10-year equity unit trust review feedback #2: “Ringgit to blame for underperformance”

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

Screen Shot 2017-08-21 at 4.59.42 PM.png

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.

Many gloves and furniture companies listed on the Bursa did very well at the height of the ringgit turmoil as did many British stocks during Brexit.

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.

2 thoughts on “10-year equity unit trust review feedback #2: “Ringgit to blame for underperformance””

  1. A global portfolio may not necessarily comprise developed market blue chips. It could be focused on EM stocks which could suffer steep currency collapses like AFC 1997/98. Currency risk does matter in EM as it can eat up 90% of returns.


    1. The last i checked, the affected stock markets have more than recovered from the AFC, currency notwithstanding.

      Thanks for backing up your statement with numbers. Wiping out 90% returns is huge. Can you point me to that particular research? It’s very interesting because the MSCI EM index has 843 companies and the MSCI emerging Asia index tracks 564 companies and if you’ve read my post, has given the msian managers a good run for their money. It’s mega to say that these 843 or 564 companies have almost no ability to manage their share prices for currency risks. If that’s what you’re saying then the emerging world economy is in trouble because what’s supposed to be the world’s top CEOs and CFOs aren’t doing their jobs. Unless, you’re saying that this 90% loss is attributed to active fund management….then that’s a different thing altogether. Fire that fund manager and take your money elsewhere.


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