Asian financial markets are facing the heat from the brewing economic crisis in Greece. The Ringgit took the hardest hit among other currencies.

The boiling domestic issues in Malaysia concerning scandals involving 1Malaysia Development Berhad (1MDB) and lower oil revenue are only making things worse for the Ringgit. The currency fell to a 16-year low yesterday at 3.809 against the US dollar – a level last seen before the exchange rate was pegged in 1998.

It was down 8.1% year-to-date and is currently the worst performing currency in Asia.

Independent economist Lee Heng Guie said Greece might be a small economy but the contagious implications on other weaker links in the eurozone could spook investors if they would force Greece to leave.

“Recovery in the eurozone is still weak and people are worried that possible fallout from Greece may impact the region’s economy,” he said.

Another economist said the depleting international reserves indicated that Bank Negara had carried out some currency stabilizing activities.

A source suggested that Bank Negara might have sold more than US$1bil yesterday to jock up the ringgit, which dropped to an intra-day low of 3.814 in early trade.

The country’s international reserves marked US$106.38bil as at end-May, slightly higher than US$105.95bil at end-April.

“Our current account is still in surplus mode, so a twin deficit is unlikely,” the economist said, adding that the reserves level should be feasible at above US$100bil.

“Bonds and the Malaysia Government Securities (MGS) have continued to thrive. Foreigners still believe in the country’s long-term outlook, as they remain the biggest bondholders,” she said.

Foreign investors had been increasing their holding of MGS up until the end of May this year, according to a recent estimate by Standard Chartered Global Research.

As at end-May, foreign ownership of MGS stood at 47% or US$43bil of the total outstanding of US$92bil.

However, May marked a significant turning point, both for the ringgit and the stock market.

MIDF Research, in a recent note observed that foreign investors had been net sellers of local equities in the past two months. According to them, June was the worst month for Bursa Malaysia since 2014 as foreign outflows totaled more than RM3bil.

This increased the cumulative net foreign outflow for the year to RM9bil, significantly higher than the RM6.9bil that had left the market in the whole of 2014.

“The Greece NO vote means uncertainties ahead and there will likely be a global sell-off in equities in the immediate term,” MIDF Research said.

“However, the Greece outcome should have been expected and priced in,” it added.

But the worst, however, may not yet be over for the ringgit.

“Fitch’s revision of Malaysia’s outlook seemed to be short-lived because of the negative sentiments. Investors don’t like uncertainties,” one analyst said.

A foreign report last Friday had alleged that there was investigative evidence of money from state fund 1Malaysia Development Bhd being channelled to what was believed to be Prime Minister Datuk Seri Najib Tun Razak’s personal accounts. Najib has denied the allegations and is looking at legal options against the publisher.

Meanwhile, the economy is still absorbing the impact of the goods and services tax while the country’s biggest trade partner, China, shows signs of slowing down.

“We expect a worse third quarter, as we foresee weaker economic numbers,” the analyst said.