Markets relieved as Malaysia taps Zeti's deputy as central bank chief

by **Cals** Thu 28 Apr 2016, 03:18

Markets relieved as Malaysia taps Zeti's deputy as central bank chief

By Reuters / Reuters | April 27, 2016 : 8:20 PM MYT

KUALA LUMPUR/SINGAPORE (April 27): Malaysia appointed as central bank governor, a deputy to its widely-respected, longtime leader — a move welcomed by markets anxious about economic and political problems confronting the country.

Muhammad Ibrahim, 56, comes in at a time when Prime Minister Najib Razak faces political pressure and the economic challenges are the biggest since the 1997-98 Asian financial crisis.

Making the appointment on Wednesday, Najib expressed confidence that under Muhammad's leadership, Bank Negara Malaysia "will continue assisting the government with advice to further strengthen Malaysia's economy, as well as managing monetary policy, and regulating and developing the financial services industry".

Markets players see Muhammad as a non-political candidate approved by outgoing governor Zeti Akhtar Aziz.

The appointment "is positive on the ringgit as the new governor is from the central bank rather than the government", said Qi Gao, an emerging Asian currency strategist for Scotiabank in Hong Kong.

The ringgit turned firmer after the announcement and strengthened to 3.9080 per dollar. It stood at 3.9110, up 0.4% from the previous close, as of 0824 GMT.

Qi said that if the Federal Reserve remained "dovish" at its meeting this week, "we will see more portfolio inflows to Malaysia".

Muhammad, who will begin a five-year term on May 1, will chair his first policy meeting on May 19. His first public appearance should be when first quarter growth figures are announced on May 13.

In a statement, Zeti said Muhammad's appointment was positive.

"Being part of our policy team at the bank will provide continuity and the much needed certainty in this prevailing period of great uncertainty," she said.

Zeti's steady hand

After Zeti's steady hand on the tiller for 16 years, businesses and investors will be looking for policy continuity and assurances about the central bank's independence.

"Clearly we got a good outcome today... wouldn't really say it's a game changer for the economic situation, but what it basically says is we going to get policy continuity from the central bank," said Brian Tan, a Singapore-based analyst with Nomura.

Last year, the ringgit was Asia's worst performing currency, losing nearly 19% against the U.S. dollar as the economy was hit by tumbling commodity prices and by a political crisis engulfing Najib, after reporting of foreign transfers made into a personal bank account, and state-run fund 1Malaysia Development Berhad, which has huge debts.

This year, the ringgit has strengthened, though economic concerns, including weak consumption remain.

Zeti, who steps down on April 30, was named as one of the world's best central bank chiefs by Global Finance magazine in 2009.

Muhammad had been one of Zeti's deputies since 2010. During a career spanning 32 years with the central bank, Muhammad held a key role during the Asian financial crisis as managing director of Danamodal Nasional Berhad, a bank recapitalization agency.

The new governor is a member of the central bank's monetary policy committee and is an independent director on the board of national oil firm Petronas.

A chartered accountant and University of Malaya graduate, he holds a master's degree from Harvard University and a postgraduate diploma in Islamic banking and finance from the International Islamic University Malaysia.

Southeast Asia's third-largest economy grew 5% in 2015, slowing from 6% in 2014. In January, Najib cut this year's forecast to 4.0%-4.5% from 4.0%-5.0%.

[size=12](US$1 = 3.9110 ringgit)

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