The decline in the currencies of Malaysia, Singapore and Taiwan won’t last because of accelerating inflation and current-account surpluses, Goldman Sachs Group Inc said in a research note yesterday.
All 10 of Asia’s most-active currencies outside of Japan fell against the US dollar last week on speculation that the US Federal Reserve’s rate cuts are coming to an end. The Malaysian ringgit and the New Taiwan dollar both lost 0.4 percent against the greenback last week, while the Singapore’s currency declined 0.01 percent.
“Higher inflation is a key reason for our long-held love affair with the Singapore and [New] Taiwan dollar and the ringgit,” wrote Michael Buchanan, chief economist of Asia ex-Japan with Goldman Sachs in Hong Kong. “Singapore and Malaysia use their exchange rates as the primary tool of monetary policy.”
Singapore’s dollar traded at S$1.3607 to the US currency at 3pm in the city yesterday, data compiled by Bloomberg showed. The ringgit was at 3.1575 to the US dollar and the NT dollar closed at NT$30.498, down NT$0.043 on turnover of US$1.022 billion.
Singapore’s inflation reached a 26-year high this year, spurring the central bank to tighten its monetary policy last month by allowing faster appreciation to reduce import costs.
Malaysia’s inflation rate also reached a 13-month high of 2.8 percent in March due to rising food and transport costs.
“There will be fundamental pressure for appreciation on these currencies from their strong current account surpluses,” Goldman said.
It expects Singapore to post a surplus of more than 20 percent of GDP this year. Malaysia’s surplus will reach “mid-teens” of GDP this year and Taiwan’s will be more than 5 percent, Goldman said.
All three currencies will also benefit from “China proxy trades,” it said.
These currencies have high correlation to the yuan and the forward market has already fully priced in the Chinese currency’s appreciation.
“The Singapore dollar and the ringgit have moved almost exactly the same amount as the yuan since the Chinese depegged the currency in July 2005,” and they have less “hassle premium” priced into their currencies due to the more open capital accounts, Goldman said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts