KUALA LUMPUR (Nov 25): Malaysia’s third-quarter results season has been ‘disappointing’ so far, said CIMB Securities, warning of downside risks to its earnings forecasts for stocks on the benchmark index.

More companies under coverage underperformed than outperformed expectations, according to CIMB. In particular, exporters or companies with exposure to foreign earnings reported currency losses due to the sharp rise of the ringgit against the US dollar during the quarter, the research house noted.

“These results could pose downside risks to our KLCI earnings forecasts,” CIMB said. “We plan to review our KLCI valuation model after the results season to incorporate the earnings revisions.”

CIMB's current forecast calls for 13% growth for this year’s earnings of KLCI companies, and the research house has end-2024 target at 1,732 for the index, which closed Friday at 1,589.78.

The consumer, glove, and technology sectors were the main disappointments, CIMB’s analysis of the results released up to Nov 21 showed.

Out of the 10 consumer companies that have reported 3Q results, 70% fell below expectations amid poor sales due to weak consumer sentiment and boycott activities, as well as margin compression in specific cases.

Rubber glove manufacturers — Hartalega Holdings Bhd (KL:HARTA), Top Glove Corporation Bhd (KL:TOPGLOV), and Kossan Rubber Industries Bhd (KL:KOSSAN) — grappled with higher input costs and forex losses stemming from unhedged receivables and forward contracts.

The technology sector, the previous quarter’s weakest performer, disappointed again with 67% being weaker than expected, CIMB said. Apart from the weak ringgit, the sector also faced soft demand recovery in electronics manufacturing services, communications, and automotive, it flagged.

The plantation sector, however, bucked the trend thanks to strong crude palm oil prices driven by supply shortfalls, the research house added.