Tips on investing in the current unpredictable market conditions

KUALA LUMPUR: Investors should stick to stocks with steady dividend returns to protect their investments amid an unpredictable market condition, according to AmInvestment Bhd chief investment officer for equities Andrew Wong.

He favoured telecommunications companies, which traditionaly pay out the bulk of their profits as dividends.

Other so-called defensive stocks are in the utility sector, the healthcare industry and construction companies that have strong contract visibility.

Wong, however, said it was not immediately clear where the market was heading in the near term. although he sees the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) fairly valued at around 1,700 points.

“At the current market, it is impossible to price emotions and the obvious concern is about the political noises,” he told a media briefing yesterday on the firm’s outlook for the stock market. “The market doesn’t like uncertainties,” he said.

Citing Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz’s statement yesterday, Wong said the issues surrounding 1Malaysia Development Bhd were one of the many factors affecting the FBM KLCI and the ringgit’s performance.

“The ringgit does not deserve to be at this level, it should be stronger,” he said, adding that the ringgit would regain its strength when uncertainties are cleared.

Wong said the weaker ringgit was a boon for exporters, but that shares in glove makers were no longer cheap after a strong run-up earlier this year.

“Companies that have high exposure from a strong US dollar have a deep-value play, but the glove makers’ share prices are no longer a deep-value play,” he said.

On the construction sector, Wong said investors could find better value in smaller builders who have a good track record of bagging new jobs.

“These companies have been sold down unfairly,” Wong said, without naming specific companies.

On the RM20bil injection to “reactivate” state equity investment firm ValueCap Sdn Bhd, Wong said that while the value is only about 0.6% of the local bourse’s market capitalisation, it would prop up the market.

“A lot of countries have done that. Hong Kong and Thailand have done it. I don’t think there’s anything wrong in doing it.

“It would successfully support the market, especially since the market has about 21% foreign holdings at the moment,” he said.