Defensive telcos hounded by Fed rate hike fears

Should investors be spooked?

Telco stocks are often favoured for their defensive nature and stable dividend yields. However, this attractive trait is now being eroded by fears of an interest rate hike by the US Federal Reserve.

OCBC Investment Research notes that while rate hike fears are a key detriment to the attractiveness of telco stocks, investors should think twice before moving their funds from this defensive sector.

“From the latest set of sluggish economic data out of the US, market watchers have pushed back the likelihood for a rate hike to 3Q or 4Q 2015. And even if there is a rate hike then, most market players believe that the Fed would still adopt a “wait and see” approach and not push for a series of rapid rate hikes in succession. As such, we do not expect the telcos to lose much of their relative attractive against other safe investment options like fixed deposits,” said OCBC.