KUALA LUMPUR (Nov 25): Liquidity in Malaysian financial market remains available, despite onshore banks being required to adhere rules that prevent facilitation of offshore ringgit Non-deliverable forward (NDF) market, according to Malaysia’s Financial Markets Committee (FMC). 

The FMC was set up in May this year to review and draw up comprehensive strategies for wholesale financial markets. The committee comprises participants/representatives from Bank Negara, financial institutions, corporations, financial service providers and other institutions or stakeholders which has prominent role or participation in the financial markets.

In a statement today, the FMC said a total of RM39.7 billion and US$49.1 billion was transacted in the Malaysian bond and foreign exchange market last week (Nov 14 to Nov 18).

This compares to the RM17.8 billion and US$31.6 billion transacted in the preceding week, FMC added.

“Liquidity continues to be available, supporting smooth and orderly functioning of Malaysian financial market in intermediating the needs of market participants. Non-residents participants such as corporates, global asset and fund managers, as well as clearing and custodian banks, continue to transact in the Malaysian financial markets,” it said.

FMC said these transactions were intermediated by 58 Malaysian onshore banks which include 19 foreign banks that are subsidiaries of regional and large global banks. 

“A number of foreign banks have begun discussing with Bank Negara on their financial market transaction needs to facilitate smooth transition during this period, without causing market disruption,” it revealed.

The committee also reiterated that Bank Negara requires onshore banks to adhere to current rules, in order to prevent facilitation of offshore ringgit NDF market, in line with the “well-established policy of the ringgit”.

“This is to protect the interest of the real sectors and genuine investors in the Malaysian financial market from undue ringgit volatility. Ringgit prices and its volatility had been affected by activities and prices in the offshore NDF market, which is not necessarily reflective of economic fundamentals and underlying trade and investment activities,” it said.

Therefore, the FMC said it welcome the initiatives and strategies announced by Bank Negara Governor Datuk Muhammad Ibrahim, to further deepen liquidity on the onshore market, while providing more flexibility for market participants to manage foreign exchange risks with onshore banks.

“The FMC looks forward to carry through these initiatives and engage with the industry, to support an efficient and effective implementation,” it said.