M'sian stocks jump to celebrate BN victory

M'sian stocks jump to celebrate BN victory

With the election overhang removed and the incumbent Barisan Nasional (BN) government retaining power, Malaysia's stock market powered to a high of 1,826 points or 7.8 per cent at the opening of trade but eased later to close 3.4 per cent up. The ringgit also strengthened to a 10-month high of 2.9920 to the greenback.

Volume was higher than usual at 1.9 billion shares worth nearly RM5 billion (S$2 billion) being traded. More than 800 stocks gained and there were only 90 losers, reflecting the upbeat mood.

Analysts expect the market to re-rate and to gradually narrow the gap with regional markets in the months ahead. A number of them have upgraded year-end targets to around the 1,815 level.

They are however more divided about subsidy rationalization and the implementation of a goods and services tax (GST). Those less optimistic about the pace anticipate a further delay "given the smaller BN win" - 133 Parliamentary seats from 140 in 2008 - and Umno elections later this year. The United Malays National Organisation is the dominant party in BN.

"We are of the view now that the subsidy rationalization programme and GST will be pushed later into 2014," said Maybank IB Research.

It also pointed to the extreme volatility that marked ringgit trading during the first hour of the markets on Tuesday, when the currency oscillated between 2.99 and 3.04 against the greenback. Maybank is holding to its year-end target of 2.98, and to between 2.85 and 2.90 by the end of 2014.

Among the top stock gainers on Tuesday were counters perceived to be politically-linked and which had lagged in the run-up to the elections. They included CIMB (10 per cent), SapuraKencana Petroleum (13 per cent), UEM Land (13 per cent), Gamuda (9 per cent), DRB-Hicom (7 per cent) and Felda Global Ventures (5 per cent).

Overseas, Australia's mining firm Lynas Corporation surged 18 per cent on expectations that its controversial Malaysian plant would be left alone following BN's win.

"Today everyone, including retailers, is in," said a remisier who was handling more calls than in the run-up to the election.

Philip Capital's chief investment officer Ang Kok Heng said the buying included those who had sold ahead in anticipation of a BN loss.

AmResearch described the election outcome as "the best compromise for the equity market" with BN maintaining the mandate to ensure policy continuity while opposition Pakatan Rakyat's increased representation provides better checks and balances.

It expects the initial buying wave to be liquidity-driven by the redeployment of institutional monies on the sidelines to increase equity exposure and to benefit big-cap proxies such as CIMB, Tenaga, Axiata and Sime Darby.

Foreign funds - already net buyers to the tune of nearly RM9 billion in the first quarter - are also expected to follow through in the months ahead.

Maybank said the uptrend would be supported by a number of factors, including greater clarity and stability on the political and policy fronts, a strong domestic economy and growth in corporate earnings.

Mr Ang expects new highs in the US market and improving economy to also exert a positive influence on the local market. Still, having bought earlier, he said his fund is currently paring down and sticking to the market wisdom of "Sell in May, go away."

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