4 ways Malaysians should hedge against a weak Ringgit & protect their wealth

Dear Malaysians…

We have the best street food in the world. Some of the nicest people. And a rich multi-culture with diversity.

But of all the things we are blessed with, a strong currency is not one of them.

Never mind if it isn’t the strongest. It is currently at its weakest (against the USD) since the 1997 Asian Financial Crisis.

The Ringgit was at its weakest in late 1997 when the dollar at one point fetched as much as 4.88 ringgit.

And we have surpassed that level yet again! Not the kind of “Malaysia Boleh” that we wanted.

Fortunately, Malaysians today are blessed with many choices to hedge the weakening Ringgit. If the Ringgit is weak and (would seemingly) continue to weaken, the straightforward choice is not to have your wealth tied to the currency.

Here are some ways to transfer your wealth into other value-preserving assets.

1) Convert to other currencies

The most straightforward way is to convert a weaker currency, to a stronger currency.

Back then in the 90’s, there were certainly not many solutions or methods available for swift currency conversion.

Fast forward to today, we have a myriad of providers to do so.

There are several banks in Malaysia that offers multi-currency account, so no worries.

Banks these days offer multi-currency accounts for clients to hold multiple currencies, as we become more savvy in planning our foreign currencies for investments and travel.

Banks like RHB, Hong Leong Bank, Maybank, and HSBC all offer multi-currency accounts. Of course, do check the number of foreign currencies offered and the requirements, to determine whether it suits you and if you qualify for one. The requirements can be as easy as having a minimum sum of less than RM10,000 to open one.

Wise is also present in Malaysia right now.

Our parents might have borne the brunt of the spiraling Malaysian Ringgit during the financial crisis. They most likely did not have a choice to negate it.

But we do now.

2) Buy gold

You don’t earn the status of a safe haven asset if you can’t preserve value.

Gold might not be the best investment asset class for prolonged compounded returns. But at least it holds its value relatively well (*cough* Bitcoin *cough*).

It should not make up the bulk of anyone’s portfolio, but having a decent allocation especially when your home currency is weakening, can help in terms of value preservation.

Managing foreign currencies requires knowledge of the central banks of the currencies you are holding. Monetary policies can change depending on the economic climate, and you are still taking a risk on the country should you opt for FX.

But when it comes to gold, the only conversion that matters is the price of gold in your home currency. And as long as gold remains as a safe haven, which it should, it is a straightforward option to hedge a weakening currency.

3) Buy international stocks

Coming over to Singapore for the last 7 years required me to sacrifice time and miss out on key occasions and events with my family and friends, who are still in Malaysia.

But one of the gains obtained from these sacrifices is the vision and opportunities to invest outside of my home country.

My investment journey started off with a portfolio of stocks purely of Malaysian listed companies. But as I delved deeper into the world of international stocks, the quality of businesses, competitive advantage, and track records, thumped most Malaysian stocks hands down.

Since I started investing in the US and even Singapore markets, I have not bought any Malaysian stocks, apart from a few stocks that offer dividend reinvestment plans.

Starting from a pure 100% Malaysia stocks portfolio, today Malaysia stocks only make up 16% of my portfolio.

Countries operating in Malaysia might be affected by the weak Ringgit if their business is very domestic-focused. But stocks in other parts of the world would not be affected by the weakening Ringgit.

These days, choices to open an account to trade US stocks are aplenty. So there are no reasons for you not to do so.

Alternatively, you could always pick a plain vanilla US ETF index to invest in for the long term.

4) Buy Malaysian stocks in the export business

For individuals who do not feel comfortable or find it a hassle to manage international stocks, there are still opportunities to hedge your wealth from the weakening Ringgit.

There are local companies that are in the export business that can benefit from the weakening Ringgit. Export sales are usually denominated in USD or other currencies. Even if companies maintain their selling price in any foreign currencies, the revenue and profit when converted back to Ringgit would benefit due to the favorable exchange rate.

This can create a revenue and profit bump. And that usually gives share prices some upside movements as well.

Ringgit can be weak, but you can do something about it now!

The weakening Ringgit is certainly an eyesore and would affect the disposable purchasing powers of ordinary Malaysians.

However, compared to our parents’s era where not much could be done, we have more options these days.

Yes it would not be straightforward to explore and discover which of the methods mentioned suit each and everyone’s risk profile. But that would be up ot each and everyone of us to put in the time and effort and ponder this through.

If history repeats itself, then we have definitely not seen the bottom of the Ringgit’s depreciation. This is a personal financial risk that we all need to take action for swift remedial.

Otherwise, we would have no one but ourselves to blame.

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