MIDF: Expect below 4.00 US dollar-ringgit rate in 2025

KUALA LUMPUR: The US dollar-ringgit exchange rate is expected to drop below the 4.00 level in 2025, says MIDF Research in its new revised projection.

The research house also estimated that the ringgit may touch RM4.03 against the greenback by the end of this year.

MIDF Research said on Thursday that the local currency is expected to appreciate further in the fourth quarter of 2024 (4Q24) amid interest rate cuts in the United States.

“On balance, we foresee more funds will flow into the emerging markets, including Malaysia, as the US Federal Reserve continues with its policy easing.

“With the overnight policy rate to be kept unchanged, the narrowing interest differentials will also be supportive of the ringgit, gaining from the weakening of the US dollar.”

MIDF Research also expects the domestic equity market’s positive momentum to continue in 4Q24, driven by the inflow of foreign funds, a healthy economy and corporate earnings outlook as well as undemanding valuations.

In view of the still positive liquidity and fundamental prospects, the research house has maintained its FBM KLCI end-2024 target at 1,750 points.

As for 2025, the preliminary target is set at 1,850 points.

“Going into next year, we expect Malaysia's economy to remain healthy with our preliminary gross domestic product growth forecast at 4.6% in 2025.

“Along with the baseline expectation of rather resilient macro performance, market consensus is forecasting the FBM KLCI to register a healthy 8.6% year-on-year earnings growth in 2025,” it said.

Commenting on its preferred sectors in 4Q24, MIDF Research said it favours sectors that provide good dividend yields and potential laggards.

As rates soften, it expects investors may be looking for assets that will provide them with similar or higher yields.

“Banks tend to give quite good dividends, and we have seen a re-rating of regional banks lately (including ours – hence, the share price performance in 3Q24).

“Similarly with real estate investment trusts (REIT), its dividend yield-Malaysian Government Securities spread has widened recently which may increase the attractiveness of REITs.

“Lastly, we like the consumer sector as a potential laggard play.”

MIDF Research does not have a negative outlook on any sector.