KUALA LUMPUR, April 13 Malaysia's central bank
said on Thursday it will allow all resident entities to
short-sell Malaysian government securities from May 2, in an
effort to boost liquidity in the bond market and provide
additional risk management tools.
Only licensed banks and investment banks were allowed to
short sell before.
Non-bank entities will also be allowed to have a net forward
hedging position of up to 100 percent of their underlying assets
and manage an additional 25 percent of foreign exchange
exposure, said Bank Negara Malaysia (BNM) Assistant Governor
Adnan Zaylani Mohamad Zahid.
The new initiatives are part of BNM's measures to improve
liquidity and encourage more onshore trade of the ringgit
. The ringgit hit a near 19-year low of 4.4980 to the
dollar on Jan. 4, though it has since recovered 1.5 percent this
Adnan said the central bank is also considering a plan to
allow short selling shariah-compliant Malaysian government
investment issue (MGII) bonds to narrow the pricing gap with
"We will issue a concept paper and expect industry feedback
by April 28," Adnan told journalists at a briefing on the new
On foreign exchange risk exposure, Adnan said residents will
be given additional options to hedge up to 6 million ringgit
($1.36 million) per bank without documentary evidence in the
pound sterling, euro and Japanese yen starting May 2.
Residents are currently given two pairing options to hedge
their foreign exchange risk exposure - dollar/ringgit and
Adnan said BNM is also implementing a new code of conduct
for financial markets, replacing the existing code issued in
1994 to update on the principles and standards to be followed by
market participants and the role of industry associations "in
preserving market order and stability".
In November, the central bank stepped in to discourage
ringgit trade in the non-deliverable forwards (NDF) market, as
the Malaysian currency languished as Asia's worst performer in
the aftermath of Donald Trump's U.S. presidential election
BNM later announced in December new measures to boost
liquidity and domestic trade of the ringgit, steps that the
central bank said have helped stabilise the currency.
($1 = 4.4230 ringgit)
(Reporting by Joseph Sipalan; Editing by Sam Holmes)