Mobius says Malaysian ringgit is undervalued by 28%

[KUALA LUMPUR] Franklin Templeton's Mark Mobius said on Tuesday that Malaysia's currency is undervalued by 28 per cent, which makes the country an attractive prospect for investors looking at Southeast Asian economies.

The ringgit was Asia's worst performing currency last year when it lost 18.5 per cent to the dollar. It has since strengthened 4.0 per cent this year with the return of foreign capital to ringgit bonds.

"It is a 28 per cent undervaluation, which is why we have been buying local stocks," Mr Mobius, who is executive chairman of Templeton Emerging Markets Group, said in his speech at a conference in Kuala Lumpur.

"The currency is undervalued, so I advise you all after this conference to head to the nearest mall and start shopping, because things are very, very cheap here. And this is why we are very positive on Malaysia at this stage," he added.

Mr Mobius said emerging markets are at a "turning point", and listed Brazil, Vietnam and Malaysia among his favourite emerging market investment destinations.

Currencies in Southeast Asian economies came under increased pressure last year amid a global slump in prices and a slowdown in China.

The MSCI index of Southeast Asia, a benchmark of the region's biggest stocks, plunged about 20 per cent last year, driven in part by these factors which brought down valuations down to 2009 lows.

Malaysia's economy grew 5 per cent in 2015, slowing from 6 per cent in 2014 but within the government's 4.5-5.5 per cent estimate.

The ringgit took a hit from sustained weakness in global oil and commodity prices last year, and continues to face risks from Malaysia's diminishing surplus, which narrowed to 5.39 billion ringgit (S$1.81 billion) in January trade.

Beyond Malaysia, he said while growth is decelerating in China, Mr Mobius said it remains "an enormous growth story" with a significant increase in the economy's dollar value over the past two years when growth was at 7 per cent, compared with when it grew at 10 per cent in 2010.

Mr Mobius said India is also growing at a "very nice rate" with increasing foreign reserves, that along with the Indian rupee, have been managed well by the country's central bank.

REUTERS