KUALA LUMPUR: The Bank of Japan’s intervention to cap the sharp appreciation on the yen against the US dollar is not expected to have significant impact on Malaysian automotive companies, said analysts.
After the intervention (for the third time this year), the yen settled around the 78.00-level at press time.
The Japanese currency soared to nearly three-month high at the 79-level in early Tokyo trading yesterday compared with last week’s closing of 75.8 against the greenback before the Japanese government’s intervention.
Yesterday, against the ringgit, ¥100 strengthened to RM3.9371 at press time. The yen has appreciated nearly 4.5% against the ringgit since last Wednesday when ¥100 was equivalent to RM4.1211.
Japan’s Finance Minister Jun Azumi was quoted as saying that the Japanese government intervened unilaterally in the foreign exchange market yesterday to counter speculative moves that did not reflect the health of the Japanese economy.
According to Ahmad Maghfur Usman, an analyst at OSK Research, most automotive companies will only experience marginal cost reductions in imports from a weakening yen.
“UMW Holdings Bhd and Tan Chong Motor Holdings Bhd would be less affected as their costs are primarily denominated in the US dollars,” he told The Edge Financial Daily.
UMW and Tan Chong, the distributors of Japanese vehicles Toyota and Nissan respectively, import mostly from Thailand. The completely-knocked down (CKD) and completely built-up (CBU) car imports from Thailand are transacted in US dollars, he said. UMW’s exposure to the yen is through its 23.6% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), he added.
Proton Holdings Bhd is another auto company which will unlikely experience a large impact as its cost exposure in yen is less than 10%, he said.
According to an analyst at TA Securities, 20% of Proton’s bill of material (BOM) costs in 2010 were exposed to currency fluctuations. Of that 20%, 7% was from the yen, 11% from the US dollars and the remaining from nine different other currencies, the analyst said.
Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.
Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.
Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.
Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.
A stronger ringgit against the yen would mean that TNB would have to fork out less to pay interest on its debts.
TNB had RM5.46 billion of debts denominated in yen and RM2.91 billion in the US dollar as at Aug 31, it said in its notes to its 4Q financial statements. On that date, TNB had RM19.05 billion worth of debt obligations, of which RM10.66 billion or 56% were ringgit-based borrowings.
On the movement of the yen, economists believe that if it continues to weaken, the trend will only be for the short-term.
“In the period of a few weeks to three months, the yen will likely go to about 75 against the US dollar,” Affin Investment Bank’s head of retail research Dr Nazri Khan told The Edge Financial Daily.
Another economist, Jason Fong of RAM Holdings Bhd, said that in the short-term, the yen is expected to exhibit some degree of volatility, “as traders try to speculate on the timing and the degree of intervention by Japanese policy makers for short-term currency gains”.
In the medium- to long-term, Fong said the yen is expected to face some upward pressure. “This is due to the extra easy liquidity conditions in the US — a prolonged near-zero interest rate policy and the Federal Reserve’s extraordinary measures such as the recent ‘Operation Twist’,” he told The Edge Financial Daily.
“Increased global risk aversion may also weaken the yen as investors seek a safe haven in US dollar-denominated assets, which occurred during the end of August,” he said.
Fong said more frequent policy interventions in the currency market could likewise weaken the yen. “A depreciation in the currency would cause investors to accumulate losses and may prevent further speculation in the yen,” he said.
This article appeared in The Edge Financial Daily, November 1, 2011.
After the intervention (for the third time this year), the yen settled around the 78.00-level at press time.
The Japanese currency soared to nearly three-month high at the 79-level in early Tokyo trading yesterday compared with last week’s closing of 75.8 against the greenback before the Japanese government’s intervention.
Yesterday, against the ringgit, ¥100 strengthened to RM3.9371 at press time. The yen has appreciated nearly 4.5% against the ringgit since last Wednesday when ¥100 was equivalent to RM4.1211.
Japan’s Finance Minister Jun Azumi was quoted as saying that the Japanese government intervened unilaterally in the foreign exchange market yesterday to counter speculative moves that did not reflect the health of the Japanese economy.
According to Ahmad Maghfur Usman, an analyst at OSK Research, most automotive companies will only experience marginal cost reductions in imports from a weakening yen.
“UMW Holdings Bhd and Tan Chong Motor Holdings Bhd would be less affected as their costs are primarily denominated in the US dollars,” he told The Edge Financial Daily.
Perodua stands to benefit most from the yen's weakening as its payables are largely dominated in yen.
UMW and Tan Chong, the distributors of Japanese vehicles Toyota and Nissan respectively, import mostly from Thailand. The completely-knocked down (CKD) and completely built-up (CBU) car imports from Thailand are transacted in US dollars, he said. UMW’s exposure to the yen is through its 23.6% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), he added.
Proton Holdings Bhd is another auto company which will unlikely experience a large impact as its cost exposure in yen is less than 10%, he said.
According to an analyst at TA Securities, 20% of Proton’s bill of material (BOM) costs in 2010 were exposed to currency fluctuations. Of that 20%, 7% was from the yen, 11% from the US dollars and the remaining from nine different other currencies, the analyst said.
Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.
Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.
Perodua, analysts said, is the only auto company to benefit most as its payables are largely denominated in yen.
Apart from the automotive industry, a tumbling yen will also benefit companies such as Tenaga Nasional Bhd (TNB), which has large debts denominated in the currency.
A stronger ringgit against the yen would mean that TNB would have to fork out less to pay interest on its debts.
TNB had RM5.46 billion of debts denominated in yen and RM2.91 billion in the US dollar as at Aug 31, it said in its notes to its 4Q financial statements. On that date, TNB had RM19.05 billion worth of debt obligations, of which RM10.66 billion or 56% were ringgit-based borrowings.
On the movement of the yen, economists believe that if it continues to weaken, the trend will only be for the short-term.
“In the period of a few weeks to three months, the yen will likely go to about 75 against the US dollar,” Affin Investment Bank’s head of retail research Dr Nazri Khan told The Edge Financial Daily.
Another economist, Jason Fong of RAM Holdings Bhd, said that in the short-term, the yen is expected to exhibit some degree of volatility, “as traders try to speculate on the timing and the degree of intervention by Japanese policy makers for short-term currency gains”.
In the medium- to long-term, Fong said the yen is expected to face some upward pressure. “This is due to the extra easy liquidity conditions in the US — a prolonged near-zero interest rate policy and the Federal Reserve’s extraordinary measures such as the recent ‘Operation Twist’,” he told The Edge Financial Daily.
“Increased global risk aversion may also weaken the yen as investors seek a safe haven in US dollar-denominated assets, which occurred during the end of August,” he said.
Fong said more frequent policy interventions in the currency market could likewise weaken the yen. “A depreciation in the currency would cause investors to accumulate losses and may prevent further speculation in the yen,” he said.
This article appeared in The Edge Financial Daily, November 1, 2011.
