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Saturday, November 21, 2015

Ringgit undervalued, seen stabilising next year - Standard Chartered

KUALA LUMPUR (Nov 20): Standard Chartered said the ringgit was trading up to 15% below its intrinsic value and further weakness in the currency was seen in the near term.

Standard Chartered chief investment strategist Steve Brice said due to poor fundamentals, the ringgit was expected to weaken by 3% to 5% versus the US dollar
in the next three to six months.

"We expect further weakness in the ringgit in the medium term amid weaker fundamentals and lack of positive catalysts. Further downside for oil prices over the next six months will continue to pressure the country's trade balance.

"Ringgit is undervalued by 10% to 15% now," Brice said at a media briefing here today.

At 1:21pm, the ringgit was traded at 4.2607 against the US dollar. The current levels compare with 3.3372 on Nov 26, 2014.

Today, Brice said the ringgit had weakened to current levels as investors noted Malaysia's balance of payment, real deposit rates and foreign exchange reserves.

Brice, however, ruled out the possibility that the ringgit would weaken past 4.8000 against the greenback.

The assumption took into account a commodity price recovery next year. The ringgit's strength tracks prices of crude oil, which forms a crucial portion of the Malaysian economy and government revenue.

He said ringgit valuations were extremely cheap versus historical numbers. Thus, when commodity prices start to stabilise in the second half of next year, the ringgit is expected to rebound, according to him.

Brice said although technical analysis suggested a stronger ringgit versus the US dollar next year, he did not expect the ringgit to appreciate past the 4.0000 level.

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