Ringgit Leads Advance in Asia Before Najib's 2016 Budget Speech

  • Prospect of more ECB stimulus buoys emerging-market assets
  • GDP to increase 4 to 5 percent next year, Najib says

Malaysia’s ringgit led gains in Asia as the prospect of more monetary stimulus from the European Central Bank buoyed emerging-market assets and Prime Minister Najib Razak delivered his budget speech.

Najib pledged to boost consumption, spur private investment and accelerate selected infrastructure projects next year, while narrowing the fiscal shortfall to 3.1 percent of gross domestic product from a revised 3.2 percent in 2015. The MSCI Asia Pacific Index of stocks climbed with regional currencies Friday as ECB President Mario Draghi suggested the euro area may need a fresh injection of stimulus by the end of the year to counter an economic slowdown.

“The ringgit is up on speculation the budget will be friendly, focusing on infrastructure and boosting consumer spending,” Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur said before Najib’s speech. “The ECB’s stimulus measures should drive flows to Asia.”

The ringgit strengthened 1.6 percent to 4.2205 a dollar in Kuala Lumpur, following a 3.9 percent loss over the previous five trading days, according to prices from local banks compiled by Bloomberg. It has declined 1 percent this week. The currency’s 17 percent slump this year has made it Asia’s worst-performing exchange rate as a slide in Brent crude prices hurt the region’s only major net oil exporter and a funding scandal linked to Najib spooked foreign investors.

The prime minister said in his annual address that Malaysia’s economy would expand 4 percent to 5 percent in 2016, compared with an estimate of 4.5 percent to 5.5 percent this year.

Consumer Prices

Consumer prices in Malaysia rose 2.6 percent in September from a year earlier, slower than the median estimate of 2.9 percent in a Bloomberg survey and compared with a 3.1 percent increase in August, official data released Friday showed. Foreign-exchange reserves climbed $800 million in the two weeks to Oct. 15 to $94.1 billion, according to a Bank Negara Malaysia statement issued after markets closed Thursday. They dropped the most since 2008 last quarter.

Malaysian sovereign bonds due March 2019 gained, with the yield declining three basis points on Friday and this week to 3.60 percent, prices from Bursa Malaysia show. The 10-year yield increased one basis point to 4.15 percent and rose three basis points from Oct. 16.

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