THE local bourse is expected to buck the regional/global bullish trend – if there is any – following the overnight market run-up on Wall Street as the US October producer price index (PPI) figures reinforced the view of inflation already peaking.
On the contrary, UOB Kay Hian Research expects a period of “interim weakness” to ensue in the local bourse after the 15th General Election (GE15) slated this Saturday (Nov 19) should the following scenarios materialise:
- Pakatan Harapan (PH) emerges as the coalition with the highest number of parliamentary seats;
- The Yang di-Pertuan Agong invites PH to form a coalition (a few days to do so);
- If PH fails to form a ruling coalition, then the Agong will propose a coalition which has the majority of parliamentary seats to form a government In our base case the winning coalition would have Perikatan Nasional (PN), Barisan Nasional (BN) and Gabungan Parti Sarawak (GPS) as the main component coalition members; and
- Based on various surveys, it would seem that PN will lead the coalition and Muhyiddin would again emerge as PM.
“Nevertheless, we expect Malaysian equities to quickly regain momentum to be aligned with the global equity momentum after the formation of a new government,” opined head of research Vincent Khoo in a post-GE15 stock market outlook.
However, UOB Kay Hian Research caveated that such outlook can only happen if:
- There is stability in business policies, noting that all coalitions’ manifestoes have largely converged in support of the people’s welfare, SMEs and green agendas, with no apparent policies that would damage business sentiment; and
- No repeat of highly socialistic policy introduction that would deeply dampen business sentiment which caused a steep market slump post GE14 (even should PH form the new government).
“Recall that the most controversial proposal after GE14 was the proposed restructuring of tolled road concessions which has been largely addressed by a creative scheme which allowed Gamuda Bhd to offload its key tolled roads at market-driven pricing,” added the research house. – Nov 16, 2022
