Ringgit depreciates 1.5 pct in Q2 on NR portfolio outflows

KUALA LUMPUR, The ringgit depreciated 1.5 per cent in the second quarter against the US dollar in tandem with regional peers amid global and domestic uncertainties.

Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus said the depreciation of ringgit was driven mainly by non-resident ( NR) portfolio outflows as investors sentiment remained subdued.

For the first two months of the quarter, domestic financial markets were affected by cautious investors sentiment amid the moderating global growth outlook and escalation of the global trade tensions.

These uncertainties remain elevated and continue to dampen investors risk appetite towards regional financial markets, including Malaysia, she said in a press conference announcing the second quarter Gross Domestic Product, here today.

Domestically, Nor Shamsiah said potential reviews on Malaysia’s inclusion in the FTSE Russell World Government Index also weighed down sentiments in the domestic bond market.

As a result, NR portfolio outflows of RM5.1 billion had led the ringgit to depreciate by 1.5 per cent, she said.

She noted that from July 1 to Aug 15, the ringgit depreciated by 1.2 per cent against the greenback and slipped 1.3 per cent for year-to-date, and going forward, the confluence of global factors would continue to have bearing on the regional currencies movement, including the local currency.

Despite weak sentiments, domestic bond and equity markets remained supported by sustained demand from domestic institutional investors throughout the quarter.

The performance of domestic bond and equity markets were also lifted by a recovery in investor sentiment towards the end of the quarter on expectations of monetary policy easing by major central banks which led to the improvement in investors risk appetite, spurring the NR portfolio inflows, she said.

NR holdings of Malaysian Government bonds registered a net inflow since June and as at July this year, it stood at 22.2 per cent of the total holdings, said Nor Shamsiah.

She added the country’s liquidity conditions remained sufficient to facilitate financial intermediation despite the decrease in the level of surplus liquidity placed with the central bank, reflecting the net outflows the quarter.

Source: BERNAMA (News Agency)