KUALA LUMPUR: Malaysia’s ringgit is falling at the fastest pace among Asian emerging markets, the 10-year bond yield just spiked to an eight-year high and the stock market is closing in on a record third straight annual loss.

But fund managers say it’s a good time to buy.

Mitsubishi UFJ Kokusai Asset Management Co said it’s looking to add to holdings of Malaysian sovereign debt after expectations for faster US interest-rate increases spurred a selloff. Areca Capital Sdn Bhd and Affin Hwang Asset Management Bhd see an opportunity to buy the nation’s shares.

“We have positioned ourselves for a market rebound,” said Danny Wong Teck Meng, chief executive officer at Areca Capital, whose stock fund has beaten 98% of its peers with an 11%annual return over the past five years.

“Malaysia is losing its core attractiveness, and the country doesn’t stand out like it used to compared to peers, but technically it’s oversold right now.”

A crackdown on currency speculators last month exacerbated outflows and saw the ringgit weaken even as oil rebounded, an unusual phenomenon for east Asia’s only net exporter of the commodity.

The ringgit has decoupled from oil and if it starts moving in tandem with crude again it should be poised for a sharp recovery, Areca’s Wong said last week before the Saudi announcement.

With more than a third of its local sovereign bonds held by foreigners, Malaysia is vulnerable to external shocks like Donald Trump’s election win. The ringgit has dropped 5.3% since Nov 8, almost twice as much as South Korea’s won, the next worst performer in emerging-market Asia.

The yield on Malaysia’s benchmark 10-year benchmark sovereign notes shot up 75 basis points last month, reaching an eight-year high of 4.46% on Nov 29 before falling to 4.1% by the end of last week.

“The ringgit will probably become more stable over a few months, and then we may consider increasing exposure to Malaysia,” said Tatsuya Higuchi, the Tokyo-based chief fund manager for foreign fixed income at Mitsubishi UFJ Kokusai Asset, which managed US$105bil at the end of September. Excluding the currency vulnerability, Malaysia is more attractive than most of its peers apart from higher-yielding Indonesia and India, he said.

The ringgit has lost 35% since the end of 2013 and the FTSE Bursa Malaysia KLCI Index of shares fell 12%, trailing gains of at least 17 percent in Thai, Indonesian and Philippine gauges. Foreign funds net sold Malaysian stocks in each of the six weeks through Dec 2, taking outflows this year to RM2.5bil.

“We are buying into this market sale,” said Gan Eng Peng, the Kuala Lumpur-based equities head at Affin Hwang Asset, whose Select Opportunity Fund beat 98% of peers with a 9.7% return in the past year.

“The ringgit’s massive depreciation over the last three years is overdone, he said.

Malaysian assets have rallied in December as the central bank said it would provide greater hedging flexibility in the onshore currency market after last month’s crackdown deterred investment.

The Saudi move, which drove a jump of as much as 6.6% in Brent crude on Monday, is an extra tailwind.

“The combination of relatively sharper depreciation in the ringgit and a higher proportion of foreign holdings in local government bonds contributed towards a more acute risk aversion response in Malaysia,” said Victor Yong, an interest-rate strategist at United Overseas Bank Ltd in Singapore.

“Further dampening of currency depreciation pressures will be beneficial.”

– Bloomberg