Friday, February 22, 2013

Investing in Foriegn Stocks and Currency

In the midst of worldwide currencies devaluation race, the safe haven is Singapore Dollar. Keep your money there.

Countries from all over the world are devaluing their currency to save their economy. United States had been quietly devaluing US Dollar while blaming China of keeping Renminbi artificially low. UK, Japan, South Korea, Venezuela, etc. all had their currencies devalued recently.The devaluations can be intentional simply to gain competitive edge or just a side effect of monetary easing (i.e. lower interest rate, printing money into economy, loosen credit control, etc.) to boost economy.

In response to the possible currency war, G20 government officials met to vow not to devalue currencies for economy benefits.

When we invest in the stocks of a country, we will not want the denominating currency to devalue. So which country that we should invest in?

Which currency to buy?

In a world where most countries race to devalue their own currency in order to gain competitive advantage for the nation's economy, there is one tiny country that has little incentive to manipulate to keep their currency low.

In another words, for this country, it is okay to allow their currency to grow higher without losing economy competitiveness.

This country has
  1. large export and large import (therefore any changes of forex are merely pass through)
  2. a very large portion of international trade (import and export, investment and being invested) as compared to their own tiny little local economy in terms of GNP
  3. been hiring overseas people and would like to pay them cheap

Higher currency value will still affect service sectors of this country, i.e. tourism, living expenses, etc. But this tiny little red dot country has one of the highest income per capita in the world and attracts all sort of investments and tourists from all over the world. There should be little problem with slow and steady growth of currency value.

When the whole world tries to devalue their own nations' currency, this country is okay with its currency valuation or even allow it to grow in relation to other currencies.

If I trade in forex, I would buy this currency for long term.

This currency is Singapore Dollar.

  • I don't trade forex
  • To me, currency valuation is important because I invest in shares
  • This is my analysis only, there is no other "Authority" reference