No breather for ringgit as China devalues yuan

PETALING JAYA: The ringgit and the local stock market took a big hit yesterday after China shocked markets by devaluing the Yuan in a move that spiked the US dollar almost instantly.
In the wake of China's record 1.9% currency devaluation, the ringgit slid further to a mere 0.037 points away from the RM4 to the dollar level as at 5pm yesterday.
The local currency strengthened to 3.9735 to the dollar, up 23.67% from a year ago, while the FBM KLCI index lost 17.66 points or 1.07% yesterday.
China's move to devalue the yuan, an attempt to boost its exports, has put all eyes on Bank Negara Malaysia's on next move as one foreign currency (forex) trader reckons that the central bank will have to put the brakes on the "runaway" ringgit if it breaches the 4.00 per dollar level.
He said Bank Negara have not really made a significant effort to stop the ringgit fall although there has been speculation the central bank is buying the currency to stem its losses.
Malaysia's foreign-exchange reserves dropped below US$100 billion (RM397 billion) last month for the first time in five years, partly due to capital outflow from some withdrawal of portfolio funds by investors resulting in further depreciation of the ringgit.
Meanwhile, the KLCI extended its sell down after closing lower at 1,636.71 points despite chalking up gains early morning on the back of bargain-hunting.
Malaysian stocks succumbed to renewed selling-pressure as investors remain cautious over the domestic issue and a weak ringgit.
The finance Index fell 1.63% to 14,705.21 points, the properties index dropped 0.28% to 1,150.26 points and while the plantation index was down 0.36% to 7,154.67 points.
Among the laggards from the 30 largest stocks were AMMB which shed 18 sen to RM5.26, Petronas Dagangan (-70 sen to RM20.58), Maybank (-28 sen to RM8.52), Sime Darby (-24 sen to RM8.16) and Sapura Kencana -6 sen to RM2.19).
Market breadth was negative with 290 gainers as compared with 529 losers.