How does Brexit affect me? What will happen to the value of my investments? What next? We hear from Alon Rajic, Managing Director of Finofin Ltd which owns MoneyTransferComparison.com, about what expats should be thinking about in these financially uncertain times.
The day following the referendum, Friday 24 June 2016, will go down in history as one of the most volatile days in the history of currency exchange rates, and possibly one of the worst days for the global economy as a whole. The results of the long awaited Brexit referendum were announced and Britain voted to exit the European Union. The unexpected result sent shockwaves throughout the economic world.
Since there’s no recent precedent of a country leaving the EU, no one knows what the future holds. Expats living in Singapore who need to regularly send or receive money from abroad will understandably be worried about Brexit’s impact on managing their finances.
The stats
To begin with, the impact on the pound (GBP) Singapore dollar (SGD) pairing has been significant. Towards the end of Thursday, when it appeared that Brexit would not happen, GBP1 could buy SGD2. On Friday morning GBP1 was worth SGD1.82. Compare this to August 2015, before Brexit concerns gained momentum, when GBP1 could buy SGD2.20. Similarly, on June 23 SGD1 could buy you only EUR 0.655, but as the Brexit was announced on the morning of 24 June, the rate jumped to 0.67 Euro for 1 SGD. Conversely, the SGD saw the biggest drop against the USD in 10 months, of almost two percent.
Practical solutions
Although it’s not clear what will happen with exchange rates in the near future, there are ways to minimise the risks involved.
Here are the top five rules for expats in times of instability, provided by MoneyTransferComparison.com one of the leading FX transfer review sites:
1. Business as usual: If recent events have been unfavourable for you, it doesn’t mean you should cease exchanging foreign currency at once. If you have an immediate need to buy something, or you need to move money to Singapore to support your daily living expenses – do it. Don’t wait it out, hoping for the rates to return to normal, because this is merely speculation.
2. Talk to an expert: Instead of stressing yourself out over the currency rate, you can speak to an expert currency dealer. This dealer will suggest the best course of action for you, based on your own individual needs, and will notify you of any drastic changes to the exchange rates. You could even speak to your dealer face-to-face, if the company has local offices in Singapore (some companies do).
3. Use FX options: If you need to move large volumes of funds, you should definitely consider FX options, which only commercial foreign exchange companies are also able to offer to private clients (banks won’t). Such options include Forward Contracts (fix today’s rate for the next 12 months), or simple “Buy” options which are executed automatically when a certain rate has been reached. These hedging tools are helpful for people who have regular international payments to make (like mortgages) or ones which are moving large volumes of funds (like buying a property).
4. Cut your foreign exchange fees: Individuals who transfer significant funds abroad regularly are paying thousands of SGD each year in fees and exchange rate mark-ups. Unless you have no access to banking, avoid cash-to-cash transfers, as remittance company’s fees are exorbitant. Banks are also notorious for their abundance of hidden fees, which make international money transfers a lot more expensive than they should be. Instead, contact a money transfer service which is geared towards expats and offers wholesale rates. You can also renegotiate your pricing if you’re moving large volumes, and there is no reason for you not to do so.
5. Take advantage: If the rates moved in your favour post-Brexit, you can take advantage of that. The biggest investing opportunities come at times like these. Invest into markets where your currency buys more than it did in the past and aim for the long term ROI (Return on Investment). For instance, the UK’s real estate market is now 20% than it used to be less than a year ago (if your savings are in SGD).
What the future holds
While the past few days have given the impression of total instability, the foreign exchange market is likely to normalise. The current volatility has little to do with how Brexit will pan out, and more to do with investor panic. Such a big, unprecedented economic event has sent investors running to safe havens. As the implications of Brexit become clearer, the markets may gradually stabilise. The Monetary Authority of Singapore (MAS) has already taken steps to curb excessive volatility in the SGD, and the Bank of England has released a soothing message which states they have been well prepared for such a scenario.
On the other hand, Brexit could cause a chain reaction leading to even more uncertainty. Scotland and Northern Ireland – who voted strongly in favour of remaining in the EU – could choose to pull out of the UK. Scotland in particular chose to remain part of the UK in a 2014 referendum, with a major factor being membership of the EU. If Scotland and Northern Ireland do pull out of the UK, the pound will plummet even further.
Unfortunately, the main takeaway here is that it’s almost impossible to make accurate predictions on the SGD and especially the GBP/SGD and USD/SGD pairings. However, this does not mean that your own foreign exchange flow has to be unpredictable.
The final word
No one can predict what will happen in the coming days. Understandably, expats around the world are concerned about the volatility in the foreign exchange market. However, commercial foreign exchange companies do provide options that allow you to impose stability on your transfers, with better rates.
Presented by Alon Rajic, Managing Director of Finofin Ltd which owns MoneyTransferComparison.com
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