Malaysia’s ringgit headed for its worst slump since the
Asian Financial Crisis as results from UK’s referendum showed the nation
leaning toward leaving the the European Union, spurring a flight to haven
assets.
The ringgit fell 2.5 per cent to 4.1207 per dollar as of
12:36pm in Kuala Lumpur, set for the biggest loss since June 1998, prices from
local banks compiled by Bloomberg show.
It earlier rose to a seven-week high of 3.9893.
The central bank extended onshore trading by an hour to 6pm
today to “facilitate market transactions.”
The pound tumbled more than 10 per cent and a gauge of the
dollar soared as results showed almost 52 per cent of voters favored leaving
the trading bloc while 48 per cent wanted to stay.
The uncertainty in the lead up to UK ballot has contributed
to volatility in Asia’s worst performing currency this quarter, with political
scandals involving Prime Minister Datuk Seri Najib Razak and a state-backed
fund’s default on a bond payment undermining confidence in the ringgit.
Risk-off mode
“An unexpected turn of events with Brexit becoming a reality
is driving market into risk-off mode,” said Winson Phoon, a fixed-income
analyst at Maybank Investment Bank Bhd in Kuala Lumpur.
“The weakness can last for more than a knee-jerk moment and
I expect the bond market to eventually succumb, with the 10-year government
bond yield potentially grabbing the 4 per cent handle.”
The 10-year government bond yield rose four basis points to
3.93 per cent, while the five-year yield surged eight basis points to 3.52 per
cent, stock exchange prices show.
The FTSE Bursa Malaysia KLCI Index dropped 1.4 per cent.
While the European Union doesn’t feature as one of
Malaysia’s top export destinations, oil prices fell as the early results of the
UK vote came in, dimming the outlook for the finances of Asia’s only major net
oil exporter.
Brent crude slid more than 5 per cent to extend its drop
below US$50 (RM 206.37) a barrel.
The ringgit and South Korea’s won have the highest
sensitivity to moves in the MSCI Asia Pacific ex-Japan Index of shares, a proxy
for risk sentiment in the region, and making the currencies the most exposed to
the outcome of the UK poll, according to an analysis by Bloomberg strategist
Masaki Kondo.
The stocks gauge fell 4.6 per cent today.
“Bank Negara Malaysia, together with the Malaysian financial
market participants, are monitoring and will remain vigilant to any potential
emerging risks and challenges to the domestic financial markets,” the central
bank said in a statement yesterday.
Liquidity in the domestic market remains “ample” and the
country’s financial markets are “well positioned to face any major volatility,”
it said. — Bloomberg
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