PETALING JAYA: The appreciation of the ringgit versus the US dollar has brought about trading opportunities in Malaysian equities focusing on value amid expectations of de-dollarisation and a broader reallocation of capital toward emerging market currencies.
UOB KayHian Research recommended a tactical trading stance focusing on value- driven opportunities amid a moderate upside for Malaysian equities.
“Key beneficiaries include importers and companies with high US dollar debt, while exporters may face margin pressure,” it said.
The research house advocated exposure in value stocks backed by sound fundamentals, considering the fluid trading environment as the ringgit’s strength represents a significant macro tailwind for corporate earnings, with reallocations towards domestic demand and import-reliant sectors from those reliant on US dollar revenue.
Among the potential winners are retail and consumer discretionary stocks like MR DIY Group (M) Bhd
and Fraser & Neave Holdings Bhd.
Automotive stocks (Bermaz Auto Bhd, Sime Darby Bhd), aviation (Capital A Bhd), plantation (Kuala Lumpur Kepong Bhd and SD Guthrie Bhd), healthcare (Duopharma Biotech Bhd) and others like Axiata Group Bhd, Tenaga Nasional Bhd, Genting Bhd and Genting Malaysia Bhd are also potential winners.
“Most of the key beneficiaries are expected to gain from lower import costs, alongside lower debt servicing cost, given the meaningful US dollar debt exposure.
“That said, the margin improvement in auto sector would still be offset by overall soft demand and market share loss to Chinese competitors,” it noted.
Stocks at the losing end of the weaker greenback include exporters from the technology and electronic manufacturing services sectors, commodity-linked stocks such as Press Metal Aluminium Holdings Bhd and OMH Holdings Ltd, as well as glove makers.
It said during the last ringgit appreciation cycle in the third quarter of 2024 (3Q24), when the ringgit rose to a peak of RM4.09/US dollar from RM4.66/US dollar between end-July and end-September before rebounding to RM4.49/US dollar by mid-November, retail and consumer stocks emerged as direct beneficiaries during the 3Q24 results reporting season.
