Ringgit takes a breather after multi-billion 1MDB power deal with China

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Edra plant
Edra power plant in Malaysia

Malaysia’s battered currency, the ringgit, rose the most among emerging-market currencies on November 24, while stocks and bonds gained after scandal-hit and debt-ridden state investment company struck 1Malaysia Development Berhad (1MDB) struck a $2.3-billion deal with a Chinese nuclear energy firm to sell its power assets.

The currency climbed to a three-week high while the FTSE Bursa Malaysia KLCI Index rallied for a fourth day, the longest stretch since October. The ringgit was also supported by an agreement by Saudi Arabia to help stabilise oil prices, which have fallen by more than half from a 2014 peak and hurt Malaysia’s export earnings.

In particular, 1MDB is selling its unit Edra Global Energy Bhd to state-owned China General Nuclear Power in a deal expected to be completed in February 2016. Edra is the largest independent power producer in Bangladesh and Egypt and the second-biggest in Malaysia and also holds assets in the United Arab Emirates and Pakistan through joint ventures.

The sale takes 1MDB one step closer to winding down its operations amid criticism from lawmakers some $11 billion of debt accumulated in less than five years and other alleged financial misconduct.

An international probe into 1MDB, along with weak global fuel prices and subdued demand from China, has damaged investor sentiment in Malaysia and battered its currency. Malaysia’s Prime Minister Najib Razak, who chairs 1MDB’s advisory board, has been under intense pressure to quit as his opponents blamed mismanagement at the fund for its debt that has contributed to a 19 per cent drop in the ringgit this year.

Najib has also found himself embroiled in a political scandal over what he calls a donation he received from the Middle East that is thought to be connected to the state firm.

However, Najib, who has repeatedly denied any wrongdoing in his handling of 1MDB, conceded that the business model of the fund was “too idealistic,” although the impact of its poor performance would be contained.

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Reading Time: 2 minutes

Edra power plant in Malaysia

Malaysia’s battered currency, the ringgit, rose the most among emerging-market currencies on November 24, while stocks and bonds gained after scandal-hit and debt-ridden state investment company struck 1Malaysia Development Berhad (1MDB) struck a $2.3-billion deal with a Chinese nuclear energy firm to sell its power assets.

Reading Time: 2 minutes

Edra plant
Edra power plant in Malaysia

Malaysia’s battered currency, the ringgit, rose the most among emerging-market currencies on November 24, while stocks and bonds gained after scandal-hit and debt-ridden state investment company struck 1Malaysia Development Berhad (1MDB) struck a $2.3-billion deal with a Chinese nuclear energy firm to sell its power assets.

The currency climbed to a three-week high while the FTSE Bursa Malaysia KLCI Index rallied for a fourth day, the longest stretch since October. The ringgit was also supported by an agreement by Saudi Arabia to help stabilise oil prices, which have fallen by more than half from a 2014 peak and hurt Malaysia’s export earnings.

In particular, 1MDB is selling its unit Edra Global Energy Bhd to state-owned China General Nuclear Power in a deal expected to be completed in February 2016. Edra is the largest independent power producer in Bangladesh and Egypt and the second-biggest in Malaysia and also holds assets in the United Arab Emirates and Pakistan through joint ventures.

The sale takes 1MDB one step closer to winding down its operations amid criticism from lawmakers some $11 billion of debt accumulated in less than five years and other alleged financial misconduct.

An international probe into 1MDB, along with weak global fuel prices and subdued demand from China, has damaged investor sentiment in Malaysia and battered its currency. Malaysia’s Prime Minister Najib Razak, who chairs 1MDB’s advisory board, has been under intense pressure to quit as his opponents blamed mismanagement at the fund for its debt that has contributed to a 19 per cent drop in the ringgit this year.

Najib has also found himself embroiled in a political scandal over what he calls a donation he received from the Middle East that is thought to be connected to the state firm.

However, Najib, who has repeatedly denied any wrongdoing in his handling of 1MDB, conceded that the business model of the fund was “too idealistic,” although the impact of its poor performance would be contained.

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