Ringgit Diving On Corruption Probe Of PM’s Finances
$OIL, $DXY
Malaysia’s Ringgit headed for its biggest weekly decline since the USD peg was imposed in Y 1998 and bonds plunged as investigations into a state investment company spread to the US, exacerbating losses driven by a slowdown in China and falling commodity prices.
The Ringgit weakened beyond 4.38 Vs the Buck Friday for the 1st time since the Asian financial crisis prompted Malaysia’s central bank to implement capital controls.
1Malaysia Development Bhd. is being probed by the US FBI over money laundering, while the US Justice Department (DOJ) is looking into property purchases associated with Prime Minister Najib Razak’s stepson, according to reports over the past week.
Ringgit dropped 0.9% to 4.3872 a USD as of 10:46a 25 September in Kuala Lumpur, and is down 4.2% on the week, according to prices from local banks.
The FTSE Bursa Malaysia KLCI Index of shares fell 3.6% from 18 September for its worst week in more than a month.
Former premier Mahathir Mohamad imposed a fixed exchange rate of 3.8 a USD in Y 1998 after the currency dove 35% the previous year in the midst of a devaluation in the Thai Baht. The peg stood until July 2005.
The currency has declined 26% in the past 12 months, Asia’s worst performance, as Brent Crude Oil prices that have halved in that time weigh on earnings for the region’s only major net Crude Oil exporter.
China, Malaysia’s biggest trading partner, is heading for its slowest annual growth in more than 20 yrs, and markets are focused on the impact that may have on the global economy.
1MDB, whose advisory board is chaired by PM Najib, came under the hot lights last year due to its rising debt, drawing criticism from opposition law makers and calls for the him to step down. A subsequent investigation by the Malaysian Anti-Corruption Commission revealed about $700-M that found its way into Najib’s bank accounts was from political donations and not related to 1MDB, the accounts were closed in Y 2013.
Malaysia’s sovereign bonds declined this week, with the 10-yr yield rising 15 bpts to 4.28%, according to prices from Bursa Malaysia. That’s the biggest increase since June. Five-year credit-default swaps insuring the nation’s debt climbed to 218 in New York late Thursday, the highest level since Y 2009, CMA prices show.
Stay tuned…
HeffX-LTN
Paul Ebeling
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