Malaysian Bonds, Ringgit Drop This Week as Fed Seen Tapering
KUALA LUMPUR - I don't know whether you recall how the last Asian Financial Crisis in 1997-98 affected us all. Malaysia was very badly hit. Our stock market dropped from 1,385 to 295 points while our ringgit went down to as low as RM4.80 to the dollar. At the height of the crisis, our interest rates went up to as high as 18%. After a break of 15 years are we going to see the same scenario again? I am not sure but one thing that's certain is that the current situation in Asia does have some resemblances, such as depreciating currencies and interest rates hike across the region.
The last time the Asian Financial Crisis started in Thailand due to overheat property crisis and this time - if it cannot be controlled - It is possible reckon this time it will blow from India. Read more : Full article
Malaysia’s five-year government bonds headed for their worst week in a month and the ringgit fell on speculation fund outflows will accelerate as the Federal Reserve prepares to cut stimulus.
The benchmark stock index was set for its biggest five-day drop since September 2011 after minutes of the Federal Reserve’s July meeting released this week showed policy makers were “broadly comfortable” with reducing bond-buying this year should the U.S. economy improve. Malaysia’s current-account surplus shrank 70 percent in the second quarter, prompting Deutsche Asset & Wealth Management to warn the nation could find itself in a similar predicament to Indonesia, whose currency plummeted 4.2 percent this week.
“The emerging-markets selloff is the main reason” for the rise in Malaysian bond yields, said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “There is still some concern about the current account. I don’t think we will be the next Indonesia, although the risk is there.”
The yield on the 3.26 percent sovereign notes due March 2018 climbed 12 basis points this week, the most since July 19, to 3.64 percent as of 9:54 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The yield rose two basis points, or 0.02 percentage point, today.
Foreign Outflows Foreign holdings of Malaysian government and corporate securities dropped 4.6 percent in June to 229 billion ringgit ($69 billion), the first decline since February, central bank data show. The current-account surplus fell to 2.6 billion ringgit in the second quarter, the closest the country’s come to a deficit in data compiled by Bloomberg going back to 1999.
Southeast Asia’s third-largest economy may expand 4.5 percent to 5 percent in 2013, compared with a previous prediction of as much as 6 percent, the central bank said Aug. 21. Bank of America Merrill Lynch cut its growth forecast to 4.3 percent from 4.7 percent for 2013, according to an Aug. 21 research note.
The ringgit weakened 0.8 percent since Aug. 16 to 3.3047 per dollar, according to data compiled by Bloomberg. The currency rebounded 0.2 percent today, paring its monthly drop to 1.8 percent. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 176 basis points this week to 10.12 percent. It fell 30 basis points today. Source : Bloomberg News (28 Aug 2013)
KUALA LUMPUR - I don't know whether you recall how the last Asian Financial Crisis in 1997-98 affected us all. Malaysia was very badly hit. Our stock market dropped from 1,385 to 295 points while our ringgit went down to as low as RM4.80 to the dollar. At the height of the crisis, our interest rates went up to as high as 18%. After a break of 15 years are we going to see the same scenario again? I am not sure but one thing that's certain is that the current situation in Asia does have some resemblances, such as depreciating currencies and interest rates hike across the region.
The last time the Asian Financial Crisis started in Thailand due to overheat property crisis and this time - if it cannot be controlled - It is possible reckon this time it will blow from India. Read more : Full article
Malaysia’s five-year government bonds headed for their worst week in a month and the ringgit fell on speculation fund outflows will accelerate as the Federal Reserve prepares to cut stimulus.
The benchmark stock index was set for its biggest five-day drop since September 2011 after minutes of the Federal Reserve’s July meeting released this week showed policy makers were “broadly comfortable” with reducing bond-buying this year should the U.S. economy improve. Malaysia’s current-account surplus shrank 70 percent in the second quarter, prompting Deutsche Asset & Wealth Management to warn the nation could find itself in a similar predicament to Indonesia, whose currency plummeted 4.2 percent this week.
“The emerging-markets selloff is the main reason” for the rise in Malaysian bond yields, said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “There is still some concern about the current account. I don’t think we will be the next Indonesia, although the risk is there.”
The yield on the 3.26 percent sovereign notes due March 2018 climbed 12 basis points this week, the most since July 19, to 3.64 percent as of 9:54 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The yield rose two basis points, or 0.02 percentage point, today.
Foreign Outflows Foreign holdings of Malaysian government and corporate securities dropped 4.6 percent in June to 229 billion ringgit ($69 billion), the first decline since February, central bank data show. The current-account surplus fell to 2.6 billion ringgit in the second quarter, the closest the country’s come to a deficit in data compiled by Bloomberg going back to 1999.
Southeast Asia’s third-largest economy may expand 4.5 percent to 5 percent in 2013, compared with a previous prediction of as much as 6 percent, the central bank said Aug. 21. Bank of America Merrill Lynch cut its growth forecast to 4.3 percent from 4.7 percent for 2013, according to an Aug. 21 research note.
The ringgit weakened 0.8 percent since Aug. 16 to 3.3047 per dollar, according to data compiled by Bloomberg. The currency rebounded 0.2 percent today, paring its monthly drop to 1.8 percent. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 176 basis points this week to 10.12 percent. It fell 30 basis points today. Source : Bloomberg News (28 Aug 2013)