Malaysian Ringgit Weakens on Slowdown, Stock Rout; Bonds Gain

By David Yong

Dec. 2 (Bloomberg) -- Malaysia’s ringgit fell to the lowest level in more than two years as stocks declined on concern a deepening economic slowdown will prompt investors to increase sales of regional assets. Bonds advanced.

The currency weakened for a third day after reports yesterday showed manufacturing gauges fell to record lows in China, the U.K. and Russia, pushing down U.S. equities and the MSCI Asia Pacific Index of regional shares. The U.S. economy, the world’s largest, entered a recession in December 2007, the National Bureau of Economic Research said yesterday.

“Negative indicators are going to pull Asian currencies down,” said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. “It’s worrying for the ringgit if this trend persists.”

The ringgit dropped 0.3 percent to 3.6395 per dollar as of 11:10 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.6455, the lowest since November 2006, extending this year’s slump to 9.1 percent.

A trade ministry report in two days may show exports increased 6.3 percent in October, the least since March, according to a Bloomberg News survey of economists. Slowing exports dragged down economic growth in the third quarter to the slowest in three years, Bank Negara Malaysia said on Nov. 28.

The Kuala Lumpur Composite Index of stocks dropped today to the lowest level since Oct. 30. The index has lost almost 42 percent this year, headed for its first annual drop since 2005.

Asset Sales

Foreign investors have almost halved their holdings of Malaysia’s bonds since they peaked at 126.5 billion ringgit ($34.8 billion) at end-April, according to central bank data.

Three-year government bonds rose, pushing yields to the lowest since May 2007, as investors sought the safety of fixed- income debt.

The yield on the 3.833 percent note due in September 2011 fell three basis points to 3.21 percent, according to Bursa Malaysia Bhd. The price rose 0.08, or 80 sen per 1,000 ringgit face amount, to 101.65. A basis point is 0.01 percentage point.

The finance ministry will sell 2.5 billion ringgit of notes maturing in July 2019 on Dec. 4, the final local bond auction of the year.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.