KUALA LUMPUR: Demand for the ringgit will likely surge further if Malaysian corporations repatriate their foreign liquid assets, which are estimated at nearly US$200 billion, economists said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the repatriating the liquid assets and coverting them to the ringgit would bolster the demand for the local currency.
"The management of foreign currency exposures and cash flow management would be the primary considerations whenever they decide to bring back the foreign funds," he told Business Times.
Afzanizam was commenting on Bank Negara Malaysia deputy governor Datuk Marzunisham Omar's statement on Wednesday that the local corporate sector holds US$190 billion (RM896 bilion) in foreign currency liquid assets abroad.
Marzunisham, as quoted by Bernama, said this is indicative of the country's robust international investment position.
He added that the corporate sector comprises financial institutions, government-linked investment companies, and government-linked companies, all of which hold investments abroad and derive income from these foreign investments.
He clarified that the central bank is not asking them to liquidate their assets but is encouraging them to bring back the realised profits and convert them into ringgit.
Afzanizam highlighted that the expected surge in demand for the ringgit, spurred by such repatriation efforts, indicates a potential shift in the currency's valuation and market sentiment.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar agreed that if corporations repatriated their foreign liquid assets, it would enhance demand for the ringgit and thus boosting its value.
However, Nambiar cautioned that it is a different question whether companies would find it advantageous to repatriate their funds.
He also pointed out that such a move might impact their investment decisions.
"It would be costly to repatriate the funds and then to have to inject them overseas again, if the nature of the business requires such interventions," he added.
Meanwhile, Marzunisham said Malaysia has sustained a current account surplus for the last five years, encompassing the foreign asset holdings of both corporate and financial entities.
He explained that they have the option to utilise these foreign holdings to fulfill their financial commitments, thereby diminishing the necessity to approach the central bank for foreign currency.