Soaring ringgit after Anwar's appointment as Malaysia's PM 'not sustainable': Analyst
The currency had surged by 1.8 per cent right after the appointment on Nov 24, the largest single-day gain since March 2016.
SINGAPORE: The soaring ringgit, following the appointment of Pakatan Harapan chairman Anwar Ibrahim as Malaysia’s new prime minister, is not sustainable, one observer cautioned.
The currency had surged by 1.8 per cent right after Mr Anwar’s appointment on Thursday (Nov 24), the largest single-day gain since March 2016. The ringgit further extended its gains on Friday, rising 0.8 per cent to 4.4542 against the US dollar.
But observers believe the ringgit could trade back up to around 4.6 against the dollar by the year-end.
“We're a little bit skeptical that this significant move down below 4.5 is going to be sustainable,” said Dr Sailesh K. Jha, group chief economist and head of financial market research at RHB Bank, on Friday.
“Our year-end target is 4.6, and the first half of next year, we're at 4.7 to 4.8,” he told CNA’s Asia Now. “So there's been no major changes in our currency view.”
Malaysia’s currency and stocks jumped after Mr Anwar was sworn in as Malaysia’s 10th prime minister on Thursday, ending five days of political uncertainty post-election and capping his decades-long wait for the country's top job.
PRICE PRESSURES WEIGHING ON MALAYSIANS
Meanwhile, Malaysia’s inflation rate eased to 4 per cent in October, compared to the 4.5 per cent in September, the Department of Statistics Malaysia said on Friday.
But price pressures are still weighing on Malaysians’ wallets.
On a monthly basis, the inflation in October recorded 0.2 per cent, as compared to 0.1 per cent in the previous month, which Dr Sailesh said remains fairly elevated.
On Friday, Mr Anwar said his priority would be to address the cost of living pressure amid a slowing economy.
He added that he has called for a special meeting with the relevant agencies by Monday latest to discuss the issue, including the price of goods.
The Nov 19 general election produced the country’s first-ever hung parliament, where no single political coalition managed to obtain a simple majority of seats to form the federal government.
PASSING BUDGET SEEN AS VOTE OF CONFIDENCE
Top on Mr Anwar’s agenda is to pass the national budget for 2023, which will be a major test for the prime minister and his legitimacy in the new role.
The budget was tabled before the dissolution of parliament in October, but has yet to be passed.
This could potentially happen by the end of January, said Dr Sailesh, with the possibility that it could drag out a bit further as the new administration takes over the helm.
“It's a new administration, the Cabinet needs to be formed, and as part of that Cabinet, who is the minister of finance going to be. And the new administration will be looking at the details of the budget quite a bit,” he added.
“What form the budget will take, we think it will still be on a path of fiscal consolidation, but the details will take some time to work out.”
On whether Mr Anwar’s rivals in parliament could pose a challenge to the proposed budget, Dr Sailesh said this depends on what comes out of negotiations and who takes the respective Cabinet posts, including the deputy prime minister and finance minister roles.
“There'll definitely be challenges. There could be timing delays. But at the end of the day, we don't foresee, from a balance of risk perspective, some last-minute big kind of hoo-ha,” he added.
“Malaysia's commitment to fiscal consolidation, reduction of fuel subsidies, as well as trying to think about alternative measures in terms of the path of reducing debt to GDP (gross domestic product) is going to remain intact.”