Ringgit poised for further gains in 2025
HLIB Research predicts further ringgit gains in 2025, supported by global recovery
by RUPINDER SINGH
THE ringgit's rally appears to have staying power, with Hong Leong Investment Bank Bhd (HLIB Research) expecting further strengthening this year amid a weaker US dollar, improved global sentiment, and renewed foreign capital inflows.
In its latest report, the research house maintained its forecast for the ringgit to average RM4.35 against the dollar in 2025, strengthening from RM4.57 in 2024.
By year-end, HLIB Research expects the local note to appreciate further to RM4.10.
'Ringgit has appreciated 6.5% year-to-date (YTD), largely benefitting from a shift in global sentiment following the perceived reduction in macro headwinds,' the report stated.
A key turning point, according to HLIB Research, was April 22 — dubbed Liberation
Day — when global markets began to recover in earnest, as inflation fears subsided and investors started reallocating capital from US assets to emerging markets (EMs).
'We believe the technical bottom of RM4.80/US dollar is likely in,' said HLIB, pointing to the confluence of macro improvements and policy clarity that support a stronger ringgit going forward.
While a firmer ringgit bodes well for companies with high import content or US dollar liabilities, HLIB Research cautioned that it may compress margins for exporters due to adverse currency translation effects.
The strengthening of the ringgit is also part of a broader trend across the region.
'With the US dollar being the primary source of weakness, regional currencies have rallied in tandem,' HLIB Research noted.
However, it pointed out that this foreign exchange shift has yet to significantly lift Malaysian equities, suggesting the recent rally may be more liquidity-driven than driven by foreign flows.
'Despite the equity rebound, the US dollar has lagged since 'Liberation Day,' indicating US recovery is driven by domes-
tic liquidity rather than foreign inflows,' the report observed.
Still, Malaysia appears to be attracting renewed foreign interest.
HLIB Research highlighted that foreign investors were net buyers of Malaysian equities over the past two weeks, with net inflows of RM1.4 billion.
The local bond market also saw RM2.8 billion in foreign inflows in March, while foreign holdings of Malaysian Goverment Securities (MGS) and Government Investment Issue (GII) rose to 21.1% in March — recovering from a 13-year low of 20.2% in January.
The research house believes these trends, alongside improving fiscal discipline and structural reforms under Ekonomi MADANI, could underpin a more sustained re-rating of the ringgit and broader Malaysian assets.
'Malaysia not only has a growth story to tell but also a policy narrative to share,' HLIB Research said.
Still, risks loom on the horizon.
Chief among them is the second Donald Trump presidency, which could revive protectionist trade policies.
'Trump tariffs 2.0 pose a key risk to macro, sectoral and corporate outlooks,' HLIB Research warned.
Trade-dependent economies like Malaysia may be exposed to collateral damage if broad-based US tariffs return, stalling global growth and commodity demand.
Geopolitical tensions also remain a source of uncertainty.
On the domestic front, HLIB Research-views Malaysia's macroeconomic fundamentals as sound.
However, it did not rule out the possibility of monetary easing if downside risks materialise.
The research house reiterated its 'tactically constructive' stance on Malaysian equities, maintaining its FTSE Bursa Malaysia KLCI (FBM KLCI) year-end target of 1,690.
It recommends a 'sell on strength' strategy in the near term, advocating a barbell approach that balances defensive sectors with laggards poised for catch-up.
It maintains a preference for banks, construction and utilities, while remaining cautious on export-heavy and commodity-linked sectors.
This article first appeared in The Malaysian Reserve weekly print edition
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