We don’t believe US interest rate increase can have such a big impact on emerging currency. Even FED does it in months to come merely 25 basis points or most 50. We don’t believe emerging markets are that off the financial track. Currency devalued by 20 to 30% in 12 months time is severe.
We also do not believe is 1MDB although there is a potential credibility impact. Be it RM 100 billions in debt that a figure Malaysia can absorb any given time.
Budget based on oil at USD 100 per barrel is the main problem. After new budget announced we believe Ringgit will stabilise further. Currency devaluation war will persist.
Oil price will slowly recover back to USD 60 per barrel as OPEC target. RM will stabilise and strengthen against other currencies in next 12 months.