KUALA LUMPUR – Bank Negara Malaysia (BNM) is closely monitoring the market situation following Donald Trump’s shock victory in the US presidential election.
The central bank said on Wednesday it would ensure that liquidity remains ample to support an orderly market.
“The Financial Markets Committee is also in communications with its members and will ensure that all business and transaction needs are to be met by the financial markets as required,” it said.
Asian and European markets tumbled as Republican candidate was seen heading for victory in the bitterly-contested election to beat Democrat Hillary Clinton.
At Bursa Malaysia, the FBM KLCI managed to close off the day’s low of 1,640.85. It fell 16.2 points or 0.97% to 1,647.62. The ringgit weakened against the major currencies as crude oil prices fell.
The ringgit fell against the major currencies as crude oil prices slumped. It fell to 4.2218 against the US dollar to 4.2218 from 4.2017 while it slipped against the Singapore dollar to 3.0397 from 3.0237 and it fell against the pound sterling to 5.2807 from 5.2233. It fell sharply against the Euro to 4.7474 from 4.6477.
News reports said the S&P 500 Index futures slid as much as 5% earlier while the MSCI Emerging Markets index tumbled 3.1%. The Mexican peso fell by 13% to a record low since its 1994 devaluation crisis.
HSBC Global Research pointed out in its forex strategy that the Trump victory “is a major risk-off event for forex markets”.
“The 10-year Treasury yield range should drop by 10bp to 20bp; the recent 1.55-1.85% 10-year range could fall to as low as 1.35-1.65% in a risk-off rally. Local rates in Mexico, China, and possibly Korea are potentially the most exposed. We project increased volatility in credit markets, with healthcare, energy and financials sector particularly in the spotlight.
“Equity strategy: Trump’s surprise win offers substantial downside for equities given heightened uncertainty. We expect volatility to rise, valuation multiples to contract and earnings to disappoint. US equity ‘safer-haven’ may well outperform the rest of the world,” it said.