Which stock group is most negatively affected on high inflation?

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The analysis team of Agriseco Research believes that, besides the industry groups that greatly benefit from the inflation environment, a few groups of stocks may be affected.

 

First is the group of stocks with high debt ratio. Because when inflation and interest rates increase, financial pressure will also increase, leading to changes in profit margins. In particular, businesses with low financial potential and no potential land fund will be the first and hardest hit businesses. Some industry groups with relatively high debt ratios are Real Estate and Construction.

According to Fiinpro data, the average debt ratio of these groups is above 1. Even so, within these groups, stocks of industry leaders are more resilient, these businesses are more likely to ability will take advantage of the opportunity to acquire weak businesses. Therefore, investors should choose businesses with sustainable financial strength, high debt repayment capacity and interest payments, and avoid stocks with large borrowing rates.

 

Next is the group of speculative stocks. Currently, this group of stocks has a high price level compared to the same period in 2021 but business activities have not improved. Therefore, in the event of rising inflation and interest rates, cash flow could be pulled out of the stock market and back into low-risk assets like bank deposits, which would be the most likely stock group. will be greatly affected when the market turns bad or when there are unfavorable macroeconomic and geopolitical information. Investors should reduce the proportion of stocks with high speculative nature, which has increased dramatically.

 

Finally, there is a group of businesses that do not complete the value chain because these are businesses affected by changes in input prices and are not able to transfer prices to final consumers.

 

During the inflationary cycle, these businesses will be vulnerable leading to revenue and profit shrinking when input costs increase, especially businesses that do not convert increased prices to consumers. Therefore, the business results of enterprises will be less satisfactory when suffering from low profit margins.

 

Some industry groups that we assess will be heavily affected when inflation increases, including: Construction and Building Materials such as Plastics, Animal Husbandry and Feed Group, Transportation Logistics Group, Supply Group. providing non-essential product services”, the report of Agriseco Research stated.

 

In addition, Agriseco Research also pointed out a number of industry groups that investors may be interested in, such as businesses with good business results. this year and the years to come and benefit when inflation occurs.

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