Hi guys, some views from this part of the world about the currencies and competitiveness.
Singapore exporters have been struggling with a strong currency for years until this thing happened. Even then the Singapore dollar has depreciated much less compared to other regional currencies (about 15-20% depending what day of the week). So far the effect on Creaf, operationally, has been slight (company says the reduction in cost has been small). Since Creaf reports in US$, its earnings are what they are, in fact, using Singapore dollars Creaf's profit rose 58% for the quarter, quite unlike practically all other companies on the SES which should shave off 20% from their reported earnings to convert to US$ (after all that is what institutions look at when they consider EPS growth for different markets).
What's happening here is quite comical. Investors over here sold down electronics because Nasdaq was sold down. But Nasdaq was sold down because a lot of electronics companies have relatively large (about 10-20%)exposures to Asia, compared to completely US-reliant sectors like utilities, retail, etc. What these investors failed to realize, in their haste to board the bandwagon, was that the opposite was true in Asia - that electronics companies were, relative to other companies listed here, a lot less reliant on Asia. In short, if you HAVE to hold stock in Asia, electronics would be the best sector (this unfortunately fell on deaf ears as most investors here are more familiar with the old stuff - banking, shipping, property, construction, etc).
All is not lost however. There have been some profit warnings from major companies (actually these are loss warnings). For the very same 6 months Creaf's profits grew 112% (in Singapore dollar terms), most of the very major companies here are going to report big dives in profits or outright losses. So over the next two months (believe it or not companies here are given 3 months to report earnings) the contrast (electronics versus non-electronics) will be quite glaring. And then, and only then, will there be a big rush to buy stocks like Creaf. So hang on tight. |
