Malaysia's Ringgit, Bonds Decline as Disputes May Damp Demand By David Yong

March 24 (Bloomberg) -- Malaysia's ringgit fell on concern disputes between the government and some state rulers will damp demand for local assets. Bonds declined.


The currency extended last week's loss before a central bank report on the economic outlook this week. The ruling National Front coalition government lost five of 12 states contested in the March 8 general election and its choice of two state chief ministers have been rejected by local rulers.

``The political situation is not a big help to the market at the moment, especially more so with dollar regaining some bounce,'' said Pong Teng Siew, head of research at MIMB Investment Bank Bhd. in Kuala Lumpur. ``Foreign investors are watching.''

The ringgit weakened to 3.1985 per dollar as of 11:43 a.m. in Kuala Lumpur, from 3.1795 on March 21, according to data compiled by Bloomberg. The ringgit led declines among Asia's 10 most traded currencies.

The Kuala Lumpur Composite Index of shares has dropped 8 percent since March 7 after the Front coalition led by Prime Minister Abdullah Ahmad Badawi also lost its two-thirds majority it has held in parliament for 34 years.

Since the election, the rulers of Perlis and Terengganu states have spurned Abdullah's candidates as chief ministers. Abdullah said the decision was unconstitutional and invalid, the New Straits Times reported on its Web site.

Bank Negara Malaysia will release its 2007 annual report and new economic forecasts on March 26.

Government bonds fell, lifting yields to the highest in more than a week.

The yield on the 3.833 percent note due in September 2011 rose 3 basis points, or 0.03 percentage point, to 3.41 percent, according to Bursa Malaysia Bhd., which operates the nation's bond exchange. The price fell 0.08, or 80 sen per 1,000 ringgit face amount, to 101.4.