Dec 18 2016, 07:00 PM
http://www.wsj.com/articles/malaysias-vulnerability-exposed-by-dollars-ascent-1481843998
QUOTE
Foreign investors are fleeing the country’s stock and bond markets
Malaysia has been one of Asia’s worst-hit economies amid the continued climb of US interest rates and the dollar.
Foreign investors sold $5.3 billion of Malaysian stocks and bonds in November, the largest monthly outflow since September 2011, according to ANZ Bank. That is almost a quarter of the $22.1 billion pulled from emerging markets in the region, excluding China.
The bulk of the selling was in Malaysia’s bond market. The $4.5 billion of bonds sold by foreigners in November, in ringgit terms, marks the biggest monthly debt outflow on record, according to ANZ.
The ringgit was one of Asia’s worst-performing currencies in the aftermath of the US election, and Malaysia’s central bank has been tapping the country’s already low level of reserves to support it. Last month, Bank Negara clamped down on offshore currency speculators, a worrying echo of its maneuvers to stem capital outflows during the Asian financial crisis of the late 1990s.
Despite the government’s various attempts to support the currency, the ringgit has lost 6.5 percent of its value against the greenback since the US election, hitting a nearly 19-year low on November 30. On Thursday, the currency weakened 0.9 percent, following the Federal Reserve’s announcement of its first rate increase in 2016.
Malaysia’s Achilles’ heel is the high level of foreign ownership of its government bonds. Foreign money is flighty, a factor that can accelerate a liquidity crunch during times of stress. While the latest rash of selling cut the proportion of foreign ownership to 48 percent in November from 52 percent a month earlier, the percentage is still very high for an emerging market.
Malaysia has been one of Asia’s worst-hit economies amid the continued climb of US interest rates and the dollar.
Foreign investors sold $5.3 billion of Malaysian stocks and bonds in November, the largest monthly outflow since September 2011, according to ANZ Bank. That is almost a quarter of the $22.1 billion pulled from emerging markets in the region, excluding China.
The bulk of the selling was in Malaysia’s bond market. The $4.5 billion of bonds sold by foreigners in November, in ringgit terms, marks the biggest monthly debt outflow on record, according to ANZ.
The ringgit was one of Asia’s worst-performing currencies in the aftermath of the US election, and Malaysia’s central bank has been tapping the country’s already low level of reserves to support it. Last month, Bank Negara clamped down on offshore currency speculators, a worrying echo of its maneuvers to stem capital outflows during the Asian financial crisis of the late 1990s.
Despite the government’s various attempts to support the currency, the ringgit has lost 6.5 percent of its value against the greenback since the US election, hitting a nearly 19-year low on November 30. On Thursday, the currency weakened 0.9 percent, following the Federal Reserve’s announcement of its first rate increase in 2016.
Malaysia’s Achilles’ heel is the high level of foreign ownership of its government bonds. Foreign money is flighty, a factor that can accelerate a liquidity crunch during times of stress. While the latest rash of selling cut the proportion of foreign ownership to 48 percent in November from 52 percent a month earlier, the percentage is still very high for an emerging market.
This post has been edited by wu ming: Dec 18 2016, 07:02 PM
Quote
0.1237sec
0.32
7 queries
GZIP Disabled