What factor is preventing the ringgit from fully benefiting from global sentiment?

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Domestic political uncertainty is hindering the ringgit's full participation in improved global risk sentiment.

The ringgit's ability to benefit from positive global market movements is being constrained by a lack of clarity in the domestic political landscape. Market participants are closely observing the political arena, particularly the performance and challenges faced by Pakatan Harapan following recent electoral outcomes. This internal political dynamic is overshadowing favourable external economic indicators.
Political Uncertainty Dominates External Positives

Despite a strong recovery rally in US technology stocks and a decline in US yields, which are typically supportive of regional assets, the ringgit is not fully reflecting these positive external signals. The optimism generated by lower oil prices and softening inflation expectations globally is being counteracted by apprehension surrounding Malaysia's internal political situation.
Focus on Pakatan Harapan's Political Standing

A significant portion of market attention is directed towards the political trajectory of Pakatan Harapan. The group's performance in the July 11 Johor state election is a key point of focus, with investors assessing its ability to recover and effectively navigate broader political challenges. This ongoing scrutiny contributes to the prevailing uncertainty.
US Economic Data Offers Mixed Support

While the US Institute for Supply Management (ISM) Manufacturing PMI data for July showed an upside surprise, rising to 55.6 points and reinforcing expectations of a US interest rate hike, its impact on the ringgit is tempered. Although US firms demonstrated resilience against higher import tariffs and energy prices, with technology and AI investments showing positive responses, mixed company feedback regarding elevated freight costs suggests a focus on operational efficiency rather than broad market confidence. This nuanced economic picture from the US, coupled with the ongoing domestic political concerns, creates a complex environment for the ringgit.

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What factor is preventing the ringgit from fully benefiting from global sentiment?

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