Kenanga: Malaysia's international reserves to continue increasing

Malaysia's international reserves is expected to continue increasing from the running current account surpluses, as well as Bank Negara Malaysia's (BNM) light-handed approach in the foreign exchange market, said Kenanga Investment Bank Bhd.

Kenanga Investment Bank said October was the first monthly increase after four months of sharp losses, whereby as at end-Oct, international reserves totaled US$94.0 billion, just above the six-year low of US$93.3 billion at end-September.

"Furthermore, the lower rate of decline in September gave an indication that the deterioration in reserves was abating and the October increase in reserves is confirmation of this," it said in a note.

Nevertheless, Kenanga Investment Bank said there remained a risk that the depletion of reserves could resume in the coming months, as the US Federal Reserve was on a verge of making its first rate hike since 2006.

Despite the rate hike being pushed back repeatedly from mid-year, it expects the Federal Open Market Committee to raise rates at the upcoming Dec 15-16 meeting.

"The ringgit will remain undervalued until external and domestic uncertainties recede. Our year-end forecast for the US$-ringgit is maintained at 4.48," it added.