×

Here's how to play El Nino

NASA weather International Space Station
Getty Images

The El Nino weather pattern sweeping the globe is causing a slew of disruptions, and across markets it's creating some clear winners and losers.

Analysts are pointing to insurers and some agricultural players as potential beneficiaries, while farm-equipment makers could take a hit.

The "El Nino Southern Oscillation," to give it its full name, is the warming and cooling of the Pacific Ocean away from its average temperatures, often resulting in severe weather such as floods and droughts. La Nina is the cooling phase, and El Nino is the warming phase. The current El Nino pattern is expected to be one of the strongest in decades.

Read More The hazy reason why Apple's CEO was stood up

"Generally speaking, strong El Nino delivers excess precipitation in Argentina and the south of Brazil, and dry, arid weather to Southeast Asia and Australia. We have already seen weaker-than-average monsoon rain in India," Macquarie said in a note Tuesday. "In the U.S., there are also clear signals that the weather in the south will be cooler and wetter than normal for the winter period, while the north will be exposed to slightly warmer weather."

The bank expects companies in North America, Australia and New Zealand are mostly likely to be impacted, followed by Asia, but the impact isn't likely to be uniform.

Across 100 profiled companies, "in Australia/New Zealand, 38 percent of highlighted companies are likely to be negatively impacted with 62 percent expected to be positively impacted. In North America the negative/positive split is 45/55 and in Asia the mix is 70/30," it said.

It also expects insurance companies will benefit, while those dealing in capital goods would face headwinds.

"In Australia, El Nino conditions are positive for general insurers. Warmer temperatures lead to higher probability of bushfires, which are the least costly type of insurance event (e.g. compared to hail, earthquake)," the note said. "In North America, better growing conditions will result in strong expected yields in 2016 and therefore benefit crop insurers."

Among capital goods players, it tips Deere & Co. as likely "very negatively" hit by El Nino as corn prices will likely fall on higher yields, leaving farmers will less money to spend on equipment.

Read More Strong El Niño could drench all of California this year

Macquarie isn't alone in forecasting a big impact on the market.

Hamish Smith, commodities economist at Capital Economics, raised his forecast for palm oil to end the year around 2,400 ringgit (around $559) from 1,900 ringgit a tonne in a note Wednesday.

"While a rebound in the price of crude oil supported the initial recovery, the price has also been boosted by increasingly dry conditions in the world's two main producers, Indonesia and Malaysia, as El Nino has raised supply concerns," Smith said.

Indonesia has already been particularly hard hit. The country's meteorological bureau is predicting rains won't begin until December, making for an eight-month-long "very dry" season, Malaysian investment bank CIMB said in a note Tuesday.

That means the country's raging forest fires -- largely deliberately set on Kalimantan and Sumatra islands to clear land for palm oil -- likely won't die until close to the end of the year, the bank noted.

The fires have killed 10 people so far and more than 500,000 there have suffered respiratory infections, the country's national disaster agency, Badan Nasional Penanggulangan Bencana (BNPB), said in a release on its website at the weekend.

"Bottom line is the downside risks to crop harvests have increased, in particular for rice and palm oil," CIMB said, noting the El Nino has the potential to wipe 0.9 percentage point off economic growth over two quarters.

Within the market, CIMB expects El Nino will push up palm oil prices and it tips shares of palm oil players Astra Agro Lestari and London Sumatra Indonesia to rise.

--Robert Ferris contributed to this article.