#14 MYR vs SGD – Why Are We So Behind?

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Timely updates to supercharge your wealth-building journey!

MYR vs SGD – Why Are We So Behind?

Fun Fact: 10 years ago, 1 SGD got you RM 2.50. Today? RM 3.45. Yikes, right? That’s a cool (or not-so-cool) 38% plunge over a decade. Like, seriously, no wonder our Singaporean pals dash to JB for petrol! I’d too if it’s 3.5x cheaper. 😜

Economic Showdown: MY vs. SG 🌇

Our GDP per capita hovers around RM 11,000 (based on 2021’s figures), and while we proudly showcase resources like oil and palm oil, our economic health can easily catch a cold from global price fluctuations.

Singapore, on the other hand, with its impressive USD 72,000 GDP per capita, has turned into a global magnet, pulling in an astonishing SGD 2.5 trillion in Foreign Direct Investments by 2021. Why? Because they’ve focused on building industries with stability and high returns, while we… well, could do a bit better.

Some casual reading (World Economic Forum and Fitch!) revealed: Singapore tops the world in trade openness, while Malaysia sits at 37. And on the credit score side, Singapore’s AAA beats our BBB+. Ouch.

Tools to control currency: MY vs SG

Here’s the fun part. Our central bank, Bank Negara Malaysia (or BNM), targets the interest rate to stabilize the economy. And the Ringgit, like many other global currencies, is influenced by the value of the US Dollar, or the world’s reserve currency, so the strengthening of the US Dollar usually results in the weakening of the Ringgit.

Unlike Malaysia, MAS does not control its currency based on interest rates, but on the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) instead. MAS adjusts the Sing Dollar with the guidance of multiple currencies such as the USD, Renminbi, Japanese Yen, etc which kind of works like an index.

By syncing Sing Dollar with these major global currencies, stronger US Dollar would mean a stronger Sing Dollar as well!

Can we do better?

We genuinely hope so! Today’s post is not about glorifying Singapore, but to learn why they are successful, and hopefully we can get a clue or two!

And Here’s the Trap

Even though you may have the exact household income with the neighbor beside you, two of you may live a heaven and earth life quality – simply due to the number of dependency. To put it simply, earning RM 8000 a month with 5 kids and 2 parents cannot have the same living lifestyle as those having no kids and free of responsibilities. But hey, it’s your life, live your choice.

Whether you’re a B40, M40, or a T20 high flyer, the real win is in how you manage, invest, and grow. Remember, life isn’t just about the bracket; it’s the journey, the strategy – it’s how you play the game. Catch ya on the richer side!

Speaking about managing your finances – every cent matters! I was planning for some travelling myself, so my team and I decided to find the ultimate best travel credit card to utilize every spends in exchange of rewards/lounge. And we did it! It’s legit useful and I’m gonna smash my video link here of Best Travel Credit Cards You Can Own in Malaysia (2023) just in case you want to know it too!

Word of the Week: Derivatives

Definition: Derivatives are financial contracts whose value is based on (or derived from) an underlying asset, rate, or index. Common underlying assets include stocks, bonds, commodities, currencies, and interest rates. Derivatives are typically used for hedging risks, leveraging capital, or speculating on future price movements.

Imagine you’re a farmer expecting to harvest 1,000 bushels of wheat in six months. You’re worried that the price might drop by then, which would reduce your income. So, you decide to enter into a derivative contract called a “futures contract” to sell your wheat at today’s price in six months.

Let’s say the current price of wheat is $5 per bushel. By using the futures contract, you agree to sell your 1,000 bushels of wheat at $5 each in six months, locking in a total of $5,000.

Now, fast forward six months:

1. If the market price of wheat falls to $4 per bushel, you still get to sell it at $5 per bushel because of your futures contract, effectively avoiding a loss.
2. If the market price of wheat rises to $6 per bushel, you’ll still have to sell it at the agreed $5 per bushel, missing out on extra profit.

This futures contract is a type of derivative – you didn’t exchange any actual wheat when the contract was made; instead, you entered into an agreement based on the wheat’s anticipated price. And that’s derivatives for you!

Key Economic Dates:

• 11th October: PPI (Sep), FOMC Meeting Minutes
• 12th October: Core CPI (Sep), CPI (Sep), Initial Jobless Claims

What I’ve been reading:

Here are the top stories that caught my eye:

• Australia LNG Workers to Resume Strikes, Fueling Supply Risk
• Ray Dalio says the U.S. is going to have a debt crisis
• Bond yields could race through 5%

You’re all caught up!

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Cheers,
Ziet