KUALA LUMPUR: The formation of a unity government could result in synergistic benefits for the country given the different strengths of the component coalitions.
According to Hong Leong Investment Bank (HLIB) research, the outcome of a unity government is a "positive one given the circumstances" although it acknowledges that the working relations between Pakatan Harapan (PH) and Barisan Nasional (PH) could also serve as a key challenge.
"The Centre for Market Education (CME) said that PH’s manifesto placed greater emphasis on social issues while BN focused more on the economy.
"We reckon that such differences, if managed properly, could result to 'synergies' being reaped from each other’s strengths," it said in its market strategy report.
Datuk Seri Anwar Ibrahim was yesterday sworn in as the nation's 10th Prime Minister following a four-day political impasse due to no single coalition having sufficient seats for a simple majority.
For investors, the focus now turns to the re-tabling of Budget 2023, which HLIB said could contain some of the GE15 manifesto pledges by coalitions of the unity government.
"On cost of living, PH pledged to reduce toll charges (and eventual elimination) and structure a minimum wage plan, while BN pledged to eradicate absolute poverty via the Assistive Basic Income (auto cash credit to households with monthly income of under RM2,200) and 2% income tax cut for those earning RM50,000-100,000 (M40).
"For housing, PH pledged a 100% stamp duty exemption for first time buyers (under RM500,000) to be extended to sub-sales and more affordable housing covering ownership, rent, mid-low cost and transit housing.
"Both PH and BN pledged to double the annual healthcare allocation to achieve 5% of GDP by 2027," said HLIB.
As East Malaysian coalitions are also a part of the unity government, HLIB also expects to see a growing emphasis on development and oil revenue in that part of the country.
The research firm noted that a challenge to the unity government could come in the form of the various state elections held next year including in Selangor, Negeri Sembilan, Kedah, Kelantan and Terengganu, which could put PH and BN's working relationship to the test.
"The upcoming election for the delayed Padang Serai parliamentary seat on 7 Dec could provide a glimpse to this," it said.
With the near-term political risk having eased, HLIB reverted to its previous price-earnings valuation yardstick of minus-one standard deviation below the five-year mean to derive an end-2022 FBM KLCI target of 1,530, up from 1,470 previously.
For 2023, it maintained its target of 1,580.