What should investors do when MYR gets stronger? #Weekly Market Pulse
It's been almost a month since we last discussed the rise of the Malaysian Ringgit, and over August, the MYR has impressively gained 6.53% against the USD, and 10% YTD!!
With the US rate cut leading to a weaker Dollar, We can be optimistic to imagine that RM will still have the potential. $MYR/USD (MYRUSD.FX)$
In our last session, we mentioned that a stronger Ringgit could benefit stocks. Today, let's dive deeper into the reasons behind this and explore its impact on import and export companies.
What should investors do when MYR gets stronger?
The recent appreciation of the Malaysian Ringgit (MYR) can be attributed to several main factors such as Political and Economic Stability & Global Economic Conditions. The MYR have strengthened due to weakening of the US Dollar (USD). This could be driven by expectations of interest rate cuts by the Federal Reserve or concerns about the U.S. economic outlook.
A weaker USD often leads to a stronger MYR, as investors seek higher returns in other currencies. Not only that, Malaysia has experienced a period of political or economic stability, this could increase investor confidence, leading to a stronger MYR. Political uncertainty often leads to currency depreciation, so stability can have the opposite effect, such as JP Morgan has upgraded Malaysia's rating from underweight to neutral after almost six years, crediting the country's policy reforms, data centre investments and infrastructure build-up.
What is the impact on import & export oriented company?
A stronger Malaysian Ringgit (MYR) impacts import and export companies by making Malaysian exports more expensive and reducing their competitiveness, while lowering import costs and enhancing purchasing power for importers. This dynamic affects profit margins, market share, and overall financial performance, influencing stock valuations on Bursa Malaysia.
Impact on Export Companies
>> Reduced Competitiveness: A stronger MYR makes Malaysian goods and services more expensive in foreign markets. This can reduce the competitiveness of Malaysian exports, potentially leading to lower sales and revenue for export-oriented companies.
>> Foreign Revenue Conversion: When export companies earn revenue in foreign currencies (e.g., USD, EUR), a stronger MYR means that when these earnings are converted back to MYR, the amount received is lower. This can negatively impact the financial results of export-driven companies.
>> Potential Margin Squeeze: Export companies might face pressure on profit margins due to higher costs when converting foreign earnings back to MYR. They may need to absorb these costs or risk losing market share if they increase prices in foreign markets.
Impact on Import Companies
>> Lower Import Costs: A stronger MYR makes foreign goods and services cheaper in Malaysia. Import-oriented companies benefit from reduced costs for raw materials, components, or finished goods that they purchase from abroad. This can lead to higher profit margins.
>> Improved Purchasing Power: Companies that rely heavily on imports may see an improvement in their purchasing power, enabling them to buy more or better quality goods and services for the same amount of MYR.
>> Price Competitiveness: With lower import costs, import companies can offer more competitive pricing in the domestic market, potentially increasing their market share and revenue.
A stronger MYR generally poses challenges for export-oriented companies due to reduced competitiveness and lower revenue in MYR terms. On the other hand, import-oriented companies benefit from lower costs and improved purchasing power. Investors in Bursa Malaysia typically monitor the exchange rate closely as it significantly influences the performance and outlook of companies involved in international trade.
In this week's hand-on video, i'd like to introduce you to the moomoo Learn area, with a wealth of learning materials to help you learn to invest.
At last, attached are the US and MY market weekly review and outlook ↓
🇺🇸US Stock Market Review 26 – 30 August 2024
>> $Dow Jones Industrial Average (.DJI.US)$+0.94%, $S&P 500 Index (.SPX.US)$500 +0.24%, $Nasdaq Composite Index (.IXIC.US)$-0.92%.
>> The US economy grew faster than initially thought in the second quarter of this year, because of strong consumer spending and corporate profits.
>> Event to watch: 3rd Sep US ISM Manufacturing PMI, 4th Sep JOLTs Job Openings, 5th Sep ADP Nonfarm Employment change, Initial Jobless Claims, Services PMI, ISM Non-Manufacturing PMI, Crude Oil Inventories, 6th Sep US Average Hourly Earning, Nonfarm Payroll, Unemployment Rate.
🇲🇾MY Stock Market Review 26 – 30 August 2024
>> $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$increased by 2.63% to 1,678.80 followed by the strong Banking sector shines.
>> The strong performance of the four banks was driven by higher non-interest income and lower loan loss provisions exceeded expectations.
>> Event to watch: 5th Sep MY Interest Rate.
>> $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$increased by 2.63% to 1,678.80 followed by the strong Banking sector shines.
>> The strong performance of the four banks was driven by higher non-interest income and lower loan loss provisions exceeded expectations.
>> Event to watch: 5th Sep MY Interest Rate.
In the end, I will share more market trends and investment knowledge in the official Learning group organized by the moomoo Education Team @Invest With Cici. Everyone is welcome to join.
Follow me for more trading insights in the Malaysia stock market! Have a good week.🥰
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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