KUALA LUMPUR (Dec 10): Weaker Malaysian exports amid lower crude oil prices may curb domestic corporate earnings growth, Nomura International (Hong Kong) Ltd managing director and chief Asia equity strategist Michael Kurtz said.
Kurtz said Nomura saw a 2% to 3% earnings growth for the Malaysian market next year (2015).
Speaking to reporters today during an equities and economic outlook briefing, Kurtz said this was because Malaysia's exports were "in the wrong kinds of goods, or to the wrong economies".
"We don't see Malaysia as particularly leveraged to the particular areas of global demand growth that will drive earnings upside for other markets in the region, like Taiwan for example," he said.
According to Malaysia's Statistics Department, the nation's exports fell 3.1% to RM65.1 billion in October, from a year earlier, on lower sales of crucial electrical and electronic (E&E) products besides petroleum and oil palm-based items.
Exports also fell on lower sales of natural rubber and timber products.
Kurtz, however, said Malaysian shares' valuation was at a discount to certain Association of Southeast Asian Nations peers.
Bloomberg data showed the FBM KLCI was traded at a current price-earnings ratio (PER) of 15.8 times. For comparison, the Jakarta Stock Exchange Composite
was transacted at a PER of 19.88 times.
The Thailand Stock Exchange Index has a PER of 17.47 times
On the outlook for crude oil prices, Kurtz said some stabilisation was expected as early as the second quarter of next year.
Kurtz said US$60 per barrel was a reasonable downside target, amid oversupply concerns.
"This (stabilisation) will be driven by the acceleration of the US economy and some curtailment of global (crude oil) supply.
"Avoid significant exposure to the upstream space and for investors who are more inclined to buy on value, we advise looking at downstream, either at refining or petrochemicals," he said.
Reuters reported on Wednesday that Brent's front-month futures contract traded down 86 cents at $65.98 a barrel by 0352 GMT, after falling to $65.78, although it remained above a five-year low of $65.29 touched on Tuesday.
Brent crude dropped around $1 a barrel on Wednesday, resuming its fall caused by a glut of oil in the market, after a short-lived reprieve the previous day, when a weaker dollar had provided some support.
Worries about oversupply have pushed Brent down 40 percent, since June.