KUALA LUMPUR: The ringgit is extremely undervalued – by 15% to 20% – and expected to make a turnaround in the second half of next year, Standard Chartered analysts said.
Standard Chartered group chief investment strategist/wealth management, Steve Brice, said the ringgit would probably be weaker in the next three months, by three to five per cent from where it was now.
â€œBut when it rebounces, it will be better than its regional peers. It is not the time to get excessively concerned over the weakness of the ringgit as it will probably get stronger towards year-end.
â€œWe have seen significant weakness in Asian currency in the past two years but not looking at something similar in the coming 12 months,â€ he told reporters at a briefing on currency investment outlook in Kuala Lumpur on Friday.
Brice said the Malaysian market was badly affected by sentiments due to commodity prices such as crude oil and palm oil plus the US Federal Reserve interest rate move.
â€œOnce the affecting factors stabilise, Malaysia will start seeing money coming back and it will give a strong impact and support for the ringgit. For now, it is a little bit far away from that point,â€ he said.
On the equities market, head of managed investments and product management (Malaysia) Danny Chang Choon Hing, said the FBM KLCI was expected to be at 1,700-point level at year-end.
â€œIt is going to be a flat year, as it started about the same level early this year. However, it is relatively good considering current various headwinds facing the equities market,â€ he said.
Chang said when there were headwinds against the currency, commodity prices and other related economic issues in Asia, all of these factors would have an impact on Malaysian equities.
He said to foreigners, the market was currently underperforming but was in line with its regional peers with the earning growth at a pedestrian level of 5%.
â€œThat is strong but not growing fast enough from a foreign point of view and if the stocks are flat and the ringgit gets hit, they will be losing money hence making Malaysian equities looking less atrractive.
â€œIf the ringgit stabilises, valuation on the stocks gets more atrractive and growth improves, then the turnaround for KLCI might come,â€ he said.
Chang said assuming the ringgit rebounced back to the mean/average, which was about 15% from 4.4-level, the local note would be just under RM4 versus the greenback. – Bernama