Today, a friend asked me what would happen if ringgit were to hit the US$1 to RM4 level. I said, it’s already above the psychological RM3,80 level many times. In the near term, I do not think there would be any drastic actions being taken. There’s just nothing to be done when it’s pure negative sentiment than the “about to become Greece fundamental”. Oh yeah, until today, not even ONE economist has predicted that Malaysia will fall into a recession or crisis. Of course, this is barring any unforeseen circumstances externally. I believe Ringgit is undervalued based on all the current existing fundamentals. Economic numbers, reserve numbers and even the banking industry strengths. Read here: Healthiest Malaysian banks since 1998. Wow This is especially when compared to the fundamental of the country in 1997 versus today. Let’s see what the people are saying about Ringgit lately. Yes, all of them are far more qualified and have access to more numbers than me.
Tan Sri Zeti Akhtar Aziz, governor of central bank Bank Negara Malaysia has asserted a few times that the Malaysia ringgit was undervalued and its current value does not reflect the country’s fundamental.
Financial Markets Association of Malaysia president Datuk Lee Kok Kwan: “Malaysia has little reliance on foreign currency funding, has high domestic savings, ample liquidity, well-capitalised banks, corporates are making profits, current and trade accounts in surplus and a positive GDP growth of around 5%. The fundamentals for Malaysia stack up well globally and with regional peers, in which the ringgit has weakened considerably.”
Forex Time’s Chief Market Analyst, Jameel Ahmad in an interview with Bloomberg TV said that the Ringgit is grossly ‘undervalued’ and he expects the Ringgit to stabilize and eventually gain strength in the near future.
CIMB Bank group treasurer Chu Kok Wei said that the RM3.80 level is just a number, more psychological than material, and that has to do more with the dollar’s strength instead of Malaysia’s fundamentals. “The ringgit at current levels is attractive in the medium-term and foreign holdings of Malaysian government debt is stable and there has been an uptick recently.”
Affin Hwang Investment Bank vice-president and head of retail research Datuk Dr Nazri Khan Adam Khan: “It is likely that new investors will grab the temporary opportunity in the undervalued weaker ringgit as it offered a cheap entrance point to the medium to long-term FDI and bond market.”
Maybank Investment Bank fixed-income analyst Winson Phoon: “Even when Fitch Ratings was threatening to downgrade, long-term money investors bought MGS.” He believes a fair value of Ringgit should be RM3.30 to the dollar.
Believe what you believe because I also believe what I believe. If you seriously believe Malaysia is heading towards bankruptcy, take the necessary actions. For example, selling all Malaysian related investments, move it into a safer market and come back when the prices drop steeply as per your expectations. If however you think it is a matter of time that the Ringgit regains its strength and with it a better outlook for the economy, then continue to accumulate undervalued stocks. A slowing property market is also a great place for negotiations too. Happy deciding.
written on 16 July 2015
next suggested article: Ringgit down, Buying up?
