● Bank Negara Malaysia (BNM) international reserves registered a marginal decline of USD0.02b and remained relatively unchanged at USD103.2b as at 29th November

•  Sufficient to finance 7.7 months of retained imports and is 1.1 times the total short-term external debt.

● All components remained unchanged

•  Foreign currency reserves at USD96.8b, a 3-month high.
•  Other reserve assets: USD2.3b, matched the highest level recorded in 2019.
•  Gold: USD1.9b, a 78-month high
•  In Ringgit terms, the value of BNM reserves decreased by RM0.2b or -0.05% MoM to RM432.0b USDMYR: traded at an average of RM4.1590 in November (Oct: RM4.1879), a 4-month high, appreciating by 0.7% MoM (Oct: -0.1%), underpinned by optimism in the US-China phase-one trade deal.
• Year-to-date, Ringgit has depreciated by 0.7% against the greenback, while the majority of regional currencies bucked the trend, led by the Thai Baht (+6.6%), followed by Philippines peso (+3.5%) and Indonesian Rupiah (+2.8%).

● BNM left the overnight policy rate unchanged at 3.0% for the rest of the year but may lean towards further easing as soon as in 1Q20 to support growth in view of external demand uncertainty going forward

• Uncertainty over the US-China trade feud may continue to exert pressure on domestic growth. While benign inflation attributable to lower base effect and lacklustre demand may provide room for the central bank to embark on another rate cut.
• USDMYR year-end forecast: maintained at of 4.20 (2018: 4.13), amid sustained portfolio capital outflow, and lower oil price (average YTD Brent price 2019: USD64.1/barrel vs USD71.6/barrel in 2018) but will be supported by increased current account surplus due to healthy trade balance.

Source: Kenanga Research - 9 Dec 2019