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Ringgit To Improve, Currency Undervalued, Stocks Cheap

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KUALA LUMPUR: A seasoned fund manager, Mark Mobius expressed optimism that the ringgit will improve and that issues surrounding 1Malaysia Development Bhd (1MDB) will not have a long-term impact on Malaysia.

According to Mobius, who is the executive chairman of Templeton Emerging Markets Group, foreign funds would eventually return to Malaysia given the undervaluation of the ringgit and the inexpensive valuations of Malaysia’s market.

“The ringgit is so undervalued now… a lot of companies here are doing well, so funds will come back,” he explained at a press conference at the Global Islamic Finance Forum 5.0 here yesterday.

According to Mobius, the ringgit, which he estimated to be undervalued by around 24% against the US dollar, was expected to strengthen over time.

After falling to its seven-week low to close at around 4.049 against the US dollar on Tuesday, the ringgit rebounded yesterday to around 4.038 against the greenback.

Mobius said Templeton at present remained “overweight” on Malaysia. “We remain a net buyer of Malaysian stocks.”

“The strategy is to hang in there and not get sidetracked by individual news,” Mobius said.

On issues surrounding 1MDB, Mobius said there could be a short-term knee-jerk reaction to the negative news on the fund.

“However investors would eventually refocus to look at individual company performance and the fundamentals of the country’s economy. News about 1MDB is short term in nature. It is not going to have a long-term impact on Malaysia’s economy,” Mobius said.

“It will not affect investors’ confidence. Investors tend to look at individual company performance and the general stability of the market,” Mobius said.

According to Mobius, the current outflow of foreign funds from Malaysia’s equity market was merely a temporary phenomenon as investors react to negative news from various fronts.

Expressing confidence in Malaysia’s economy, Mobius said the country’s balance of payment remained at healthy levels and its vibrant services sector continued to be key support of growth.

Meanwhile Bank Negara governor Datuk Muhammad Ibrahim said investor sentiment towards Malaysia’s capital market would improve once issues surrounding 1MDB were resolved.

“The resolution of 1MDB will improve market sentiment,” Muhammad said.

“The Government has issued statement (saying) that it would honour all commitments, and I have no doubt that the Government would honour all its obligations,” Muhammad said after launching five books at the forum.

In his first keynote address as the central bank governor, Muhammad acknowledged the fact that Islamic finance was one of the fastest growing segments of the financial industry in many parts of the world.

“It registered double-digit growth rates in the past decade despite challenging circumstances globally. Its reach and influence has expanded beyond the traditional Islamic markets, with increasingly strong footholds in banking, takaful and the capital market,” he said.

He pointed to global sukuk issuances, for instance, which increased 13% in the first quarter of 2016 despite less favourable market conditions.


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