Economists Hail Malaysia's Central Bank's Financial Mart Liberalisation Measures

KUALA LUMPUR, Jan 30 (Bernama) -- Economists have hailed Bank Negara Malaysia's (Malaysia's central bank) efforts to introduce three new financial market liberalisation measures Monday. They said the move would among other things, be the precursor for the internationalisation of the ringgit, improve risk control and enhance Malaysia's position as an investment destination. Malaysian Rating Corporation Bhd (MARC) chief economist, Nor Zahidi Alias said the new measures would improve the option for corporate foreign exchange hedging to control risks of foreign exchange exposure, especially in view of increasing volatility in the foreign exchange market. "It would also enhance Malaysia as a portfolio investment destination for foreign investors who are consistently looking for innovative products and liberalisation measures in the financial market. "It can potentially improve options for domestic wealth management and increase domestic banking fee income through innovative products as well as strengthen the position of domestic banks in regional markets," he told Bernama. Nor Zahidi said foreign exchange volatility has been a prominent feature of the financial market of late, especially after the recent recession and in the wake of the European debt crisis. As such, he added, it is imperative for market players and businesses in general to have some control over the risks associated with exchange rate movements. However, he said should these products be introduced at the retail level, sufficient knowledge needs to be made available, for the risks associated with it, to be understood by consumers. Bank Islam's chief economist, Azrul Azwar Ahmad Tajudin said Bank Negara's measures are in the right direction, with the central bank aiming to further liberalise the country's financial sector. "These measures are more towards liberalising and developing the foreign exchange market, the money market and the debt market. "Those in Malaysia can trade in foreign currency. This is a very positive move towards that goal. It will also be the precursor for the internationalisation of the ringgit," he added. Azrul said these measures will also offer local banks, more opportunities to expand their products and services to the customer base, thus diversifying its income source and take them a step closer to be on par with other global banks. Meanwhile, RAM Holdings Bhd economist Jason Fong said the new measures would increase liquidity in the domestic financial market through easier interactions between foreign and local participants. "This extra liquidity, besides allowing Malaysia to gain more prominence as a financial sector, would reduce the likelihood of asset mispricing and allow for more informed trading in the system, particularly with regards to the current derivatives market," he added. The new rules, he said also encouraged greater financial market flexibility in catering to differing investor profiles. Jason said allowing more alternatives to financial liquidity, enabled investors to optimise their risk-return profile. "In total, it would help the economy, as investors make more informed and planned decisions, reducing any additional unwanted costs in their transactions," he added. According to Jason, this will also make the Malaysian economy a more viable destination for investors in the longer-term. -- BERNAMA