Signs of weakness:Strait Talk

The currency impact on corporate profitability is a question that comes up withregularity, and this year, the question is skewed towards the impact of a weakerUSD. As it spins down to the equity markets and from the companies under ourcoverage, we cite the impact a weaker USD (via translation gains or losses inrevenues or costs in their home country) would have on corporate profitability.

    Consumers and autos sector most positively affected by dollar weaknessIn general, the sectors more positively affected by a weak dollar are consumers andautos largely due to imported costs. Consumer companies are affected by the USDmovement largely due to imported raw materials and inputs that are denominated inUSD. However, it is difficult to quantify its exact impact. Generally speaking, KalbeFarma, Indofood CBP, and Universal Robina Corp should benefit the most fromthe greenback’s weakness. Auto companies benefit from a weaker USD due toimported auto products and parts. Astra and UMW Holdings stand to gain the mostfrom a depreciated dollar.

    Negative impact from a weaker dollar.

    Other sectors are less affected as a group, though there are individual companies ina given sector that may be more susceptible to currency moves. United Tractorsand Bumi Armada are net negative with a USD depreciation, as their revenues are100% denominated in USD. The Singapore banks DBS and OCBC would be mostaffected by a weak dollar given their HK presence, while only City Developments inthe property sector through its hotel affiliate stake is more meaningfully affected. Wethink there are minimal impacts on the oil & gas, telecoms, and utilities sectors from aweaker dollar.