PENDING a more absolute outcome, the local bourse will likely react negatively in a knee jerk reaction to news that the 15th General Election (GE15) has not only failed to resolve Malaysia’s political instability but may even lead to more economic uncertainty.
Moreover, CGS-CIMB Research reckoned that the stock market might have partially priced in a win for the incumbent BN with investors becoming concerned over the strong showing by Islamist party PAS.
“There could also be concerns – similar to those in the past – of the fragility of potential alliances due to their differing ideologies,” opined head of research Ivy Ng Lee Fang in a Malaysia strategy note.
“Taking a leaf from history when the opposition parties did well against BN (Barisan Nasional) in 2008 and 2018, the FBM KLCI fell 3% and 6% one month after GE12 and GE14 respectively.”
In the same manner, if a Perikatan Nasional-led government comes into power, the research house expects potential negative share price reactions for banks, gaming, construction and the brewery sectors.
“If a PH-led government is formed, it could be negative for telco,”’ projected CGS-CIMB Research.
“However, manifestos of both potential governments are friendly to consumers, pharmaceutical and infrastructure spending in Sarawak. We expect significant stock market volatility.”
In the longer term, however, the research house noted that it will be positive if the new government takes steps towards institutional and political reforms. “We cut our KLCI target to 1,484 points for end-2022 to reflect short-term political uncertainties,” it added.
Maybank IB Research is also wary about the unexpectedly strong showing by PAS which equates to a significant structural step-up in the uncertainty surrounding Malaysia’s future political and policy direction regardless of which coalition prevails in forming the next Government.
“Sin sectors like gaming and breweries are most obviously in the firing line, hence we have removed Genting Malaysia Bhd and Heineken Malaysia Bhd from our top picks pending clarity on state and national level intentions,” revealed chief economist Suhaimi Ilias and team.
“Among other sectors, banks are at risk of another (albeit targeted) loan moratorium as per PN’s manifesto, while East Malaysia construction and oil & gas (O&G) stocks may benefit from the region once again playing “kingmaker”. – Nov 21, 2022
