Major financial markets in Malaysia have been affected by global portfolio rebalancing in the aftermath of the US Presidential Election. The fear of capital controls resurfacing has caused the Ringgit to be hit particularly hard, despite the BNM and government authorities repeatedly quelling the rumours. We believe with good reason that capital controls will not happen. Unlike in 1998, Malaysia runs a current-account surplus, has ample excess liquidity residing at the BNM, is on an improving fiscal trajectory, has structurally a broader and better-diversified economy, and its foreign reserves position remains strong. In our assessment, Malaysia is able to manage reasonable foreign outflows from the bond and equity markets, but the risk of contagion has risen. Valuation has become more attractive with the Ringgit being undervalued. We remain Positive on Malaysia. |
184 
