KUALA LUMPUR: Malaysia’s foreign exchange reserves fell a staggering RM26bil in a fortnight to RM345.5bil but was still healthy enough by all accounts when measured against the standard yardsticks.
The fall in forex reserves was not explained by Bank Negara in its bi-weekly statement of assets and liabilities but analysts point out the dramatic drop coincided with the terrible month of October when the financial crisis and stock market losses accelerated.
In a statement, Bank Negara said the international reserves amounted to RM345.5 billion (equivalent to US$100.2bil) as at Oct 31.
It said the reserves position was sufficient to finance 8.1 months of retained imports and was 3.7 times the short-term external debt, levels that are deemed healthy internationally.
Foreign exchange reserves hit a peak on June 30 when it reached RM410.9bil, around the time when commodity prices, including that of crude oil, were close to their peaks.
Crude oil price reached its all-time high of US$147 a barrel in July but started to slide precipitously later. Commodity prices such as crude palm oil also declined dramatically during the month.
Supporting foreign exchange reserves was the still strong trade surpluses registered by the country and the continued inflow of foreign direct investments.
Even with those two sources of cash, the outflow was still large, which Jupiter Securities head of research Pong Teng Siew attributed to several factors.
Apart from the repatriation of portfolio capital during the black October month for the stock market, he thinks investors too may have pulled money from the bond markets judging by the increase in yields during the last two weeks of October.
Another reason might have been multinational companies repatriating dividends earlier than normal – which traditionally takes place during the final quarter of the year – given the scarcity of funds in the US and European markets during the height of the financial crisis.
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