Investors seek refuge in safe stocks as GE14 looms

The ercest election has already driven investors to rejig their strategies

by ALIFAH ZAINUDDIN / pic by TMR file

AS THE country’s general election looms nearer and the sentiment rises, investors are already hedging their bets at the local bourse with many taking a defensive approach and seeking refuge in the safe stocks.

The 14th General Election (GE14), which must be held before August this year, has already driven investors to rejig their investment strategies, putting their fund in traditional blue-chip stocks and readjusting their portfolios to minimise risks against any market downturns.

The main index of the local bourse had risen 3.2% this year. It climbed to a high of 1,880, a 172 point jump in the last 52 weeks. Stocks in the consumer goods, banking, construction and healthcare sectors have been the beneficiaries as investors await what is dubbed to be the fiercest election in the country’s history.

Aberdeen Asset Management Sdn Bhd CEO and MD Gerald Ambrose said most investors have taken a more cautious approach by cashing in on underperforming stocks and investing in big stocks.

“People seem to be getting defensive. I think it’s more of a consumer play. Consumer goods manufacturers are seeing a good cashflow and they are paying good dividends.

“The breweries like Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd are doing well, and so has Nestlé (M) Bhd. People seem to be investing a lot there, as well as in banks,” Ambrose told The Malaysian Reserve (TMR).

Nestlé’s shares skyrocketed this year, rising 38.5% from RM101.10 to a high of RM140. The food and beverage manufacturer only boasted a 1.4% increase in annual net profit to RM645.8 million in 2017. It has proposed a dividend of RM2.50 per share.

Carlsberg’s shares have also been on a bull run, jumping 31.6% over the same period to RM19.98. The company recorded a full-year net profit of RM221.2 million last year, an increase of almost 8%. The beer maker has proposed a total 89 sen dividend per share.

Malayan Banking Bhd, the country’s largest lender, has seen its share price rising 8.3% year-to-date to RM10.46.

But Saturna Sdn Bhd president Monem Salam expects more volatility in the stock market as election campaigns heat up.

He said the share market could be influenced by how the election results sway.

“I think there are a lot of possible outcomes. It will depend on how strong the ruling government is, going into the election.

“People generally expect them to win and based on what has happened in the past, this would mean a lot of buying up to the election and then selling later on,” he told TMR. While election results may have a longer digestion period toward changes in policies, foreign direct investments (FDIs) into Malaysia could already be dissipated.

“I cannot say investors are agnostic about politics. But in terms of big investments, it is a bit slow this year,” Ambrose said.

He, however, said FDI into Malaysia continues to grow, despite at a slower pace compared to the past two years.

Official data by the Malaysian Investment Development Authority (Mida) showed that for the first half of 2017, the number of approved investments stood at RM65.4 billion, a 41% drop year-on-year.

The decline was largely due to the property slowdown and the absence of the largescale investments seen in the Pengerang Refinery and Petrochemical Integrated Development project in Johor, between 2014 and 2016.

Mida recently announced that Malaysia recorded a total of RM197.1 billion in approved investments for 2017, driven by the manufacturing, primary and services sectors.

This year, the government agency is targeting RM200 billion worth of approved investments.