Investors turn to defensive stocks in lacklustre market

PETALING JAYA: Consumer stocks have made their way to the gainers
list suggesting that investors are turning defensive in the current
market.
In yesterday’s trade, stocks such as British American Tobacco (M) Bhd, Dutch Lady Milk Industries Bhd, Aeon Credit Service (M) Bhd and Panasonic Manufacturing (M) Bhd were among the top gainers in a lacklustre market.
Such
stocks are normally less sensitive to major economic and political
changes hence their label “defensive”. Most are high dividend-yielding
stocks as well.
“Investors should take opportunity of a sideway
market to top-slice (reduce exposure in certain stocks) and turn more
defensive,” Hong Leong Research told clients in a report recently.
At the close, the 30-stock gauge of the local bourse – the FTSE Bursa Malaysia KLCI (FBM KLCI) was down 0.30% to 1,591.85.
Trading
volume was relatively low at 1.6 billion shares against an average of
2.5 billion shares per day in the first quarter of the year and against
the market’s all-time high of more than 4 billion shares per day.
While
penny stocks were ruling the market in recent weeks, the party appears
to have died down with less follow-through buying in these stocks as
evident by the dwindling trading volumes.
Market analysts are
expecting the local mart to stay sideways in April, due to the lack of
strong catalysts with most houses advising their clients to turn to
defensive, dividend-yielding stocks given the current scenario.
In
its most recent market report, OSK Research said with the benchmark
having broken new highs in the month of March, it was anticipating an
uncertain outlook for the month of April.
“On one hand, the FBM
KLCI has indeed been a laggard among regional markets indices and
having breached a key resistance level, it could see more upside but on
the other hand, as news on Europe is again turning less positive, more
profit taking could emerge in April,” it said at the beginning of the
month.
The benchmark broke past the 1,600 mark on April 2 but has not been able to maintain above this level thus far.
Locally,
the impending general elections remains a factor to contend with as
most investors are jittery about putting too much money in the market
for fear of any major political change which could then impact the
market.
“The lack of clarity on the political front which is
closely linked to businesses and the stock market is keeping buying
momentum at bay,” said a trader. While external markets such as the US
have been showing improving economic data, it is too soon to say that
the Western economies have finally got their act together, he added.