Intensifying regional headwinds threaten consumer sector’s growth prospects

Falling commodity prices and lower consumer confidence are key risks.

Regional headwinds could keep the consumer sector’s growth muted in the near-term, but discerning investors might want to take a closer look at consumer stocks as they are no longer priced at a premium.

According to OCBC, falling commodity prices and lower consumer confidence are the key challenges plaguing countries in the region.

“All of our selected countries saw lower consumer confidence levels QoQ in 4Q14 according to data from Nielsen,” OCBC stated.

Malaysia posted the lowest consumer confidence level at 89, signifying further pessimism possibly in relation to the GST implementation this April.

Challenges also persisted for Thailand amid falling commodity prices as year-on-year retail sales growth remained negative for the last quarter of 2014.

“We maintain our neutral call for the consumer sector given the short-term macro challenges faced by regional countries. But as the consumer index no longer trades at a premium, it could be time to re-consider certain counters with relatively attractive valuations and strong fundamentals. All considered, we continue to be optimistic on the outlook in the longer-term, underpinned by supportive policy reforms and accelerated government spending in the region,” stated OCBC.