Posted on 29 Jul 2015
The ringgit, per se though did not change much compared with the day before. As at 5pm yesterday, the ringgit was trading slightly higher at 3.8140 against the US dollar compared to 3.815 to the dollar on Monday.
On the stock market, the FBM KLCI fell 10.06 points or 0.59% to an all-day low of 1,699.70 points yesterday on heightened political uncertainties. There were 726 losers against 197 gainers on the local bourse.
An analyst who declined to be named expects the ringgit to continue to come under pressure as any political uncertainties will shake investors' confidence, especially when involving the controversial 1Malaysia Development Bhd (1MDB) proceedings.
BIMB Securities economist Imran Nurginias Ibrahim told SunBiz that the ringgit is expected to remain under pressure in the second half of the year, especially with the anticipated first US rate hike in September.
"If the people view the reshuffling of the cabinet as the government's preparation for the upcoming election, it might be positive. But if the people think it is related to the current issues of 1MDB, then people might see it negatively," he added.
Imran expects the country's international reserve to fall below US$100 billion (RM381 billion) soon on the back of continuous intervention by the central bank in propping up the decline of the ringgit. As at mid-July, Malaysia's international reserve stood at a five-year low of US$100.5 billion.
Nevertheless, Imran stressed that the performance of the ringgit will be driven largely by external factors, with 3.83 and 3.79 as the resistance and support levels respectively.
Fundamentally, he said Malaysia is still strong among the region, with a trade surplus. He is maintaining the reasearch firm's gross domestic product (GDP) growth projection of at least 5% for 2015.
"The economy should pick up in the second quarter, but it also depends on export and our exports have been declining," he added.
Meanwhile, Etiqa Insurance & Takaful head of research Chris Eng said the impact of the reshuffling of the cabinet will be determined by public acceptance.
"The concern that investors have is whether (any parties) will challenge this cabinet reshuffle. If there is a challenge made by certain quarters, then there will be greater political uncertainties and the market will drop further towards 1,680 and 1,670 (points) kind of levels.
"At the end of the day, it's not so much on the reaction towards the cabinet reshuffle. The market will react towards whether or not this cabinet will be accepted by all parties," he said.
Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew opined that the stock market reacted negatively yesterday to the country's latest political development, with the FBM KLCI dropping below the 1,700-point psychological level.
He foresees a continued tougher market for the second half of the year as it has been trending down for more than a year after hitting the peak in July last year.
Another analyst said that Standard & Poor's (S&P) affirmation
on Malaysia's credit rating is unlikely to have a significant impact on
the country.
"The benefit of it is not going to be reflected anywhere, even the currency or equity markets … nothing positive now," he noted.
