Malaysia's ringgit hits year low as PM resignation looms

Malaysia's ringgit fell to a one-year low and equities declined on Monday, as reports that the Prime Minister is set to resign turned investors cautious while the Philippine peso gained even as the country witnessed a surge in new coronavirus infections.

Malaysian Prime Minister Muhyiddin Yassin was expected to step down on Monday, according to media reports, after he lost his majority in parliament, pushing the country into a period of uncertainty as it grapples with surging COVID-19 cases and an economic downturn.

Dollar/ringgit traded higher following weekend news regarding PM Muhyiddin Yassin's resignation, analysts at Maybank said in a research note, adding that uncertainty on transfer of leadership weighs on sentiment in the interim.

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"Uncertainty on who takes over the leadership will weigh on sentiment in the interim, but this could turn around if there is a quick agreement on who will be appointed."

Malaysia's ringgit fell to as much as 4.2415 per dollar as of 0240 GMT, its lowest since July 2020, while the Kuala Lumpur share index was down as much as 0.7%, their worst intraday drop in nearly two weeks.

Analysts at Maybank expect the ringgit to ease off to between 4.220 and 4.240, with immediate resistance at 4.2440 holding for now.

Elsewhere, the Philippine peso edged firmer and the bourse soared as much as 2.7% to mark its best intraday performance since the start of the month.

The Philippines has been reeling under the pressure of rising new coronavirus cases and consequent movement restrictions, hitting investor sentiment. So far in the quarter, shares are down 6% while peso has weakened 3.4%.

In Thailand, the baht slipped and equities were down a percent to hit their lowest since mid-May even after second-quarter economic growth was unexpectedly strong. GDP expanded 7.5% in the June quarter from a year earlier against 6.4% growth forecast in a Reuters poll.

Elsewhere, factory activity and retail sales in China - the region's biggest trade partner - rose more slowly than expected in July from a year earlier amid new COVID-19 outbreaks and signs of growing pressure on the economy.

New COVID-19 infections in July had prompted local Chinese authorities to lock down and temporarily suspend business operations, with the authorities last week shutting down a container terminal in Ningbo after a case was detected.

"These closures, though only partial, could spell outsize logistics disruption relative to the scale of the infections being recorded," said Robert Carnell, regional head of research, Asia-Pacific at ING.

Markets in South Korea were closed for a public holiday.