Strong Ringgit: Winners and Losers

The Malaysian Ringgit (MYR) has recently shown signs of strengthening against major currencies, especially against USD, sparking conversations among investors, businesses, and everyday Malaysians. 😏💬

While this shift has its advantages, it also brings challenges for various sectors.

Let’s explore who stands to benefit from a strong Ringgit and which companies might face some headwinds. 😭😁

Who Benefits from a Strong Ringgit?

1. Importers and Retailers 🛒🛍
   
   
   A stronger Ringgit makes imported goods cheaper, benefitting companies that rely heavily on imports for their products or raw materials. This includes industries like consumer electronics, luxury goods, and automotive dealers.
   
   
   For instance, retailers like AEON and Mr. DIY that offer a wide range of imported products can enjoy better profit margins or pass on cost savings to consumers.
   
   
   The same positive effect is true for F&B companies like Berjaya Food, Nestle and chocolate products maker Guan Chong Bhd, which rely on the dollar to buy raw ingredients.
   
   
   Meantime, automotive dealers such as BAuto and Sime Darby would benefit from lower import costs of vehicle parts. Those in the healthcare industry would also be happier, such as Sunway, KPJ, Pharmaniaga and Duopharma.
   
   
2. Malaysians Travelling Abroad ~ Airlines?
   
   
   For you and me, who are going to travel abroad, you will find that our Ringgit could goes further when travelling to countries with weaker currencies.
   
   Travel agencies, airlines like Malaysia Airlines and AirAsia, and tour operators may see increased demand for international travel packages, boosting their revenue.
   
   
3. Companies with High Foreign Debt
   
   
   For businesses that have borrowed in foreign currencies, a stronger Ringgit reduces the amount of MYR needed to repay these loans.
   
   
   Companies such as Malaysia Airports Holdings Bhd, MISC Bhd, AirAsia and Axiata Group Bhd, which have significant USD-denominated debt, may experience relief in terms of repayment and interest costs, thus, improving their balance sheets.

At the time of writing this blogpost

Who is Affected by a Strong Ringgit?

1. Export-Oriented Companies
   
   
   A strong Ringgit makes Malaysian goods more expensive on the global market, which can be a disadvantage for export-driven industries.
   
   
   Notably, companies like Top Glove, Hartalega, and Supermax in the glove manufacturing sector, which export a significant portion of their products, may see reduced demand as their products become pricier for foreign buyers.
   
   
2. Tourism and Hospitality Industry
   
   
   While Malaysians travelling abroad benefit from a stronger Ringgit, it could mean fewer foreign tourists visiting Malaysia, as the cost of travel becomes more expensive for them.
   
   
   Hotels, resorts, and hospitality companies like Genting Malaysia, Berjaya Corporation, Shangri-La Hotels and YTL Hotels (under YTL Hospitality REIT) could experience a dip in revenue due to decreased tourist spending.
   
   
3. Plantation and Commodity Producers
   
   
   Commodities like palm oil are typically traded in USD, so a stronger Ringgit means that plantation companies receive fewer Ringgit for every dollar earned.
   
   
   Major players such as Sime Darby Plantation and IOI Corporation might face reduced profitability, especially if they don't have adequate hedging strategies in place.

The Bigger Picture

The impact of a strong Ringgit is a double-edged sword. While it eases inflationary pressures and helps importers, it can hurt exporters and sectors relying on foreign tourist inflows.

Companies that have diversified revenue streams or possess effective hedging strategies tend to weather these fluctuations better.

For businesses and investors, it's essential to understand how currency movements impact profitability. As the Ringgit continues its journey, companies must adapt their strategies to either capitalize on the strength or mitigate potential risks.

Whether you’re a frequent traveller, an investor, or a business owner, staying informed about the Ringgit’s movements will help you navigate Malaysia’s dynamic financial landscape.

What’s your take on the strong Ringgit?

Are you benefiting, or are you feeling the pinch?

😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁😭😁

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