Over the past 5 weeks, we have seen a steady increase in USD-MYR pair, from 3.86 to 3.95. This 2% strengthening of USD-MYR may be misconstrued by some to be a weakening of our currency.
Chart 1: USD-MYR daily chart as at May 15, 2018 (Source: Investing.com)
If MYR is really weakening, then
That may explain why the SGD-MYR pair should also hook up. It did not hook up but seems to be trading sideways instead of hooking-up as seen in the earlier chart for unlike USD-MYR pair. The reason for USD-MYR hooking up is the strengthening in USD.
Chart 2: SGD-MYR daily chart as at May 15, 2018 (Source: Investing.com)
If we can look the chart below, we will see that USD index has broken above its downtrend line, RR at 90.5 in April. The upside breakout of USD index marked the start of an uptrend for USD. When this move becomes more pronounced, we will likely see an improvement in the sentiment for our exporters.
Chart 3: USD index's daily chart as at May 11, 2018 (Source: Stockcharts.com)
Let's look at the O&G sector. This sector should benefit more in the medium-term from both the strengthening of the USD and improving crude oil prices. We have seen Brent crude rising from as low as USD45 in June last year to USD77 today.
Chart 4: Brent's daily chart as at May 11, 2018 (Source: Stockcharts.com)
O&G stocks seems to move in tandem with the rising Brent prices. However O&G share prices started to consolidate & trade sideways since February this year. That coincided with the continued drop in USD-MYR during that period. See the next two composite charts below.
Chart 5: Brent, Hibiscs & Armada's daily chart as at May 11, 2018
Chart 6: USD-MYR, Hibiscs & Armada's daily chart as at May 11, 2018
Next, we will look at the semiconductor stocks. These stocks have dropped about 50% since November last year. This sharp drop happened even though the Philadelphia Semiconductor Index (SOX) appears to be in an uptrend line- which was only convincingly violated in Mar this year.
Chart 7: SOX's daily chart as at May 11, 2018 (Source: Stockcharts.com)
The drop in semiconductor share prices seem to be closely correlated to the weakening of the USD-MYR pair. They seem to be indifferent to the continued rise in SOX. Based on this, I believe semiconductor share prices will likely recover once USD-MYR pair begins to rise- notwithstanding the weakness in SOX. See the next two composite charts below.
Chart 8: USD-MYR, Unisem & MPI's daily chart as at May 11, 2018
Chart 9: SOX, Unisem & MPI's daily chart as at May 11, 2018
Based on the above, I would recommend that you track USD-MYR closely if you want to get into some good O&G stocks as well as buying Unisem & MPI. Other exporters, such as furniture makers & EMS players, should also benefit from a rising USD. Good luck!