The ringgit dropped 0.6% to 3.6435 a dollar today after news that strategic investor 1Malaysia Development Bhd may require a RM3 billion cash injection from the government. – The Malaysian Insider file pic, February 23, 2015.
The ringgit is under pressure today on concerns that strategic investor 1MDB will need a bailout to service its RM42 billion debt.
1Malaysia Development Bhd may require a RM3 billion cash injection as income from its power assets is insufficient to service borrowings, according to a report today in The Edge Financial Daily.
1MDB said last week it will break up its assets and refrain from taking on new investments.
“Sentiment towards the ringgit is unlikely to change until we get clarity over the financial position of 1MDB,” Bloomberg quoted Khoon Goh, a strategist at Australia & New Zealand Banking Group in Singapore, as saying.
“There is concern that a government bailout would be required.”
The ringgit dropped 0.6% to 3.6435 a dollar as of 9.32am in Kuala Lumpur and earlier fell to 3.6460, the lowest level since April 2009, according to prices from local banks compiled by Bloomberg.
The local financial markets were shut on February 19 and 20 for the Lunar New Year break.
1MDB’s financial position has become “a source of uncertainty” and the company’s borrowings were weighing on Malaysia’s sovereign rating outlook, Fitch Ratings said in a January 21 statement.
Fitch rates Malaysia A-, the fourth-lowest investment grade.
Government bonds have also retreated. The yield on 10-year notes climbed one basis point, or 0.01 percentage point, to 3.89%, Bloomberg data show. – The Edge Financial Daily
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