Amidst the panic, there are views emerging that the two factors driving down the local bourse '“ falling oil prices and weakening ringgit '“ could be almost coming to an end.

'I am quite optimistic we are more than halfway coming to an end and these two big factors could start to stabilise quite soon,'' said Pong Teng Siew (pic), head of research of Inter-Pacific Securities, noting that the KL stockmarket had only taken a downturn last year.

Even under the worst scenario, oil price may drop US$5 per barrel or around 10%, and possibly not much more, Pong said, adding that it should not be assumed that low oil prices would persist for years to come, as each time there is a report that inventories have fallen, the price of oil immediately goes up.

As for the weakening of the ringgit, it may not be 'too far down the line,' Pong said, noting that the US Fed had appeared reluctant to raise interest rates, as evident in its latest minutes.

'The US economy may be on the eve of a recession; it has been a long period of expansion from the last financial crisis (the last US recession ended in June 2009). Also, US economic data is quite patchy,'' noted Pong.

Yes, US housing starts were strong; they had fallen off-peak, bottomed and climbed out only to hit 1992 levels. Moreover, funds that are not getting the yields from government bonds are investing in residential houses and apartment complexes; the danger in raising US interest rates is that it could kill off these activities, said Pong.

Amidst the positive data, the Federal Reserve Bank of New York reported that its Empire State manufacturing index plunged to minus 14.9 from a positive reading of 3.9 in July, which was the lowest level since April 2009, said AP.

Financial data firm Markit said its preliminary US manufacturing purchasing managers' index fell to 52.9 in August, its lowest since October 2013, from a final July reading of 53.8.

Job creation also slowed in August, with the index at 52.2, its weakest since July 2014, down from a final July reading of 53.8.

'A few more of this kind of negative data, and the Fed may call off the rate hikes,'' said Pong.

Noting that the investment mindset had changed from focusing on GLCs and blue chips, he pointed out that small caps and tightly held companies on the FBM Fledgling index [FBMFLG] had performed better than the KLCI.

Nevertheless, foreign selling on Bursa Malaysia may continue as each time the current market tries to stabilize, foreigners sell into the upturn; in fact, more than RM40 billion have been sold since the middle of 2013, said Pong.

The flight of capital from emerging markets has risen towards US$1 trillion over the past 13 months as confidence in the world's developing economies dwindles, said The Guardian, quoting a report from the Financial Times (FT).

Total net capital outflows from the 19 largest emerging market economies reached US$940.2bil in the 13 months to the end of July, almost double the net US$480bil lost over three quarters during the 2008-09 financial crisis, said The Guardian, quoting a compilation of official data and estimates by NN Investment Partners, as reported by the FT.

Another survey also showed investors have cut exposure to emerging markets to record low levels. The monthly Bank of America Merrill Lynch poll of 202 fund managers showed that China's slowing economic momentum and an emerging market debt crisis had replaced a eurozone break-up as the biggest global 'tail risk' in investors' minds, said The Guardian.

Asian lenders are seeing their loan books rapidly deteriorate across the region as China's slowing economy dampens trade and hurts companies that had borrowed heavily from the banks, said Reuters.

Indonesian banks saw provisions against bad loans as much as triple in the first half of 2015, most of their increasing non-performing loans said to be from the mining and construction sectors, which have been hit the most by slowing demand from China.

Singapore's banks, which had boosted their China credit, were this year hit by a drop in China trade financing deals as mainland borrowing conditions eased and offshore interest rates widened.

Hong Kong's Bank of East Asia said impairment losses had more than doubled to HK$782mil in the first half and warned its outlook looked challenging amid China's slowdown and a stock market plunge, said Reuters. In Thailand, bad loans at commercial banks rose in the second quarter to their highest level since 2012, hit by a slowdown in Thai exports, especially to China.

From now till mid-September, when the US Fed meets possibly on interest rate hike (chances of a rate hike have fallen to 36% from 45%, said CNBC, quoting RBS) investors will be on tenterhooks regarding the ringgit.

What will the fate of the ringgit be, is anyone's guess.

One thing for sure is internal politics should not be so messy that it forms a cloud or another dimension to the problem of weakening ringgit.

Otherwise, even when the externalities have cleared, we may still be struggling with a currency weakened by sentiment.

Capital outflows from emerging markets and deteriorating loan books among regional banks can be problems to the efficient functioning of the financial system.

The severity of these problems need to be monitored so that other offsetting factors can be used to strengthen the financial system.