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Old 29-09-2013, 06:04 PM
lazyplane lazyplane is offline
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Quote:
Originally Posted by Zhang View Post
Very sharp observation. Indeed forex risk is a problem for residents of countries with strong currencies like Singapore.

I mitigated it to a degree by taking 80% loan so am only 20% exposed, but clearly renovation cost and transaction costs are not hedged. Net net I took c. Rm410k loan, so my unhedged exposure was c. Rm185k. At avg entry price of 2.48, I have lost c. RM5 to 6k.

This is c. 4 months rental. Remember the rm500 is positive cashflow not net profit. Net profit is c. Rm1.3 to 1.5k because the part of the mortgage payment also goes towards repayment of principal, and not all to interest.

But big picture, am ok w sgd-myr at 2.48 because this was a 15 yr low for myr. Its hard to see the sgd maintain at current levels, in my view. Businesses are starting to feel the pain of the high sgd, as reflected by the poor export numbers. Believe once the housing market in singapore is brought under control, mas will allow sgd to weaken to boost the economy. Now mas' hands are tied because once they allow sgd to weaken, the housing prices could jump again, and thats becoming a real political problem for the govt.
Suggest you measure this way over the life of x years say 3 years:
Your 20% injection is exposed to SGD. Consider your MYR 1.3 -1.5k as your dividend flow/returns over this investment. Assume spot rate transfer out.

If the FX /interest view is against you, your 1.3-1.5k MYR will get hit and shrink. If it improves , then this will increase.

If everything is in your favour, you will see your 20% stake increase in value ie house price go up, dividends get higher and higher in value ie fx and i/r, and your "asset stake" increase from 20% to x % due to loan amount reducing after factoring maintenance cost.

All the best. I think SGD trend is hard to predict despite whatever one says. eg
Many have lost big time because they thought SGD appreciate against USD. While history can point to this, when certain events happen, the bumps along the way can really be difficult to take
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