Malaysia Has Capability To Withstand Inflows Of Hot Money, Says Zeti
November 22 2010
KUALA LUMPUR, Nov 22 (Bernama) -- Malaysia has the capability to withstand the inflow of hot money, which has been a concern, particularly, by countries in South East Asia including China.
In stressing the country's sound financial management, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said: "So far, we have been in the position to intermediate this flows.
"We also have all the instruments at our disposals to manage this flows. Our market is far more matured and developed now and we are in a much better condition to manage these flows than previously.
"At this point in time, the conditions are manageable. If the need arises, we will act collaboratively with other central banks in the region to deal with any risk to our region," she told reporters when asked on Malaysia's concerns over the inflow of hot money here Monday.
Dr Zeti also said:"We also have a well developed surveillance system and near real time flows to detect any emerging risks. Further more, our financial institutions have become much stronger and, therefore, they can absorb and withstand the increase in volatility," she added.
On the formation of asset bubbles, the governor said :"Right now, we are not seeing the formation of any asset bubbles.
"We do not see this as a problem and we are well positioned to take pre-emptive action. We did this in 1990s before the Asian financial crisis.
"Therefore, Malaysia did not have the busting of property bubbles in 1997 and 1998. We did not because property prices had stabilised in 1996 as a result of this kind of measures, which are now called macro prudential measures. We were highly successful in dealing with asset bubbles," said Dr Zeti.
To a question on whether the strengthening of the ringgit affected the economy, she said different sectors in the economy were affected differently.
In fact, she said some sectors were actually benefitting from the appreciation of the local currency.
"But what is important is, we need to look at the flexibility of our economy to respond and absorb this kind of changes and that is why any fundamental change in our exchange rate needs to happen gradually.
"We always encourage the economic sectors to build buffers during good times, so that they can ride it out during challenging times and build up efficiency level and potential for innovation," she added.