PETALING JAYA: Analysts and fund managers are increasingly bullish on the shock victory by the Opposition coalition Pakatan Harapan (PH), and while they expect a knee-jerk selldown in the market this coming Monday, the FBM KLCI will increasingly turn positive as more clarity emerges.
Some feel the market can end higher in less than a month, while others feel it could take longer. The consensus view, though, is that a new government which promises reforms is positive for the market.
Affin Hwang Asset Management director of equities strategy and advisory Gan Eng Peng (right) said that it is easy to see how the script would be written; Malaysia will be touted as a reform play after a reset on 60 years of policies and on the back of a healthy economy.
MIDF Amanah Investment director of corporate investment banking Sherilyn Foong (centre) said that a PH win is generally seen as positive for corporate Malaysia, as it would see an enhanced role of the private sector being played out.
Retirement Fund Inc or KWAP chief executive officer Datuk Wan Kamaruzaman Wan Ahmad (left) said that the 14th general election or GE14 has seen people rallying to remove a government that put its personal interest first instead of the interest of the people and the country. The promise of money and benefits did not sway the voting public.
“This is positive for the country in the medium and long-term outlook. This will also lead to the country learning from its previous mistakes and repairing its shortcomings to ensure better public and corporate governance,” said Wan Kamaruzaman.
On the market, he said there would be short-term market gyrations and volatility, as Malaysians adjust to a new beginning.
“To those who have positioned themselves in this scenario, any sharp correction is an opportunity to increase Malaysian equity exposure. Nevertheless, my view is that there would not be much downside from its current level, as corporate Malaysia remains generally independent of politics with a positive earnings outlook,” he said.
He added that the election, which generally ended without any violence and a smooth transfer of power, will be looked upon very positively by global markets.
“We will now have long-term stability, which is a magnet for investors,” he said.
Meanwhile, Gan said that heightened uncertainty leads to bigger discounts with the adjusting factor being lower share prices.
“This would be the immediate reaction. We are looking at a 5% to 8% immediate downside within one to three days, where we note that pre-results, the market had already corrected by 3.5% since the April record-high was achieved. Contractors and politically-linked counters could take the brunt of the hit,” said Gan.
Rakuten Trade Sdn Bhd vice-president (research) Vincent Lau said that the PH win was a positive development over the long term.
Just like how the US has the Democrats and Republicans to ensure check and balances, this shows that Malaysia really practises a two-party system.
“We will be recommending clients to buy once the market has calmed. Malaysia has good economic fundamentals and many of the stocks have been significantly sold down. We will start to buy now to position for the year-end,” said Lau.
Gan is bullish on the market’s outlook.
“We think policy uncertainty will fade as the incoming government clarifies its position. Any new government would want to generate confidence for the market and overall population. This fading uncertainty should bring investors back to the market.
“Ultimately, we think markets would end up higher in less than a month than pre-election with this new government, barring unforeseen global macro overhang and a smooth transition of power is achieved,” he said.