Focus shifts to ringgit as rupiah, baht lose shine<\/p>\n
SINGAPORE (Reuter): Southeast Asia's most sought after
\ncurrencies, the Indonesian rupiah and the Thai baht, are losing
\ntheir sheen as policy uncertainties and fear of capital controls
\nforce investors to look elsewhere, analysts said at the weekend.<\/p>\n
Benefiting on the rebound is the Malaysian ringgit, which
\nthough dogged by a spate of not-so-good news for its economy has
\nbeen surging in the past two weeks, pushed up by fresh investment
\nand relocation of funds by international investors, they said.<\/p>\n
Analysts said factors that had made the rupiah and baht
\nattractive, their high yields, or domestic interest rates, are
\nstill the highest in the region.<\/p>\n
But there was a possibility of both Indonesia and Thailand
\nputting in place controls to slow the flow of capital into their
\nfunds-flush economies.<\/p>\n
\"There is a fear in the market that Thailand and Indonesia,
\nunable to manage the inflow of funds, may impose some capital
\nrestrictions,\" said a dealer with a Kuala Lumpur bank.<\/p>\n
High inflation in the two countries is making it imperative
\nfor them to maintain a tight monetary policy, but inflow of funds
\nhas been exerting pressure on interest rates.<\/p>\n
The Bank of Thailand said about 240 billion baht (US$9.4
\nbillion) of foreign funds flowed into Thailand in the first three
\nmonths of the year. Of the foreign funds, up to 170 billion baht
\nwas invested in bills of exchange and 70 billion baht in non-
\nresident baht accounts.<\/p>\n
Dealers in Bangkok said the Bank of Thailand was considering
\nvarious measures to curb the \"hot money\", or short term funds,
\nflow into the country, including changing the basket of
\ncurrencies against which the baht is valued and curbing sale of
\nall government paper to foreign investors.<\/p>\n
\"There is a possibility of some curbs (on foreign funds),\"
\nsaid Desmond Supple, regional economist with British research
\nfirm I.D.E.A. in Singapore.<\/p>\n
He said in Indonesia too \"there is growing pressure on the
\ngovernment to allow greater depreciation of the rupiah\".<\/p>\n
\"Inflationary pressures (in Indonesia) are undermining any
\nmonetary loosening, but it has to maintain a tight monetary
\npolicy,\" he said.<\/p>\n
If these measures were implemented, the two currencies would
\nbecome less attractive, analysts said.<\/p>\n
Fresh investment<\/p>\n
In anticipation, a large part of fresh investments,
\nparticularly from the Japanese in their new financial year which
\nstarted on April 1, have begun to keep clear of baht, rupiah and
\neven the safe but low-yielding Singapore dollar.<\/p>\n
Much of that money has got diverted into the ringgit, pushing
\nit up to a seven-month high towards the end of last week, just
\ndays after the country announced a 1.1 billion ringgit (US$438.2
\nmillion) trade deficit in January.<\/p>\n
The ringgit had been sold down towards the end of 1995 and
\nearly this year on predictions that the fast-growing Malaysian
\neconomy was running out of control with a huge current account
\ndeficit and high inflationary pressures, dealers said.<\/p>\n
\"Now we are saying that Malaysia will be better than even
\nThailand,\" said Neil Saker, regional economist with Crosby
\nSecurities.<\/p>\n
Analysts said this did not mean that there will be no interest
\nin rupiah and baht.<\/p>\n
\"Together with the Singapore dollar and the (Philippine) peso,
\ncurrencies of the region will continue to be the most sought
\nafter, though not for the same reasons,\" said an economist with a
\nSingapore-based bank.<\/p>\n
While the Singapore dollar is considered a safe investment as
\nthe Monetary Authority of Singapore does not allow wide
\nfluctuations, the prime determining factor for investment in the
\nothers would continue to be interest rates.<\/p>\n
The three-month interbank rate is at 16 percent in Indonesia,
\n9.0 percent in Thailand, over 14 percent in the Philippines and
\n7.10 percent in Malaysia.<\/p>\n
The rate is at 2.10 percent in Singapore, 5.56 percent in the
\nU.S. and less than 0.5 percent in Japan.<\/p>\n
According to I.D.E.A., this is bound to attract a lot of funds
\nto the region's currencies.<\/p>\n
\"However, this trend will be problematic for many central
\nbanks in the region as they will impede the conduct of their
\nmonetary policies,\" it said in a recent study.<\/p>\n
Almost all the countries in the region were facing
\ninflationary pressures and needed to maintain a tight monetary
\npolicy, which would be undermined by the huge funds inflow, again
\nparticularly from Japan.<\/p>\n
\"Overall, therefore, while the expected influx of Japanese
\nfunds into high yielding Asian economies will lead to a bullish
\nphase for those countries' currencies and asset markets, by
\nexacerbating overheating conditions the longevity of these
\ninflows is likely to be comparatively brief,\" I.D.E.A. said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/focus-shifts-to-ringgit-as-rupiah-baht-lose-shine-1447893297",
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