Sunday, October 4, 2015

Currency Depreciation & Inflation Fear

Is your country facing serious currency depreciation?

For South East Asia, the worst one are Indonesia and Malaysia. Malaysia Ringgit has been depreciated more than 30% against USD and 24% against SGD in less than past 6 months, due to economy uncertainty, poor economy forecast by analysts, and internal politics issues. Imagine your wealth has suddenly shrink more than 30% within 6 months, how do you feel? For those imported businesses transacted in USD or RMB, eventually the price will be paid by the consumers.

Another recent pain point is the inflation within my country. The Government has implemented 6% service tax starting from April 2015. It has caused all items price increased.

I remembered when our family having breakfast in one of the favorite Chinese restaurants back in 1988, a plate of kolomee costs RM2.20. It has shot up to RM2.70 after 6 years, about 10 cents hike per year. Today, it has shot up to RM7.50 per plate. This has indicated RM1 you saved today, does mean it is still has RM1 value next year, due to inflation, or perhaps currency depreciation.

I read a newspaper article just now regarding the new trade minister of Indonesia, Tom Lembong. He suggested ASEAN countries to consolidate and use RMB as trading notes to minimize the impact on notes depreciation issue. I think this makes a lot of sense. It will benefits for ASEAN due to China has a very solid and strong fundamental economy and their currency has appreciated a lot over the past few years. It is the best choice after USD.

As for inflation, we have no choice but to do something about it. What I mean is to avoid unnecessary spending and use the savings to invest. The investment return should be higher than the inflation rate. The best investment vehicles for now will be still real estate and stock market.

I personally prefer stock market due to it is easy to liquidate, instant, flexible and able to start from small amount. Of course, the risk is much higher than real estate. I have made loss of more than RM25,000 over the past 2 years. Well, perhaps I did not really 'invest' but just speculate. I believe I will do well in the near future after paid my valuable lesson fees

Instead of waiting, let's begin now if we want to fight through the inflation and want to have a comfortable retirement life. At least start something first then you will learn along the way. That's how we can become the best.

All the best, people.

1 comment:

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