The Malay Mail Online (06/01/2018) - KUALA LUMPUR, Jan 6 — The strengthening of the ringgit against the US dollar to break the psychologically significant 4.0 level to US$3.99 — a 16-year high — is testimony to the strength of the Malaysian economy.

The country continues to rake in good economic numbers, bolstered by rising oil prices, with analysts and international organisations agreeing that GDP growth will trend above the five per cent level.

With increased momentum in the economy, the International Monetary Fund (IMF) said the country is now more resilient than it was in recent years.

Real GDP growth has surprised observers on the upside, growing at 5.9 per cent year-over-year in the first three quarters of 2017.

Malaysia is also expected to ride on the back of a global trade recovery and pick up in domestic spending.

Higher oil prices have allowed Prime Minister Datuk Seri Najib Razak to channel funds to voters burdened by rising living costs.

This has allowed him to give more goodies to the people while adhering to the fiscal discipline of narrowing the budget deficit to 2.8 per cent of GDP this year, from an estimated three per cent in 2017.

IMF team mission leader Nada Choueiri said: “For the year as a whole, growth is projected at 5.5 to six per cent, still driven by domestic demand and robust exports. On the external side, the current account balance surplus has increased, helped by strong exports.”

World Bank Group Malaysia and Thailand director for regional partnerships, Dr Ulrich Zachau said the economy is expected to remain strong in 2018.

He said accelerated growth has been fuelled by strengthening domestic demand, improved labour market conditions and wage growth, as well as improved external demand for manufactured products and commodities.

He said as Malaysia is expected to achieve high-income status in the next few years, it is important to increase per capita income of all groups, particularly those in the Bottom 40 (B40).

Meanwhile, upbeat economic data released this week, particularly in the US, Europe and China, and the recent influx of foreign funds into the Malaysian equities market, also supported the renewed confidence in the country’s economy, Bernama reported.

The local currency finished 100 basis points or 0.25 per cent better versus Thursday’s 4.0050/0080.

Inter-Pacific Securities Sdn Bhd research head Pong Teng Siew said the market saw foreign funds inflow after Bank Negara Malaysia hinted at a rate hike during its Monetary Policy Committee meeting in November.

“Regionally, the ringgit outperformed its peers, including the Thai baht.

“I believe the ringgit will undergo profit taking after a rally, but movement will be confined within a narrow range of between 4.06 and 4.07.

“That’s the lowest level it will go. Overall, there is still more room for the ringgit to appreciate,” he told Bernama.

Traders also said the local currency is fundamentally just as strong as the baht.

The ringgit also improved against a basket of major currencies.

It climbed against the Singapore dollar to 3.0081/0123 from Thursday’s 3.0129/015 and rebounded vis-a-vis the yen to 3.5279/5333 from 3.5584/5614 on Thursday.

The local unit appreciated against the euro to 4.8116/8192 from Thursday’s 4.8228/8280 and rose versus the British pound to 5.4048/5132 from 5.4240/4296 on Thursday.

Meanwhile, the bull run on Bursa Malaysia continued yesterday, pushing the Composite Index (CI) to end at an intra-day high of 1,817.97, while driven by persistent buying momentum across the board, dealers said.

The benchmark FTSE Bursa Malaysia KLCI moved above the 1,800-level throughout the day, closing 14.52 points or 0.81 per cent higher from the 1,803.45 recorded on Thursday.

It opened 1.34 points firmer at 1,804.79 and went as low as 1,803.81 at one point.

The barometre index rallied on gains in blue chips led by Axiata, CIMB, Genting Malaysia, Press Metal, Genting and Sime Darby, with a total contribution of 11.26.

The strong bull run resulted in a relatively high turnover of 5.836 billion shares worth RM3.943 billion compared with 5.05 billion shares valued at RM3.28 billion on Thursday.

Regionally, the ringgit outperformed its peers, including the Thai baht. Overall, there is still more room for the ringgit to appreciate.

Besides strengthening against the US dollar, the ringgit has also improved against the Singapore dollar, the baht, the yen, and the euro.