Question: What is the impact of the currency movements on the stock market?
This simple article is of interest to those investing in overseas stock markets.
24-10.08
http://biz.thestar.com.my/business/exchange.asp
Units of Malaysian ringgit per unit of foreign currency:
1 US DOLLAR = 3.6070
1 AUSTRALIAN DOLLAR = 2.4250
1 BRUNEI DOLLAR = 2.4040
1 CANADIAN DOLLAR = 2.8860
1 EURO = 4.6510
1 NEW ZEALAND DOLLAR = 2.1580
1 PAPUA N GUINEA KINA =1.4810
1 SINGAPORE DOLLAR = 2.4035
1 STERLING POUND = 5.8310
A possible impact could be that when the local currency is on the rise, foreign investors will want to sell their shares to realise their gains (shares realise value and exchange rate profit).
Similarly, when the local currency is falling, foreign investors may have the tendency to buy local shares since the cost is relatively cheap, provided the stock market is still bullish.
Scenario 1
MR rises ---> means that foreign investors will
---> sell shares,
---> change back into their own currency for capital gains
Scenario 2
MR falls ---> means that foreign investors will
---> retain local currency
---> buy Malaysian shares as the latter are relatively cheap
Ref: Making Mistakes in the Stock Market by Wong Yee
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
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