Business

Saturday January 28, 2012

Foreign exchange rules to be liberalised further

By THOMAS HUONG
huong@thestar.com.my


KUALA LUMPUR: Malaysia's foreign exchange administration rules will be liberalised progressively in order to broaden the participation of regional players in the domestic market, according to Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

Measures would continue to be introduced for the development of cross-border settlement infrastructures to enable more efficient and cost-effective foreign currency trading and settlements, said Dr Zeti during her speech at the 13th annual conference of the Fixed Income, Money Market and Derivatives Association of India (FIMMDA) and Primary Dealers Association of India (PDAI).

Meanwhile, a prominent area of focus for the central bank was the development of Malaysia's bond market.

Zeti noted that Malaysia's bond market had grown to RM867bil or 105% of gross domestic product (GDP) in 2011, and had become one of the largest debt securities market in South-East Asia.

She also pointed out that the volumes transacted in the domestic money market and the foreign exchange market had reached RM23.5 trillion and RM9.21 trillion trades respectively.

Zeti said the potential for further collaboration between India and Malaysia was tremendous.

“Malaysia's exports to India amounted close to US$9bil in 2011, equivalent to 4.1% of Malaysia's total exports, while the outstanding direct investments from India are now close to US$500mil.”

Zeti also said Malaysia was evolving to become a major multi-currency bond and sukuk market.

“Our Islamic capital markets have thrived, with a growing presence of international issuers and investors operating in both the ringgit and foreign currency sukuk markets in Malaysia.”

She pointed out that last year, Malaysia had issued the first 10-year global sovereign US dollar sukuk, with the issuance size of two billion.

She also pointed out that there was increasing economic integration in Asia, which was supported by the strong demand from the growing middle-class population, which was projected to reach 3.3 billion by 2030. “The intra-regional trade in Asia now represents more than 50% of total trade in the region, increasing from 32% in 1995.”

Zeti said with the high savings rate in Asia and the massive requirement for infrastructure development, the region would benefit significantly from a more efficient intermediation of Asia's surplus funds.

“Intra-regional cross-border portfolio investments have already increased to 28% of total assets holdings in 2011 compared with 21% in 2001,” she said.

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