My colleague told another colleague who was visiting Australia two weeks ago about the Ringgit. She said, ‘Aiya, when we go overseas, no need to think about buying anything. Ringgit has depreciated so much.’ When I pointed out that it’s not true versus all currencies and definitely not versus AUD, she replied, ‘Can’t be. Ringgit depreciated 25 percent!’ I smiled and moved on to other things. Actually, if we wish to compare one year ago versus today, 27th September 2016, Ringgit has appreciated close to 8 percent versus the US$ and I do not wish to comment on the reason for that AWESOME currency’s appreciation. Just let it be…… As for Ringgit vs the AUD, based on 12 months basis using XE.com as at today, it has barely moved.
Yes, with regards to how to handle the Ringgit, I like the new Bank Negara Malaysia governor Datuk Muhammad Ibrahim. He said, ‘the market will decide.’ I think this is another no-nonsense and capable governor and I do hope that nothing changes when his contract is up for renewal in a few years’ time. REGARDLESS of the government of the day. I have summarised some of his views about the Ringgit today. Full article is in themalaymail today. He shared that central banks will only intervene to contain excessive movements. Note, he did not say appreciation or depreciation. With large movements up and down every day, all businesses would be very worried. Even new investments would be scared to invest in Malaysia.
He shared that some of the bearish factors affecting the ringgit include weak export markets, low prices for Malaysia’s oil, gas and commodities, and concerns over a multi-billion dollar financial and political scandal at state fund 1Malaysia Development Berhad (1MDB). He summed it up by saying, “In the short-term, exchange rate movements could react to news headlines and market sentiment, instead of reflecting the underlying strength of the economy.” Most importantly, he shared what BNM should be focusing on. It is to ensure the availability of ample reserves, maintain strong economic fundamentals and manage exposure to external debt.
By the way, to anyone who believes ringgit will depreciate further, property is not the best focus. A better focus may be on overseas blue chip stocks if you really believe ringgit will drop further. Properties are just too illiquid and we may not know if we are trapped during the process of buying or even selling. Due to the potential huge movements, we may still lose quite a lot because no one, I repeat, not even the most famous economists in the world could predict with any accuracy how the currency would move. Whichever country we love to invest, read more. Focus on all those same measurements that the economists are using to measure Malaysia today. Then decide. Happy reading.
written on 27 Sept 2016
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