KUALA LUMPUR: Malaysia's removal from the US currency watchlist is a positive development, while the government must continue to strengthen the nation's fundamentals to sustain the investors' confidence, said Socio Economic Research Centre (SERC) executive director Lee Heng Guie.
Given that Donald Trump had proposed about 10 to 20 per cent tariffs on all global imports, Lee stated the concern is that people will start to narrow down which countries will enjoy huge trade surplus with the United States (US), especially in Southeast Asia.
"Among Southeast Asia, Malaysia is ranked at 13th compared to Vietnam, who is listed at the top. Our surplus with the US has increased quite significantly, which means we enjoyed a trade surplus," he told media at the 50th Deloitte TaxMax seminar here today.
Lee was commenting on the recent report that Malaysia, which was previously under the US Treasury Department monitoring list for currency manipulation, has been removed as it continued to only meet the significant bilateral surplus criterion.
The semi-annual report released by the department looks into countries with large trade surpluses with respect to the US that also actively intervene in foreign exchange markets to gain a competitive advantage.
Lee commented further that based on Trump's previous administration, Malaysia reaped more benefits with import demand from Malaysia to the US increasing by 7.7 percent in five years.
He added that Malaysia also enjoyed growth due to global trade diversion and China's supply chain reconfiguration to other countries.
"We still have to capitalize on this because we are friendly foreign policy to everyone. I think what we need to do is continue to consistently implement the narrative that we are committed to improving the whole country in the investment," he said.
As for the ringgit's performance against the US dollar, Lee said the local currency is still strong against the greenback for this year, although it has weakened since last month.
He said that Bank Negara Malaysia (BNM) and the government's collaboration to encourage the repatriation of funds into the country supported the ringgit from July to September this year, but the Trump effect becomes one of the main causes of the weaker ringgit.
"It is mainly because of the investors' concern over Trump 2.0 and whether the policy that he is planning to take, in particular tariff policy, not just to China but also the up to 20 percent tariff he wants to implement across the board," he said.
According to BNM, the ringgit depreciated by 7.8 percent against the greenback between Oct 1 and Nov 13 this year.
The central bank said the depreciation of the ringgit was mainly driven by the strengthening of the US dollar over the same period amid expectations for a smaller US policy rate cut following robust US economic data.
However, in the third quarter of 2024, the ringgit increased by 14.9 percent against the US dollar, while the nominal effective exchange rate (NEER) also increased by 9.9 percent.
BNM noted that this appreciation was partly driven by the shift towards a monetary policy easing stance by the US Federal Reserve (Fed), which has alleviated pressure on regional currencies, including the ringgit.