Cheap Diving Lures Singaporeans as Ringgit Falls: Southeast Asia

Cheap Diving Lures Singaporeans as Ringgit Falls: Southeast Asia

The ringgit’s descent to a 15-year low against the Singapore dollar is luring tourists and property-buyers from the city-state, providing relief as Malaysia’s economic growth slows.

In the past three months, the ringgit has lost 5.8 percent against the greenback and 4.1 percent versus the currency of Singapore, which accounted for 52 percent of overseas visitors last year. Malaysia’s current-account surplus shrank 70 percent in the second quarter, while Singapore’s widened 28 percent, helping fuel a selloff in the nation’s assets by overseas investors preparing for the Federal Reserve to reduce stimulus.The falling ringgit has played a part in a rising number of enquiries from Singaporeans in Iskandar, an economic development zone in the southern state of Johor that borders the city-state, according to real-estate company CBRE Group Inc. Overseas passengers passing through airports run by Malaysia Airports Holding Bhd. rose 14 percent to 3.2 million in July from a year earlier, an Aug. 30 stock exchange filing by the company shows.

“The weaker ringgit presents opportunities for us,” Tan Kok Liang, a vice-president of the Malaysian Association of Tour and Travel Agents, said in an interview last week. “Singaporeans will find the dive and mountain-climbing packages a lot cheaper,” said Tan, referring to tours offered by his company in Kota Kinabalu on the Malaysian part of Borneo island.

Property Rules

Arrivals from Singapore dropped 2.7 percent to 13 million in 2012, the first decline since 2003, although they have rebounded 8 percent in the first half of this year, according to data from Tourism Malaysia, the government’s travel body. The industry accounted for 7 percent of Malaysia’s gross domestic product in 2012, a World Travel & Tourism Council report shows.

Singapore introduced rules to curb property speculation as residential prices increased 62 percent in the past four years, according to an Urban Redevelopment Authority index, making the city-state the most expensive market in Asia after Hong Kong.

Around 90 percent of the 130,000 foreigners that own properties in Johor are Singaporeans, according to a June 3 report in the Straits Times newspaper. Taxes on real estate owned by non-Malaysians will be raised by the end of the year, Johor Chief Minister Mohamed Khaled Nordin said in the report. Iskandar’s proximity to the city-state makes daily commuting to Singapore for work a possibility.

“A lot of the Singaporean interest is in the Iskandar area, which has seen an uptick in development activity over the past 12 months,” Nabeel Hussain, an associate director at CBRE Malaysia in Kuala Lumpur, said in an Aug. 30 e-mail interview. “The amount of queries from Singaporeans has naturally risen as well in line with this. While currency factors play a part, it should be noted that Malaysian property is already heavily discounted to Singapore.”

‘More Attractive’

The ringgit reached 2.6037 per Singapore dollar on Aug. 29, the weakest level since 1998, and was trading at 2.5758 late yesterday, according to data compiled by Bloomberg. The Malaysian currency has dropped 8 percent versus the greenback since May 22, the day the Fed said it could taper bond-buying that’s inflated emerging-market asset prices, while the Singapore dollar fell 0.7 percent.

“Many foreign investors, including Singaporeans, look at Malaysia as a very good destination,” Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore, said in an Aug. 26 interview. “For those that are already looking at it, the ringgit’s drop will make the proposition a lot more attractive.”

The divergence between the nation’s currencies reflects “a widening gap in economic fundamentals,” according to a research note from DBS Group Holdings Ltd. released last week. “Pressure on the ringgit will remain until the external balance improves or somehow domestic demand cools by itself,” analysts including Singapore-based Philip Wee and Jens Lauschke wrote in the report.

Current Accounts

Malaysia’s current-account surplus was 2.6 billion ringgit ($792 million) in the second quarter, the closest the country’s come to recording a deficit in data compiled by Bloomberg going back to 1999. The excess in Singapore’s broadest measure of trade was S$18 billion ($14 billion).

Exports from Malaysia fell for a fifth month in June and the central bank cut its forecast for 2013 growth last month to 4.5 percent to 5 percent from a previous prediction of as much as 6 percent. The economy expanded 5.6 percent in 2012.

Foreign ownership of Malaysian corporate and government debt fell 5.7 percent to 216 billion ringgit in July, the biggest decline since September 2011, central bank data show. Fitch Ratings lowered its outlook on the country’s A- credit rating, the fourth-lowest investment grade, to negative from stable on July 30, citing weaker prospects for budgetary and fiscal reform following elections in May that returned Prime Minister Najib Razak to power.

“The weaker ringgit will help increase property investment, tourism and exports,” Tsutomu Soma, the manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo, said in an Aug. 28 interview. “Although it won’t be enough to boost growth significantly. The Singapore dollar’s gradual appreciation versus the ringgit will probably continue.”

To contact the reporters on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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