Malaysia: Consumer Sector Holding Despite Rising Prices Of Wheat, Sugar And Palm Oil
Malaysia’s consumer sector remains solid, however research house like MBSB has advocated a more selective and defensive positioning as rising commodity and feed costs threaten to put renewed pressure on margins in the second half of 2026.
The research house said the input-cost environment became more challenging in August after some sequential relief in June, with wheat, raw sugar, crude palm oil (CPO) and PET resin all registering increases both year-on-year and month-on-month.
Despite the cost pressures, MBSB said underlying conditions for the consumer sector remained supportive, underpinned by resilient domestic consumption, stable employment, manageable core inflation, fiscal assistance through STR and SARA, wage support and continued value-seeking behaviour among consumers.
The house continues to favour staples, essentials and value-driven retailers with pricing power, scale and a stronger ability to pass through costs.
Its top picks are 99 Speedmart Retail Holdings Bhd, with a BUY call and target price (TP) of RM4.37; MR D.I.Y. Group (M) Bhd at BUY and RM2.13 TP; Leong Hup International Bhd at BUY and RM1.03 TP; and Nestlé (Malaysia) Bhd at BUY with a RM116.10 TP
Wheat, Sugar And Palm Oil Costs Climb
Among key food and beverage inputs, wheat prices averaged US$26,098 per tonne in August, increasing 29.5% from a year earlier and 5.4% from July.
MBSB attributed the year-on-year increase to production cuts across Europe following severe summer heatwaves and escalating military hostilities affecting exports from the Black Sea region. Month-on-month prices were also supported by deteriorating European Union crop conditions and logistical bottlenecks in major grain shipping lanes.
Raw sugar rose 4.0% year-on-year and surged 12.3% month-on-month to US$38,453 per tonne, while CPO climbed 13.5% from a year earlier and 4.9% from July to US$1,182 per tonne.
MBSB said CPO prices were supported by production declines in major producing countries, stronger biodiesel demand and growing concerns over El Niño risks to Southeast Asian plantations.
Cocoa provided some year-on-year relief, falling 20.8% to US$6,092 per tonne, but prices rebounded 7.1% month-on-month as concerns emerged over potential El Niño effects on upcoming crops.
Coffee prices were mixed. Arabica was 5.4% lower year-on-year but increased 3.6% from July, while Robusta fell 6.6% year-on-year and 2.8% month-on-month.
Packaging Costs Add To Margin Pressure
Beyond agricultural commodities, packaging has emerged as another cost concern.
PET resin prices increased 35.0% year-on-year and 4.6% month-on-month to US$1,127 per tonne, which MBSB said could sustain margin pressure for bottled water companies such as Life Water Bhd and Spritzer Bhd.
MBSB has NEUTRAL calls on Life Water and Spritzer, with target prices of RM1.63 and RM2.92 respectively.
The research house said the overall August cost environment had therefore become “less benign”, potentially putting renewed pressure on F&B manufacturers heading into the second half of 2026, particularly where companies have limited ability to pass higher costs on to customers.
Chicken And Egg Prices Rebound
The poultry segment is also facing a changing cost and pricing environment.
Retail egg prices increased across all grades in July. Grade A eggs rose 11.0% year-on-year to 47.6 sen each, Grade B increased 8.9% to 44 sen and Grade C climbed 7.4% to 39.4 sen.
Average retail chicken prices, meanwhile, increased 6.1% year-on-year and 1.0% month-on-month to RM10.88 per kg.
MBSB said the rebound in egg and chicken prices should support poultry average selling prices, although higher feed costs remain an important margin risk for integrated producers.
Soybean meal prices increased 12.1% year-on-year and 1.6% month-on-month to US$355 per tonne in August, while corn jumped 19.9% year-on-year and 7.1% from July to US$20,007 per tonne.
The renewed increase in both feed inputs could cause margin pressures to re-emerge, particularly if producers have limited ability to pass costs through or government intervention constrains pricing flexibility.
MBSB said integrated producers are comparatively better placed to manage the volatility through procurement scale and operational efficiencies, although feed costs remain an important factor to monitor for Leong Hup and QL Resources Bhd.
Stronger Ringgit Provides Some Cushion
Foreign exchange movements are providing some relief against the increase in US dollar-denominated commodity costs.
The ringgit averaged 4.07 against the US dollar in August, compared with 4.23 a year earlier, representing a 3.8% year-on-year appreciation. It was also marginally stronger than the 4.08 average recorded in July.
However, the ringgit remained weaker against the Chinese yuan, with CNY/MYR averaging 0.60, translating into a 2.4% year-on-year depreciation.
MBSB said the stronger ringgit against the US dollar should continue to partly cushion the landed cost of dollar-denominated commodities and imported raw materials. Conversely, weakness against the yuan could reduce the foreign-exchange benefit for China-sourced goods, including those sold by retailers such as MR D.I.Y.
For F&B manufacturers, however, MBSB said foreign exchange remained only a partial buffer, with commodity, packaging and freight expenses representing larger potential swings in margins.
Defensive Consumer Names
Against this backdrop, MBSB said it remains selective within the consumer sector.
Staples such as bottled water, poultry and protein products and essential retail should prove comparatively resilient because of defensive demand, while selected companies retain some ability to adjust prices.
Discretionary consumer companies face a more challenging environment due to softer consumer sentiment and higher operating expenses, although depressed valuations could offer upside if earnings remain resilient.
MBSB identified 99 Speedmart as its preferred exposure to consumers trading down towards essential, high-frequency household purchases, while MR D.I.Y. benefits from affordable household spending and procurement scale.
Leong Hup offers exposure to affordable protein consumption, while Nestlé Malaysia is supported by demand for essential food products.
Should consumer spending confidence improve, MBSB sees higher-beta opportunities in AEON Co (M) Bhd, Padini Holdings Bhd and selected café and F&B companies, although its present preference remains firmly tilted towards staples and value-oriented retailers.
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Source : Business Today
