KUALA LUMPUR (April 18): RHB Banking Group said the recent ringgit selloff has been overdone after panic selling.
In its Rates & FX Market Update today, RHB Group Treasury head for Rates/FX Strategy Suresh Ramanathan and senior analyst Jia Wen Quek said two headlines, namely Norges Bank's announcement to slash emerging markets (EM) bonds in early April, and FTSE Russell's announcement that it may drop Malaysian debt from its FTSE World Government Bond Index on accessibility and liquidity concerns, disproportionally hit Malaysian assets, with USD/MYR touching an intraday high of 4.1455, short of the psychological 4.15 handle.
"We hold the view that markets panicked and overreacted to the news," they said, adding that removing Malaysia from the index will not impact the country's fundamentals and credit rating.
They said: "Furthermore, medium-term outlook of Malaysian bonds remain intact, which should eventually drive foreign inflows into the space:
The analysts said they see several factors that can potentially restore confidence in the ringgit over the short term, namely:
They added that Malaysia's defenses against external volatility have strengthened in recent years, which should bode well for the ringgit's medium-term attractiveness, attributing to: