Export stocks were THE sexiest place to be in 2015.

However of late, investors have been shunning export stocks, selling them down as if they were toxic assets. The reasons?

1) The RM gaining some lost ground on the USD.

2) Worries of global consumer spending.

Let us have a look whether these 2 arguments stand with some very simple analysis:

1) From the table below, we can see that exporters will still be able to reap the benefits of a stronger USD assuming a base USD/RM exchange rate of 4.15 for the rest of the year which is 6% higher than 2015's full year average. Moreover, for 1Q16 and 2Q16, the rate of 4.15 is still an enormous 13% and 15% gain over the respective quarters in 2015. It is safe to say that you can expect these 2 quarter results to be positive for export stocks. For the 2nd half, the USD/RM would be pretty much unchanged thus profits should remain at current (3Q15) high levels.

Assuming the USD/MYR is volatile throughout the year which is most likely going to happen, my various USD/RM assumptions ranging from 3.85 - 4.45 show that there is a positive bias for exporters to gain. Assuming an equal 20% probability for each of the USD/RM rates, export driven stocks can still see a 6% gain on FX over 2015 which is very conducive.

2) My arguments on global consumer spending are less based on numbers but more on common sense:

The domestic market with a population of only 30mil is tiny compared to the billions of people globally. In addition, spending power of local consumers is nothing compared to developed nations particularly the US. Thus, for a company to grow at an above average growth rate, they have no choice but to export to larger markets with richer consumers.

Secondly, for every loser, there will be a winner. Much of the financial world is a zero sum game and currently the losers are the oil and gas firms while the winner is the consumer. Savings from pump prices will inevitably be translated into spending elsewhere. It is only a matter of time. Some analysts estimate that: 'With oil prices now around $20-$30 a barrel compared to $70-$80 a barrel a few years ago, consumers are saving roughly $50 per barrel of oil per day. Running through the math, that totals almost $2 trillion dollars per year in wealth that previously was flowing into oil company coffers and now goes elsewhere.' Where that money goes, it is up to you to guess.