Soft commodities including palm oil and rubber that are produced in emerging markets will get a boost as Donald Trump’s election win weighs on local currencies, an analyst said Tuesday.
Nirgunan Tiruchelvam, director at Religare Capital Markets, told CNBC’s “The Rundown” that Trump’s surprise win in the U.S. presidential election had “immense consequences” for the soft commodities complex.
“Soft commodities companies (get) a lot of exposure to the rising prices of soft commodities, many of which are denominated in emerging currencies that are going to depreciate with this unexpected event,” he explained.
Soft commodities are traded internationally in dollars on the spot market, so the companies translating these prices into local currencies that are used domestically will see a boost to profits.
Indonesia’s rupiah fell by as much as 3 percent against the dollar on Friday to five-month lows, as the greenback strengthened in anticipation that Trump’s win signaled higher interest rates in the U.S. Malaysia’s ringgit fell to its lowest against the dollar since late 2015, near levels not seen since the Asian Financial Crisis in 1998. Both currencies continued their slide on Monday.
On Tuesday, Malaysia’s ringgit extended its losses, with the dollar fetching as many as 4.34 ringgit, but Indonesia’s rupiah steadied, with the U.S. dollar buying 13,335 rupiah in Asia trade, in line with Monday’s levels.
Tiruchelvam’s top picks in the complex were palm oil-related company stocks, such as Singapore Exchange-listed Golden Agri-Resources and First Resources. “Across the board, if you are investing in palm oil, you will do very well,” he said.
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