Export-driven stocks continue to shine

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KUALA LUMPUR (Jan 4): Export-driven stocks continued to rise on the expectation of weakening ringgit, although the FBM KLCI was in downtrend today.

These export-oriented stocks included electrical and electronics (E&E) counters such as Malaysian Pacific Industries (MPI), Inari Amertron Bhd, Globetronics Technology Bhd, and packaging counters like Thong Guan Industries Bhd.

At noon, MPI was the top gainer, rising 29 sen or 3.11% to RM9.60, followed by Inari, which was up 26 sen or 7.1% to RM3.92, and Globetronics, which was up 24 sen or 3.69% to RM 6.74. Inari and Globetronics were among the top five gainers this morning.

Thong Guan was also one of the top ten gainers today, having increased by 20 sen or 6.35% to RM3.35.

When contacted by theedgemarkets.com, Kenanga Research’s head Chan Ken Yew said he still likes export-driven counters, as the ringgit starts to weaken again against the US dollars, and these counters should be able to benefit.

At 1.20 pm, the US dollar rose 0.94% to 4.3335 against the ringgit.  

According to Chan, investors are expecting the US interest rate hikes of another 75 basis points in 2016, and 100 basis points in 2017, eventually, dollars are expected to strengthen further against ringgit.

“It’s true that these stocks have gone up substantially, but the trend is still there, and market will react ahead the expectation,

“Whether their valuations are expensive, it depends on the market perception. Under a favourable trends, we cannot discount their strong earnings to continue, “ Chan added.

However, Chan highlighted that he is selective on these counters, as they have outperformed the market in the past one year.

His top pick in the export-driven sector is SKP Resources Bhd. It was reported in The Edge Financial Daily today, quoting Kenanga Research analyst Desmond Chong, that the main catalyst for the plastic parts and components manufacturer is the two contract wins from UK-based Dyson Ltd, for the manufacturing of cordless vacuum cleaners. The contracts are worth a combined RM1 billion per year, over five years.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)