KUALA LUMPUR: The bumpy ride in Malaysia’s financial markets is about to get bumpier as expectations for an uptick in foreign and domestic investor sentiment following the appointment of Mr Anwar Ibrahim as premier in November last year have dissipated.
MIDF Research blamed the depreciation of the currency on the “sharper-than-expected decline in exports, subdued global manufacturing activities and the limited boost from China’s port-reopening economy”.Typical policy responses to bring stability to a depreciating currency would be to raise interest rates or intervene directly in currency markets through large purchases of the local unit by the central bank.
Bank Muamalat chief economist Mohamed Afzanizam Abdul told CNA that the pressure on the ringgit was a result of the interest hikes in the US, geopolitical tensions involving China and the fluctuation in commodity prices. This is because the country’s heavy reliance on imports for food products has been a major source of rising inflationary pressures.
“There is a real urgency for the government to revisit the agri-food sector,” said Mr Afzanizam, who added that another issue that needs immediate government attention is the impact of the rising annual remittances by foreign workers, who make up 30 per cent of the national workforce, on the local currency.
The premier’s close advisors whom CNA spoke to grudgingly acknowledge that criticism about the focus on politics as fair. But they have argued that the upcoming electoral battle in six key states in Peninsular Malaysia represents a critical test in Mr Anwar’s overall plans to push his reform agenda for Malaysia.
The changing allegiances among the Malays has resulted in a polarised electorate, a situation that has pushed investors in the stock and currency markets to the sidelines.
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