Currency Ringgit strengthens as Malaysian shares rebound on bargain hunting

Currency
Ringgit strengthens as Malaysian shares rebound on bargain hunting

KUALA LUMPUR (Aug 25): The ringgit appreciated against the US dollar after weakening to a fresh level at 4.2685 earlier as investors bargain hunted for beaten-down Malaysian shares.
The ringgit strengthened to 4.2428 at about 11.40am. The FBM KLCI rose 13.97 points or 0.9% at 11.45am to 1,546.11.
Yesterday, the KLCI tumbled 42.53 or 2.7% to close at its intraday low of 1,532.14 as an almost 9% drop in the Shanghai Composite Index routed world markets amid China economic growth concerns.
Today, Reuters reported that volatile global markets showed signs of a respite from the recent blood-letting on Tuesday, as bargain hunters helped Asian stocks off three-year lows hit on fears that China's economy was risking a hard landing, with Chinese shares losing another 5%.
Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing's 7% target for 2015.
Investors are also unnerved by uncertainty over US monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.
Analysts and economists said the combined impact of China's slower economic growth and the strengthening US dollar on expectation of higher interest rates in the world's largest economy had forced Asian economies including Malaysia to readjust to the broader landscape.
Research firm Morgan Stanley wrote in a note it foresaw the China and US impact resulting in "systematic downside risks to the region’s (Asia) growth outlook".
"China’s strong investment growth trend has played a key role in the trend for industrial commodity prices, and the unwinding of this trend has led to a persistent downward trend in commodity prices. This will have most impact on Indonesia and Malaysia, considering their status as the net commodity exporters in the region.
"Finally, the move by the PBOC (People's Bank of China) to now target a stable trade-weighted exchange rate, rather than targeting a stable USDCNY, has meant that other economies in the region will find it more challenging to manage their own trade-weighted exchange rates, considering that the RMB accounts for a high share in the trade-weighted exchange rates of other economies in the region," Morgan Stanley said.