Malaysia's international reserves rise in first half of November amid ringgit slide

A money changer counts ringgit at a shop in Putrajaya, outside Kuala Lumpur, on Oct 26, 2007.
A money changer counts ringgit at a shop in Putrajaya, outside Kuala Lumpur, on Oct 26, 2007. PHOTO: REUTERS

KUALA LUMPUR (REUTERS) - Malaysia's international reserves rose by US$500 million (S$712.7 million) in the first two weeks of November, but analysts expect reserves to dip steeply going forward due to a surge in capital outflows.

International reserves - foreign currency, reserves held at the International Monetary Fund, Special Drawing Rights (SDRs), gold and other reserve assets - stood at US$98.3 billion as of Nov. 15, Bank Negara Malaysia (BNM) said on Tuesday, up from US$97.8 billion on Oct. 31. Foreign currency reserves rose to US$90.9 billion from US$89.9 billion on Oct. 31.

BNM said the international reserves were sufficient to finance 8.4 months of retained imports, and were 1.2 times short-term external debt.

"We expect the next reserve release to show a marginal decline as this one may not capture recent capital outflow,"said Trinh Nguyen, senior economist at Natixis investment bank in Hong Kong. "We expect the next reserve release to show a marginal decline as this one may not capture recent capital outflow."

The ringgit has shed more than 5 per cent since Donald Trump's victory in the US presidential election on Nov. 8, making it Asia's worst performing currency. On Tuesday it was at 4.43 per US dollar. One Singdollar could buy RM3.11, the weakest the currency has been since last September.

Foreigners hold around 40 per cent of the total outstanding bonds in the Malaysia market, one of the highest proportions in Asia, making it vulnerable to capital outflows as investors switch funds out of emerging markets in anticipation that US interest rates will rise as a result of Trump's pro-growth policies.

The central bank has been intervening in the onshore market to try and halt the ringgit's slide, and it has also sought to deter speculators from selling the currency in the offshore non-deliverable forwards (NDF) market.

Global economic uncertainties, slumping commodity prices and a scandal that has dogged Prime Minister Najib Razak's over state fund 1Malaysia Development Bhd have all weighed on the ringgit over the past couple of years.

Malaysia's international reserves made some recovery earlier this year after plunging to US$94.5 billion in 2015, but are still a long well off the May 2013 peak of US$141.4 billion.