Kenanga: External uncertainties may weigh on domestic growth

KUALA LUMPUR: Despite ample foreign reserves, uncertainties arising from external factors can weigh on domestic growth in the short- to medium-term, said Kenanga Investment Bank.

Kenanga said Bank Negara Malaysia’s foreign international reserves fell US$0.6 billion (RM2.4 billion), or 0.6 per cent month-onmonth (MoM), to US$101.4 billion as at December 31, falling back into a declining mode after a brief rebound to US$102.0 billion as at end November.

Bank Negara Malaysia said international reserves stood at US$101.4 billion as at December 31 2018.

The reserves position was sufficient to finance 7.4 months of retained imports and was 1.0 times the short-term external debt, said Bank Negara.

A contraction in foreign reserves was observed during majority of the months last year, following the 14th General Election results, ongoing trade war and monetary policy tightening in the United States and advanced economies.

Kenanga said the ringgit was tracking a similar path — its value of reserves dipped 0.8 per cent MoM, or RM3.3 billion, to RM419.5 billion from RM422.8 billion in November.

In December, the ringgit was traded at an average of 4.17 against the US dollar, gaining 0.3 per cent MoM, its first month of appreciation after depreciating for the past seven consecutive months.

As domestic indicators are pointing towards growth moderation and as inflation was expected to remain benign on the back of subdued global oil prices, Kenanga believes Bank Negara will hold the Overnight Policy Rate unchanged at 3.25 per cent this year.