Thailand
Malaysia: Ringgit IRS trade by non-resident banks offers a positive signal
KUALA LUMPUR: Bank Negara’s move to allow non-resident banks to trade in ringgit-denominated interest rate swap (IRS) effective March 15 is seen as a positive move by the central bank, signalling that it has the policy instrument and enough room to manoeuvre in the financial market, Juwai IQI Global chief economist Shan Saeed said.
He said this move would further strengthen the onshore market and give it the necessary boost.
“It will send a signal not only to local but also global investors that Malaysia wants to move aggressively in the global economy and Bank Negara has a strong role to play, ” he told Bernama.
Saeed said the central bank has played its cards very strategically in the past and has prudent monetary policies to maintain the country’s growth, price and employment stability.
“It has given a boost to the financial market… and that is why the financial market in Malaysia is quite vibrant with banks being resilient in taking external shocks.
“Overall, I believe the economy has performed considerably well taking into account the global economic fragility. Macro-economic stability has been maintained, which is the key for global investors, ” he added.
Sunway University economics professor Yeah Kim Leng said it is a welcome initiative to enable foreign banks to participate in the onshore IRS market.
“It will not only boost liquidity but also lower hedging costs for companies seeking to insure against interest-rate fluctuations, ” he said.
Meanwhile, UOB Malaysia senior economist Julia Goh said it is a positive market development that will help deepen liquidity in the ringgit IRS market to assist corporates and investors manage hedging and funding costs.
Bank Negara has on Wednesday announced that effective March 15, non-resident banks may trade ringgit-denominated IRS without any underlying commitment with any onshore bank or its appointed overseas offices. — Bernama
Source: https://www.thestar.com.my/business/business-news/2021/03/12/ringgit-irs-trade-by-non-resident-banks-offers-a-positive-signal