Profit-taking caps consumer stocks

PETALING JAYA: Consumer counters that had been trending steadily for most of the week, however, closed lower yesterday as investors took profit after a decent run as the market volatility emanating from the ongoing eurozone sovereign debt crisis pushed investors to place their money in defensive stocks.

At 5pm yesterday, Dutch Lady dipped 14 sen to RM24.44, Nestle was down two sen to RM56 while F&N slipped 2 sen to RM18.36.

During the week, share prices of F&N and Nestle gained 2% and 0.18% respectively.

“The ongoing eurozone sovereign debt crisis has created a lot of volatility in Asian markets and a sense of nervousness among regional investors,” said an analyst from a local bank-backed brokerage.

“Defensive stocks like consumer counters don't spike very much in good times but they also do not plunge in bad times.

“In fact, some counters remain generally flat regardless of economic conditions,” the analyst added.

Another analyst concurred, noting that defensive counters were generally unaffected by business cycles.

“During periods such as an economic downturn, investors generally buy into defensive counters as part of their portfolios. This is because defensive stocks can be expected to perform relatively well in most phases of a business cycle, even in tough economic conditions.”

He, however, noted that when economic conditions improved, investors were likely to sell off defensive stocks in haste.

“The first sign of market optimism, defensive stocks generally lose out as investors would prefer to buy high-risk, higher-yielding stocks.”

On yesterday's performance, he said defensive stocks were consolidating following steady gains lately.

Shares of Guinness Anchor Bhd were also up this week, boosted by the company's proposed special interim dividend of 60 sen per share for the financial year ending June 20, 2012. During the week, its shares rose 9.12%, but closed down 10 sen yesterday.

The performance of the FBM KLCI was rather unimpressive this week, in line with regional indices which were generally lacklustre as the ongoing eurozone woes continued to sap investor confidence.

Analysts forecast choppy trading for the remaining two weeks of the year as they reckon that a solution to the debt crisis could still drag on .

“We forecast more volatility in the last two weeks of the year as global markets start winding down for the Christmas and New Year holidays,” said an analyst.