When seeing the conversion rate of SGD (Singapore Dollar) to MYR (Malaysian Ringgit) is gaining the historical high, MYR depreciate to the lowest in the history, I am strongly considering to invest stock in Singapore soon. Based on the www.gocurrency.com, 1SGD = 2.58287MYR on 10 August 2013.
I can't speculate what's the future currency rate, I don't know how to analyse much on the economy situation. What I know is, I'm currently working in Singapore. Although the currency rate might be attractive, I still have to think further whether to convert back the SGD into MYR to invest in Malaysia.
Two conditions I need to take care of: 1st, if MYR drops further. 2nd, if MYR gain back to previously 1:2.45 range.
MYR drops further
It does mean something good for those who work in Singapore, earn SGD and seeing the value of SGD appreciate against MYR. If MYR drops further, we can exchange for more MYR with the same amount of SGD. But, in terms of economy, it also means that the higher inflation rate is happening in Malaysia, which causes the currency to drop. So, even if we could change for more MYR, we are still having the similar purchasing power in Malaysia, no change. Unless, SGD itself appreciate against USD as well. Then, we might have better purchasing power in Malaysia.
Seeing MYR dropping does not make me too much excited. For short term, yes, before price of everything gets inflated. But, in long term, it does not favour much on the economy. It will eventually cause everyone in Malaysia to spend more over the time, for the same thing. Let's see how much MYR has been depreciated against SGD over 5 days. August 5th, it was 2.49, today it was 2.58, it's a depreciation of 3.6%, just five days.
If MYR drops further against SGD, that means my value of MYR in SGD might be lower. I have to use more MYR to change the same SGD, in order to spend here. If I were to convert my SGD back and invest in Malaysia, my return rate has to be more than the rate of depreciation of MYR against SGD, and I also have to cope with inflation rate! I have more jobs to do!
MYR gain back in future
If MYR has a very good management in future, and fully implement the natural resources that our country have, uniquely owned by our country, like petroleum, tin and oil palm, I believe Malaysia economy would be far better than Singapore in future. But, people just can't see the long term, they tend to greed for the short term profit and personal benefit. Those politicians, you know, I know, as Malaysians.
But, if MYR gain back from MYR2.58 to MYR 2.45 in future. And, if I manage to convert my SGD to MYR at 1:2.58 and invest in Malaysia. If Malaysia economy really gains better, I am not earning the return rate from the investment, but also the currency exchange rate! I have better spending power in Singapore! Of course, that's given that MYR gain back.
I hope that's not just a dream, I do hope Malaysia could be better day.
Comparing between Singapore vs Malaysia investment
However, another thing I need to consider about is the return rate in both country. Let's say I were to invest in Singapore without losing to the rate of currency conversion. Let's compare the fixed deposit in both Singapore and Malaysia. Malaysia has the average fixed deposit of 3.5% annual, but Singapore only has 1%. This means that it is not a wise move to invest the cash money in the bank by saving as fixed deposit.
But, comparing both country in term of fixed deposit, it's 2.5% difference. Does this difference reflects the same in average investment return in Singapore too? In Malaysia, I could expect of more than 8% dividend return by investing in stock market. Certain companies do pay out more than that. But, is it the same case here in Singapore? This will be one of my homework in future. I am going to work it out and find out more.
Investment is fun as a source of knowledge, fun as a tool of benefit, fun as a platform of networking with people of the same field.