Analysts: Consumers still cautious about spending

Petaling Jaya: Malaysians are likely to change their lifestyle and spending patterns given the uncertain impact of the global economic slowdown.

Analysts said consumers would likely remain cautious next year.

OSK Research said although the Kuala Lumpur Composite Index had reflected the US financial turmoil and the global economic slowdown, the full impact of a slowing economy had yet to hit the man on the street.

“We believe the true impact will hit Malaysian shores by January as exporters clear off their previous order books and new orders are significantly cut back,” OSK said, adding that domestic spending would take a turn for the worse after the festive season.

The research house said after months of weaker spending power due to high inflation, the capacity of Malaysians to cope with reduced income in 2009 would be eroded, resulting in a cutback in spending on leisure travel and imported high-end products.

As households scrutinised spending patterns, OSK Research said there would still be winners.

“On the flipside, automakers of affordable cars, providers of staple food products, domestic travel and domestic apparel brands are likely to benefit from downtrading by the consumers,” the research house said, adding that it had identified seven sectors — auto and autoparts, breweries, broadcast media, food, retail, transport and tourism, and tobacco — which it expected to be the beneficiaries.

“Given the rather gloomy outlook for next year, during which total industry volume for the auto sector is expected to fall 11% with a massive pullback on the commercial and high-end passenger vehicle segment, we expect consumer demand to shift to lower-priced fuel-efficient vehicles,” OSK said.

Companies involved in selling necessities targeted at middle to low-income earners will be the beneficiaries while low-cost staple food manufacturers will gain due to the affordablity of their products.

OSK said operators of toll roads, domestic flights and flights within Asean would also likely be beneficiaries as more consumers would opt for domestic holidays or shorter flights to save on the still high fuel surcharge.

However, it warned that these beneficiaries of downtrading were medium-term investing ideas and were not entirely suitable for the current volatile market conditions.

“We want to advise investors to keep a close watch on these companies and look for the right entry levels come the first quarter of 2009 as stability returns to the market,” OSK said.