MARKET DEVELOPMENT
Better Trade Data to Support the Ringgit, Say Economists
Better Trade Data to Support the Ringgit, Say Economists
09/01/2015 (The Sun Daily) - Economists opine that the better-than-expected trade data for November 2014 could provide some support to the sliding ringgit as well as allay fears of a twin deficit.
Hong Leong Investment Bank (HLIB) Research in its research note yesterday said Malaysia's current account will only turn into a deficit if Brent oil price falls below the average US$50 a barrel in 2015 and crude palm oil price dips below RM2,000 per tonne.
The research house expects the stronger set of November trade data to allay fears of a twin deficit and potential downgrade by rating agencies, hence providing some support to the weakening bias of the ringgit.
However, it said the persistent weakness in oil prices will continue to dominate and weigh down on market sentiment despite a twin deficit scenario now unlikely to happen.
"In view of the unexpected weakness in crude oil price, we've widened our ringgit range forecast to RM3.35-3.60/US$ for 2015, with a mid-point forecast of RM3.50/US$," it added.
Based on average crude oil price assumption of US$70 to US$75 a barrel, Maybank IB Research projects a trade surplus of RM78.3 billion for 2015, which is slightly lower than the estimated RM79.9 billion for 2014.
"We reiterate our view that the likely scenario is that of narrower trade surplus and current account surplus," it noted.
For every US$10 per barrel drop in annual average crude oil price, it is estimated that the trade and current account surplus could be slashed by RM4 billion.
Maybank IB Research also pointed out that the expected dampening effect of lower crude oil prices on the oil & gas industry's investment could to lead to slower imports of related capital goods, which can help towards sustaining the trade surplus.
BIMB Securities said persistent weakness in the Eurozone, Chinese and Japanese economies remain a concern and could still pose a downside risk to Malaysia's export growth.
However, it said forward-looking indicators of demand for electronics and machinery and equipment in industrialized economies still appear positive, which could help mitigate significant downside risks to sustained growth in external demand.
Due to an uneven and modest global economic recovery, BIMB Securities expects exports to experience a modest improvement in growth, but will remain supported by a weaker ringgit.
"Looking ahead, exports outlook for the first-half of the year remains choppy, given the weak global recovery, with any improvement in global demand likely coming through only in the second-half of the year. On balance, we foresee real exports to register a less robust growth in 2015," it said.
Hong Leong Investment Bank (HLIB) Research in its research note yesterday said Malaysia's current account will only turn into a deficit if Brent oil price falls below the average US$50 a barrel in 2015 and crude palm oil price dips below RM2,000 per tonne.
The research house expects the stronger set of November trade data to allay fears of a twin deficit and potential downgrade by rating agencies, hence providing some support to the weakening bias of the ringgit.
However, it said the persistent weakness in oil prices will continue to dominate and weigh down on market sentiment despite a twin deficit scenario now unlikely to happen.
"In view of the unexpected weakness in crude oil price, we've widened our ringgit range forecast to RM3.35-3.60/US$ for 2015, with a mid-point forecast of RM3.50/US$," it added.
Based on average crude oil price assumption of US$70 to US$75 a barrel, Maybank IB Research projects a trade surplus of RM78.3 billion for 2015, which is slightly lower than the estimated RM79.9 billion for 2014.
"We reiterate our view that the likely scenario is that of narrower trade surplus and current account surplus," it noted.
For every US$10 per barrel drop in annual average crude oil price, it is estimated that the trade and current account surplus could be slashed by RM4 billion.
Maybank IB Research also pointed out that the expected dampening effect of lower crude oil prices on the oil & gas industry's investment could to lead to slower imports of related capital goods, which can help towards sustaining the trade surplus.
BIMB Securities said persistent weakness in the Eurozone, Chinese and Japanese economies remain a concern and could still pose a downside risk to Malaysia's export growth.
However, it said forward-looking indicators of demand for electronics and machinery and equipment in industrialized economies still appear positive, which could help mitigate significant downside risks to sustained growth in external demand.
Due to an uneven and modest global economic recovery, BIMB Securities expects exports to experience a modest improvement in growth, but will remain supported by a weaker ringgit.
"Looking ahead, exports outlook for the first-half of the year remains choppy, given the weak global recovery, with any improvement in global demand likely coming through only in the second-half of the year. On balance, we foresee real exports to register a less robust growth in 2015," it said.