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
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
