Consumer stocks suffer as regional headwinds escalate

Weak consumer sentiment took a toll.

Locally-listed consumer names underperformed in the first quarter due to intensifying regional headwinds, a report by OCBC Investment Research revealed.

OCBC noted that the two consumer indices underperformed the FSSTI's year-to-date return of 1.6%. The FTSE Consumer Services (FSTCS) index had a YTD return of -0.7%, while the FTSE Consumer Goods (FSTCG) index offered a year-to-date return of 2.9%.

"Topline numbers for consumer stocks under our coverage were still reasonable, but bottom-line performance from OSIM, Petra Foods and BreadTalk did not meet our expectations as the companies continue to incur higher operating costs including gestation expenses. A subdued macro environment took a toll on performance as well as these stocks
received a setback from weaker economic sentiment in their respective key markets, namely China and Indonesia," stated the report.

Only Sheng Siong Group and Thai Beverage reported solid Q1 results, with both stocks outperforming the benchmark by 27% and 10.6% respectively.

“We are keeping our neutral call for the consumer sector given the subdued near-term outlook for our stocks’ key markets. Nonetheless, the long-term outlook for regional growth remains supportive,” OCBC noted.