steady on greater retail participation and the two-tier market was clearly shown on the score card.

In spite of the FBM KLCI dropping 14.23 points to 1,673.72, winners beat decliners by 373 to 335 in mid-week.

Come Thursday, global equities sustained the upward thrust and the bulls on the domestic front took the opportunity to strike back.

Blue chips topped the gainers list while second and lower liners dominated the active page.

On the back of the better sentiment, the key index hit a new all-time high of 1,692.25, up 17.93 points that day.

It scaled another new peak of 1,699.68 in early session yesterday before retreating to close down 0.07 point to 1,692.58 owing to an apparent profit-taking activity.

Statistics: Week-on-week, the key index rose 11.25 points, or 0.7% to 1,692.58 yesterday, against 1,681.33 on Dec 28.

Total turnover for week ballooned to 4.093 billion units valued at RM6.020bil, compared with 2.920 billion shares worth RM3.941bil done previously.

Technical indicators: After triggering a sell at the overbought area in mid-week, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index weakened further to finish at the 66% and 73% respectively.

Likewise, the 14-day relative strength index retraced slightly from the top to end at the 69 points level.

In stark contrast, the daily moving average convergence/divergence (MACD) histogram continued to surge steadily, in tandem with the daily trigger line to keep the bullish signal.

Weekly indicators remained positive, with the weekly MACD and the weekly slow-stochastic momentum index keeping the buy call.

Outlook: Bursa Malaysia extended the upward momentum for the fifth consecutive week, largely due to “window-dressing” activity and funds taking fresh positions, as well as re-balancing their portfolios, with gains in the quality issues propelling the FBM KLCI higher to set a new record almost on a daily basis. The “fiscal cliff” resolution in the United States also aided local sentiment to some extent.

Based on the daily chart, the local bourse is bullish and it will remain so, as long as the key index continues to flirt inside the newly-established upward channel and supported by the rising 14-day and 21-day simple moving averages.

However, investors should take note that the local market has chalked up a total of 109.01 points, or 6.9% over the past five weeks and the bulls are starting to look tired. The next logical move would be to pause for air before resuming their rally later.

While we expect blue chips to correct in the short-term to avoid overheating, second and lower liners, a favourite for retail investors, are showing signs that they are ripe for a rally.

Technically, the daily and weekly MACDs are promising, but given the overbought condition, the local market is likely to consolidate, probably within a tight range this week.

Resistance is expected at every 20- or 30-point intervals above the 1,700-point psychological barrier.

Important support is pegged at the 1,680 points, followed by the 1,670 points and the next, at the 1,660-point mark.

MARKET TREND By K.M. LEE

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