Posted on 29 Oct 2015
“The ringgit has finally found its stability. It is already considered good if it doesn’t drop further as the ringgit is facing other challenges,” he told a media briefing on the fourth quarter (Q4) market outlook here yesterday.
The ringgit weakened 0.3% to 4.2720 against the greenback yesterday.
Teng said 3.80 is more reflective of the ringgit’s fundamentals, accompanied by rising international reserves and trade surplus.
“I personally think the ringgit is undervalued at 4.20 to 4.30 level. The current level seems a bit stretched and oversold. But the long-term fair value will depend on the economic cycle and the policy that we have is in the right direction,” he stressed.
The movement of oil prices is also seen as a contributing factor the direction of the ringgit. Teng expects oil prices to continue to trade within US$40 to US$60 per barrel and to rebound only towards the end of 2016 or early 2017 when oil supply comes down.
“We will see more sustainable trend for oil in late 2016 or early 2017 on expectation of disruption in oil supply,” he noted.
In general, Teng sees the local economy well supported by the current account surplus and manufacturing/export focus.
Commenting on the stock market, he said the local bourse is set to rise in the current quarter in anticipation of a further delay in an interest rate increase by the Federal Reserve due to continued weakness in US economic data.
The prolonged weak economic environment in the US has fuelled speculation that the Fed may be looking to introduce a new round of quantitative easing (QE).
“The weak data means a much prolonged cycle of QE and more drugs are put into the system to keep it alive,” Teng noted.
A fourth round of QE, if it materialises, however, will lead to more volatility in the global market, he said.
While the revival of ValueCAP Sdn Bhd and a potential injection of RM20 billion would support the local stock market, Teng stressed that external developments play a more significant role in influencing the fund flows.
On investment strategy, Teng advised investors to focus on stocks that have structural growth and dividend payout, as well as non-cyclical stocks such as healthcare.
He expects corporate earnings for the third quarter to disappoint, amid a moderation in economic growth.
