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Malaysia: Crackdown deters investors

by Jonathan Adams
Pension Portfolio

Malaysia is succeeding in snuffing out currency speculation – now it has to deal with the fallout.

Offshore trading in ringgit non-deliverable forwards has slumped by about 70 per cent since the central bank took steps in November to deter foreign banks from trading the contracts, according to EBS BrokerTec’s electronic-trading platform.

Now, officials are looking at easing rules on the short-selling of government debt after the crackdown saw global funds withdraw more than RM35 billion (£6.39 billion) out of Malaysian sovereign bonds in the four months through February.

“From what I’ve heard from participants, it’s probably made it harder for some offshore investors in Malaysian debt to hedge their risk,” Jeff Ward, head of Nex Group’s EBS BrokerTec Asia, said in an interview last week in Singapore, referring to the offshore NDF curbs. “Some banks say they can hedge onshore for their clients for trade-related transactions.”

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