Weak ringgit pushing talent away, but upside for Singaporeans

The lunch time crowd walk on the promenade in front of skyscrapers of the Marina Bay Financial Centre in Singapore July 12, 2012. — Reuters pic

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.