The art of shifting funds as Malaysia looks for new PM candidate

THE resignation of Prime Minister Tan Sri Muhyiddin Yassin yesterday (Aug 16) both lengthens and increases financial market uncertainty as the eventual coalition that forms the new leadership can create policy delay, changes as well as the coalition being unstable itself.

As this might or might not be clarified soon, investors have no better choice but to keep reassessing new developments to adjust their views and strategy accordingly.

Below are some tips from Affin Hwang Asset Management on how investors can position themselves in the financial market:

  • For conventional funds coming from a heavily invested level, reducing some weights for cash optionality is prudent in this environment. Shariah funds have higher cash levels going into this crisis due to less re-opening play options and significantly weaker market compared to conventional funds.
  • Technology, retail, healthcare, and manufacturing sectors offer the least political risk although not from a valuation perspective;
  • Banks, government-linked companies (GLCs) and politically-linked stocks are at risk now due to potential for more national duty given the limitation of fiscal and monetary policies to stimulate the economy.
  • This is a risk and not an eventuality as a new coalition might not go down this route or it might not be necessary if the economy opens with pent up private sector consumption.
  • If politics can stabilise combined with economic re-opening, there is potential for a 5%-10% bounce towards the year end. In this regard, Affin Hwang favours:
    • Re-opening plays like banks, retail, property, healthcare
    • Global growth plays like technology, manufacturing
    • Digitalisation theme like telco, payment companies

Moving forward, Affin Hwang opined that the least negative impact to the market in increasing order is as follows:

  • Continuation of the current administration either under Deputy Prime Minister Datuk Seri Ismail Sabri or even Muhyiddin as the party could have the largest minority coalition;
  • Barisan National (BN);
  • Pakatan Harapan – If history repeats itself, the coalition represents the most policy and personnel changes during its tenure; and
  • A unity or bipartisan government – As it is unprecedented, its impact on market can be harder to evaluate at this point.

“Whatever coalition that wrest control of Parliament will benefit from the vaccination work done and reap the benefits of economic reopening as well as less selling pressure by government-linked investment companies (GLICs) from the expiry of the various withdrawal schemes,” added Affin Hwang. – Aug 17, 2021

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