Get Updates by Email

02 December 2014

Malaysian Ringgit Affected by Falling Oil Prices

Dear Reader

Malaysia's stock exchange and ringgit currency recently took a beating due to falling oil prices.

According to the Star:
The plunge follows an Opec decision not to cut production despite a huge oversupply in global markets. ... it [price per barrel] could plunge all the way to US$32.40 per barrel.

Oil prices fell to their lowest in five years yesterday due to the production war between Opec and the American oil boom from shale oil producers.

In recent months, the United States has become a major producer of shale oil and gas – fuel that’s extracted from rock fragments – threatening the position of Saudi Arabia as the dominant oil-producing country.

In response to the threat, Opec, which is influenced by Saudi Arabia, has vowed to continue production of oil in a market where supply has outstripped demand.

This has led to a free fall in global oil prices that have declined by more than 40% since July this year.Source

Malaysia is a net exporter of oil, and oil is currently below USD70 per barrel. According to Channel News Asia:
Mr Divya Devesh, FX strategist in FICC Research at Standard Chartered Bank, said: "Malaysia happens to be a net oil exporter, so lower oil prices impact Malaysia trade and fiscal balance negatively. So as a result of that, we have seen a sharp move higher in (US) dollar-ringgit.

"Also what we have seen is some degree of correction in Malaysia equities, particularly the oil and gas sector that has been badly hit because of the slide in oil prices, and we are seeing some of that equity weakness seep into currency as well."
Source

Down in Singapore, money changers are snapping up the Ringgit. Source The article quoted a Malaysian, Chew, who planned to remit more money home, and a Singaporean, Rosnah, who planned to stock up on Ringgit as she goes quite often to Johor Bahru (JB) for her shopping, etc.

The most interesting part of the article? Here it is:

Analysts have said that Malaysia, whose oil-related industries account for a third of the country’s revenue, is likely to be the Asian country which will be hit hardest by the sudden steep decline in oil prices.




0 comments: