KUALA LUMPUR — December 2, 2016: In a move to further broaden and deepen Malaysian financial markets, Bank Negara Malaysia (BNM) today introduced a series of measures, effective December 5, to enhance the liquidity of the foreign exchange market.
One is to allow residents, including resident fund managers, to freely and actively hedge their US dollars and Chinese reminbi.
However, the exposure is up to a limit of RM6 million per client per bank, with a one-time declaration of non-participation in speculative activity.
Residents and non-resident fund managers can now actively manage their foreign exchange exposure of up to 25 per cent of invested assets.
Assistant Governor Adnan Zaylani Mohamad Zahid told a media briefing here today that to broaden accessibility of foreign investors and corporates to the onshore foreign exchange market, offshore non-resident financial institutions
may participate in the Appointed Overseas Office framework which will be accorded additional flexibilities on ringgit transaction.
These flexibilities include foreign exchange hedging (own account/on behalf of client) for current and financial account based on commitment, opening of ringgit account (book-keeping) and extension of ringgit trade financing.
As part of streamlining treatment for investments in foreign currency assets, residents with domestic ringgit borrowing, are free to invest in foreign currency assets both onshore and abroad up to the prudential limit of
RM50 million for corporates and RM1 million for individuals.
Residents without domestic ringgit borrowing shall continue to enjoy flexibility of investing in foreign currency assets both onshore and abroad up to any amount.
This gives equal treatment for residents with ringgit borrowings investing in foreign currency assets whether in the onshore or offshore market.
Exporters can now retain only up to 25 per cent of export proceeds in foreign currency, compared with 100 per cent previously.
They may hold higher balances with approval from BNM to meet their obligations in foreign currency.
Payment by resident exporters for settlement of domestic trade in goods and services is now to be made fully in the ringgit.
All ringgit proceeds from exports can earn a higher rate of return via a special deposit facility.
The facility for ringgit proceeds will be offered to exporters via all commercial banks and receive a rate of 3.25 per cent per annum. This facility will be offered until Dec 31, 2017, subject to further review.
Foreign currency arising from conversion of export proceeds will be used to ensure continuous liquidity of foreign currency in the onshore market.
In addition to the newly announced hedging measures, exporters are also able to hedge and unhedge up to six months of their foreign currency obligations.
These measures are intended to promote a deeper, more transparent and well-functioning onshore foreign exchange market where genuine investors and market participants can effectively manage their market risks with greater
flexibility to hedge on the onshore market.
“A deep and liquid onshore foreign exchange market will enable investors to better manage against volatile currency movements,” Adnan said.
The above measures are part of a series of market development initiatives by the financial markets committee.
The aspiration is to have a highly developed, liquid and deep foreign exchange market in Malaysia to commensurate with the growth of the economy and the increasingly sophisticated needs of users.
To facilitate enquiries, contact 03-2698 6089, 03-2692 8736, 03-2691 6473, 03-2691 3164 or 03-2693 0772 (Mondays to Fridays from 9am to 5pm)/Saturdays and Sundays from 9am to 1pm or email [email protected] from Dec 3. — Bernama