AN ex-journalist friend noted how Friday’s (Aug 13) live telecast of Prime Minister Tan Sri Muhyiddin Yassin’s special address to the nation at 6pm was “perfectly timed”.
“It was after the stock market has closed, hence there will be two days (weekend) to contain market jitters stemming from any adverse outcome or reaction … but may the force (he is a Star Wars fan) be with those who went bottom fishing on Friday,” so remarked the retired friend who has since been observing the stock market as a favourite pastime.
Recall that on Friday, the PM extended ‘olive branch’ in the form of political reform which was rejected outright by the Opposition. The promised reforms included equal funding for all MPs, the PM’s two-term limit, anti-hopping laws, more parliamentary committees with 50% Opposition chairmanship and the implementation of Undi 18.
On Friday, the FBM KLCI closed above the 1,500 psychological mark at 1,505.11 points, up 3.14 points or 0.21%. Year-to-date (YTD), the benchmark index has slumped -7.5% (Dec 31, 2020: 1.627.21 points).
No thanks to ailing effect from a fourth wave of COVID-19 and political turbulence stemming from attempts to unseat Muhyiddin, Bursa Malaysia is today one of Asia’s worst performing stock market – a sharp reversal of fortune from last year when the local bourse was regarded as the region’s star performer.
According to MDF Research, retailers have cumulatively been the only net buyers on Bursa Malaysia to the tune of RM9.30 bil YTD till Aug 9 while both local institutions and foreign investors were net sellers amounting to -RM3.31 bil and -RM5.99 bil respectively.
As the stock market could have already priced in the current political scenario, Malacca Securities Research head Loui Low expects the downside risk to be limited with investors looking beyond the pandemic for now.
“Should he (the PM) be able to gain some support (last Friday), the market may perform much better in that sense over short term as it deemed as a positive event,” Low told FocusM.
“However, the mid- to long-term outlook very much hinges on the election that he is calling for after the pandemic. That will depend on who is being elected which is hard to predict from now.”
JF Apex Securities Research head Lee Chung Cheng, too, noted that the stock market has been digesting eventuality of such political outcome since last year as evidenced by the net outflow of foreign fund.
“Impact will be there but not significant,” he observed. “There is likely a challenging short- term outlook which is bogged down by political instability and a widespread of the Delta variant affecting re-opening of the economy.
“Investors should construct defensive portfolio, taking position on value (re-opening theme and laggards) and high dividend yielding stocks towards 4Q 2021.”
TA Securities Research head Kaladher Govindan does not expect major foreign investment outflow from the most recent political development as most foreign funds which wanted to exit because of uncertain domestic politics had already done so.
“In fact, any positive outcome that ends the current political tussle and leads to a stable government should be positive for the economy and the equity market,” he opined. “Expect any knee jerk downside to be a buying opportunity.”
Kaladher deems the 1,450-point level to act as a good support while feeling “upbeat about the long term potential as I am of the view a new bull cycle has already kicked off since Bursa Malaysia hitting a low of 1,207 in March 2020.”
“Thus, investors should view any price weakness in domestic equity market as an opportunity to go long. Banks look cheap in a monetary tightening environment, which could happen in 2H 2022,” he added.
As it is, all ears will be on an official announcement after the Muhyiddin’s audience with the Yang di-Pertuan Agong tomorrow (Aug 16) with all indications pointing towards a decision to step down from his post. – Aug 15, 2021
Photo credit: Malaymail
