Investment Opportunity in Ringgit (Forex)

Malaysia: Firm economic recovery underpinned surprising interest rate hike; Good for KLCI March 10, 2010


The central bank recently raised OPR by 25 basis points to 2.25% which surprised many investors. Here, we will take a closer look at the implications of the rate hike to the equity market and economy.  (Author : iFAST Research Team)

Keynotes

• OPR was raised by 25 basis points in BNM's latest monetary statement, a surprise to many investors.

• The rate hike was underpinned by a stronger than expected economic recovery.

• Rate hike is expected to damper loan growth albeit in a mild manner.

• RM is expected to appreciate against USD which bodes well for the equity market, but might hurt exports temporarily.

• BNM demonstrates its commitment to ensure a sustainable economic recovery by controlling inflation expectations while interest rates remain accomodative. Equity market outlook remains optimistic.

The hike in interest rate is expected to lead to the appreciation of the ringgit. Interesting to note that there is a stronger than expected turnaround in the economy. Malaysia economy moved out of recession in 4Q 09 by posting a better than expected y-o-y growth of 4.5%, bringing GDP growth of -1.7% y-o-y in 2009. This was much higher than market consensus of -2.4% y-o-y.

With all investments, I always believer in doing sufficient research in websites like FundSupermart, or Poems and more publications, then discern, what is worthy of investing. Do not be penny wise, and pound foolish! :P