Overall, MIDF Research said, the inflationary pressure in the country will remain stable.
“We foresee better food supply globally and it will ease the pressure on food prices domestically in the second half of this year,” it said.
The price of crude palm oil (CPO) has been trending down since the beginning of July and is now below RM4,000 a tonne. The price of the commodity was hovering above RM6,000 from March to May.
It peaked at RM7,194 per tonne on April 29. MIDF said that with the decline in CPO prices, there would be less pressure on food inflation in the second half of 2022 (H2 2022).
“We foresee better food supply globally and it will ease pressure on food prices domestically. Hence, we maintain our headline CPI (consumer price index) at +2.8% for this year, within Bank Negara’s inflation forecast range of 2.3% to 3.3%,” it said in a note today.
In its new report, Moody’s Investors Service said China’s economic slowdown and higher input costs would reduce the profitability of companies in most sectors, except for those in upstream commodity-related industries.
Still, it said, most companies will maintain steady leverage because of prudent investment planning, while leverage will increase for some because their debt growth will outpace earnings before interest, taxes, depreciation and amortisation (Ebitda) expansion.
“Increases in interest rates will make it harder for high-yield industrial corporates to gain access to funding. In particular, property developers will face increasing challenges in addressing upcoming maturities with refinancing costs picking up meaningfully, likely resulting in more defaults,” senior vice-president Lina Choi said.
She said the strong commodity prices will support the cash flow of upstream commodity-related companies.
Although mining companies may face higher operating costs, they will be able to maintain their profitability and steady leverage.
Leverage will remain stable, too, for internet companies as well as food and beverage companies with their revenue growth, strong cash flow generation and prudent investment strategy.
“On the other hand, leverage will rise for construction, chemical, auto-related and technology hardware companies because of higher costs and debt-funded expansion.
“Nevertheless, Moody’s expects the increase in leverage to be moderate. Their strong market positions and solid funding access will continue to support their credit quality,” Choi said.
Meanwhile, the credit quality of transportation and utility companies will remain largely stable, but with some differentiation due to capital spending and high fuel costs. But most companies will receive strong government support and funding access to mitigate the challenges.