KUALA LUMPUR (Nov 14): CIMB Investment Bank Bhd said the ringgit could potentially touch up to 4.80 against the U.S. dollar in the near term, expecting currencies to remain volatile, until there is greater clarity on the new U.S. administration’s policies.

CIMB Investment analyst Ivy Ng said the technical chart for the ringgit looks bearish for the near term and said that the ringgit could touch between 4.50 and 4.80 against the greenback in the next three to six months. 

In a note today, she said the onshore ringgit closed lower at 4.285 against the U.S. dollar on Friday, while the currency’s non-deliverable forwards fell 2.5% from its previous close to 4.487 per U.S. dollar, turning the ringgit into the second-worst performing currency in ASEAN year-to-date.

“Since the election, the US yield curve has steepened to reflect the market’s expectation of an inflationary impact of Trump’s campaign promises. 

“This narrowed the premium of emerging market yields over the U.S. and resulted in unwinding of carry trades funded in U.S. dollar. The ringgit has fallen in line with this trend and the weakness was further compounded by the relatively high foreign holdings of Malaysian government bonds.

“Currency volatility could remain in place until clarity on the new U.S. administration’s economic and trade policies are made known. Beyond this however, the decent fundamentals of ringgit could prevail and the ringgit could recover to U.S. pre-election levels,” said Ng.

She said if the weak ringgit persists, Malaysian corporates will be net beneficiaries as exporters will become more competitive, while companies that have assets abroad will gain from the currency effect.

Ng said companies that will be biggest winners of the weak ringgit are HeveaBoard Bhd, Top Glove Corp Bhd and Evergreen Fibreboard Bhd.

Meanwhile, top losers are Tan Chong Motor Holdings Bhd, Bermaz Auto Bhd and UMW Holdings Bhd.

“The FBM KLCI fell 1% on Friday, dragging along several casualties that could benefit from the weak ringgit. Share prices of YTL Power, Genting Plantations and Inari fell 1% to 3% on Friday, despite being beneficiaries of a weak ringgit. We have Add calls on these stocks and the sell down could present buying opportunities for investors,” said Ng.

The research house maintained its year-end target of 1,730 for the KLCI and 1,880 for end-2017. It said it maintains its top picks for the year, but advocated investors to look into defensive sectors such as utilities and construction, amid short-term uncertainties.