The most secure sectors had the majority of earnings come from Malaysia, CIMB Research added, whereby costs are largely ringgit denominated. — AFP photo
KUCHING: Analysts peg the plantation sector as a net beneficiary of the recent Brexit move with prices of crude palm oil (CPO) to benefit from the ringgit visibly weakening against the US dollar since.
According to researchers with MIDF Amanah Investment Bank Bhd (MIDF Research), the lower ringgit against the US dollar has made CPO price more competitive against it rival, soybean oil.
“We make no change in our earnings estimate and target price as UK consumption of palm oil is relatively low against global palm oil consumption,” it explained in a note yesterday.
CIMB Investment Bank Bhd (CIMB Research) also affirmed that winners came from several sectors that are ringgit dependent.
“Winners came from the finance, utilities, construction, glove, property, transport, technology and small-cap sectors,” it said in a separate note.
“The other sectors – such as plantations, auto, consumer and healthcare – faced neutral to negative impact.”
The most secure sectors had the majority of earnings come from Malaysia, CIMB Research added, whereby costs are largely ringgit denominated.
“Our top large-cap sectors are still construction and finance,” it added.
Meanwhile, it continued to advocate real estate investment trusts (REITs) and dividend yielders which offer protection and returns.
“Given the negative outlook post-Brexit, interest rate hikes are likely to be delayed for now. As such, we believe the REIT sector also offers investors’ portfolios some protection,” it said.
Looking at other sectors, MIDF Research also expected not to see any major impact on the aviation sector from Brexit as passenger traffic or travel sentiment is unlikely to be affected.
“If any, custom or immigration requirements could be imposed when entering UK borders from countries within the European Union.
“However, this will not have any direct impact on local aviation players,” it added.
For port and shippers, the firm forecasted a 0.3 percentage point decline in global trade growth from 2.8 per cent to 2.5 per cent arising from a dip in consumer spending as both private and public investments will slow due to uncertainty pertaining to the Brexit.
“Correspondingly, if we reduce our throughput growth forecast for FY16 for Westports by minus 0.3 percentage points from six per cent to 5.7 per cent, the impact will be minimal at a 0.4 per cent decline in our earnings estimate,” it added.