Ringgit Rallies With Stocks as Oil Rebound Eases Deficit Concern

by Elffie ChewLilian Karunungan

(Bloomberg) -- Malaysia’s ringgit gained the most since September 2013 and the benchmark stock index headed for the highest close in two months as a rally in the price of oil eased concern the nation’s finances will deteriorate.
The currency climbed 2.1 percent from Jan. 30 to 3.5555 a dollar as of 11:48 a.m. in Kuala Lumpur as markets reopened after holidays on Monday and Tuesday, according to prices from local banks. Brent crude jumped 5.8 percent on Tuesday and has increased almost 19 percent in five days to $57.40 a barrel.
The price of the commodity had fallen to as low as $45.19 on Jan. 13, the least since 2009, causing the government to revise its 2015 fiscal deficit target to 3.2 percent of gross domestic product from 3 percent. Prime Minister Najib Razak has reduced this year’s growth forecast to 4.5 percent to 5.5 percent from as much as 6 percent. Malaysia is Asia’s only major net exporter of oil.

“Brent is still up from its low in January and the ringgit’s rise is
catch-up to the move as the Malaysian markets were closed in the past two days,” said Nizam Idris, Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. “The crude oil price increase also gives the perfect excuse to people who are long dollar-ringgit to sell.”
One-month implied volatility in the ringgit dropped 20 basis points to 9.98 percent, adding to Tuesday’s 60 basis-point slide, according to Bloomberg-compiled data.

Stocks Climb

The FTSE Bursa Malaysia KLCI Index of shares climbed 1.3 percent and headed for its highest close since November. SapuraKencana Petroleum Bhd., the nation’s biggest oilfield services contractor by market value, surged 6.7 percent, the most this year. Petronas Chemicals Group Bhd. rose 4.9 percent. The Standard & Poor’s 500 index of U.S. equities advanced 1.5 percent Tuesday.
“Markets are taking their cue from the U.S. market and oil prices,” said Ang Kok Heng,the Kuala Lumpur-based chief investment officer of Phillip Capital Management Sdn., which manages $428 million. “The oil rebound benefits Malaysia. There is less pressure on the ringgit.”
A report Thursday may show Malaysia’s exports rose 0.9 percent in December from a year earlier, according to the median estimate in a Bloomberg survey. Overseas sales increased 2.1 percent the previous month.
Global funds cut holdings of Malaysian debt, both government and corporate, by 4.5 percent to 225.9 billion ringgit ($63.3 billion) in December, adding to the 5.8 percent outflow in November, according to the central bank’s website.
Three-year sovereign bonds rose, with the yield falling two basis points to 3.51 percent, data compiled by Bloomberg show. The yield on 10-year notes dropped two basis points, or 0.02 percentage point, to 3.78 percent.