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| THE STRAITS TIMES | THURSDAY, AUGUST 13, 2015 |

TOPOFTHENEWS

US$ rise hitting firms more than yuan slide Still, China factor expected to affect earnings of Singapore firms with mainland presence Annabeth Leow and Chia Yan Min Singapore firms trading with China say they are being hit harder by the strengthening greenback than the suddenly weaker yuan. This is because many firms here pay their China suppliers using US dollars. However, the double whammy of a sliding yuan and slowing growth in China is still expected to hit the earnings of Singapore firms with a presence on the mainland. China stunned the world’s financial markets yesterday by devaluing the yuan for a second straight day, triggering fears that the world’s second-largest economy is in worse shape than believed. Mr Ron Ang, co-founder of Absolute Liquor, said the firm has not gained from the weaker yuan as it pays China suppliers in US dollars. It imports beer and holds the sole distributorship for Chinese beer

brands Pearl River and Cheerday. The stronger US dollar means its China imports are more expensive. One US dollar could buy about S$1.41 yesterday, from about S$1.37 at the start of this year. The strengthening greenback has led to higher costs and the firm may have to increase prices by the year end if it keeps appreciating against the Singdollar, Mr Ang said. “Beer companies which import from overseas and deal in US dollars are being affected. We haven’t moved prices up yet, but once a few brands start doing so, everyone will.” Interior furnishings firm Goodrich Global’s chief executive Chan Chong Beng said it sells to China in yuan, but imports goods for sale in China using US dollars. “Obviously the weaker yuan (and stronger dollar) don’t help us because our costs become higher and our revenue is also worth less,” Mr Chan said, adding that China

MAS ready to curb Singdollar volatility The Monetary Authority of Singapore (MAS) stands ready to curb excessive volatility in the Singdollar after the devaluation of the yuan. The central bank said yesterday the Singapore dollar has stayed in its policy band despite higher foreign exchange market volatility. The current policy of modest, gradual Singdollar appreciation against a basket of currencies “remains appropriate from the perspective of overall macro economic conditions”, the MAS added.

The yuan has fallen about 0.8 per cent against the Singdollar since Tuesday’s first devaluation. The weaker yuan could dampen China’s demand for imports from here and slow a rebound in tourist arrivals from China, the Ministry of Trade and Industry said. But as the depreciation has been small so far, the impact on exports and tourist arrivals is likely to be contained, a spokesman said. Chia Yan Min

makes up about 40 per cent of the company’s revenue. Even if trades with China were in yuan instead of US dollars, Aldon Technologies group managing director Allen Ang said the firm would not be worried about competing with Chinese exporters. “To be frank, (the Chinese) are only good in their own domestic market. They don’t have the capability to export what we are exporting,” said Mr Ang. The firm refurbishes process kits and parts for flat panel and semiconductor manufacturers. Mr Ang said his Chinese customers are “begging” him to trade in yuan to spare them losses. “If they use the US dollar, their risk is higher than ours.” DBS Group Research analyst Derek Tan said that, even before the recent moves to devalue the yuan, the slowing Chinese economy had already hit listed Singapore firms in sectors such as retail and residential property. The weaker Chinese currency will have the greatest impact on the revenues of companies which derive a larger portion of income from China, he noted. Bosses say they remain optimistic about China’s long-term prospects but are bracing themselves for further falls in the currency. Mr Chris Leong, managing director of Leung Kai Fook (Guangdong) Medical, said: “We do not like to see the yuan fall to the extent that we need to increase our selling prices to sustain a reasonable profit margin, and we do not expect to see it happening in the near future.” It has a production plant in China, with most costs in yuan. Goodrich’s Mr Chan said: “Eventually, the market will have to settle down... China will continue to be very important for us.” [email protected] [email protected]

Online shopping, home loans affected Yasmine Yahya Assistant Business Editor The shock move to devalue the yuan has not only unleashed financial market turmoil but is also punishing shoppers and home owners here by sending the Singapore dollar down and interest rates up. The Singdollar, which closely tracks the yuan, has weakened sharply against the US dollar, the British pound and the euro since China’s surprise decision on Tuesday. This will cast a gloom over a favourite local pastime – online shopping. Goods sold on popular US and Europe-based e-commerce sites such as Amazon and Asos are now more expensive when their prices are converted to Singdollars. Those looking for a bargain will have to limit themselves to China-based e-commerce sites such as Taobao for the time being, as the yuan’s drop has been even greater than the Singdollar’s. This is making yuan-priced goods cheaper. In fact, travellers who have booked trips to China are in luck as they will get more bang for their buck now. Dynasty Travel said it has seen a 15 per cent spike in inquiries and bookings for China for travel between September and December in the past two weeks. But local home owners will have little reason to celebrate. The Singapore Interbank Offered Rate (Sibor), the benchmark interest rate to which most home loans here are pegged, has risen to a four-month high in the wake of the yuan’s devaluation. This means that home owners looking to refinance their mortgage or take out a new loan will have to pay more. “It’s probably better to get a fixed rate loan for at least the next two years,” said Promiseland financial adviser Wilfred Ling. As the name suggests, the interest rate on a fixed-rate loan will remain unchanged for a certain period of time regardless of Sibor’s movements. But while Western imports and local home loans may get more expensive, goods and services across

Currencies in flux Yuan drops against US dollar 0.164

$

Aug 12 0.1566 cents

0.162 0.160 0.158 0.156

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O 2014

N

D

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F

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A

M 2015

J

J

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Singdollar drops against US dollar 0.85

$

Aug 12 0.7099 cents

0.80 0.75 0.70

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O 2014

N

D

J

F

M

A

M 2015

J

J

A

Ringgit drops against Singdollar 0.40

$

Aug 12 0.3487 cents

0.38 0.36 0.34

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O 2014

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F

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M 2015

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Source: BLOOMBERG ST GRAPHICS

the Causeway have become cheaper than ever as the yuan devaluation has caused a further depreciation of the Malaysian ringgit against developed market currencies, including the Singdollar. The ringgit is now at its weakest against the Singdollar in over two decades, with one dollar buying 2.86 ringgit. One money changer that The Straits Times spoke to reported brisk business yesterday, with many customers changing Singdollars into ringgit. Mr Mohamed Rafeeq, owner of Clifford Gems & Money Exchange at Raffles City, said: “Everybody has come to grab ringgit. Some passers-by saw the price and just wanted to buy.”

He said the amount of ringgit he sold yesterday was up 20 per cent from Tuesday. His shop also saw a 15 per cent rise in the amount of US dollars being sold by customers. Malaysian Jenny Kok, 31, who commutes to work in Singapore every day, felt the benefits of a weaker ringgit were tempered by concerns about her country’s future. “I’m happy for now because I can change the Singdollars I have for more ringgit. But, in the long term, the weak ringgit would not be ideal if I were to work in Malaysia.” [email protected]

• Additional reporting by Annabeth Leow, Yvonne Lek and Jose Hong

S’pore transport pioneers recall tough early days Olivia Ho When Captain Kenneth Toft first started flying in the 1960s for Malayan Airways, the carrier that would later become Singapore Airlines (SIA), it was a risky business. Often flying over uncharted areas without the benefit of radio aids or an electronic guidance system, he would sometimes have to descend below the clouds in bad weather and use the pinpricks of light from lighthouses to navigate. The 78-year-old said: “In the old days, when we kissed our wives and girlfriends goodbye, we meant it, because not all of us came back.” Capt Toft, who retired from SIA in 1997 after 37 years of flying, was among a generation of transport pioneers thanked yesterday by Transport Minister Lui Tuck Yew at the ministry’s SG50 gala dinner. In his speech, Mr Lui painted a picture of the chaotic transport scene 50 years ago – one plagued by pirate taxis and bus companies more keen on fighting each other than transporting passengers, and when SIA was still an infant airline operating just 10 planes from Paya Lebar Airport’s single runway. Mr Lui said: “The world-class brick-and-mortar infrastructure which facilitates our overseas travel and the movement of cargo and goods in, out and through Singapore, the innovative transportation policies and measures which smoothen our daily commute, and the efficient, fuss-free transportation services... are the legacy of our pioneers.” Mr Lui commended late pioneers such as former Civil Aviation Authority of Singapore chairman Sim Kee Boon, the man behind the construction of Changi Airport, and MRT Corporation’s first executive director Lim Leong Geok, the eldest son of war hero Lim Bo Seng and part of the team that built Singapore’s first MRT. He also lauded long-serving transport staff such as principal engineering assistant Thambiah Ramasamy who, with more than 60 years of service, is the longest-serving employee of the Land Transport Authority (LTA). Mr Thambiah, he said, was among the team who put up the first Electronic Road Pricing gantry, and at 79 years of age contin-

Retired pilot Kenneth Toft (right) was among a generation of transport pioneers at the Transport Ministry’s SG50 gala dinner, which also featured an exhibition (above) on local transportation since independence. ST PHOTOS: DESMOND FOO

ues to supervise work on the gantries today. Pioneers at the gala night were quick to reminisce about the teething trials of Singapore’s early transport days. LTA rail director Ow Chun Nam, 62, recalled the challenges involved in the first phase of the MRT’s construction, such as having to treat the entire length of Robinson Road with grout to stabilise the poor ground. “That was quite a massive job,” he said. Looking towards the future, he

added: “The important thing... is to have a group of youngsters to come forward and take an interest in underground construction. ” Mr Lui said: “Seated among us this evening are the pioneers that 50 years from now, some minister is going to stand at some podium in some hotel acknowledging. “We are grateful that we can... stand on the shoulders of giants as we continue the work of building Singapore.” [email protected]

RISKY BUSINESS

In the old days, when we kissed our wives and girlfriends goodbye, we meant it, because not all of us came back.

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CAPTAIN KENNETH TOFT, 78, who started flying in the 1960s for Malayan Airways, the carrier that would later become Singapore Airlines