KUALA LUMPUR: Importers of Japanese goods are expected to benefit from the weakening yen as goods become relatively cheaper than before.
“Broadly, imports from Japan are going to become cheaper due to this weakening. This will benefit the importers, particularly the auto sector and other capital intensive industries, which derive their capital goods from Japan,†said RAM Holdings Bhd chief economist Dr Yeah Kim Leng.
According to Malaysia External Trade Development Corp (Matrade), major imports from Japan in 2012 include electrical and electronics products, machinery, appliances and parts as well as transport equipment.
HwangDBS Research supports Yeah’s view that car assemblers with high import contents stand to benefit from the weaker yen.
RHB Research said in its report benefactors of the weakening yen will include MBM RESOURCES BHD and TAN CHONG MOTOR HOLDINGS BHD.
According to the report, MBM’s yen exposure will come from associates Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Hino Motors (M) Sdn Bhd that contribute more than 90% to the company’s earnings.
Its sensitivity analysis revealed that every 10 sen change in RM1:¥100 is expected to impact MBM’s earnings for 2013 by 4.1%.
As for Tan Chong, some 20% of its foreign exchange requirements are denominated in yen while the remaining 80% is largely denominated in US dollars.
This would translate into a 1.8% boost in 2013 earnings for every 10 sen change in RM1:Â¥100, said the research house.
Under normal circumstances, the ringgit’s appreciation against the other currencies would cause exporters to feel the pinch as their goods become more expensive for trading partners.
But in the case of the weakening yen, Yeah said exports to Japan should remain largely indifferent.
“This is because Malaysia’s exports to Japan largely comprise commodities, and commodities are relatively less sensitive to currency fluctuations,†he said.
Based on Matrade figures, there was a substantial increase in refined petroleum products and crude petroleum exports to Japan for the first 11 months of 2012.
Other major exports to Japan include liquefied natural gas and optical and scientific equipment, mainly cameras designed for underwater use, aerial survey and forensic use.
Exports to Japan for January to November 2012 stood at RM76.32 billion, representing 11.8% of total exports, while imports totalled RM57.87 billion or 10.4% of the total. Yeah highlighted that the weakening yen could mean that global markets may experience a reduced capital outflow from Japan.
However, Japan’s foreign direct investment (FDI) to Malaysia may only experience a slight dampening as Malaysia continues to be a darling among Japanese investors.
“Japan FDI will still continue because of the relative attractiveness of Malaysia in terms of profitability and their strategy to use Malaysia as a manufacturing hub,†he said.
The Malaysian capital market is also unlikely to feel any effect from the weakening yen as Japan’s portfolio flow to Malaysia is relatively small, said Yeah.
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