310竞彩足球胜负（www.99cx.vip）:Weak ringgit has its strengths
CLICK TO ENLARGE
KUALA LUMPUR: A weaker ringgit is not the main determining factor of export competitiveness and it does not always work in favour of export-oriented industries.
While commodity exporters like Petroliam Nasional Bhd and palm oil produces have benefited financially from the weaker ringgit, the second-quarter results of tech companies revealed that there were other factors that added up to an industry’s or company’s bottom-line performance.
Socio-Economic Research Centre’s (SERC) executive director Lee Heng Guie said a recent survey showed that currency volatility was among the top challenges faced by companies.
“This concern came up in the survey when the ringgit started to weaken recently as the US dollar strengthened,” Lee told StarBiz.
SERC is an independent, non-profit think tank of The Associated Chinese Chambers of Commerce and Industry of Malaysia.,
The ringgit hit a historical low against the US dollar at RM4.50 (or 22 US cents for a ringgit) yesterday on the increasing possibility of a rate hike by the Federal Reserve due to inflationary concerns.
“Actually a weaker ringgit is like a double-edged sword. It may be able to boost competitiveness, wherein our exports that are priced in US dollars will be cheaper in other markets. But this effect will be netted out as other currencies have also declined against the US dollar,” Lee said.
“A weak ringgit adds to the overall cost of production – such as buying intermediate or finished goods. You have to note that prior to the recent weakening of the ringgit, there were increased business costs as well due to the Russia-Ukraine war, commodity prices and implementation of the minimum wage. The weakened currency will add to another layer of cost on companies,” Lee added.
Private investor and former investment banker Ian Yoong said exporters that have a high percentage of imported raw material or foreign labour components may not benefit much from a weak ringgit after some time.
“A weak ringgit will undoubtedly benefit the Malaysian manufacturing sector in the medium term (12 to 24 months) if their products are sold in the US dollar or a currency that has surged in value against the local unit. In the unlikely event exports are transacted in the British pound, which has weakened against the ringgit, these exporters will suffer a financial loss,” Yoong said.
He said it would be better for a country like Malaysia to have exchange rate stability, as a fluctuating exchange rate will “wreak havoc” on the profitability of many exporters and importers.
“A fluctuating exchange rate could lead to substantial foreign-exchange losses if the products are sold a few months ahead. History is a good guide. When the ringgit weakened from RM2.80 to about RM3.80 against the US dollar in a short space of time during the Asian Financial Crisis in 1997, the benefits to exporters lasted about one to two years,” Yoong said.