"Bank Negara said it is not currently considering implementing capital controls to deal with inflows of funds due to massive liquidity in western economies that are seeking higher returns in faster growing emerging markets.
Bank Negara Governor Tan Sri Zeti Akhtar Aziz noted today that large and volatile capital flows into regional economies could pose risks to macroeconomic policies and financial stability but said that Malaysia was in the position to intermediate the flows and had also gained experience from the 1997 Asian financial crisis.
“We are not considering any kinds of restrictive measures,” she said. “If the need arises, we will act collaboratively with other central banks in the region.”
The US government has announced plans to pump US$600 billion (RM1.86 trillion) in liquidity into its economy by June next year in a bid to boost its economy.
Critics of the plan contend that much of that money will find its way to emerging markets due to higher interest rates and better performing stock markets, potentially creating asset bubbles in those countries.
Gross inflows of foreign direct investment grew to RM8.9 billion in the third quarter from RM5.3 billion in the second quarter, reflecting larger inflows of equity capital and drawdown of intercompany loans, Bank Negara said today.
It added that portfolio investment in the third quarter registered a larger net inflow of RM9.3 billion compared with RM6.2 billion in the previous quarter due to foreign interest in the local capital market, particularly the equity market.
