ASEAN KEY DESTINATIONS
Malaysian banks advising on FX
Banks are having a busy time, advising and transacting for clients who need to hedge and make decisions in the midst of uncertain economic conditions.
Sentiment has turned cautious and defensive as businessmen look at lowering their costs and investors at locking in their gains.
“Due to volatile foreign exchange markets, importers and exporters are concerned as Europe sells a lot to the world including Asia cars, wine, branded goods, medical equipment and so forth,” said Datuk Lee Kok Kwan, deputy CEO and group treasurer, CIMB Group.
“Businesses are worried about the effects of volatile foreign exchange rates on their businesses especially when Malaysia is a large trading nation where imports and exports are a multiple of gross domestic product.''
Even individuals such as parents who sent their children abroad to study also needed to pay close attention to the forex markets as the volatility was very high and locking in at the right time could mean up to 20 percent reduction in university fees in ringgit terms, Lee added.
Long-term interest rates have dropped a lot in both the bond and swap markets a sign of a slowing economy worldwide. The eurozone, in particular, was looking quite perilous, Lee noted.
When the US announced that there would be no hike in rates till 2013, US interest rates declined significantly where the 10-year fixed rate treasuries is now at 2.05 percent, all-time historical lows.
“Corporates are thinking if they should lock in their cost of funding today as it has become so much cheaper. Or should they wait and hope for rates to go even lower?
“On the part of investors and fund managers, they are wondering if they should sell and take profits as yields have declined so much. But the constant worry is that once they sell, what do they do with the cash? This has always been a problem for high-saving nations like Malaysia and most of Asia. This, however, is certainly a position of strength for Asean plus 3 as the global economy heads into uncertain economic times,'' Lee said.
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