China stock rout hits yuan sentiment; ringgit view most bearish in a month

[SINGAPORE] Bullish sentiment on China's yuan fell to the lowest in three months as Chinese stock markets plunged, while short positions on the Malaysian ringgit hit their largest in one month due to rising political tensions, a Reuters poll showed.

Bearish bets on most emerging Asian currencies increased as the savage sell-off in China and Greece's protracted debt crisis hurt risk sentiment, according to the survey of 16 fund managers and currency analysts conducted between Tuesday and Thursday.

Chinese stocks have lost about 30 per cent over the last three weeks. The sell-off pushed the yuan in the offshore market to four month-lows on Wednesday, although the renminbi remained stable onshore.

The yuan's long positions fell to their lowest during the last two weeks since early April, the poll showed. In the previous survey published on June 25, bullish bets hit a seven-month high.

Caution remained over the outlook for Chinese stocks, although they rebounded on Thursday after the securities regulator banned shareholders with large stakes in listed firms from selling the shares for six months.

The ringgit's short positions rose to their largest since early June as corruption allegations swirl around Prime Minister Najib Razak. Earlier this week, the currency briefly weakened past its old of 3.80 per dollar, fixed in September 1998 during the Asian financial crisis and scrapped in 2005.

Malaysia's central bank had been spotted intervening for five consecutive sessions through Thursday to support the worst-performing Asian currency so far this year, traders said.

The Wall Street Journal (WSJ) reported last week that investigators probing 1MDB had traced funds flowing into Mr Najib's personal account. Reuters is unable to verify the report and Najib has denied taking any money from the debt-laden state fund or any other entity for personal gain.

The report undermined short-term positive sentiment on the Malaysian currency after Fitch Ratings unexpectedly upgraded its rating outlook to "stable" from "negative".

Bearish bets on South Korea's won rose to their largest since late March as the currency hit a two-year low on Thursday on continuous foreign stock selling.

The Bank of Korea cut the country's growth forecast on Thursday, while keeping interest rates steady at a record low to support the sluggish economy.

Pessimistic bets on the Taiwan dollar hit a seven-month peak as the island's stocks suffered on Wednesday their largest single-day slide in more than three years, with heavy foreign selling.

The Thai baht's short positions increased to their highest since late May as the currency hit a near six-year low on Wednesday. The currency came under pressure from capital outflows.

Thailand's central bank is expected to keep the currency weak in a bid to revive the economy by boosting exports, analysts said.

Long positions in the Indian rupee almost disappeared as the Chinese stock turmoil raised concerns of foreign fund outflows from Asian emerging markets in general.

Short positions on the Singapore dollar and the Philippine peso grew.

The currency poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long US dollars.

The figures include positions held through non-deliverable forwards (NDFs).

REUTERS