Finance Minister Zeti speaks up on Capital controls

From the Edge:

 Malaysia has "moved on" from using controls to manage capital flows, its central bank said on Friday, signalling it would not resort to such measures amid a falling currency and slowing economic growth.

"Extreme measures such as capital controls are for extreme periods. We are certainly not experiencing such extreme conditions," the central bank said.

"This is a marked contrast to the experience in the late 1990s," it added, responding to a Reuters query on whether capital controls — a measure Malaysia employed during the Asian crisis of the late 1990s to staunch capital outflows — were once again an option.

"We are now in a period when the economy has been on a steady growth path with a low level of unemployment for several years," the central bank said. 

Because talk of capital controls dominated Russia's economic rumour mill, this rumour also got people to think how safe their money is in Malaysia.  The depreciating Ringgit isn't helping to quiet the rumor as well.

This statement probably is positive on the Ringgit as nothing has really been said before regarding Malaysia on the possibility of reinstituting capital controls within the last few weeks.   I say the last few weeks because that is when the whole Russian currency fiasco started dominating headlines, then that is when people started to worry.

  But it is sort of a double edged sword.  The conditions she gave are certainly far away from what is happening now, but it is a possibility.  If Malaysia has unemployment reaching 8-9 percent, people may start abandoning the country in droves.  Careful what you say.

We can interpret her statement as we are so far away from capital controls at this point even with the Ringgit at 3.6 to the US dollar.  Markets will like this for sure.