Saturday, September 09, 2006

Ringgit, Reserves, Revaluation

- of cabbages and kinks - said...
I would be grateful if you explain this statement: "Bank Negara's international reserves at a steady US$79.3 billion, meaning the ringgit should see at least room for a 5% gain over the next 12 months." How does the reserves affect the appreciation? Why 5% ?


I see 5% gain over the next 12 months, not because of the reserves, the reserves act as a basis for supporting a stronger ringgit over the near to medium term. The reserves do point to better management of ins and outs. If you look at the correction in emerging marts in May, it was swiftly followed by a correction in currencies of emerging marts, but there were three or four currencies which rebounded well. Besides the Chinese yuan, which was managed, so it did not move much - the currencies which rebounded well included the Brazilian real and ringgit, bit "where there is surpluses in trade and reserves". My statement only lends crednce to my opinion that the ringgit will have more institutional followers (not fresh shorts) when BN allows the ringgit to appreciate in tandem with the yuan. If you market the currencies next to each other for the last 6-9 months, you will find that the ringgit has the closest correlation to the yuan, and thats not coincindental.

3 comments:

gsg said...

hi, just read through yr posting on Tebrau Teguh.... wonder you have any updates on it, I am itching to buy it at current price now, wonder if it is a good idea?

cheers, gsg

Salvatore_Dali said...

If you read my posting a few weeks after the sharp run up of Tebrau (I think I started recommending it at 38 sen), it tried to breach 72 sen, then stayed around 55-65 for a long time. I did not like the fact that large blocks kept changing hands, and still no real upside activity. If you read the beginning of my recommendation on Landmarks, I said that Tebrau swishing activity made me uneasy, and that I would switch to Landmarks. Still the fundamentals are there for Tebrau, but its still a concept play. If you did not participate earlier, it would take some digesting before another round is due, but it will come around. Right now, the syndicates are being corrected by SC/Bursa and we need to wait till the blood stop flowing before people even dare to jump back in. However, to buy for the next round, 28-30 sen , if you can get them, looks to be a good entry level.

gsg said...

thank you for yr advice