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Hi RealTraders',
If you have been following developments in ASIA, currencies of these
developing countries including Thailand, Phillipines, Indonesia, Malaysia
and even Singapore have all been dropping owing to the actions of hedge
funds and foreign currency traders selling "short" these currencies. The
Central Banks of Thailand and Malaysia have attempted to stop the
speculation of these currencies by limiting the forward contracts of
purchasing the local currencies by a set amount, so that speculators are
unable to cover their shorts and thus are "punished" to cover their shorts
in other ways, notably one of which is to sell their physical stock and
shares in the equities market to get local "dollars". This has caused
turmoil in the stock markets. For example, the PE Ratio of the Kuala Lumpur
Stock Exchange is now at a 17 year historical low of around 12.
Just yesterday, the authorities have declared that the Central Bank of
Malaysia will no longer defend the local dollar, the ringgit, and therefore
it is expected that the Central Bank will no longer come in to prop up the
dollar in value terms.
I am no currency trader, and would like to hear from experienced forex
traders and stock traders just how this will impact on the stock market
here in Malaysia. Would the awowed "hands-off" policy from the Central Bank
( the local equivalent of the Fed) give a positive impact to the
stockmarket or otherwise?
Thanks.
Peter
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