● Bank Negara Malaysia (BNM) international reserves edged up by USD0.2b or 0.2% MoM to USD103.2b as at 31st October

- Sufficient to finance 7.6 months of retained imports and is 1.1 times total short-term external debt.

● Higher foreign reserves due to an increase in foreign currency reserves and other reserve assets

- Foreign currency reserves (+USD0.1b or 0.1% MoM to USD96.8b): first expansion in three months, reflecting higher repatriation of export earnings along with marginally softer outflows of portfolio capital.

- Other reserve assets (+USD0.1b or 4.5% MoM to USD2.3b): matched the highest recorded in 2019.

- Other components remained unchanged.

● In Ringgit terms, the value of forex reserves increased by RM0.9b or 0.2% MoM to RM432.2b as at end-October

- USDMYR: traded at an average of RM4.1879 in October (Sep: RM4.1855), its weakest level in one year, depreciating by 0.1% MoM (Sep: +0.1%), as concerns on China’s economy following the release of a 27-year low GDP growth and delays in the signing of the Phase-1 US-China trade deal outweigh the appreciation pressure ensuing the tabling of the 2020 federal budget.

- Other regional currencies: strengthened in October, led by the Philippine Peso (1.2%), followed by Thai Baht (0.7%) and Singapore Dollar (0.6%), while the value of Indonesian Rupiah remained relatively sustained.

● BNM left the OPR at 3.0% for the rest of the year, but may lean towards further easing (up to 50 basis points) in 2020 to uplift growth

- Uncertainty to prevail in both the global and domestic front, with prospect of softer economic growth and benign inflation.

- USDMYR year-end forecast: maintained at of 4.20 (2018: 4.13), amid continued portfolio capital outflow and weaker oil price (average YTD Brent price 2019: USD64.1/barrel vs USD71.1/barrel in 2018).

Source: Kenanga Research - 8 Nov 2019