Domestic firms at risk as regional currencies slide

Which companies are under threat?

Locally-listed firms will struggle to grow their toplines as regional currencies lose ground against the relatively strong Singapore Dollar.

DBS noted that although the SGD has weakened considerably against the greenback, it remains substantially stronger compared to currencies of key trading partners such as Australia, Malaysia and Indonesia.

“The weakening regional Asian currencies against the SGD makes Singapore goods and services more expensive compared to regional competitors, and will have a negative impact on Singapore’s exports and GDP growth. The relatively strong SGD will also negatively impact companies’ revenue bases when overseas earnings are translated back into SGD,” DBS said.

Among the companies which will bear the brunt of the strong SGD are Frasers Commercial Trust and Petra Foods.

On the flip side, the weak SGD versus the USD will benefit exporters to the US and help companies whose contracts are pegged in USD.

These firms include ST Engineering, Neptune Orient Lines, Venture Corporation and Interplex.

“With the Fed expected to hike rates later this year, regional currencies look set to continue on their weakening trend against the USD. Consensus expects the first rate hike in December. For Singapore, attention turns to the MAS policy meeting in October. With the slowdown in Singapore’s economy and the SGD on a strengthening path against regional currencies, all eyes are on whether the MAS will allow the SGD to weaken,” DBS noted.