Feedback #2 on my post is related to feedback #1 about financial choice and in fact expands on it. It’s interesting that so many conversations centred around blaming the weak ringgit for penalising Malaysian investment. The feedback goes like this: Malaysia-focused unit trusts did well but performance was whacked by the ringgit.
I myself said it too.
Flashback: What I said
Yes, it is mathematically true that the weak ringgit caused Malaysia-focused funds to compare poorly to many regional/global markets. But did we kinda miss the point here in how we are framing the argument?
It’s a chicken and egg question:
Did the weak ringgit cause the Malaysian market to do not as well?
Did Malaysian companies underperform and just happened to be quoted in the Ringgit?
Is going local or global more advantageous from an investment perspective?
Are we investing in currencies or are we investing in great companies?
My view is that a company’s listing jurisdiction shouldn’t technically affect our investing decisions, rather we want to invest in companies that thrive in the global competitive marketplace over the long term.
For example, many Chinese tech stocks are listed on the Nasdaq and quoted in the USD. Alibaba, the Chinese juggernaut is itself listed on the NYSE, quoted in USD. There are also many Chinese stocks listed in Malaysia, quoted in RM. Grab was started and run by Malaysians but legally headquartered in Singapore.
Are Apple, Samsung and Alibaba respectively USD, KRW or CNY companies or are they just global companies with good potential?
Many ETFs with multiple listings in markets in the US, Euro, Hong Kong and Singapore are quoted in the respective local currency but with the exact same portfolio.
I’ve also many times been asked: does investing overseas make one vulnerable to forex risk?
Why I think currency movements shouldn’t matter in a global portfolio:
- Companies are pretty geographically diversified so a currency discussion becomes academic
- Corporations’ currency hedging can either be natural through global diversification or active through treasury departments
- Sales & profit growth of surviving companies generally outperform currency costs and not collapse under it otherwise they wouldn’t be around
This whole conversation seems to be shrouded in marketing or nationalistic rhetoric and I think it would be anathema for industry people to practice a kind of market patriotism according to where they are based or what markets they over-love.
This is because we all buy imported food, clothes and cars and many fund managers probably send their children to private schools with international pricing. Our infrastructure is replete with imported goods and services. So our investments, like our consumption, have an existential, bread and butter impetus about them. It’s really about our survival.