Key Financial Trends of August 2024

Singapore Dollar Hits New High in 2024 Against the US Dollar

On 14 August 2024, the Singapore Dollar (SGD) hit a new yearly high of approximately 1:1.316 against the US Dollar (USD) after rising as much as 0.1%. This was the highest point the SGD reached against the greenback since 28 December 2023, where the exchange rate then was 1:1.319.

The SGD’s performance in 2024 pales in comparison only to the Malaysian Ringgit (MYR) and Hong Kong Dollar (HKD). To put things into perspective, the USD/HKD exchange rate dipped by 0.47% from 17 August 2023 to 2024. The contrast is more stark for the MYR, strengthening by 4.72% against the USD in the same one-year period.

What’s more, the SGD is expected to keep this performance up as the Monetary Authority of Singapore (MAS) foresees itself maintaining the current monetary policy until 2025. This will be supported by the US Federal Reserve’s expected interest rate cut in September. Likewise for the Asian currencies whose USD exchange rates are strengthening.

However, despite Singapore’s economy being projected to grow between 2-3% in 2024, experts cautioned the USD might rebound after interest rate cuts are implemented. Should the US enter a recession, the Federal Reserve would be persuaded to execute larger and/or more frequent interest rate cuts.

What This May Mean For You

A strong SGD is a boon for investors looking to put their money into USD-denominated assets, whether they’re equities on US stock exchanges or Treasury Bills. You enjoy greater value when you exchange your funds before making a trade. On a less serious note, you’ll also enjoy greater value if you’re travelling to the US or purchasing anything priced in USD.

With that said, don’t expect this to last forever. As mentioned above, the SGD is set to weaken against the USD. This is especially so if the MAS eases its monetary policy next year. For investors looking to secure their profits for any USD-denominated asset, it’s the perfect time to do so as they’d essentially be getting a larger amount of SGD.

Related: Interest Rates and Returns for Singapore Savings Bonds (SSB) in August 2024

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The Philippines Makes First Interest Rate Cut in Four Years

Bangko Sentral ng Pilipinas (BSP), the Philippines’s central bank, cut its key interest rate by 25 basis points to 6.25% on 15 August 2024. The BSP’s decision was significant as it marks the first interest rate cut for the Southeast Asian nation since November 2020. Furthermore, the Philippines is the second Asian nation to implement an interest rate cut this year.

BSP Governor Eli Remolona stated that another 25-point interest rate cut is expected to take place in either October or December. Although the impact of this interest rate cut and the potential one in October/December will only be felt in 2025, the BSP still expects inflation to trend downward. It’s forecasting a 3.3% inflation rate by end-2024 and 2.9% in 2025.

Although the BSP previously mentioned its plans to cut interest rates, implementing this on the back of a 4.4% inflation rate in July – up from 3.7% in June – is a brave move. Other central banks in Asia will be keenly watching the Philippines to see how this unfolds, granting them confidence to follow suit if everything goes well.

As borrowing costs dip slightly, the Philippines hopes for an increase in household spending and the number of companies going public. The country’s economy supports this optimism, with its GDP rising by 5.8% and 6.3% in the first and second quarter of 2024 respectively. It even beats out Indonesia, Southeast Asia’s largest economy.

What This May Mean For You

For both leisure and business travellers to the Philippines, you would’ve been buoyed by the SGD’s consistent strengthening against the Philippine Peso (PHP). The SGD/PHP exchange rate is over 4% higher in the past year alone. This nearly doubles when you extend it to 19 August 2022 to 17 August 2024.

Unfortunately, if you’re a retail investor looking for opportunities in the Philippines, only a handful of brokerages offer the Philippine Stock Exchange. Alternatively, if you have a significant amount of capital, you can consider a real estate investment there. However, you’ll definitely need to commit an equal amount of time and effort to your due diligence.

Related: 5 Best Travel Hacks for Business Travellers

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Temasek Invested US$3.3B in US Tech Stocks in Q2 2024

In the second quarter of 2024, government-owned investment firm Temasek Holdings put a total of US$3.3 billion into the shares of 11 large US tech firms. The bulk of the funds went towards Alphabet (Google’s parent company), Amazon.com, Apple, Microsoft, Meta Platforms (Facebook’s parent company), and Nvidia.

The investment itself didn’t raise eyebrows, but the timing did. In July and early-August, these six firms’ share prices plunged amid recessionary fears and waning enthusiasm in their artificial intelligence innovations. Current stock market darling Nvidia wasn’t immune either, opening at US$123.47 on 1 July before ending the month at US$117.02.

On that note, much is unknown about the exact circumstances of Temasek Holdings’ trades. For instance, the firm could have bought the shares at the start of May and still turn a profit in late-August, despite the month-long sell-off. To use Meta Platforms as an example, it opened at US$428.60 on 1 May. On 16 August, it closed at US$527.42.

Additionally, a US$3.3 billion investment may seem hefty, but recall that Temasek Holdings’ net portfolio value reached S$389 billion as of 31 March 2024. Because of its long term focus, it’s unlikely the company liquidated any of its US tech stock holdings during that turbulent trading period either.

What This May Mean For You

Given the timing of Temasek Holdings’ investment, it probably decided it had sufficient data from the US tech giants’ earnings reports for the first quarter of 2024 and previous quarters. It may have considered the stock markets using the second quarter to price in an interest rate cut from the Federal Reserve as well.

Temasek Holdings’ investment isn’t ideal at first glance, but once you analyse the performance of the shares they chose, their timing isn’t bad at all. It also imparts a valuable lesson to retail investors to have conviction in their assets. If you believe an investment is worth your money after thorough research, don’t let short term price fluctuations fluster you.

Related: 3 Ways Mimicking Hedge Funds Can Actually Hurt Your Investment Portfolio

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TSMC’s Revenue Increased By 45% in July 2024

Taiwan’s largest company, Taiwan Semiconductor Manufacturing Co (TSMC), reported on 9 August 2024 that its revenue for July increased by 45%. The multinational semiconductor manufacturing and design firm raked in a total of NT$256.95 billion amid demand for AI-optimised processors.

According to its CEO, Wei Chung Ching, AI is “so hot” and the company needs until 2025 or 2026 to catch up to the demand for its computer chips. He also said all of TSMC’s customers are working on AI capabilities for their products. Even Apple is readying its Apple Intelligence platform for a full launch in 2025.

For the third quarter of 2024, analysts have forecasted that TSMC will achieve a 37% increase in revenue. This translates to NT$747.4 billion in total sales, and if TSMC posts equal or higher revenue numbers for August and September, it will exceed that forecast. Back in June, its revenue for the month was around NT$207.87 billion.

In April 2024, the firm received US$6.6 billion in grants from the US and loans worth up to US$5 billion to support its manufacturing hub in Phoenix, Arizona. It has two facilities there which will become operational in 2025 and 2028, with a third plant on the way. This will allow TSMC to strengthen its relationship with Nvidia and Apple, and court even more customers.

What This May Mean For You

TSMC has been growing exponentially in the past 3-4 years due to innovations in AI capabilities – and the resulting demand for hardware – and the quality of their products. Its share price for both its New York Stock Exchange and Taiwan Stock Exchange listings is enjoying a year-to-date increase of over 60%.

Invested in TSMC when it was chosen to manufacture Apple’s 5nm ARM processors in 2020? Your holdings would’ve nearly quadrupled in value. TSMC’s growth has substance too, as its revenue figures show. Likewise for its gross profit of NT$358.1 billion for the second quarter of 2024. This is almost NT$100 billion higher than the same period in 2023.

Related: Investing 101: Why You Need To Invest To Grow Your Money

Read More:

• What You Can Invest In Singapore To Diversify Your Portfolio
• 5 Best Dividend-Paying Stocks and REITs in Singapore
• Currency Crunch — How to Make Use of Weakening Currencies to Further Your Travel Plans
• How the Monetary Authority of Singapore Operates and How It Affects You
• A Basic Guide to Working Capital

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