Ringgit no longer considered undervalued, surpasses RM4.35 against US Dollar

KUALA LUMPUR: The ringgit is no longer deemed undervalued after surpassing the RM4.35 mark against the US dollar, according to Mohd Sedek Jantan, Head of Investment Research at UOB Kay Hian Wealth Advisors.

According to Bernama, Mohd Sedek stated that the domestic currency is likely to continue its upward trajectory, potentially reaching RM4.25 against the US dollar by the end of the year.

The current value of the ringgit is primarily driven by market dynamics, influenced by supply and demand forces, he told Bernama.

He added that foreign investors might continue to purchase assets denominated in ringgit into the next year, anticipating that the US Federal Reserve will begin cutting interest rates in September.

Following recent developments in the US, the economist forecasts a 25 basis point rate cut this year, followed by three additional cuts totaling 75 basis points in 2025.

Mohd Sedek noted that foreign interest in Bursa Malaysia surged on August 16, and this momentum is expected to persist.

“Foreign investors will likely continue increasing their holdings in luxury sectors, especially financials, as the interest rate cuts will significantly benefit this industry.

“With lower returns from fixed-income assets like bonds, investors may be attracted to dividend-paying stocks. Malaysian banks, known for their consistent dividend payments, could draw significant investment inflows,” he said.

Banks have reported stronger financial performance during the ongoing reporting season, which has increased interest in their respective stocks.

On Wednesday, Maybank announced an 8.2% increase in net profit to RM2.53 billion for the second quarter, up from RM2.34 billion in the same period the previous fiscal year.

This performance was driven by higher revenue of RM17.17 billion compared to RM16.13 billion in the same period.

Public Bank’s net profit for the second quarter also rose to RM1.78 billion from RM1.61 billion a year earlier, while revenue increased to RM6.69 billion from RM6.26 billion.

Bank Islam Malaysia reported a net profit of RM137.16 million for the second quarter, up from RM136.13 million in the previous quarter.

However, RHB Bank’s net profit declined to RM722.31 million for the quarter, down from RM808.70 million in the second quarter of the 2023 fiscal year.

CIMB Bank is expected to announce its financial performance later this week.