Wrong to blame 1MDB for ringgit’s fall, says Arul Kanda
(The Rakyat Post) – It is wrong to conclude that the ringgit’s depreciation of late is entirely due to concerns over debt issues surrounding 1Malaysia Development Bhd (1MDB), its president and group executive director Arul Kanda Kandasamy said.
He lamented that various quarters were linking the ringgit’s slump to 1MDB, saying “there was no correlation between the two”.
“To say that the ringgit’s slide was because of one company, I think it’s stretching the point too far,” Arul Kanda said when asked if the financial problems surrounding 1MDB were exerting additional pressure on the local currency.
“If you look at the last one month and assess the volatility in the ringgit and the ups and downs of its value, and plug that against the news on 1MDB, you will see there is no correlation.”
On the contrary, he said, the ringgit was very much influenced by the drastic drop in global oil prices and devaluation of the Chinese renminbi that had adversely impacted the local currency.
Arul Kanda also said concerns over the emerging markets also weighed on currencies of emerging markets, depreciating such currencies as the Brazilian real, Norwegian kroner and New Zealand dollar.
The combination of plunging crude oil prices, China’s currency devaluation and rise of the US dollar led to the ringgit declining by about 16% against the greenback since August this year. It ended today at 4.2670.
Similarly, the Brazilian real fell to an all-time low in September, the Norwegian kroner also tumbled to an all-time low last month while the New Zealand dollar fell significantly after the Chinese devalued their currency.
All these currencies, including the ringgit, were linked either to concerns over emerging markets, devaluation of the Chinese currency or plunging commodity prices, especially of crude oil, which is now hovering at a low of US$48 per barrel.
“That’s not to say 1MDB has zero impact. I agree that there is some impact of some certainty around that.
“But I would also suggest that various political uncertainties in the country have also influenced the value of the currency,” he said during a special programme entitled Bernama TV with Arul Kanda.
The programme, to be aired on Astro 502, HyppTV 410 and www.bernama.com, at 10pm today, was hosted by Suriati Sanusi and co-hosted by Mikhail Raj Abdullah, who is also the deputy editor-In-chief for Bernama Economic Service.
To allay investor concerns over the ringgit, Arul Kanda said 1MDB has in place a rationalisation plan which would progressively dispose of its assets or bring in new equity to reduce its debt.
Arul Kanda reiterated that 1MDB has never defaulted on its debt and has met the principal and interest payments when due.
“From that perspective, investors should take comfort that we recognise the challenges, we are open about it and we are here to fix the situation.”
