Yes. I now have a problem with my business. 25% only. I got to check with my bank to clarify...

Except palm oil, most raw materials are imported. Holding usd is a hedge for raw material purchase. Forex volatility or depreciation increase pricing risks, making export less competitive.

Believe bnm will implement more measure making changing from myr to usd more difficult.

The purpose of forcing conversion is two fold. 1st.Discourage speculation because holding in USD after exporting and trying to time the conversion can be a form of speculation especially in excess of what is needed as working capital. 2nd is as stated to promote liquidity and depth ie some are buyers of ringgit and some are sellers. This is to promote onshore settlement of ringgit to replace the NDF. This is in line with their belief that offshore speculation is the real and only reason behind ringgit weakness and they are trying to shift all hedging and transactional activities onshore and in the process requires as much ringgit demand as possible. How else do you suggest they do it? Anything they do also got negative side one but if compared to alternative, this is the best way.

This post has been edited by aspartame: Dec 3 2016, 08:51 AM

M puzzled with the latest guidelines the whole nite
Will clarify with my RM on the mechanism as it's confusing

This is just a problem due to information being strewn everywhere.

See this. http://www.bnm.gov.my/index.php?ch=en_pres...ac=4316&lang=en
"Residents without domestic ringgit borrowing shall continue to enjoy flexibility of investing in foreign currency assets both onshore and abroad up to any amount"

Basically, bnm is running short of usd.

Bnm could increase mgs yield, bank interest rate to attract mgs foreign holders to stay.

This measure is to prevent people to borrow myr to buy usd. Wonder how many company and individual is without domestic myr borrowing?


This post has been edited by icemanfx: Dec 3 2016, 09:11 AM

I think got mistake lor..
Its make no sense

Morning, gents,...

I would interpret #10 exactly as is written, ie if no borrowings, then can invest without limit in onshore assets. In this case, FOR OFFSHORE ASSETS, since it is silent on this clause, then status quo remains, or follow the relevant statements in the article by Sesshoumaru.

I think the recent rulings are more targetted towards exporters only, for the bulk of it comes from this group. I think for private investors, no so much focus,..... yet.

But having said the above, I really don't know when will the turn for private investor comes,...

not sure if this makes it clearer...

I did think of the above tactic too, with regards to exporting companies, until I came across the following excerpts. In fact, I recalled somewhere that is is not legal to park proceeds in overseas financial institutions after collecting payments from overseas customers.

" At the moment, exporters are required to bring back their proceeds into Malaysia within three months of completing a transaction. However they are allowed to hold the proceeds in foreign currencies. "

Meaning, previously,... exporting companies are allowed to park their proceeds in the foreign currencies that they collected their payments in, ie no need to convert back into the RM. This proceeds are to be kept in local FCAs - Foreign Currency Accounts, be it in the USD, AUD, etc,...When kept in local FCAs, BNM will still 'have control' over this money.

As of yesterday, and effective from Monday onwards, BNM has imposed an additional ruling onto the money kept in the FCAs :-

" Among the measures are that exporters are to convert 75% of their proceeds into ringgit effective Monday. "

Hence, mathematically, 75% of the FCA amounts will be CONVERTED into the RM NEXT WEEK ! , indirectly, buying the Ringgit and selling the foreign currencies, especially the USD !!! What is the boost here then ? According to calculations by BNM :-

" The amount held by exporters in foreign currencies is estimated to be closer to RM90bil. At current exchange rate of dollar and ringgit, the gradual conversion of the export proceeds could result in Bank Negara’s reserves increasing by more than US$18bil (based on an exchange rate of RM4.44 to the dollar). "

Adding USD 18Bil to our current reserves of USD 96Bil is adding 20% strength onto the Ringgit, ie, again, mathematically, the Ringgit should strengthen by 20% against the major foreign currencies by end of next week.

And what is the early effect seen ????????????

" Bank Negara’s measures were immediately felt in the offshore market. For the first time in recent weeks, the ringgit strengthened against the US dollar in the offshore market closing at RM4.44 yesterday evening. In the domestic market, the ringgit closed at RM4.45 against the dollar, weakening marginally. "



Any opinions, forummers ??

Edited : Sorry, forummers, forgot to add the link of my source,... lest you guys think I made up this story : http://www.thestar.com.my/news/nation/2016...nd-for-ringgit/

This post has been edited by Hansel: Dec 3 2016, 11:02 AM

this must be the only "big" thing BNM found they can do to help the RM.

i think there will be short term effects effects, RM will recover a bit.

longer term... i see this discouraging some sectors.

FDI or JV's will almost certainly reduce further since this is simply a form of capital control.



No surprise BNM resort to this kind of cap control. they have consistently said, "no pegging" but never said "no cap control"!

No.

http://www.bnm.gov.my/documents/2016/faq_i...cial_market.pdf

See item 22.

So there won't be an immediate boost right of the bat with the existing balances, mandatory speaking anyways. Only if the corps decide to just liquidate all FC into MYR (voluntary) will the immediate shoring of reserves happen.

Edit: Some typos and additional info.

This post has been edited by Sesshoumaru: Dec 3 2016, 11:14 AM

Tq bro AVFAN,... always a pleasure to see your postings. I'll comment to some sentences below :-

QUOTE

Other measures to increase the demand for the ringgit include placing a cap on the amount that companies and individuals can invest locally or abroad in foreign currencies.

At the moment, companies and indivi­duals with loans tied to local banks can only invest a certain amount abroad for instance to purchase companies or properties.

Comment : I wonder credit card debts are regarded as loans ties with local banks ? If they are, then we have to pay-up the credit card debts first before doing a TT ??? Doesn't make sense. Maybe can-lar,....

By the way, if this is going to be enforced (don't know how they are going to do this though), then, yes, this step will certainly cut out a lot of potential overseas investors. Everybody has at least a bank loan or a car loan.

For companies with loans, the limit is RM50mil while for individuals, it is RM1mil.

Comments : Only 1Mil for individuals ?? If the Ringgit falls, then that RM1Mil is GOING TO BE BREACHED. Then what happens ?? Must selloff our assets in excess of RM1Mil overseas, instruct our overseas banks to wire-transfer the proceeds back to Maybank and Public Bank in RM ? This is not practical,... how to follow,.. and furthermore, how are they going to oversee this ??? Err,... enforce a ruling telling everybody to declare all their overseas assets ??

However, there are no restrictions for companies and individuals if they want to invest in foreign currency assets in the domestic market.

Comment : Of course there is no cap here, they can anytime force you to convert back into the RM as and when they pleased. Now they are doing it to the exporting companies.

“Companies and individuals tend to buy US dollar bonds or investment instruments sold by local banks by taking borrowings from local banks. Now there will be a cap on this,” said a dealer.

Comment : This is speculative. Maybe, to curb speculative activities, this is right. Otherwise, speculators will get burnt when the timing is wrong,... unless they don't have to pay back, like some 'powerful' individuals in the country - they don't have to pay back if they lose. The majority must pay back.

Effective Monday, local companies and individuals with borrowings can only invest up to RM50mil and RM1mil respectively in foreign currency denominated assets in the domestic market.

Comment : Let's see how they enforce this,....


In summary,..............BNM is closing the doors too !!!!!!!!!!!!!

for new proceeds can expect a variety of responses from exporters.

some have comply fully, some may find new ways to export and keep fx outside.

overall, i think RM will recover a bit, but this is a dampener for aspiring exporters.

this is a huge misstep, the longer term implication on businesses is very big


big businesses will start planning to de-base from msia, making here as "branch", keep only minimal working capital locally.
who wants to keep retained profit here if they are forced to convert to myr ? it's messing up their m&a plans

actually, the formality of control over using local debt to buy fx even domestically existed for some time now with local banks.

either just the banks were self prepared or BNM is now invoking this control on all local banks/brokers.

becos 2 yrs ago, i was asked (verbally only) by my local banker if i have any property loan as i do buy sgd/usd stocks with local brokers.

now, i'm quite sure they will soon get everyone to declare and sign some document.

Hmm,... if we're talking abt future amts coming back, then why did that asst giv mentioned abt the current improvement that can be enjoyed ?

"The amount held by exporters in foreign currencies is estimated to be closer to RM90bil. At current exchange rate of dollar and ringgit, the gradual conversion of the export proceeds could result in Bank Negara’s reserves increasing by more than US$18bil (based on an exchange rate of RM4.44 to the dollar)."

And why is the Asst talking all the time ??? Where is the main man ??? I keep asking this,....

completely agree with you.
short term positive.
long term negative.
prorbably election will be called within 6months.

i think that's just an upbeat projection based on existing data.

possible all will convert voluntarily over time, possible little will.

Yeah bro,... agreed with you. I have friends telling me that it's hard for them to TT funds out. This was many years ago.

Doors are closing,....