KUALA LUMPUR, Sept 4- Foreign investor confidence is gradually returning to the Malaysian equities and currency markets following yesterday’s move to reduce fuel subsidies as they feel the government is serious in tackling the fiscal deficit and rising debt position.
With the ringgit hitting a three-week high in intraday trading Tuesday at 3.25 to 3.26, foreign buyers took positions in the equities market after the ringgit appreciated which also saw Bursa Malaysia closing 6.65 points higher.
Analysts told Bernama that foreign investors previously spooked by Fitch Ratings’ move to downgrade Malaysia’s sovereign credit rating outlook to negative from stable in July felt local markets were now more “fairly priced.”
They said that yesterday’s move would undoubtedly be part of a series of measures to resolve structural problems affecting the economy, especially that of the rising fiscal debt.
The fact that the move to reduce petrol and diesel price by 20 sen would lead to direct savings of RM1.1 billion for this year alone speaks volumes of the government’s zest in reducing subsidies despite the difficulties.
This has sent a positive message to the market with foreign funds which left in July after the downgrade partly returning to the local currency and equities markets.
An analyst with a bank said the ringgit’s uptrend could be sustained as domestic sentiment was also boosted by improved manufacturing and production indices in China and the United States leading to inflow of foreign funds.
“The bigger picture emerging here is that the government will continue to take more measures to reduce the burgeoning subsidies payout especially for fuel and this has boosted sentiment,” the analyst said.
It is estimated that the governments forks out a staggering RM30 billion annually to support subsidies.
Foreign funds and investor confidence is “slowly but surely coming back” as equity investors are picking up selected stocks which they feel are attractively priced,” he said.
Although the ringgit closed slightly lower against the US dollar today, there is renewed optimism that the increase in the local currency would be sustained following the government’s announcement that the petrol price hike was part of the subsidy rationalisation policy.
– BERNAMA
