Ringgit leads advance in Asia before Najib's 2016 budget speech

[KUALA LUMPUR] Malaysia's ringgit led gains in Asia before Prime Minister Najib Razak's budget speech as the prospect of more monetary stimulus from the European Central Bank buoyed emerging-market assets.

Mr Najib will unveil the government's 2016 spending plans for Southeast Asia's third-largest economy on Friday. Trade Minister Mustapa Mohamed said in parliament Tuesday that the budget will reveal measures to strengthen the ringgit, Asia's worst performer this year. The MSCI Asia Pacific Index of stocks climbed with regional currencies Friday as ECB President Mario Draghi suggested the euro area may need a fresh injection of stimulus by the end of the year to counter an economic slowdown.

"The ringgit is up on speculation the budget will be friendly, focusing on infrastructure and boosting consumer spending," said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. "The ECB's stimulus measures should drive flows to Asia." The ringgit strengthened 1.3 per cent to 4.23 a dollar as of 12:10 p.m. in Kuala Lumpur, following a 3.9 per cent loss in the last five trading days, according to prices from local banks compiled by Bloomberg. It has lost 1.2 per cent this week. The currency's 17 per cent slump this year has made it Asia's worst- performing exchange rate as a slide in Brent crude prices hurt the region's only major net oil exporter and a funding scandal linked to Mr Najib spooked foreign investors.

The budget will be "one of the most difficult," Mr Najib was quoted as saying in a New Straits Times report on Monday. The government aims to cut the fiscal deficit to 3.2 per cent of gross domestic product this year from 3.5 per cent, after amending the target from 3 per cent in January as oil prices continued to slide. Mr Najib's speech is due to start at 4 p.m. local time.

Consumer prices in Malaysia rose 2.6 per cent in September from a year earlier, slower than the median estimate of 2.9 per cent in a Bloomberg survey and compared with a 3.1 per cent increase in August, official data released Friday showed. Foreign-exchange reserves climbed US$800 million in the two weeks to Oct. 15 to $94.1 billion, according to a Bank Negara Malaysia statement issued after markets closed Thursday. They dropped the most since 2008 last quarter.

Malaysian sovereign bonds maturing in 2019 gained, with the yield declining two basis points to 3.62 per cent, prices from Bursa Malaysia show. The 10-year yield increased one basis point to 4.15 per cent.

BLOOMBERG