International exporters to US set to win amid dollar gains

investmentnews.com:

The surging dollar has hurt stocks outside the US but one group at least stands to gain: companies that export to the world’s largest economy.

Those with significant dollar earnings are set for a windfall, with major beneficiaries including heavyweight Asian chipmakers and European industrial and pharmaceutical firms. Shares of exporters to the US have already beaten a broad gauge of non-American companies this year, based on Goldman Sachs Group Inc. indexes.

“Exporters to the US should benefit not only via currency translation, but also in terms of the trade advantage,” George Maris, chief investment officer for global equities at Principal Asset Management, said in an interview in London. “They should be able to show significant margin improvements, whether they’re European or Japanese or Chinese exporters.”

The dollar has gained versus all its major peers this month as a stronger-than-expected US economy has pushed back bets on Federal Reserve interest-rate cuts. While exporters have been sold off in the global risk-off environment, they may be at the forefront of any rebound as the 12-month trailing earnings per share of those in Asia ex-Japan and Europe have tended to move in tandem with the greenback.

Some of the biggest expected gainers are in Asia. Taiwan Semiconductor Manufacturing Co., which gets nearly two-thirds of its revenue from the US, posted its first profit increase in a year in the first quarter even as its scaled back its outlook for future expansion. Shares have rallied 29% this year in Taipei, while the island’s benchmark index rose more than 10%.

The equity markets of Japan and Taiwan are both likely to benefit from the stronger dollar given their relatively high proportion of offshore revenues,