Brace for higher financial market volatility, says DON

Malaysia has to brace for an increased volatility in the financial markets, given the surge in the reverse capital flows in line with the expected US interest rate hike, as well as improved growth prospect in the US economy.

Sunway University Business School Professor of Economics Dr Yeah Kim Leng said this came as there had been a shift in the US economic expectation after Donald Trump's election as the 45th US president.

"The increased volatility will likely take place in most emerging markets as investors are uncertain over the US policies when Trump assumes the presidency.

"But the volatility will vary in each country. In the case of Malaysia, the foreign investments in bonds market, especially in the government securities, may see some increased outflow," he told Bernama here today.

Yeah said this would also result in greater weakness in the ringgit.

"However, we think this is just one of the episodes taking place in the Malaysian financial market, like in the past episodes, where we have been able to cope with this kind of outflow.

"What the ringgit is exhibiting is that the Malaysian and foreign investors are trying to hedge their currency positions due to increased demand for the US dollar," Yeah said.

At 2pm, the ringgit was quoted at 4.3250 against the greenback, unchanged since today's opening. - BERNAMA