22 July 2005

How the RM de-peg might effect stocks

Following from yesterday's news, lets look at how managed float RM will effect stocks on Bursa Malaysia @ KLSE. Firstly, the overall consensus is that RM will appreciate against most currencies but that the actual quantum* of increase is uncertain. The Edge rightly points out that the early trading in the forex market might see the RM fluctuate in value as the market searches for a fair price for the RM. Over in KLSE, stock traders will take a somewhat longer term view of matters & deciding that given the assumption of significant RM appreciation in the medium term, what will the effect be on listed companies? This ape's seeing stone says
  1. tourism stocks: inbound tourism stocks (e.g. hotels) might fall as Malaysia will become a more expensive place to visit, while outbound stocks (e.g. those listed travel agents with really big booths in MATTA fairs selling 7D/6N trips to China) will rise as foreign travel becomes cheaper for Malaysians.
  2. transportation stocks: transport concerns, especially those who use a lot of fuel (like airlines) will rise as oil, which is priced in USD, will be cheaper.
  3. stock of companies with large foreign currency debts but mostly local operations (eg. some utilities) will rise as their foreign denominated debts will become cheaper to repay using their locally earned RM.
  4. stocks of companies selling imported goods (e.g. luxury good retailers) will rise as the cost of their materials will decline.
  5. stocks of export producing companies will fall, as their products will become less competitive on the world market & their RM earnings of exports will fall.
For a stock trading prospective on the managed float, head over to Kuzco's blog. * amount. Here at Shagadelica, we love thesaurus.com

Disclaimer: This ape shall not be responsible for any financial losses arising from actions taken on the basis of the above message. This is not professional advice. You would be gullible to believe anything you read on a blog by an ape & silly in the extreme indeed to think even for a moment, that any legal action of that nature would be viewed with anything but utter contempt by a court of law.

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