Importers like Sheng Siong among winners from MAS tightening: DBS

AGAINST the backdrop of yet another round of currency appreciation, importers with domestic operations, such as grocery giant Sheng Siong , could see upside in the coming months given that overseas input costs are now relatively cheaper in Singapore dollar terms.

However, currency appreciation is often a double-edged sword and in this case, likely to hurt companies who amass revenue overseas but report earnings in Singapore dollars, said DBS analysts in a research note on Friday (Oct 14).

The analysts highlighted Singtel as an example, noting that the company earns more than 80 per cent of its profits from abroad.

Inbound tourism, they warned, could also take a hit if potential travellers shy away from Singapore due to the stronger Singapore dollar against other currencies. This impact is likely to be felt more strongly by tourists from Australia and Malaysia, whose currency performance has paled in comparison with that of the rupiah and rupee.

The latest round of adjustments comes as inflation across the globe continues to climb. The Monetary Authority of Singapore (MAS) has forecasted core inflation to average 4 per cent in 2022, slightly higher than DBS’ 3.8 per cent estimates.

“While inflation should moderate, it will remain high for some time. At the same time, growth in Singapore’s major trading partners will slow to below trend but stay positive in 2023,” said MAS in a statement.

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The country’s gross domestic product (GDP) has continued to display resilience despite the last few rounds of tightening as GDP for the third quarter came in above estimates at 1.5 per cent. GDP growth however is likely to continue its slowdown into the fourth quarter, said industry watchers.