Time to trade ringgit offshore again: Aberdeen

 

People who attacked the ringgit a decade ago are not going to raid the ringgit today because they can't borrow the money to do so anymore, says Aberdeen Asset Management

IT IS time for the ringgit to be traded offshore once more as Malaysia's fundamentals are a lot healthier than they were 10 years ago, said Aberdeen Asset Management managing director Gerald Ambrose.

He said the authorities should not fear another raid on the currency as there is "no fundamental reason for shorting the ringgit".

"People who attacked the ringgit a decade ago, they are not going to raid the ringgit (today) because firstly they can't borrow the money to do so anymore and secondly, the ringgit is one currency that should be a lot stronger than it is now," he said.

Ambrose spoke to reporters on the sidelines of the 13th capital market summit organised by Asli (Asian Strategy and Leadership Institute) in Kuala Lumpur yesterday.

He pointed out that when the ringgit was pegged in 1998, it was due to concerns that it would be further sold down as Malaysia had current account and bank payment deficits.

"But now our current account and Bank Negara's reserves are very healthy ... if we free float the ringgit tomorrow, it will strengthen dramatically," said Ambrose.

He said Malaysia should not worry about losing its export competitiveness and compare it against other regional currencies.

"By free floating the currency, there is no need to intervene everyday and calculate where the ringgit is against other currencies ... just let the market decide, it will benefit everyone."

Earlier in his presentation titled "Regaining Foreign Investor Confidence: The Next Steps," Ambrose said Malaysia does not have structural problems like the West but will no doubt enter a cyclical slowdown.

He said compared to Malaysia's fiscal stimulus package of RM7 billion, the US Federal Reserves and US Treasury's US$8.5 trillion bailout are "serious numbers".

"Even Malaysia's 2008 forecast fiscal deficit of 4.8 per cent of gross domestic product isn't relevant anymore compared to the worsening situation in the west," he said adding that banks in Malaysia still trust one another compared with their counterparts in the US and Europe.

He added that foreign investors are exiting Malaysia not because of the country's politics or the economic situation but they have to meet their redemption calls and pay back their borrowed money.