FX Restrictions To Persist

Second Finance Minister Nor Mohamed Yakcop stated on May 6 that Malaysia will retain its ban on ringgit borrowing for the purposes of trading, underscoring CFW's view that FX liberalisation in Malaysia will maintain its current gradual pace. The Malaysian Institute of Economic Research (MIER) had previously suggested that the country's impressive balance of payments performance could see offshore trading in the ringgit reintroduced this year, but while CFW accepts that Malaysia will continue to press ahead with FX reforms, we believe that it will do so at a more gradual pace than the MIER suggests. FX restrictions will therefore continue to prove a constraint on foreign investors over the medium term.

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