China's Premier Li Keqiang attends a news conference in Putrajaya, Malaysia, November 23, 2015. Photo - Reuters
In what are seen as measures that could boost Malaysia's capital market and the ringgit in the longer term, the Asian powerhouse said that it would buy more Malaysian bonds, an action that will lend support to the ringgit should foreigners sell down as they brace for an upcoming rise in US interest rates.
"We want to assume a market role by purchasing your treasury bonds," Chinese premier Li Keqiang said at the Malaysia-China High Level economic forum here yesterday.
He did not however say how much worth of Malaysian bonds China would buy.
The ringgit is one of the worst-performing currencies in the region year to date, shedding almost 20 per cent against the US dollar over the period amid political uncertainties and external weaknesses.
The stock market is down 5 per cent since January while Malaysian bond market investors have also suffered a negative impact since the beginning of this year.
On the 50 billion yuan new quota, Li said this would be given to Malaysian investors under the Renminbi Qualified Foreign Institutional Investor (RQFII) programme.
The RQFII essentially allows foreign investors to invest in China using offshore renminbi accounts. Without access to RQFII, foreign investment in China is largely curtailed.
In its response, Bank Negara said in a statement that China's decision to extend the RQFII programme to Malaysia would complement the renminbi clearing bank arrangement in Malaysia and collectively, the initiatives will support the growing trade, investment and financial flows between China and Malaysia as well as position Malaysia as another offshore renminbi centre in the region.
It said with this framework, Malaysian qualified institutions would be able to mobilise offshore renminbi funds to gain direct exposure to the Chinese financial markets and contribute to the development of the renminbi market in Malaysia.
Notably, Malaysia's closest neighbour Singapore said recently that China had doubled its investment quota to 100 billion yuan.
Li said the measures announced were part of China's plan to help boost Malaysia's economy while strengthening ties between the two countries which have long enjoyed a good working relationship.
In spite of the positive news, the ringgit ended lower at yesterday's close finishing at 4.3010/3050 against the US dollar from 4.2830/2880 last Friday.
Li also said yesterday that China was keen to work with Malaysia to help it achieve its goal of becoming a high-income nation by 2020.
Among ASEAN countries, Malaysia has been doing the most trade with China since 2008, Prime Minister Datuk Seri Najib Tun Razak said earlier this year.
Trade between both countries had reached a historic high last year totalling more than US$100bil (S$141.7 billion).
China, the world's second largest economy after the United States, is also Malaysia's top trading partner.
In terms of Chinese manufacturing projects implemented in Malaysia as of Dec 31, 2014, these totalled 182 worth US$2.83bil.
More recently, Malaysia has seen the setting up of the Xiamen University Malaysia Campus in Salak Tinggi, Sepang which will take in its first batch of students in February.
The collaboration between Malaysia and China in setting up this overseas campus is expected to contribute to the creation of skilled manpower in both countries.
Li said that in the next five years, China was expected to import foreign goods worth US$10 trillion.
Meanwhile, Bank Negara said in its statement that the Securities Commission would further collaborate with the China Securities Regulatory Commission to implement the newly-announced RQFII programme. - Asia One Business
No comments:
Post a Comment