Ringgit no longer undervalued, may hit RM4.25 by year-end: Economist

KUALA LUMPUR: The ringgit is no longer perceived as undervalued after breaching the RM4.35 level against the US dollar, said UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan.

However, Mohd Sedek anticipates the currency will continue its upward trajectory, potentially reaching RM4.25 per greenback by year-end.

He said the ringgit's value is now primarily driven by market dynamics, dictated by supply and demand forces.

Speaking to Bernama, he said foreign investors are likely to keep accumulating ringgit-denominated assets into next year, in anticipation of the Federal Reserve beginning to cut interest rates next month.

Given recent developments in the US, he forecasts a 25-basis-point rate cut this year, followed by three cuts totalling 75 basis points in 2025.

Mohd Sedek observed that foreign funds' interest in Bursa Malaysia surged on Aug 16 and is expected to maintain momentum.

"Foreign investors will continue to increase their holdings in blue-chip sectors, particularly financials, as a rate cut would significantly benefit this industry.

"With lower yields on fixed-income assets such as bonds, investors may be drawn to dividend-paying stocks. Malaysian banks, known for consistent dividend payouts, could attract substantial investment inflows," he said.

He added that the recent earnings season, which saw banks reporting stronger profits, has also contributed to increased interest in their stocks.

Today, Maybank announced an 8.2 per cent rise in net profit to RM2.53 billion for the second quarter (2Q FY2024), up from RM2.34 billion in the same period last year, driven by higher revenue of RM17.17 billion compared to RM16.13 billion previously.

Public Bank's net profit rose to RM1.78 billion in 2Q, up from RM1.61 billion a year ago. Its revenue increased to RM6.69 billion for the quarter, from RM6.26 billion previously.

Bank Islam Malaysia posted a slightly higher net profit of RM137.16 million in 2Q, versus RM136.13 million a year ago.

In contrast, RHB Bank's net profit fell to RM722.31 million during the quarter, down from RM808.70 million in 2Q FY2023.

CIMB Bank is expected to announce its earnings performance later this week.

-- BERNAMA

Read the latest news here