April 28, 2016
A few friends who have followed me for some time asked me why have I stopped writing about Ringgit these days. It’s already recovering, right? Well, last year, I did write a few articles about Ringgit. Read one here: Summary Q2 2015:Malaysian economy, Ringgit and Zeti or this: 1998 vs 2015, just numbers no rhetorics In fact I wrote no less than 10 articles last year about the state of Ringgit, most of the time against many who were very sure Ringgit was about to collapse. One time, I wrote about the potential risk of quickly buying a property in Australia simply to hedge against the fall in Ringgit. Read here: Hedging? Do it now, for future. property in Australia? Buying a property would require considerable time while the currency can keep falling very fast or even rebound too.
Beginning 2016, I no longer need to write about Ringgit. Most of the articles about Ringgit today is positive, whether local or foreign ones. Note though that my position is that Ringgit remains volatile and open to external developments more than what’s happening within Malaysia. Many of these articles continue to relate Ringgit’s recovery solely to oil prices. It’s better to look back at “manufacturing” and “services”sector for Malaysia and then make your decision. I think it’s better than oil price or any other commodity prices for that matter.
Ringgit is undervalued based on its fundamentals, period. When we want to compare, look at all the same points from all the international rating agencies, then look at all the other nations whom we think so highly of. Oh yeah, for that one about household debt versus GDP, Australia is at 123 percent today. I think it’s doing okay? Greece defaulted last year. It’s household debt was just 63 percent vs GDP. When the mortgage crisis hit the U.S. in 2008, the household debt to GDP was at 91 percent. Today, it is nearly 80 percent. Oh yeah, UK is at over 86 percent currently. Hardly low by any country standards. These numbers tell just one side of any story. Invest when we have read more. Also, when we buy overvalued, regardless of how the economy moves, we may still be in trouble. Last but not least, if we really intend to hedge against any potential depreciation of any currency, then buy good blue chip stocks in the countries we feel should do okay. NOT buy and keep their currency. Happy investing.
written on 24 Apr 2016
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