KUALA LUMPUR, July 16 — The ringgit's current weakness against the
Singapore dollar has many residents of the island republic and investors taking
advantage of the favourable exchange rate while local talent appear to move out
to get better pay, Singaporean media reported today.
This comes after the ringgit,
which once enjoyed near parity to the Singapore dollar in the 1970's and early
80's fell to 2.51 on Friday, its lowest level since July 1998 as international
funds rushed to buy Singaporean assets which are perceived to be a safe haven
in the midst of global economic turmoil.
Some money changers in Singapore
sold out of Malaysian ringgit notes on Friday after the ringgit hit a 14-year
low against the Singapore dollar prompting many Singaporeans to try and stretch
their dollar by picking up ringgit on the cheap said a Channel News Asia report
carried by Singapore daily Today.
The Straits Times also reported that
both Singaporeans and Malaysians who work in Singapore are snapping up more
ringgit for their travels to Malaysia, or for their families there.
The daily also said that some
investors have not been put off by the ringgit's weakness and some property investors
and manufacturers could even be encouraged by the ringgit's weakness.
The ringgit's weakness could also
impact Malaysia's efforts to attract and retain talent as the Singapore
dollar's strength makes it more attractive to work in the city state.
Many expatriates have given
Malaysia a miss in favour of Singapore partly due to the fact that they would
be earning Singapore dollars and hundreds of thousands of Malaysians head
across the causeway for the same reason.
Johan Merican, CEO of Talent Corp,
the agency in charge of helping the country shore up its human resource base,
suggested at a conference last week that Malaysian companies pay more in order
to be competitive to employers in the region but it would be difficult for
local firms to keep pace to the Singapore dollar's relentless rise which makes
wages there more attractive to Malaysians.
The Straits Times cited the
example of a 41-year-old service director, who lives in Johor Baru but who
works in Singapore earning an extra RM400 a month just from the currency's
recent appreciation alone.
“I've bought my children a PSP,”
the service director, Bernard Dass, was
quoted as saying.
Malaysian employers would find it
difficult to keep up with the automatic wage increases that Singaporean
companies can offer just from the currency appreciation.
Some Singaporean investors could
also be encouraged to give Malaysian property a closer look as they become
cheaper and yields remain acceptable the Straits Times said.
It gave an example of an investor
who bought a property in Penang who said that while the ringgit has fallen by
eight per cent, the property had appreciated by 20 per cent which still gave a
net gain.
'The fall in the value of the
ringgit means there is a further 3 to 5 per cent discount for those looking to
buy, which might further pique interest,' PropNex chief executive Mohamed
Ismail was quoted as saying.
An increase in interest from
Singaporean property investors however could put put upward pressure on prices
and potentially price more Malaysians out of the market.
Malaysian houses are
tantalisingly cheap for Singaporeans where a public housing HDB flat can now
cost upwards of S$500,000 or RM1.25 million.
For that amount of money, a
Singaporean can purchase a middle to high end landed property in Johor or in
the outskirts of Kuala Lumpur and still have money left over to park in a fixed
deposit.
The Malaysian economy could
receive a boost however from Singaporean investors looking to lower costs.
On the flip side, some Malaysian
companies could struggle to pay for imported goods.
The Straits Times said that
printing and packaging firm Teckwah Industrial Corp it is relocating some
operations to the Iskandar region to make its products more competitively
priced while spirits retailer Hock Tong Bee, said the weak ringgit drives up
the import costs of his Malaysian unit.
The Singapore dollars strength is
partly due to government policy and the financial hub's sterling reputation
among investors.
Despite Malaysian government
bonds offering a higher yield than Singapore, fund managers continue to snap up
Singaporean assets due to the dollar's stability and the republic's 'AAA'
rating.
Unlike Malaysia, the Singapore
government also adjusts the currency to help deal with inflation in the
republic, which surpassed five per cent in March.
Lee Wei Lian
Business & Investment Opportunities
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