Sinking pound
creates opportunities and challenges across
Singapore
SINGAPORE: Money changers across the country ran out of pounds
as investors, students, and holiday-makers sought to cash on a weak
sterling on Friday (June 24).
The pound, which has fallen 11 per cent against the Singapore
dollar so far this year on Brexit fears, crashed to a multi-year
low of around S$1.80 when it became clear those fears would become
reality.
When Channel NewsAsia visited Change Alley at Raffles Place,
money changers including Raffles Money Change, China Money
Exchange, Mohamed Thahir Exchange, and City Money Changer had run
out of sterling by 3pm on Friday.
It was a similar story elsewhere in the Bugis area, according to
25-year-old Tan Yenfang, who is starting a masters degree programme
in the UK this September. “I went to five money changers around my
workplace and they all said there's no stock,” she said.
Others, like Ms Chew Hui-Yan, second year student in University
College London, said her parents managed to buy pounds via the
bank. “My parents bought 10,000 pounds once they heard the pound
was falling. I have another friend whose mum was also changing
money as the pound fell," said Ms Chew.
Beyond a potential short-term buy opportunity, the weak pound
creates new dynamics for people travelling to, working in, and
doing business with the UK.
COMPANIES & MARKETS
Singapore companies with significant investments in the UK
include property developers City Developments and Ho Bee, and
transport group ComfortDelGro. According to Mr Gabriel Yap,
executive chairman at investment firm GCP Global, the sliding pound
would mean currency losses for these Singapore firms.
“I think the impact mainly will be in the translation losses
from earnings for those that have invested in the UK. These firms
invested in assets in the UK when the pound was significantly
pricier,” he said.
“Their earnings translated back to Sing dollars this coming year
will be significantly affected. The uncertainty of that will also
wreck havoc on their share prices.”
Still, CDL struck a positive note, saying that the company
continues to have confidence in the long-term fundamentals of the
UK economy and its strategy of targeting predominantly UK nationals
for its residential developments. It added that it has a strategy
to deal with exchange rate uncertainties: "The Group manages its
foreign exchange exposure by a policy of a matching receipts and
payments, and asset purchases and borrowings in each individual
country, so as to create a natural hedge".
Describing the situation as “unchartered waters”, Singapore
International Chamber of Commerce chief executive Victor Mills said
he expects volatility in the global markets to continue until
clarity of the UK’s exit terms are known. This a matter which could
easily stretch out over the next two years at least.
“I think the result of the referendum will be mainly negative
for the UK in the mid to long term. The issue of membership of the
European Union was hijacked by the immigration debate which, as we
all know, is an emotive issue everywhere and usually for all the
wrong reasons,” he added.
TOURISM
Travel agency Chan Brothers said that should the pound continue
to weaken against the Sing, already-strong demand for travel to the
UK “looks set to continue”.
“The British pound has been falling steadily against the
Singapore dollar since August 2015. This is definitely a boon for
travel,” said Ms Jane Chang, its head of marketing communications,
adding that the agency has so far seen a 30 percent year-on-year
growth in demand for travel to the UK.
Travel booking companies Wego.com and TripZilla.com said they
saw the developments as a positive for UK-bound Singapore
travellers, but a negative for Singapore’s tourism market in the
short run.
“As a destination, Singapore welcomes a large number of UK
travellers and serves as a gateway to the rest of Asia. There may
be a slight drop in UK visitors initially,” said Mr Ross Veitch,
CEO and co-founder of Wego.com.
“We expect there will be a overall drop in inbound tourists from
the UK due to weakness in pound and uncertain economic impact of
the Brexit. The UK makes up almost 30 per cent of Singapore's
inbound travellers from EU, so we would certainly feel some
impact,” said Ms Winnie Tan, CEO, TripZilla.com.
Ms Tan was a shade more circumspect about the numbers of
Singaporean tourists looking to take advantage of the cheaper
pound.
“We do not expect the number of bookings to skyrocket overnight.
Again, drawing comparison to what happened when the Australian
dollar fell below parity versus the Sing recently, it will take a
while for travellers to react and travel bookings to pour in.”
PROPERTY
As the dust settles on the Referendum result, and officials
start to negotiate the exit plan, there will be uncertainty over
the next two years, said Mr Ku Swee Yong, the CEO of property
agency Century 21 Singapore. This could hurt London’s appeal to
international property investors and absentee landlords.
“The uncertainty could result in corporate considerations, like
to shore up cash by downsizing the workforce. This could hit those
in trading-related activities, in commodities. And this will affect
rents, especially in London,” said Mr Ku.
“With the decision to exit the European Union, for existing
Asian property owners, the fall in the pound will impact the
repatriation of any income returns, as well as the gains on any
disposal,” said Mr Nicholas Holt, head of research for Asia Pacific
at Knight Frank.
“Although there is likely to be more volatility in the market,
ultimately most investors are looking to the long term – so will
continue to hold their assets, in the hope that any short-term
instability will eventually subside when more clarity of the UK’s
role in Europe is determined."
Meanwhile, Colliers International said the UK’s economic
fundamentals remained unchanged despite Brexit.
We consider buying opportunities "ripe" for Asian investors,
said Mr Richard Levene, Director, International Properties,
Colliers International. “This also creates an excellent opportunity
for our international buyers to benefit from currency gains as the
pound strengthens over time.”
WORKING PROFESSIONALS
The exchange rate implications would also be felt on salaried
professionals working in Singapore and the UK. Architect Leanne
Taylor, 27, who earns in Sing dollars, has mixed feelings.
The British national, who has been working in Singapore for more
than two years, said Brexit has led her to reconsider plans to move
back home.
“On one hand, maybe it's a good time to go back and buy a house.
On the other, architects like me will not be able to access the EU
market and tender for work, and that’ll mean fiercer competition
for local work,” she said.
“If I were still in the UK, I wouldn't be too happy. On a US
dollar basis, income would have dropped 5 to 10 per cent and taxes
are still sky high, at 30 to 40 per cent,” said a Singaporean
banker who declined to be named. He recently relocated home after
two years in London.
“Some of my colleagues, especially those who have invested in
real estate, are reeling from the sterling plunge. The property
market is relatively more illiquid, with more transaction costs,”
said the 29-year-old.
As for London-based Singaporean Edna Goh, 29, she is less
concerned about the dollars and cents of it all.
The finance professional, who has lived in London for the last
seven years said: “To me, it's not about the money. It's about how
London is becoming less tolerant to immigrants. It's very upsetting
given that London is London because of the EU.”
- CNA/ll
