KUALA LUMPUR, April 17 — The oversubscription of Malaysia’s US$1.5 billion (RM5.4 billion) sukuk shows that the ringgit is still a good currency for investors to hold despite the negative perceptions as well as the poor outlook on emerging currencies.
Market experts told Bernama the oversubscription of the government’s inaugural long-tenured sukuk marked the global investors’ confidence in Malaysia’s creditworthiness and financial system.
They believed the ringgit is ‘undervalued’ and is experiencing a trading pattern, despite the country’s strong fundamentals with its diversified economy and surplus in trade, among others.
The sukuk issuance helps the local currency to surge to 3.6240/6270 against the US dollar as at 5pm today from yesterday’s close of 3.6520/6550.
The country has issued US$1 billion of 10-year Trust Certificates which were oversubscribed by almost seven times while that of US$500 million with a 30-year tenure was oversubscribed by six times.
“The oversubscription rate and the competitive pricing of the sukuk is more noteworthy as it was registered amid selling pressure on the ringgit,” said MIDF Amanah Investment Bank Bhd, Head of Research, Zulkifli Hamzah, said.
The local unit had came under selling pressure in the early part of the week despite the oil price staging a strong recovery, he said.
Inter-Pacific Research Sdn Bhd Head of Research, Pong Teng Siew, said the interest in Malaysian bonds stemmed from the bright outlook for the ringgit as the currency’s weakening cycle has come to an end.
“The US dollar is weakening on expectation the US Federal Reserve would raise interest rates, but in my opinion the US economy is too weak for that,” he said.
Pong said the ringgit will not weaken beyond 3.70 against the greenback.
Dr Yeah Kim Leng, Dean of Business at Malaysia University of Science and Technology, said although there were many factors affecting the movements of the currency, “I think the ringgit is undervalued.”
JF Apex Securities head of research, Lee Chung Cheng, said the rise in the local currency reaffirmed investor confidence in the Malaysian economy and its fundamentals.
Affin Hwang Investment Bank vice-president/head of retail research Datuk Dr Nazri Khan Adam Khan said the local currency was expected to move back to an ideal level of 3.5 and below against the greenback.
The ringgit had earlier been undermined by speculations, including that of the 1Malaysia Development Bhd and of rating downgrades.
“However, with the current US dollar retreat and as Bank Negara Malaysia has yet to increase its rate, there might be positive outlook for our currency,” he said. — Bernama
