Back in March I commented that there will be “one more pain to come” as the bear cycle moves to the next and possible final phase. This is the hardest and longest part of the market which is characterised by depression.

Judging from the sentiment I feel from reading reports, articles and talking to traders, I think that we are currently about to enter that phase. As I speak the KLSE has just given up all its gains from March 2007 and expected to drift lower.

Just like when bears were being ridiculed in 2007  for their unwarranted pessimsim, bulls now risk sounding stupid in the face of recent market action in our current political climate. As the saying goes, it never rains but pours.

If I tell you now that I expect the market to head lower, possibly below 1000 and gloom to deepen even further, I be you may not even disagree. So much for predictions.

So what now for market investors? In the international space, the classic investments during such times are: consumer staples (e.g food producers, tobacco), utilities (e.g. electric companies, water companies), bonds, and high dividend. Consumer staples such as Dutch Lady and F&N are seen to be essentials, and so even during economic downturn, people will spend on food and drink (as well as cigarettes). Utilities like Tenaga provide electricity, which is also seen to be an essential. Besides these 2 categories, investors will also put money into dividend paying companies. Some of them, like Genting and Public Bank are yielding around 7% at current prices (Manulife yielding 10%). Attractive for the income if nothing else. Bonds are also seen as a safe play for similar reasons because yield will always keep prices from going too low.

It pays to have a large chunk of your portfolio in some of these securities at the moment. But remember not to get too wedded to the idea of cheap income as share prices can also fall and dividends can be cut. Also some of the best bargains are to be had during harsh times, so it pays to keep one eye on those growth stocks and start buying them out over the phase - stocks like Notion, Dgate , Maybulk etc.