KUALA LUMPUR, Dec 20 — Hong Leong Investment Bank (HLIB) Research expects staple products to remain stable in the first half of 2024 on the back of a steady unemployment rate, rising in-home consumption in light of living cost pressures and subsidy rationalisation, as well as spending caution with tightening of credit conditions.
The investment bank opined that the commodity prices would hold up at the current levels with limited upside from the dim global demand and this would benefit food and beverage (F&B) players with the potential for margin recovery especially after the rounds of price hikes implemented in the past three years.
“Additionally, the stronger ringgit would bode well for the staples as the raw materials are mostly denominated in US dollar. Our house projects ringgit to broadly appreciate next year, averaging at RM4.44 per US dollar.
“However, we reckon the impact will be partially muted by the increase in operating expenditure from higher wages and electricity tariff hike,” HLIB said in a note today.
As for retail, the investment bank expect sales growth to moderate year-on-year with less discretionary spending due to a dampening consumer sentiment, higher interest rate environment, subsidies rationalisation, and increase in the sales and service tax (SST).
Meanwhile, the Israel-Hamas war that began in early October 2023 has resulted in the boycotts of numerous prominent Western brands with alleged connections to Israel or purportedly expressing support to it.
“This intense boycott is unlike anything we have witnessed before, lasting over two months now and surpassing the typical brief duration of previous boycotts.
“Some newspaper articles reported a decline in sales and foot traffic for the affected brands during this prolonged period.
“Under our coverage, Berjaya Food and Nestle are feeling the brunt of this boycott. Though we are unable to ascertain the exact financial impact, our back of the envelope estimates this could hit approximately 10 per cent of sales for the fourth quarter of 2023,” HLIB said.
— Bernama
