Not Glamorous But Consistently Delivers Great Returns
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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The market has reversed and corrected, you have excess cash, you feel like starting to invest in Bursa Malaysia, but you are not sure which companies to invest in — why not focus on consumer staples stocks, the Shariah-compliant essential goods sector.
In the world of investing, filled with ups and downs, many investors are often attracted to sectors that promise rapid growth such as technology and artificial intelligence (AI). However, in the excitement of chasing high returns, many forget that stability and consistent income are also important for the long term. This is where the essential goods sector — such as food, beverages, and daily necessities — plays a crucial role.
This sector may not be glamorous, but it has proven to be resilient in any economic condition. Everyone still needs to eat, drink, and maintain hygiene, regardless of whether the market is rising or falling. This article will explore how investing in essential goods can be a stable and worthwhile complement to your portfolio.
Key idea: The global consumer staples sector may not be as exciting as the technology or communications sector in terms of growth, but it remains robust and defensive. Companies in this sector typically generate stable cash flows, regardless of economic conditions. Many major players in the industry have focused on reducing debt in recent years, creating room to return more value to shareholders through dividends and share buybacks.
Investment strategy: If your investment portfolio is too heavily weighted towards the technology sector, it is time to rebalance it with stocks from the essential goods sector — such as food, beverages, and daily products. Demand for these goods remains stable, even in difficult times. Focus on companies that are market leaders in their products — at least in the top three. Look for companies that continuously improve product quality and have the ability to raise prices without losing customers, even when costs increase due to inflation.
Overall picture: With efficient management, attractive product innovation, and improved operational efficiency, the essential goods sector can offer competitive returns. They do not depend on massive economic growth, AI spending, or cloud technology — just basic necessities like food, beverages, and hygiene products that are always needed.
If you want to stabilise your investments, this sector simply cannot be ignored.
Below is a list of Shariah-compliant stocks in the consumer goods (consumer staples) sector listed on Bursa Malaysia. These stocks include companies involved in the production of food, beverages, and household products that are daily necessities for consumers:
1. Nestlé (Malaysia) Berhad (NESTLE)
2. Fraser & Neave Holdings Bhd (F&N)
3. QL Resources Berhad (QL)
4. Spritzer Bhd (SPRITZER)
5. Eng Kah Corporation Bhd (ENGKAH)
6. Hup Seng Industries Bhd (HUPSENG)
7. Power Root Berhad (PWROOT)
8. Kawan Food Berhad (KAWAN)
9. Heng Guan Food Industries Bhd (HENGGUAN)
10. TOMYPAK Holdings Berhad (TOMYPAK)
A company that provides flexible packaging for food and beverage products.
The tension from the global trade war is now creating significant opportunities for Asian consumer stocks, as investors seek shelter in companies that fulfil the basic needs of local buyers.
Goldman Sachs and Morgan Stanley recently recommended the Asian consumer staples sector following the new wave of tariffs on 2 April, urging investors to take a more defensive stance.
Fidelity International also took advantage of the decline in Chinese consumer stock prices, hoping that these companies would benefit from government stimulus measures.
The MSCI Asia Pacific Consumer Staples index surged 5% since 2 April, the best performance among 11 sectors, compared to a 2.5% decline in the broader market benchmark.
Supermarket chains such as Yonghui Superstores in China and Kobe Bussan in Japan each rose at least 19%, followed by other beverage and dairy companies that also posted strong performances.
This sector had previously lagged due to the excitement around technology stocks, but a notable shift has now occurred as investors move from growth stocks to defensive stocks, given that US-China trade tensions are casting a shadow over the global economic outlook.
The sector has also received support from signs that Asian governments are prepared to launch fiscal stimulus to support domestic spending.
"This change signals a shift in investor mindset from pursuing global growth and exports to seeking the stability of domestic demand," said Charu Chanana, Head of Investment Strategy at Saxo Markets, Singapore. "Investors are beginning to assess a more fragmented and protectionist world, where local policies and domestic consumption matter more."
Although a prolonged trade war could affect nearly all sectors, consumer staples have proven more resilient during economic pressure.
The sector also experienced four consecutive years of decline until 2024, compared to the technology sector which surged from 2019, providing room for recovery.
Fiscal stimulus such as 48 new measures by the Chinese government to encourage household spending, as well as South Korea''s supplementary budget of 12 trillion won, are expected to continue supporting this sector. In India, favourable monsoon forecasts are expected to boost rural demand.
Fidelity International increased its holdings in Chinese and Hong Kong consumer stocks following the major sell-off on 7 April, with priority given to mainland China-listed stocks expected to benefit more from Beijing''s support.
Asian consumer stocks also performed better than their US and European counterparts during periods of market uncertainty, thanks to promises of swift policy support.
Goldman Sachs upgraded the sector to "overweight", emphasising its defensive nature and domestic focus. JPMorgan took a similar stance in Southeast Asia.
"Consumer staples is not an industry where demand fluctuates significantly, and most of its companies have limited exposure to US exports," said Hironori Akizawa, CIO of Tokio Marine Asset Management International.
The main risk is if inflation surges, which could dampen interest in this sector.
However, for now, investor consensus views this sector as a safer bet, with earnings growth expectations double that of the MSCI Asia Pacific index over the next 12 months.
"This sector will remain a focal point for investors in the current environment, unless there is a major change in US tariff policy," said Nick Twidale, Head of Market Analysis at AT Global Markets, Sydney.
Asian consumer stocks have now become a ''safe haven'' for investors during the trade war, supported by stable domestic demand and government policy support. The sector is expected to continue attracting interest as long as global uncertainty persists, although inflation risks need to be monitored.
This article is intended for educational and academic discussion purposes, and is not a recommendation to buy or sell.
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Consumer staples stocks refer to companies that produce daily essential goods such as food, beverages, hygiene products, and household items. Demand for these products remains stable regardless of economic conditions, making stocks in this sector more defensive.
Shariah-compliant consumer staples stocks allow Muslim investors to invest according to Islamic principles whilst enjoying the stability of the essential goods sector. These companies are not involved in prohibited activities and have debt ratios permitted under Shariah guidelines.
Yes, consumer staples stocks are often regarded as defensive investments during volatile markets. Because demand for essential goods is not severely affected during recessions, stocks in this sector tend to be more stable compared to other sectors.
Examples of consumer staples stocks on Bursa Malaysia include Nestle Malaysia, Dutch Lady, QL Resources, and Power Root. These companies have a consistent track record and frequently pay dividends to shareholders.
Shariah-compliant consumer staples stocks offer a unique combination of stability, consistent returns, and halal investment. They are a wise choice for investors seeking protection during market uncertainty.
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