GE15 impact on Bursa Malaysia: What stocks to buy pre- and post-GE15?

WHILE there are some trading opportunities tied to speculation surrounding the 15th General Election (GE15), punters have been advised to stick to fundamentally sound and liquid plays given that the GE15 is likely to have a neutral-to-mild uptick market effect as global issues take centre stage.

Even as its projection assumes a base case for an UMNO-led coalition winning a bigger majority in parliament which positively implies stability in politics/business policies, UOB Kay Hian Research reckoned that the market still lacks past elections’ (before GE14) mojo of coinciding with major government contract awards.

“Instead, investment sentiment will continue to be swayed by global issues – stubbornly high inflation and the US’ monetary policy contraction throughout 2022, the ongoing Russia-Ukraine conflict and China’s zero-COVID-19 policy,” opined head of research Vincent Khoo and team in a GE15 strategy note.

UOB Kay Hian Research’s top picks in the GE15 theme are its “buy”-rated large caps such as government-linked company (GLCs) banks such as CIMB Group Holdings Bhd, Malayan Banking Bhd, RHB Bank Bhd while its two anticipated stocks post-GE15 are Gamuda Bhd and MyEG Services Bhd.

“By 1Q 2023, we expect the newly-installed Federal Government to award MRT3 (Mass Rapid Transit Line 3) contracts (Gamuda is a leading bidder for the tunnelling section) and to give the green light for MyEG to roll out the automated testing module for car driver license,” projected the research house.

“Meanwhile, non-rated Citaglobal Bhd (formerly WZ Satu Bhd) could also appeal as a concept-driven trading play.”

Sector-wise, UOB Kay Hian Research observed that over the past four GEs, the sector which outperformed prior to the polling day was consumer while he underperformers were interestingly the construction sector (in both pre- and post-GE) and finance (post-GE).

Stock-wise, the outperformers in the four GEs included KPJ Healthcare Bhd (before and after GE), Gamuda, Tenaga Nasional Bhd (before GE) and Bursa Malaysia Bhd (month of GE).

Conversely, underperforming stocks – generally in most of all periods reviewed – included Telekom Malaysia Bhd (before and after GE) and Malaysian Resources Corp (after GE).

“We would avoid Tenaga Nasional (“sell”/target price: RM6.60) which is unlikely to repeat its market outperformances in some of the past GEs given the risk of future dividend cuts amid tight cash flow (its receivables – mostly from the Government – has ballooned to RM19.2 bil in 2Q22),” added UOB Kay Hian Research. – Oct 19, 2022

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