KUALA LUMPUR, March 18 — The Malaysian ringgit has been reported to be one of emerging Asia’s best performing currencies this month, giving investors another reason to buy the nation’s bonds.
Bloomberg reported that the ringgit strengthened by almost 0.8 per cent in March after Bank Negara Malaysia (BNM) said it was encouraging state-linked firms to repatriate and convert their overseas earnings.
It added that other bond positives are improving exports and a relatively stable inflation rate.
M&G Investments Asia fixed income fund manager Peerampa Janjumratsang was quoted as saying that Malaysia’s government bonds are a key element of Asia’s investment strategy.
“We currently maintain a moderately overweight position,” said the Singapore-based fund manager to the international financial wire.
Janjumratsang said that this was based on the “potential for the ringgit’s outperformance, supported by the country’s strong consumption and stable inflation profile.”
Based on indexes compiled by Bloomberg, Malaysia’s local-currency sovereign bonds have returned 1.1 per cent to dollar-based investors this month, compared with a gain of just 0.2 per cent for emerging Asian debt as a whole.
The report said part of their recent outperformance can be put down to the ringgit, which bounced back from a 26-year low set last month as the government and BNM stepped up efforts to support it.
In late February, it was reported that foreign investors’ appetite for Malaysia’s sovereign and corporate bonds will likely be less this year amid a weakening currency, dwindling hedged returns and slowing global economic activity.
Economists said the country’s sovereign bonds particularly may face a bleak prospect over the near term due to the negative sentiment surrounding the ringgit.
M&G’s Janjumratsang said the ringgit’s recent gain motivates exporters and local investors to favour ringgit deposits and investments over the US dollar.
She added this counters fears of a further depreciation of the ringgit.
Malaysian exports jumped by 8.7 per cent in January from a year earlier, ending 10 straight months of annual declines based on a government report on Febuary 20.
Based on a Bloomberg survey, the report said that economists will predict another year-on-year increase when February’s data are released today.
BNM data showed that overseas investors bought a net US$119 million of Malaysia’s conventional government bonds in February in comparison with Thailand and Indonesia, where both saw net outflows.
The report also quoted Singapore-based Maybank Securities Pte ltd head of fixed-income research Winson Phoon who said that they will continue to recommend staying tactically FX-unhedged in Malaysian bond positions as the ringgit tends to outperform regional currencies when the regulator steps up support following an extended period of weakness.
Earlier, it was reported that the ringgit opened lower against the US dollar in cautious trading, ahead of the US Federal Reserve (Fed) meeting on Tuesday and Wednesday.
At 9.05am, the ringgit had depreciated to 4.7150/7190 against the greenback, from last Friday’s close at 4.7050/7095.
