Ringgit's dive expected to boost travel to Malaysia

Singapore

THE Malaysian ringgit hit a fresh low of RM 2.81 against the Singapore dollar on Monday, which could further lift tourist volumes into Singapore's neighbour.

The currency has depreciated to its lowest level against the Sing dollar since 1981, due in part to domestic concerns.

The recent fall in oil prices as well as intensifying political uncertainty in Malaysia over allegations that Prime Minister Najib Razak misappropriated funds are contributing to the ringgit's latest slump. Conversely, the Sing dollar has remained quite resilient.

"Global sentiment had been weighed by the 'No' vote from the weekend Greek referendum and this acted as a depressant for Asian currencies," said FX strategist at OCBC Bank, Emmanuel Ng. "The Malaysian ringgit had the additional baggage of the negative weekend news flow, resulting in the SGD-MYR pushing higher."

Travel agents that BT spoke to expect higher bookings for travel to Malaysia, especially if the ringgit deteriorates further.

According to Alicia Seah, spokeswoman for Dynasty Travel, enquiries have jumped over the last two weeks by about 25-30 per cent, both from leisure travellers as well as those from the meetings, incentives, conferences and exhibitions (MICE) segment. MICE travellers - which include associations or corporations organising incentive tours for their staff - tend to head to places such as Langkawi or Penang.

Ms Seah also expects to see a lot more impromptu travel to Malaysia, given the weaker ringgit as well as the upcoming long weekends in July and August around Hari Raya Puasa and National Day, respectively.

"Malaysia is just a short distance away and (Singaporean travellers) don't have to take long leave," she pointed out. "Some of the theme parks in Johor Bahru, like Legoland, will enjoy more visitors from Singapore."

Over at Chan Brothers Travel, the outlook for travel bookings to Malaysia looks positive as well.

"We are expecting it to rise by 10 to 15 per cent, should forex remain this low against the Singapore dollar or continue to slide further," added a spokeswoman for Chan Brothers.

On the other hand, the lower ringgit may weigh on an already challenging year for Singapore's tourism industry, where visitor arrivals were down about five per cent year on year in the first four months of this year, according to preliminary figures from the Singapore Tourism Board. Headwinds include the strong Singapore dollar against regional currencies such as the Indonesian rupiah and the ringgit.

Malaysia is a key tourism market for Singapore, with visitors from Malaysia accounting for about 1.23 million of the 15.1 million travellers that came to Singapore last year. The inflow of Malaysian travellers to Singapore was already down nearly 4 per cent in 2014 over 2013.

Maybank Group's head of FX research, Saktiandi Supaat, expects the ringgit will slide to RM2.85 against the Sing dollar in the coming weeks, and potentially even beyond to RM2.90. However, he does not see it free-falling to RM3 in what he deems the worst case scenario.

Meanwhile, DBS' senior currency economist, Philip Wee, expects it could end up falling to RM2.87.

"(Malaysia's) Bank Negara wouldn't want it to move drastically out of whack too fast," said Mr Supaat, noting that a swift depreciation could have repercussions on imports. "They would want to mitigate it."

In the medium to long-term, however, Mr Supaat reckons that the Singapore dollar will also ultimately weaken slightly, which could take the ringgit back to below the RM2.80 range.