Durian tastes even sweeter as ringgit drops on oil slump

[KUALA LUMPUR] Sales have doubled at Uncle Lim's durian farm as Singaporeans flood over the border into Malaysia to buy the spiky, stinky fruit, lured by the cheapest exchange rates since the countries separated 50 years ago.

The Malaysian ringgit's weakness means they can now buy at least two top-grade durians there for the price of one in Singapore. The Southeast Asian native fruit - known for its sweet, custardy flesh and banned from the city-state's subways and hotels because of its pungent odor - can retail for more than S$40 apiece in Singapore.

"I receive a call every 10 minutes right now, on top of Facebook and WhatsApp messages," said Wesley Loo, who organises bus tours to his father-in-law's orchard in the southern Malaysian state of Johor. "One of the reasons is the weaker ringgit."

Singapore's dollar rose to a record 2.80 ringgit on Thursday, up more than 5 per cent this year, and currency forwards project it will strengthen to 2.84 in a year from now. More than three decades ago, the currencies were close to parity, according to data compiled by Bloomberg that go back to 1981.

While Singapore's currency has been supported by central bank expectations of a pick up in inflation, plunging crude oil prices have dragged the ringgit to a nine-year low against the US dollar.

The ringgit is Asia's worst-performing currency in the past month, tumbling more than 3 per cent against the greenback. It sank last week to within 0.7 per cent of the 3.80 level where it was pegged from the Asian financial crisis in 1998 until 2005. Bank of America Merrill Lynch and Macquarie Bank Ltd say it's just a matter of time before that threshold is tested.

Malaysia's foreign-exchange reserves remain near a four- year low reached in March, limiting the central bank's capacity to defend the currency. Fitch Ratings warned in March that there's a risk of a sovereign downgrade for the country.

The biggest winners as the ringgit slides may well be those who reside in Malaysia and commute to the city state to earn Singapore dollars.

Nazzi Beck lives in Johor but works in Singapore as the acting head of Islamic global banking at Malayan Banking Bhd, Malaysia's biggest lender. He is considering investing in more properties in Kuala Lumpur or Penang, adding to the two apartments in Johor he already owns.

"With the ringgit's depreciation, the obligation will get a lot less," said Mr Beck, who takes as long as two hours to drive to Maybank's offices in Singapore's central business district from Johor. "I would first probably take advantage of the weaker ringgit to pay down my mortgage."

If forecasts prove correct, he will get that opportunity. Nizam Idris, head of currency and fixed-income strategy at Macquarie in Singapore, said the ringgit may slump further toward 4 per US dollar.

"The profile is for the ringgit to perform worse than the Sing dollar," said Claudio Piron, co-head of Asia foreign- exchange and rates strategy at Bank of America Merrill Lynch in Singapore. "Malaysia certainly has a greater level of vulnerability and they have less ammunition in their FX reserves."

Singapore's dollar strengthened 4 per cent against the greenback over the past three months. Traders may be betting the island state will maintain its monetary policy stance, which calls for a gradual appreciation in its exchange-rate against an unspecified basket of its trading partners. The Monetary Authority of Singapore sought to slow that appreciation in January before leaving policy unchanged in April.

BLOOMBERG

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