Tuesday, April 20, 2010

Ringgit strength cheers Malaysian shoppers

By Lee Wei Lian


— When avid marathon runner June Koay recently allowed herself to order specialty running shoes, socks and sports gels from a US based website, it was thanks to the strengthening ringgit.

The ringgit, which has appreciated about 7 per cent against the US dollar so far this year has been immediately felt by those who shop online but is expected to make imported goods cheaper in the long run boosting the purchasing power of Malaysians and creating a “wealth effect”.

“I had to think twice about buying the shoes online last year when the ringgit was 3.48 to the US dollar,” Koay told The Malaysian Insider. “Now that it is about 3.2, it really does make a difference.”

Yong Ying Nee, who runs her own public relations firm, says that when the ringgit recently hit 3.2 to the US dollar, she and a friend were prompted to visit the online store of American fashion retailer, American Apparel, where previously she had not bothered due to the unfavourable exchange rate.

“I am more inclined to visit US online retailers now,” she said.

Yong added that a stronger ringgit would allow her to make travel plans to the US to visit friends and also make it cheaper for her to go to the UK in November for a wedding.

“Previously, I would just look at regional holiday destinations,” she said.

Besides the US dollar, the ringgit has also appreciated against the British pound, the Euro and the Singapore dollar.

RAM’s chief economist Dr Yeah Kim Leng said that the strengthening ringgit will allow us to import more goods for less and make it cheaper for Malaysians to travel overseas.

“Our purchasing power will increase,” he told The Malaysian Insider.

He acknowledged that exporters, who had thin margins, could see their competitiveness eroded slightly but added that the stronger ringgit was a healthy trend that would make it easier for Malaysians to import high tech capital goods and speed up the upgrading of the economy.

Parents who plan to send their children overseas for studies are also happy about the stronger ringgit.

Mr Chia Weng Kues whose daughter is headed to the UK later this year is delighted about the exchange rate vis-à-vis the British pound which could see him saving up to RM15,000.

“It’s a huge difference,” he told The Malaysian Insider. “We normally don’t get such a good deal.”

Some Malaysians working overseas however were less pleased about the ringgit’s new strength

Alex Lee who works in Singapore recently had to remit RM11,000 to his parents in Malaysia to assist with the purchase of a new car last week.

He watched in “irritation” as the ringgit rose from about 2.4 to 2.3 to the Singapore dollar.

“The strong ringgit cost me more than RM300 extra,” he said.

The strong ringgit might also not immediately translate into cheaper imports due to the stickiness of the old pricing.

One branch manager of a luxury European car dealer in Kuala Lumpur told The Malaysian Insider that even if the cars were to cost less to import, the prices had to be maintained to avoid agitating earlier buyers of the car.

“They may complain if prices drop RM20,000 a few months after they buy the car,” he said. “We also have to protect the re-sale value of the cars.”

Traders who do business in US dollars are also worried about currency volatility as it makes it more difficult for them to hedge their business.

Johnny Tai, chairman of the international trade and relations bureau at the SMI Association of Malaysia said that while the strengthening of the ringgit was good for the overall economy, those who traded goods denominated in US dollars will be negatively affected.

“For example, if the ringgit keeps strengthening, where previously you would collect 3.2 for every US dollar you earn now you get only 3.1,” he told The Malaysian Insider. “The denomination of trade in US dollars is widespread.”

He also added that a fluctuating ringgit makes it more difficult to commit transactions as sellers may hold out for a higher rate or buyers may balk at new pricing.

Some however are already predicting a pull back in the ringgit value.

“The short term could see a technical pull back in the ringgit value,” Alan Inn, co-head of CIMB Investment Bank Bhd told The Malaysian Insider.

But for now at least, Malaysian consumers are enjoying the stronger currency.

“I think I’ll buy my travellers cheques now,” said Yong.

Report derived from Malaysian Insider web page

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