RM Unpegging from US, Consequences?

[Ken K. Kour 0]

Now That Malaysia (Ringgit) and China (Yuan) have given up the peg of their currencies to the US dollar. (Malaysia was at 3.80RM to 1USD)

 

Source - The Star

 

Some 'experts' have predicted that it would mean less fuel costs for the airlines, as the Ringgit should 'Hover' at a level of about 3.50-3.60 per 1USD.

 

Other effects will be that Air Asia will be paying less for its purchase of Airbuses as the RM strenghtens agaisnt the US and Euro..

 

"A major industry that may also benefit from a stronger ringgit will be airlines. They would have to pay less ringgit for their jet fuel and AirAsia Bhd, which is making a huge fleet purchase, would incur a lower purchase cost. All that, however, may be offset by the amount of revenue they get in US dollars. " - The Star

 

 

 

 

- Just to inform you guys

[Radzi 2]

All you said is true. Furthermore, now it is slightly cheaper to travel overseas for Malaysians with the ringgit buying slightly more Euro, USD, pound or AUD.

 

And I hope price of cameras and accessories will be lower a bit.....

[Ken K. Kour 0]

Thats good news for alot of us, like for me studying overseas, schools fees should drop by abit hopefully.. Although, when put into action today, the exchange rates have fluxed upwards,

 

yesterday it was 2.28RM - 1SGD

Today its 2.31RM - 1SGD

 

but hopefully, it will settle at about 3.50-3.60 as predicted over the next few weeks... also, apart from that extract about AK, there are also alot of consequences for the other markets, such as consumer electronics etc that i didnt copy.

[Sing Yew 1]

That may be possible. But bear in mind however most Asian currencies have been swinging upwards as well after the renminbi has been revalued. The AUD has also rallied today. As such, the appreciation of RM has to outpace these currencies in order for us to have a lower exchange rates with those countries.

[S V Choong 4]

China has given up their peg with US Dollars? Not quite!

They have pegged it at USD $1.00 - CNY 8.11 level. That's hardly any improvement at all. It is just one of those "entree" tricks to keep Uncle Sam quiet for the moment, but expect the US to keep barking on China for this rate in the coming future.

 

HKD is also pegging on USD at USD $1.00 - HKD $7.85 level.

 

So what is the exchange rate of USD and MYR at the moment?

[H Azmal 0]

From http://www.xe.com/ucc

 

Live mid-market rates as of 2005.07.22 11:46:43 UTC.

 

1 USD = 3.77965 MYR 1 MYR = 0.264575 USD

[Ken K. Kour 0]

Airline counters soar on positive expectations

By ANNA MARIA SAMSUDIN

 

July 23 2005

 

STOCKS of AirAsia Bhd and Malaysian Airline System Bhd (MAS) soared yesterday on expectations that the airlines would be among the main beneficiaries of Malaysia’s lifting of the ringgit peg.

 

Budget airline AirAsia was the second most actively traded counter after power company Tenaga Nasional Bhd.

 

AirAsia closed 11 sen higher to RM1.77 — its highest level in more than five months. Trading was active with 24.83 million shares dealt with.

 

MAS also performed well, ending the day with a 16-sen gain to RM3.72 with over one million shares traded.

 

Analysts said airlines are among the first in line to benefit from Thursday’s change in Malaysia’s foreign exchange policy.

 

After seven years of being in a fixed exchange rate regime, Malaysia switched to a managed-float system, letting economic fundamentals and demand and supply dictate the currency’s value while managing it to be close to its fair value against a basket of trade-weighted currencies.

 

In a report, ECM Libra Securities Sdn Bhd said the ringgit de-peg would be positive for AirAsia as 60 per cent of its operating expenses, for jet fuel and aircraft leases, are US dollar-denominatetd while the bulk of its revenue is in ringgit.

 

It estimates that a 5 per cent appreciation in the ringgit will result in an 8 and 9 per cent increase in AirAsia’s earnings to RM225 million and RM338 million for the financial years ending June 30 2006 and 2007 respectively.

 

The securities house upgraded its target price to RM2.05 from RM1.88, and recommends a “buy” on AirAsia.

 

Another analyst estimates that a 5 per cent appreciation in the ringgit will result in some RM30.4 million savings and an 18 per cent increase in AirAsia’s net profit for the current financial year ending June 30 2006.

 

Similarly, a 5 per cent appreciation in the ringgit will result in some RM137.2 million savings and a 31 per cent increase in profit for MAS in the financial year ending December 31 2006.

 

This is after taking into consideration the negative impact on MAS’ topline, as about 10 per cent of its revenue is denominated in US dollars.

 

The ringgit de-peg, however, failed to spur interest in Transmile Air shares, which declined 20 sen to RM11.

 

Analysts believe the move will have minimal impact on Transmile as its agreements with customers are largely on a “cost plus” basis.

 

Shipping company Malaysia International Shipping Corp (MISC) is seen among the losers.

 

According to Nomura Advisory Services Malaysia, MISC stands to suffer from a one-off translation loss since most of its earnings is in US dollars.

 

The impact on its profit margins and cash flow, however, is expected to be minimal as its revenue and cost are mainly in US dollars.

 

The research house said MISC should benefit from the stronger ringgit given that 90 per cent of its borrowings and most of its capital expenditure is in US dollars. MISC’s shares closed 50 sen lower to RM18.30 with 2.3 million shares traded.

 

-NST

[Roszaimy 0]

I think yesterday, RM has settled at RM3.75 per USD.

 

For airline business, it should be positive because of lower effective price for jet fuel (which is quoted in USD). Also, remember, buying airplanes also involve a huge sum of USD!

 

Anyway, after the peg removal, I noticed the share price of Transmile Air fell a bit. Mainly because the company derives most of its revenue from overseas operation (main HK and China).

[Isaac 0]

I hope it will back to the pre-97 level

ONLY RM2.80 = USD1 (if i'm not mistaken).

Many Malaysian will become rich again, LOL.

[Ken K. Kour 0]

1 USD = 3.7845 MYR currently (29th - 7 - 05)

 

Seeing the unpegging has been in action for only a week, this isnt a bad thing, finally a step in the right direction for malaysia, and for malayisans. Albeight a small step.

 

next step - one of the following

- an order of 20 777-200LR/30 777-300ER (imran knows what i mean)

- make MAS the most sought out jobs (never have pilot shortages - future planning)

- buy out EK and SQ

- hire some of the M-Wings members as independant reviewers and inspectors

[Keith T 2]

Does that mean I'd have less Malaysian currency when I visit Malaysia? And I intend to visit KL pretty soon, when I visit SIN in Sept actually. Hopefully the difference will be negligible...

 

Hehe no offence intended

[Roszaimy 0]

Does that mean I'd have less Malaysian currency when I visit Malaysia? And I intend to visit KL pretty soon, when I visit SIN in Sept actually. Hopefully the difference will be negligible...

3667[/snapback]

Yes, should be less Ringgit you will get when you visit here. But to me lah, it's VERY minimal difference, regular travelers won't really feel much, it's not like Ringgit was revalued by 50%.

 

This small currency movement only matters for importers/exporters of goods and other stuff. And maybe investment people too.