These Two Companies May Benefit From A Stronger Dollar After The US Election

The US election could have a significant impact on the world.

One obvious impact of the US election result has been on emerging market currencies. Countries from Mexico and Brazil to Indonesia and Malaysia have seen their currencies depreciate in some cases by as much as 10%.

Singapore has not been spared, with our local currency down by about 2.5% after the election.

The depreciation of S$ could affect us in different ways. The most obvious will be on company earnings.

As the US dollar appreciate against the Singapore dollar, local companies that import goods in US dollars will have to pay a higher price. That’s bad news. On the other hand, a stronger US dollar is a positive for exporters such as Riverstone Holdings Limited (SGX: AP4).

Other than earnings, investors will also need to look at balance-sheet risks. In other words, companies that have borrowed heavily in US dollars. As the US dollar strengthens, the borrowings becomes more onerous in Singapore dollars.

Other than Riverstone, there are two more companies that could benefit from the appreciation of the US dollar

Venture Corporation Ltd (SGX: V03), an electronics manufacturer with expertise in a wide range of activities that include printing & imaging, networking & communications, retail store solutions & industrial, computer peripherals & data storage and test & measurement / medical & life science and others.

Venture Corporation has most of its businesses dominated in US dollars. Moreover, a stronger economy, which some expect after the election, could further boost its profitability, since Venture does businesses with big US technology companies. According to its 2015 annual report, every 5% appreciation in the US dollar will increase profit by S$4.22 million.

Another company that may benefit from the stronger USD is Singapore Technologies Engineering Ltd (SGX: S63) – a conglomerate with business interest in four segments, namely Aerospace, Electronics, Land Systems and Marine.

A glimpse into the 2015 annual report shows that close to a quarter of ST Engineering’s sales comes from the USA. As the USD strengthens, so will should the profitability, since STE reports in Singapore dollars. One note, however, is that the company has traditionally hedge its currency exposure. So this could offset some of the benefit of a stronger dollar.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.The Motley Fool Singapore has recommended shares of Riverstone Holdings. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.