Inve$t | Market Sentiments | 30 June 2023
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According to Economy Minister Rafizi Ramli, intervention in the forex market is a normal and routine matter for Bank Negara Malaysia (BNM), which continuously monitors capital inflows and outflows. There is a need for BNM to monitor the currency rate movements amid certain situations, especially those involving a large amount of Ringgit. An example is when an export firm exports goods and receives the payments in USD, so the currency being retained in Malaysia is not in Ringgit. If the foreign currency amount is large and the situation persists, it will obviously have an impact on the Ringgit.
That is the context for BNM’s intervention for the need for detailed knowledge of factors other than global ones that influence currency values. He was speaking at a press conference on Wednesday (June 28) when commenting on BNM’s recent statement on its intervention in the forex market.
BNM assistant governor Adnan Zaylani, who is also the Financial Markets Committee (FMC) chairman had said in a statement on Tuesday that BNM would intervene in the forex market to stem currency movements that were deemed excessive. While the value of the Ringgit will continue to remain market-determined, BNM expects that ongoing measures by the government to further strengthen the economy will help ensure that the Ringgit better reflects the country’s fundamentals. The FMC said the extent of the recent depreciation of the Ringgit was not reflective of the country’s economic fundamentals.
Rafizi said that the moderation of inflation rate to 2.8% in May 2023 was the lowest level since the inflation downtrend that began in September 2022 at 4.5%. The lower May 2023 inflation signals a broad decline across all spending categories, marking a comprehensive price stabilisation. He was optimistic that the inflation rate downtrend would continue based on forecasts and data as well as the domestic and international macroeconomic situations.
The LI recorded 108.4 points in April 2023, reflecting Malaysia’s challenging economic scenario – DOSM
The Leading Index (LI) is a predictive tool used to anticipate economic upturns and downturns in an average of four to six months ahead. According to the Department of Statistics Malaysia, the Leading Index for Malaysia declined further to negative 2.7 per cent, registering 108.4 points in April 2023 as against 111.4 points in the preceding year. Decreases were recorded in all of the LI component, which resulted in a softer performance except the Number of Housing Units Approved showed an uptick. Concurrently, the monthly LI dropped 1.6 per cent in April 2023, as opposed to negative 1.1 per cent in the previous month. Apart from Expected Sales Value in Manufacturing, most components similarly experienced downturns.
The April smoothed LI growth rate remained below the 100.0 points trend for seven consecutive months, reflecting Malaysia’s challenging economic outlook in the near term, with global economic conditions adding to the challenges. In terms of the current economic situation, the Coincident Index (CI) registered 121.8 points in April 2023, an increase of 2.2 per cent compared to 119.2 points in the same month of the previous year.
The increase in the Volume Index of Retail Trade (9.5%) contributed significantly to this growth. Meanwhile, the CI decreased by 0.1 per cent month on month, owing to the unfavourable performance of the Industrial Production Index (1.0%).
Eye On The Markets
On Wednesday (28June), the Ringgit closed at 4.6720 against the USD and 3.4568 to the Sing Dollar. On Monday (26June), the FBM KLCI opened at 1391.55. As at Friday (30June) 9:00am, the FBM KLCI is down 3.03 points for the week at 1388.52. Over in US, the overnight Dow Jones Industrial Average closed up 269.76 points (+0.80%) to 34,122.42 whilst the NASDAQ shed 0.42 points (-0.02%) to 13,591.33.