A one per cent decline in Japan's Gross Domestic Product (GDP) could shave 0.2 percentage points off Malaysia's growth, but this can be compensated by other trading partners and the internal growth engine, according to CIMB Research.

It, however, said Malaysia may benefit from the diversion of production facilities from Japan as part of global supply chain risk management.

However, CIMB Research warned that a full meltdown of the nuclear plants in Japan would reduce Malaysia's GDP growth estimate of 5.5 per cent for this year between 0.5 and 1.0 per cent via both direct and indirect trade and income effects.

More of the impact is expected to be felt in the second and third quarters although full-year growth is anticipated to be in the positive trajectory.

As for the local stock market, CIMB Research said timber and rubber glove sectors would be the biggest winners.

In contrast, the aviation, gaming and power sector would be the worst hit.

'We maintain our end-2011 KLCI target of 1,700 points and view selling pressure from the convergence of negative developments as a buying opportunities,' it added. - Bernama