KUALA LUMPUR: The ringgit has seen significant developments since November last year when it was one of the most volatile currencies, but now it has not only strengthened but has greatly stabilised, said Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim.
“The implied volatility has declined from a peak of 9.7% to about 3.7% currently,” he said in his opening remarks at the Financial Markets Association of Malaysia’s annual dinner last Friday.
He said the influence of offshore market activities and its damaging spillovers to the ringgit exchange rate had subsided, consistent with the significant decline in transaction volume in the non-deliverable forward market.
“On the other hand, foreign exchange transaction volume in the onshore market has been sustained with improving transaction costs, facilitating business transactions for all market participants,” he said.
Muhammad said the ringgit did, to some extent, reflect Malaysia’s economic fundamentals, and the fact that its recent recovery coincided with strong domestic data releases suggested that.
“Nevertheless, in a global financial market that is driven by short-term developments, the ringgit exchange rate can veer in unexpected directions and reach levels that are far from reflecting economic realities,” he said.
“Unfortunately, most of these movements are not driven by facts, but perceptions and in ringgit’s case, I would call it misperceptions.
“We tend to, in some other instances, base our perception on prior evidence and situations that we are familiar with, rather than update our views with new information,” he said.
For many economists and analysts, Malaysia is an oil-dependent economy and when the oil price goes south, the Malaysian economy suffers.
“While this was true many years ago, these simple relationships are continuously assumed to be fixed and hold to perpetuity,” said Muhammad.
Despite the many structural changes leading to a more diversified Malaysian economy and reduced reliance on oil, this perception has persisted.
“For the uninitiated, the percentage of oil revenues to government revenues was 41.3% in 2009 compared to only 14.6% in 2016.
“This fact seems to elude many analysts,” he added. – Bernama
PETALING JAYA: Foreign selling returned to Bursa last week, with international investors dumping RM297.1 million net of Malaysian equities, the highest weekly attrition recorded in seven weeks.
“Foreign selling returned to Bursa at a rather intensified level compared with the amount disposed in the past six weeks that did not exceed RM100 million net,” MIDF Research said in its fund flow report today.
Foreign buyers exactly matched foreign sellers on Monday and a bout of acquisition took place on Tuesday where foreign investors bought RM181.3 million net, the highest net inflow in a day in almost five months despite the weak China industrial output data that coincided with the 0.22% dip in the FBM KLCI.
“However, foreign investors were back in selling mode thereafter until the week ended with Thursday recording the highest amount sold at US$282.1 million (RM1.17 billion) net. The heavy foreign buying on Thursday saw the FBM KLCI close at an eight-month low of 1,718 points ahead of the House of Representatives’ vote for a tax cut bill,” it said.
It noted that market sentiment improved later on Friday following the central bank’s announcement of a strong Q3’17 gross domestic product growth of 6.2%, which led to a 0.21% rebound in the FBM KLCI.
“Foreign selling still occurred on the same day but on a reduced level below RM100 million net,” it added.
Following the intense foreign selling last week, the cumulative year-to-date inflow has substantially decreased to RM9 billion from RM9.31 billion in the week before but the year-to-date inflow still offsets about 31% of the total net outflow from 2014 to 2016.
Foreign participation improved as the foreign average daily trade value (ADTV) surged by 27% to RM1.13 billion after three weeks of staying below the RM1 billion mark.
In contrast, the retail ADTV decreased by 8% to settle below the RM1 billion level at RM957 million.
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KUALA LUMPUR: The newly Ace Market-listed Kejuruteraan Asastera Bhd (KAB) intends to grow its mechanical engineering (M&E) business to account for 50% of the group’s total revenue contribution in the next five years, from less than 10% currently.
KAB’s current core business, the electrical engineering services, which contributes almost 90% of its total revenue, involves the installation, testing and commissioning of electrical systems. Its M&E services include the installation, testing and commissioning of air-conditioning and mechanical ventilation systems.
KAB, which was the most active stock, closed at a premium of 20%, or 5 sen, over its issue price of 25 sen in its debut on the Ace Market of Bursa Malaysia last Friday.
Its shares opened at 33 sen, hit a low of 28 sen and high of 33 sen before ending its maiden day at 30 sen, with 159.92 million shares traded.
Speaking at a press conference after the group’s listing ceremony, its managing director Datuk Lai Keng Onn said going forward the company aims to expand and strengthen its M&E services capabilities, driven by positive outlook for the construction sector and by undertaking more affordable housing projects.
“Actually, the M&E contract value for affordable housing projects is higher. So we are aggressively tendering for it. That’s why if the market has a lot of affordable housing projects, it is an advantage for us. We also can see that currently there is huge potential for us to grow in the mechanical sector,” he said.
Lai said the group is also targeting to expand its geographical presence in Kuala Lumpur, Johor as well as Penang, noting it is in the process of finalising one or two affordable housing scheme projects in Johor.
Lai expects KAB’s current order book of RM210 million will keep the group busy until 2019, and is expected to hit RM250 million by year-end. The company is now awaiting the outcome of its bids worth RM250 million for contracts that include affordable housing and mixed-development projects.
Lai said the group is also keen to participate in tendering for infrastructure projects in the future, including the Mass Rapid Transit project.
For the third quarter ended Sept 30, 2017, KAB posted a net profit of RM2.12 million, on the back of RM30.18 million revenue. For the nine months period, it registered a net profit of RM5.35 million, with a revenue of RM83.23 million.
The group raised RM20 million from its initial public offering (IPO), which comprises a public issuance of 80 million new shares and offer for sale of up to 32 million existing shares. Of the proceeds raised, 58% will be used for working capital, 12.5% for capital expenditure, 9.1% for repayment of bank borrowings and 17% for listing expenses. About 3.4% will be used to set up a proposed new branch office in Johor Baru and an additional office in Kuala Lumpur.
Its public offer of RM16 million issue shares was oversubscribed by 57.33 times.
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