August 08, 2022

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USD vs Export Counters

Following the rout on export stocks since before CNY until the recent rebound, the experience has shown the irrationality of the market. There are times when people are overly optimistic. There are also times when people are overly negative. This cause us to make irrational decisions such as cutting loss then regretting when the share price rebounds. Or for those holding on to cash refusing to bottom pick for fear of catching the falling knife.

Lets see a few example:

1. FL Bhd from RM2.80 plunge all the way to RM2.02 before rebounding to RM2.48 within 1 week. While MYR has strengthen against USD, did it change anything fundamentally for FL Bhd? Many were asking me is it time to buy as it fell all the way? Honestly, I was just as worried because the I cannot see the bottom. But each time it makes a steep fall, I calculated and recalculated the DY / PE to determine the intrinsic value and realize it is getting cheaper and cheaper. This chain of thoughts led me to make my decision whether to buy or hold. This helped me overcome my fear.

2. How about Pohuat, FFHB, Magni, Latitud, SAM, KESM? The answer is no. Fundamentally, the counters are still expected to deliver good results this coming earnings season.

3. The fact of the matter was when times are bad (sell down), people lose their focus and what they want to accomplish. Unless recession is coming, yes being fearful is good. However, a sudden weakness in USD does not represent the fundamental strength of MYR. MYR did not strengthen against USD on its on merit. It was a simple case of USD being weak due to comments by Yellen on Capitol Hill and rumours of simulation on negative rates. Once the market prices it in, normalization will happen.

Do I foresee USD to continue to strengthen against MYR? Not 100%. But I do foresee MYR to remain above RM4 against USD until the relevant sectors such as O&G, Property and Banks bottom line shows some healthy growth. Unless and until that happens, the upside of MYR against USD is limited. 

UPA Corporation Berhad (Update)
Insights - 8 Companies to Accumulate on Weakness


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This  information should not and cannot be construed as or relied on and (for  all intents and purposes) does not constitute financial, investment or  any other form of advice. Any investment involves the taking of  substantial risks, including (but not limited to) complete loss of  capital. Every investor has different strategies, risk tolerances and  time frames. You are advised to perform your own independent checks,  research or study; and you should contact a licensed professional before  making any investment decisions.

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