Impact of Devaluation on Singapore
Currently, China is the biggest export market in Singapore, accounting fourteen percent of the export value. Thus, devaluation by Singapore dollar will make the products in Singapore more costly to the Chinese. In connection to this, 5 years ago, one Singapore dollar trade is as high as 5.33 Chinese RMB, which has strengthened against Singapore dollar. As Singapore is an advanced economy, exports to the country of China may be advanced and intermediate value added products, which may not be price sensitive; hence, it should be able to withstand increase in some of the prices.
If nationals think that the devaluation of the RMB is a top trend, exactly, we will yet see some exodus of amount of funds from wealth Chinese to the rest of many countries in the world. According to one of the economists at Bloomberg named Tom Orik, he estimated that a one percent drop in currency value leads to about forty billion when it is put in the Exodus funds with a three-month lag. With regards to this, the RMB has steadily devalued against the dollars in Singapore. However, in the last few years, the RMB has been increased against the Singapore dollar.
What is the impact of Devaluation on interest and export rate?
If devaluation continues to lower the value of currency, it will then lead to more imports from China. However, as foreseen that a two percent RMB devaluation will not significantly affect or has a big impact on Singapore’s exports, because of the fact that, Singapore is really an advanced economy, which actually exports valued added products and intermediate goods and hence, these exported products should be able to withstand a two percent impact.
In the best-case scenario, China exports may even raise in value because of RMB devaluation, since many imports and factories may already be committed and contracted beforehand and perhaps denominated in USD. In the worst case, exports may have the possibility to fall, especially if exporters are unwilling to adjust prices to absorb the increases in prices. However, it has been noted that two percent devaluation against the USD is not necessarily two percent devaluation against the SGD, because the SGD is also lowering against the USD.
Added to that, shares of Singapore exporters, which have a huge component of China sales, will be impacted. The stock markets of China may see a large impact from funds of exodus; however, at this time, it is difficult to estimate the effect.
Which segments of real estate would be most affected? Is it industrial?
Well, in my own point of view, I doubt it would influence the real estate segment of Singapore in a huge way, unless China’s wealthy begins to move on their funds to Singapore, by means of buying industrial and commercial properties.
Therefore, the impact of devaluation on Singapore is not just big, as the country is an advanced country that has more export products than import products. This also means that it makes the country's exports competitive, because buyers need to pay less, especially when you are in the country.
Adapted from article on iCompareloan
Currently, China is the biggest export market in Singapore, accounting fourteen percent of the export value. Thus, devaluation by Singapore dollar will make the products in Singapore more costly to the Chinese. In connection to this, 5 years ago, one Singapore dollar trade is as high as 5.33 Chinese RMB, which has strengthened against Singapore dollar. As Singapore is an advanced economy, exports to the country of China may be advanced and intermediate value added products, which may not be price sensitive; hence, it should be able to withstand increase in some of the prices.
If nationals think that the devaluation of the RMB is a top trend, exactly, we will yet see some exodus of amount of funds from wealth Chinese to the rest of many countries in the world. According to one of the economists at Bloomberg named Tom Orik, he estimated that a one percent drop in currency value leads to about forty billion when it is put in the Exodus funds with a three-month lag. With regards to this, the RMB has steadily devalued against the dollars in Singapore. However, in the last few years, the RMB has been increased against the Singapore dollar.
What is the impact of Devaluation on interest and export rate?
If devaluation continues to lower the value of currency, it will then lead to more imports from China. However, as foreseen that a two percent RMB devaluation will not significantly affect or has a big impact on Singapore’s exports, because of the fact that, Singapore is really an advanced economy, which actually exports valued added products and intermediate goods and hence, these exported products should be able to withstand a two percent impact.
In the best-case scenario, China exports may even raise in value because of RMB devaluation, since many imports and factories may already be committed and contracted beforehand and perhaps denominated in USD. In the worst case, exports may have the possibility to fall, especially if exporters are unwilling to adjust prices to absorb the increases in prices. However, it has been noted that two percent devaluation against the USD is not necessarily two percent devaluation against the SGD, because the SGD is also lowering against the USD.
Added to that, shares of Singapore exporters, which have a huge component of China sales, will be impacted. The stock markets of China may see a large impact from funds of exodus; however, at this time, it is difficult to estimate the effect.
Which segments of real estate would be most affected? Is it industrial?
Well, in my own point of view, I doubt it would influence the real estate segment of Singapore in a huge way, unless China’s wealthy begins to move on their funds to Singapore, by means of buying industrial and commercial properties.
Therefore, the impact of devaluation on Singapore is not just big, as the country is an advanced country that has more export products than import products. This also means that it makes the country's exports competitive, because buyers need to pay less, especially when you are in the country.
Adapted from article on iCompareloan