KUALA LUMPUR: Bank Negara Malaysia today said greater coordination between the central bank and the government has had an immediate impact on market flows and an increased market interest in buying ringgit.
In a statement by BNM's Financial Markets Committee (FMC), it said this included stepping up coordination with government-linked companies (GLCs) and government-linked investment companies (GLICs) to encourage them to repatriate foreign investment income, and convert that income into ringgit more consistently, playing their roles to support the ringgit amidst challenging global environment.
The FMC said the potential for further conversion to ringgit could be high, given the prevailing level of foreign currency balances onshore.
"The FMC noted that BNM will enhance engagements with corporates and investors to further encourage conversions and strengthen market sentiment on the ringgit.
"The FMC also noted global investors' continued confidence in the Malaysian financial market," it said in a statement.
The statement was released after the FMC convened today in a meeting to discuss recent developments in the ringgit foreign exchange market.
The FMC concurred with the assessment that the current level of ringgit is undervalued, particularly as Malaysia's economic fundamentals continue to be strong and the economic prospect is positive.
FMC chairman and BNM deputy governor Adnan Zaylani said it was a good and informative meeting.
"Based on the insights shared, the prospect for ringgit to strengthen from here is strong," he noted.
According to the FMC, on a year-to-date (YTD) basis, the FBM KLCI rose 6.7 per cent, supported by US$422 million inflows from non-resident investors.
Long-term government bond holdings by non-residents continued to be stable at around 22 per cent while the foreign exchange market remains vibrant with a healthy daily turnover of US$15.3 billion.
"These will continue to facilitate efficient intermediation in the economy," it noted.
Meanwhile, Standard Chartered Bank Malaysia head of treasury Sylvia Wong as saying that the bank has seen balanced flows from both corporates and institutional investors as the ringgit continues to be traded in an orderly manner.
She said external factors, namely US rate hike expectations, continue to dictate regional FX movements, including the ringgit.
"Once US rate cut visibility improves, bilateral exchange rates valuation against the US dollar should improve," she added.
Allianz Malaysia Bhd chief investment officer Wong Siew Lin also said the positive equity performance YTD has not been observed for a while and the rally has been evidently broad-based in nature.
She noted that the main market has also outperformed the small-caps this year.