Reopening beneficiaries more resilient against currency translation
- Outsized revenue recovery and earnings going forward should offset negative currency translation for reopening theme beneficiaries
- SGD has strengthened against many major currencies recently, owing to a series of policy tightening by the MAS to combat inflation on the back of decent economic recovery
- Except for USDSGD, JPYSGD, EURSGD and GBPSGD have fallen close to their 5-year lows – on BOJ’s commitment towards its Yield Curve Control, while the EU and the UK see headwinds from geopolitical/political tensions, inflation, and growth concerns
- MAS has tightened its monetary policy in an off cycle move again last week
- Move helps to maintain a more stable USDSGD
- Our currency strategist sees USDSGD staying below 1.40 this year
- Positive: More stable USDSGD helps stem funds outflow and establish Singapore as a regional haven
- Negative: Singapore goods and services get more expensive, possible negative currency translation from listed companies with overseas revenue
- Strengthening SGD impacts companies differently:
- Less impact on companies with local presence or operate/report in a single currency, e.g.,
Cromwell and IREIT operate and report in EUR, Elite Commercial REIT in GBP - Companies that operate in EUR/JPY/GBP but report in SGD may see significant impact from FX translation, e.g., DHLT operates in JPY but reports in SGD
- Less impact on companies with local presence or operate/report in a single currency, e.g.,
- Firms with global presence (and derive significant revenue in these foreign currencies) will also be impacted, e.g., e.g., SIA, ART, CDLHT, and CityDev
- Financial impact may differ on company’s specific policies, strategies, hedging, and/or operations
- Example: Back in 2021, 41% of CDLHT’s revenue contribution was from Singapore (versus ART’s 7%) but Singapore’s contributions should improve this year as local borders reopen
- Continue to stick to potential beneficiaries of the reopening theme – especially as we consider the outsized recovery in revenues and earnings going forward
