This article first appeared in The Edge Financial Daily, on June 30, 2016.

KUALA LUMPUR: The ringgit is significantly undervalued against the US dollar when compared on a purchasing power parity (PPP) basis, according to HSBC Global Asset Management chief investment officer Denis Gould.

Gould noted that on a PPP basis, the ringgit is undervalued against the US dollar by 63.68%. “Yeah it looks cheap,” he said during a conference call on the outlook for global asset classes.

“It is obviously affected by the declines in oil price and commodity price ... if we were to see commodity prices going back down again it could be affected by that but there is no real concern,” Gould added.

Gould said the reward for taking equity risk still looks attractive for the medium term, and investors should look out for those in Europe or Asia — especially Hong Kong, Japan and Singapore — over the US.

“Hong Kong and China shares have very good value. The most expensive market for us is the Philippines but it has the strongest growth and inflation trade-off going forward,” he added.

As for Malaysian equities, he said it is an “averagely valued market”.

“I would say medium, within the region, not one of the cheaper markets we see like in North Asia but the earnings growth means that valuation is reasonable,” he added.

Gould pointed out that risks for Malaysia include a sharp drop in commodity prices while a sharp uptick in inflation could hurt the bond market, but he does not foresee these to be on the horizon.