Update Ringgit declines with stocks and bonds as China slows further

by **Cals** Wed 23 Sep 2015, 20:50

Update

[size=28]Ringgit declines with stocks and bonds as China slows further

By Bloomberg / Bloomberg | September 23, 2015 : 6:15 PM MYT

KUALA LUMPUR (Sept 23): Malaysia’s ringgit slid along with stocks and bonds as a measure of factory output in China added to signs Asia’s largest economy is slowing, spurring demand for the relative safety of the dollar.

Emerging-market assets have been under pressure since the Federal Reserve cited China concerns as a reason for refraining from raising interest rates last week. A measure of the Asian nation’s manufacturing fell to a six-year low, according to a preliminary Purchasing Managers’ Index released Wednesday. That further dimmed the outlook for Malaysia’s biggest trading partner, just as new probes into state investment company 1Malaysia Development Bhd.and the prime minister are once again hurting the ringgit.

“Most measures of risk appetite are suggesting elevated risk aversion,” said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong. “There’s the ongoing political scandal that isn’t resolving itself in a particularly timely manner, so all these factors are weighing against the ringgit.”

Malaysia’s currency retreated 1.2% to 4.3465 a dollar in Kuala Lumpur, taking its three-day loss to 3.3%, according to prices from local banks compiled by Bloomberg. The FTSE Bursa Malaysia KLCI Index of shares fell 1.4%, dropping for a fourth day.

Record Low

The ringgit may test its all-time low of 4.8850 seen in January 1998 due to slowing global growth, low commodity prices and “idiosyncratic political risks,” Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a research note on Wednesday. It has fallen more than any other regional currency this year amid sliding energy prices that are cutting revenue for Asia’s only major oil exporter.

The U.S. Justice Department has begun a probe into U.S. properties purchased by shell companies belonging to Prime Minister Najib Razak’s stepson and funds that appeared in the premier’s personal bank accounts, the New York Timesreported this week. Najib’s office didn’t respond to a phone call and a text message seeking comment on the report on Tuesday.

The Wall Street Journal said at the weekend that the U.S. Federal Bureau of Investigation has started looking into allegations of money laundering by 1MDB. Switzerland, Hong Kong and Singapore have also launched similar inquiries.

CDS Rise

The outlook for Malaysia has also been negatively affected by its level of short-term debt, which is relatively high compared with other Asian economies, said Royal Bank of Canada’s Trinh. The country’s debt is equivalent to 54.2% of gross domestic product, a proportion only exceeded by Sri Lanka and Pakistan among 13 emerging markets tracked by Bloomberg.

Five-year credit-default swaps protecting Malaysian sovereign bonds rose to 207 in New York on Tuesday, the highest since October 2011, before retreating to 206 in Asia, CMA prices show. The five-year government note yield advanced five basis points to 3.84%, climbing for a third day, according to prices from Bursa Malaysia.

Consumer prices rose 3.1% in August, from a year earlier, a government report showed on Wednesday. That compares with the median forecast for a 3% gain in a Bloomberg survey and follows the 3.3% increase in the previous month.
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