A rebound in Malaysia’s ringgit will prove short-lived as the factors that made it Asia’s worst performer this year show few signs of going away, according to an investment arm of France’s largest bank.

“We’re in a situation where nothing’s changed, so therefore the only conclusion we have is thatMalaysia remains a market to be short,” said Mark Capstick, a London-based fund manager at BNP Paribas Investment Partners, which oversees 532 billion euros (RM2.5 trillion). “We’re short right across the board,” he said, adding that assets being bet against include the ringgit as well as the nation’s local-currency and global bonds.

While the ringgit has appreciated more than 6 percent in October to rank among the top five in emerging markets, it’s been dogged by a persistent drop in oil prices, slowing Chinese growth and a probe of fund transfers into Prime Minister Najib Abdul Razak’s bank accounts.

Malaysia’s currency is rebounding from a 17-year low reached in September as the receding prospect of a US interest-rate increase in 2015 revives demand for higher- yielding assets worldwide.

Like BNP Paribas, Pacific Investment Management Co is also sticking to its guns and maintaining bets that the ringgit’s slide will resume. Pimco, which oversees US$1.52 trillion, reported Oct 1 it had short positions on emerging-market currencies including the ringgit, Thai baht and South Korea’s won.

Global funds have pulled RM41.5 billion from Malaysian debt and equities this year amid a 15 percent slide in the ringgit. The halving in Brent crude prices from a 2014 peak is crimping government revenue for Asia’s only major oil exporter, just as growth slows in China, Malaysia’s second- biggest export market.

Najib removal

Investor confidence has also soured because of rising debt at state investment company 1MDB, whose advisory board the prime minister chairs. Najib has drawn flack over 1MDB from lawmakers, including an urging from former leader Mahathir Mohamad for him to step down. The company is in the course of selling assets to appease the criticism.

“My gut feeling is that people would like him to be removed but the chances of that happening are particularly slight,” said BNP’s Capstick. “The political problems will just be a constant.”

There are a couple of “bright lights,” said Capstick, citing the winding down of 1MDB, the currency-swap lines Malaysia has with China and the “sizeable” pension funds that the nation could fall back on. The Employees Provident Fund had RM667 billion of assets as of June 2015, according to the state-controlled entity’s website.

The drop in Malaysia’s foreign-exchange reserves completes the “whole risk,” Capstick said, noting that the central bank will be looking to accumulate dollars during periods of ringgit gains, said Capstick. The stockpile fell 20 percent this year to US$93.3 billion in September, central bank data show.

“Malaysia remains a market to be short, although we have to accept that at times when the market takes a breather, you’re going to get these slight reversals,” he said.

- Bloomberg