Singaporeans flock to money changers as ringgit falls to record low, with S$1 to RM3
Large crowds at some money changers after ringgit hits record low but some Singaporeans are taking wait-and-see approach.
Over the weekend, Singaporeans looking to take advantage of the lower ringgit flocked to the money changers.
The Malaysian ringgit fell to a record low against the Singdollar, with S$1 worth RM3.01 yesterday.
The ringgit also fell to a 17-year low against the US dollar, at RM4.24 to the dollar.
Yesterday, employees at money changers were forced to turn away several customers eager to change their Singdollars to ringgit.
Mr Mohammad Fareeq, the owner of Clifford Gems & Money Exchange at Raffles City, said: "While Singaporean customers think they are gaining, money changers are losing money every day because of the falling ringgit.
"Now, we are losing money every time we buy ringgit because the value has dropped every day for the past week. Whenever we buy, we end up selling at a much lower value the next day. So now we don't buy as much ringgit," explained Mr Mohammad.
While queues were long over the weekend, The New Paper found fewer people at the money changers yesterday.
Mr Mohammad, who is also the secretary of the Money Changers Association, Singapore, said this was because money changers were not willing to sell huge amounts of ringgit to interested customers.
He said: "Singaporeans are bringing in thousands of dollars to change into ringgit to go shopping across the Causeway. But we don't have so much stock."
He believes that money changers will eventually top up their stock of ringgit if the market normalises over the week.
One customer at MIJ Money Changers at The Arcade at Raffles Place was turned away because they had run out of ringgit.
"I wanted to change $800 into ringgit but quite a few money changers told me that they didn't have enough," said insurance agent Stephen Yeo, who wanted to do some shopping in Johor Baru.
Meanwhile, other money changers such as Jahabar Money Changer at People's Park Centre said the demand was not there although they had some ringgit in hand.
An employee there said: "It's possible that customers were waiting for the ringgit to drop further because that had been the pattern for the past week."
Fajar Money Changer at Lucky Plaza also experienced lacklustre demand yesterday after customers rushed to the money changers over the weekend.
Mr Mohammad Noor, 35, said: "I think people are speculating and hoping that the ringgit weakens even further.
"Customers think that the instability in Malaysia can only devalue the currency further."
Why is the value of the ringgit falling?
Malaysia's currency is at its lowest against the Singdollar. RONALD LOH and CATHERINE ROBERT report on its significance
1. WHAT CAUSED THE RINGGIT TO FALL SO LOW?
The allegations that Malaysian Prime Minister Najib Razak misappropriated funds from state investment firm 1Malaysia Development Berhad (1MDB) may have caused an uncertain political climate, but economists said global factors were also at play.
Firstly, the strengthening of the US dollar hurt Malaysia, as it is a key currency for trade around the world, said economist Song Seng Wun.
Mr Rahul Bajoria, a regional economist at Barclays in Singapore, said that falling oil prices have seen a decline in Malaysia's royalties from oil and gas into government coffers - causing the ringgit to weaken.
For example, in June, Malaysia's liquefied natural gas exports fell 45 per cent year-on-year while refined petroleum exports were down by about 10 per cent year-on-year, reported EconoTimes.
Yesterday, oil prices continued to fall to around US$40, their lowest levels since 2009. Prices reached a high of US$145 in July 2008.
Mr Song added that the recent political controversy had led to investors pulling out and potential investors hesitant to enter Malaysia.
2. IS THIS LIKELY TO CONTINUE?
Mr Rahul said that a big reversal does not seem likely in the short term unless oil prices bounce back or global confidence in commodities improves.
Likewise, Mr Song said that if the uncertainty continues to linger over the state of Malaysia's political landscape, it could lead to a compounding weakening effect on the ringgit.
3. IS THE WEAK RINGGIT GOOD FOR SINGAPORE?
It will be good news for those who are looking to travel across the Causeway to shop and dine as one Singdollar gets you RM3.
Said Mr Rahul: "At an individual level, it's good for those who are looking to go to Malaysia for a holiday."
But Mr Song said a weakened ringgit may mean that fewer Malaysians would be willing to spend as much as before.
"Singapore may now see fewer tourists and less business from Malaysia - who are one of the largest contributors to our tourism. That could have a negative effect on us," he said.
4. WHAT WILL HAPPEN IF THE RINGGIT CONTINUES TO WEAKEN?
In the short run, it will cause a slowdown in Malaysia's economy as people will now spend less and save more, said Mr Song.
But Mr Rahul said a financial crisis - such as the 1997 Asian financial crisis - is unlikely as Malaysia's financial position is stronger today.
He added that Malaysia has automatic stabilisers that would kick in, but we should not see immediate effects as these measures could take years to correct.
Malaysia's reserves fell by US$2.2 billion in the first 14 days of this month and are now at US$94.5 billion, a level last seen six years ago in the wake of the 2008 financial crisis.
But Mr Song said this is still sufficient to prevent a crisis as they have enough to finance at least seven months of retained imports - meaning that the country is still able to pay for at least half a year's worth of imported goods and services with its reserves.
IMPACT OF LOW RINGGIT
The plummeting Malaysian ringgit could benefit Singaporeans who purchase property in Malaysia, said Mr Colin Tan, 55, head of Research and Consultancy at Suntec Real Estate Consultants.
Mortgage payments now become less painful as owners pay less in Singdollar, he said.
Yesterday morning's all-time dip may "spark temptation", but Mr Tan warned locals to "be careful".
"The enjoyment could be temporary. If the weakening of the ringgit is linked to panic, chances are it will eventually settle when the economic situation reverts," he said.
"The cost of a loan in Malaysia may not be as cheap (as it is now) if and when the ringgit stabilises."
A stronger Singapore dollar against the ringgit could see more Malaysians scrambling to find jobs here.
This is evident from the enthusiastic response from Malaysians after wonton mee stall owner Linda Heng posted an advertisement for a stall assistant last month.
Although Madam Heng is only able to employ Singaporeans or permanent residents due to a hiring regulation, she said her phone has been ringing off the hook because of calls from Malaysian job-seekers.
But Mr Daniel Koh, general manager of Bestway Cleaning Services, said there is still a hiring quota for foreigners as well as the foreign worker levy.
Don't rejoice just yet - prices of vegetables, fruit and eggs are not about to come down any time soon.
The owner of a mini mart in Toa Payoh told The New Paper that he expects his prices to remain the same as their cost is not pegged to the fluctuating exchange rate.
But these prices may come down in the long run if the ringgit stays at this level, said economist Rahul Bajoria.
Earlier this year, The Straits Times reported that more infirm Singaporeans have been admitted to nursing homes in Johor Baru (JB), where prices can be as low as half those in Singapore.
With the falling ringgit, there has been an increase in inquiries by Singaporeans, said the owner of City Heart Care Nursing Home, located in JB, who wanted to be known only as Mr Yeo.
The 58-year-old added that they had recently lowered their rates from $850 to $800.
Stocks worldwide fall, S'pore sees dive
Singapore shares suffered their worst one-day plunge in seven years amid a sharp sell-off on Wall Street and a rout on stock markets across Asia.
The benchmark Straits Times Index closed at 2,843.39, down 4.3 per cent or 127.62 points yesterday, weighed down by a sell-off of bluechip constituents DBS, OCBC, Singtel, Jardine Matheson and Hongkong Land.
"Given how equity markets have slumped... it may be an ominous foreboding of things to come. China's sudden step out to devalue its yuan brought this uncertainty sharply into view, which was not helped by the (US Federal Reserve's) turn to bearishness," The Straits Times quoted Phillip Futures investment analyst Howie Lee as saying
China's stocks plunged the most since 2007 as government support measures failed to allay investor concerns.
The Shanghai Composite Index nosedived 8.49 per cent, closing down 297.83 points at 3,209.91, after falling as much as 9 per cent during trading earlier yesterday.
Worsening economic data and signs of capital outflows are undermining unprecedented government attempts to shore up the country's US$6 trillion (S$8.48 trillion) stock market.
China's economic growth slowed to 6.6 per cent in July, according to Bloomberg's monthly GDP tracker. Several European markets sank more than 7 per cent in afternoon trades, and in New York, Wall Street opened sharply lower with the Dow Jones industrial average losing more than 1,000 points at one stage, before recovering some ground at press time.