Bank Negara’s dynamic hedging programme gets good response

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Bank Negara’s dynamic hedging programme gets good response 1

PETALING JAYA: Bank Negara Malaysia (BNM) said its dynamic hedging programme has gained traction with the registration of 108 investors managing US$ 38 billion (RM161 billion) of ringgit assets.

“Based on feedback received from registered investors, the current dynamic hedging programme is sufficient in serving investors’ needs to manage their FX risk exposures from their underlying assets,” it said in a statement yesterday, after the central bank and Financial Market Association of Malaysia’s (FMAM) engagement with London investors on March 4.

BNM noted that additional flexibilities have also been granted to investors on a case by case basis, but it welcomes further feedback from market participants to improve the onshore foreign exchange market.

The dynamic hedging programme provides the flexibility to actively manage FX risk exposure via forward hedging activities with onshore banks or appointed overseas office (AOO) without the need to show documentation.

“While market developments are aimed to be progressive, the central bank undertakes a phased approach in liberalisation initiatives, whilst balancing financial stability objectives to promote a well-functioning financial market that supports and complements the real economy,” said assistant governor Norzila Abdul Aziz.

BNM conducted the investor engagement video conference with various portfolio managers, FX and fixed income traders and global custodians in London.

The conference is part of its engagement with financial market participants to discuss and provide insights and obtain their feedback on the latest developments surrounding Malaysia’s financial market.

On the impact of China’s inclusion in the JP Morgan GBI-EM index, market participants acknowledged that the inclusion will be implemented gradually in terms of timing and positioning.

BNM said Malaysia’s deep and liquid financial market with a large base of domestic institutional investors will be able to absorb any potential impact.

The conference also deliberated on the stimulus package announced by the Malaysian Government and the monetary policy easing by BNM as part of efforts to address the wider impact of Covid-19 outbreak on economic activities.

BNM highlighted that the stimulus package aims to provide support to cushion the impact to the sectors which are most affected such as tourism, transportation and manufacturing while spurring private consumption.

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