Question

what are the Stock investment opportunities in a recession market during the COVID 19 in Malaysia?

Answer 1

Recession is a difficult time to make investment related decisions. Shortage of fund availability, liquidity concerns, market volatility etc makes it a decision requiring huge analysis and risks. Also as the recessionary environment related to Covid 19 is so spread across around the globe making it a very difficult analysis as:

1. The impact of recession is not yet fully materialized as many economies are still in lockdown and impact will be seen only once lockdown is over

2. The future of Covid 19 virus is till unclear until a vaccine is not yet found for it

3. Economies impacted by virus is not yet final as virus can still spread to countries where it hasn't reached until a cure is found.

Thus the recessionary impact and the time span until when this recession will continue is unclear. But this recession can also be used as an opportunity for investors with no immediate liquidity needs as most of the financial instruments are currently trading at their lowest. It is generally said that in such uncertain times, it's best to invest in large cap stocks rather than medium cap or small cap stocks because:

1. Large cap stocks see the biggest falling prices and thus best opportunity for investors

2. Chances of large cap stocks not going out of business or sustaining non recoverable losses are less (too big to fail logic)

3. Governments try to supports large cap companies before medium or small cap companies due to the large size, impact on economy and employment opportunities from large cap companies

It's also seen that consumables companies are less impacted by recessionary factors than luxury products. Also covid 19 has seriously impacted industries like airline industry, tourism etc. Thus best to avoid them.

Few large cap companies to look for in Malaysia are Maybank, Axiata group, Tenaga Nasional, Petronas chemical etc