Malaysia to keep the ringgit pegged at 3.8 to U.S. dollar<\/p>\n
KUALA LUMPUR (Reuters): Malaysian Prime Minister Mahathir
\nMohamad on Saturday laid to rest all speculation that the ringgit
\ncurrency's peg might be revised, saying it will remain at 3.8 to
\nthe dollar for a \"long, long time\".<\/p>\n
Mahathir emphatically reiterated that the ringgit, pegged
\nagainst the U.S. dollar when Malaysia introduced capital controls
\nin September, will stay at the current level to enable businesses
\nto operate in a stable environment.<\/p>\n
\"If anybody tells you that the government is going to change
\nthe value of the ringgit, ask them to jump in the sea. It will
\nstay at 3.8 per (U.S. dollar) for a very long, long time,\" he
\nsaid at the launch of a campaign to promote home sales.<\/p>\n
Many analysts had said that recent gains among the region's
\ncurrencies, particularly the Indonesian rupiah, the Korean won
\nand Thai baht, might prompt Malaysia to revise the peg to 3.5 to
\nthe U.S. dollar.<\/p>\n
Adding to the confusion, other analysts suggested a possible
\ndevaluation of the ringgit to 4.2 per dollar because of weak
\ndomestic economic conditions.<\/p>\n
There was also speculation Malaysia might unpeg the ringgit
\nand impose a managed float, allowing it to fluctuate by a limited
\namount.<\/p>\n
Mahathir also said the introduction of capital controls and
\nother expansionary fiscal measures had begun showing results.<\/p>\n
He said the domestic stock market's capitalization had
\nimproved by 180 billion ringgit ($47.37 billion) since September,
\nduring which time the Kuala Lumpur Stock Exchange's blue-chip
\nComposite Index had risen by more than 50 percent.<\/p>\n
The KLSE Composite Index ended at 533.88 on Friday. It hit a
\nlow of 261.33 on September 1, when the capital controls were
\nintroduced.<\/p>\n
\"We had lost 700 billion ringgit in market capitalization,\"
\nMahathir said, noting market capitalization was more than 900
\nbillion ringgit when the Composite Index was at the 1,200 level
\nbefore the regional financial crisis struck last year.<\/p>\n
On Friday, Mahathir told a group of foreign fund managers that
\ncapital controls would remain in place for now, but he was
\nwilling to consider revising a ruling that prevents portfolio
\ninvestors in shares from repatriating their money for one year.<\/p>\n
The prime minister stopped short of making any promises to the
\nfund managers, but economists said Malaysia has set a course for
\nreturn to the international financial system.<\/p>\n
The economists said despite the government's denial, currency
\ncontrols -- which have been criticized by foreign investors who
\nhave stayed away from Malaysia -- were expected to head for a
\nphased exit in the not so distant future.<\/p>\n
Since the capital controls were introduced, Malaysia has been
\ndowngraded to junk bond status by all international credit rating
\nfirms and dropped from the Morgan Stanley Capital International
\n(MSCI) index, an important benchmark for foreign investors.<\/p>\n
Foreign investors have said that to return to the MSCI,
\nMalaysia will have to lift all restrictions on the flow of money
\nin and out of the stock market.<\/p>",
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