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Malaysian Ringgit Rises Due to the Financial Budget

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Malaysian ringgit rose

The Malaysian ringgit rose against the US dollar on October 23, 2015, by more than 1%. The financial budget by Prime Minister Najib Razak was framed to woo investors. He also increased the income tax rates in order to bring down the fiscal deficit. Razak introduced cash support for lower income grade households, allocated funds for development, and provided funding to attract affordable housing projects in the country.

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The Malaysian economy has been hit hard by falling energy prices. It weakened the ringgit this year. The slowdown in the Chinese economy combined with the devaluation of the yuan also put pressure on the ringgit. Prime Minister Razak forecasted a lower deficit in the budget aimed to support the country’s investment-grade sovereign debt rating.

Consumer inflation slowed in September

In September, consumer inflation rose at an annual pace of 2.6%. It was below expectations of 3.0%. It moderated from the levels of 3.1% in August. The rise in the inflation levels was led by a rise in alcoholic beverages and tobacco products by 9.8% while non-alcoholic beverages grew by 4.3%. The increases were offset by a fall in transport costs by 3.8%. The inflation levels rose by 0.3% on a monthly basis in September after exhibiting a flat trajectory in August.

Impact on the market

The iShares MSCI Malaysia ETF (EWM) was on a positive bias after the budget speech. It rose 0.65% on October 23, 2015. The iShares MSCI Emerging Markets Asia ETF (EEMA) was trading higher by 0.88%.

Asian ADRs (American depositary receipts) trading in the US markets were trading on a mixed note. Japanese group Mitsubishi UFJ Financial Group Inc (MTU) rose by 1.7%. On the other hand, Korean companies KB Financial Group (KB) and Woori Bank (WF) fell 0.12% and 0.49%, respectively.

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