For the first time, the Rembau Times is predicting that the Malaysian Ringgit is set to soar in 2018.
This is largely due to on the back of a massive increase in the current account balance due to soaring LNG prices, better than expected public sector fiscal position and the moderately well economic growth in the country.’
LNG prices which were trading around USD 5 to 6 MMBtu a year ago have more than doubled due to recent clean energy policies enacted by the Chinese Government. As one of the world’s largest LNG exporters, Malaysia stands to benefit to the tune of about RM 30 to RM 40 billion a year. It is worth taking note that with the strong personal bonds between Prime Minister Najib Tun Razak and Chinese President Xi Jinping, not only Malaysia has benefited from direct external trade policies, the country has also reaped the benefit of domestically orientated policies in China.
The direct impact of this is to improve the country’s current account balance, which was hovering at recent multi year lows. Additionally, this will boost Petronas revenue and profits, which will allow the country’s national oil company to boost its dividend it has committed to the Government. Yet another tailwind that will boost the Ringgit is the better than expected results from the electric and electronics sector driven by strong global demand for connected devices, smartphones and other electronic gadgets.
With this glowing economic outlook, Malaysia should witness a surge in portfolio investment especially from funds seeking higher yield in emerging markets. Bond funds could anticipate a 10% gain in the currency on top of a 3 to 5% interest rate differential from Eurozone debt market.
The Rembau Times is predicting that the USD/MYR to break through to RM 3.80 and the SGD/MYR to break through RM 2.70 within the first 3 months of 2018.