Malaysian Ringgit weakened against the Singapore Dollar, hitting RM3.20 against S$1. This is an all-time high.
Considering SGD was last exchangeable 1:1 with Malaysian Ringgit in 1973, a lot has changed.
Malaysia has a land area of 329,847 square kilometre while Singapore has 729 square kilometre.
Malaysia has 3.6 billion barrels of oil reserves and a mineral reserves worth US$396 billion and RM4.7 trillion respectively. Singapore had none.
Malaysia has 32.4 million population versus Singapore’s 5.7 million.
And yet, Singapore managed to grow her GDP at a faster rate and surpassed Malaysia’s GDP since 2015.
Malaysia feels like Manchester United now. Full of potential and resources but results are not showing. Everyone has a theory about the problems but no one seems to know how to fix it.
My view is that it doesn’t make sense for Singaporeans to invest in Malaysian securities because of the perennial weakness in the Ringgit – Ringgit depreciated at an average of 2.4% per year against the Singapore Dollar. since 1973. That’s like an emerging country’s tax on returns.
And for Malaysian investors, the reverse is true. It makes sense to invest in Singapore. You get forex gains on top of any investment returns you get.
I believe the disparity will widen as time goes by. It is not necessarily a good thing because peace in the region will be threatened when the disparity becomes too large. Conflicts and wars would make no one a winner. Hence I hope Malaysia doesn’t fall behind too much.
So will Ringgit hit RM4 against S$1? I believe it will happen, just a matter of time. I hope it doesn’t come so soon.
