KINIBIZ CIMB chairperson Nazir Abdul Razak said that it is important to properly diagnose the economic headwinds which are causing the weak ringgit so proper actions can be taken to strengthen the local unit.

Nazir said that in his view the weakening ringgit was being caused by a mix of issues. “(The economy) is being challenged by what is happening in China, with the slowing economy and the devaluation of its currency. And obviously there is the challenge of higher US interest rates and the significant drop in commodity prices.

“And if you look at it, many many countries are being challenged by these factors and there are several countries which are facing even sterner challenges than Malaysia, given the complexion of their economies. There are some economies even more dependent on oil, for an instance,” said Nazir.

Nonetheless, Nazir said that the rate at which the ringgit has fallen as well as the widening of the credit default swap (CDS) spreads for Malaysian credit was concerning.

“I am a little concerned that if you look at those data points, the ringgit and the CDS spreads, they are way beyond fundamental values. CIMB’s analyst thinks on a trade weighted basis, the ringgit should be about at RM3.70 (to the US dollar).”

Therefore it is crucial in any economic situation for the issues to be properly diagnosed. “We must get it diagnosed properly, so that we can handle it with the right set of policy measures,” he added.

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