By LYDIA NATHAN / Pic By MUHD AMIN NAHARUL
Pakatan Harapan’s victory in the 14th General Election last Wednesday should raise prospects for companies associated with links to members of the new ruling coalition.
This is especially evident for Opcom Holdings Bhd, a cyber-optic cable manufacturer which is helmed by chairman and CEO Tan Sri Mokhzani Mahathir, that saw its share price close 35% higher at 60.5 sen last Tuesday, a day before the market was closed for polling day on May 9.
Shares of Ewein Bhd and Thriven Global Bhd increased as much as 8% and 28% respectively, closing at 39 sen and 25 sen, while Eden Inc Bhd saw its stocks rise 21%, closing at 17 sen last Tuesday.
Both Eden and Thriven Global are associated with Datuk Fakhri Yassin Mahiaddin, the son of new Home Affairs Minister Tan Sri Muhyiddin Yassin.
Rakuten Trade Sdn Bhd research VP Vincent Lau said the rise in share price of these companies was driven by speculative sentiment and the investor demand for such counters is likely to continue for a while.
“There is more market activity which may continue in the near term because of the euphoria of the new government. We can expect it to continue as investors try to uncover more of such stocks,” he said to The Malaysian Reserve (TMR) last Friday.
For investors preferring to stick to the fundamentals, PublicInvest Research sees greater opportunities in the mid- and small-cap space as some share prices have been beaten down quite substantially in recent weeks, despite no discernible changes in the fundamentals.
The research outfit noted market conditions over the mid-to-longer term will remain encouraging, underpinned by improving global growth and earnings, and therefore any significant market weaknesses should be taken as opportunities to accumulate.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the public holidays last Thursday and Friday following Pakatan Harapan’s win will help contain initial knee-jerk sell-offs in the Malaysian markets.
“The two-day break provided a circuit break. Because it short-circuited the selling, the market will rebound by the time it reopens on Monday (today),” he said.
He said despite the initial sell-off in local equity markets, the uptake in the US stock markets would provide a backdrop for renewed investor take-up of equities over the medium term.
In the past weeks, the US markets saw gains due to analyst expectations of an interest-rate hike, which should be announced by the US Federal Reserve in the coming months.
However, Pong said this would be a negative for emerging markets including Malaysia as it makes yields in the US more attractive to investors.
“Markets tend to get affected if holding interest rates do go up, and in Malaysia, rates have not gone up since January despite people expecting the Bank Negara Malaysia to embark on a hike,” he said.
He added that the overlay of the election results might weaken the ringgit and cause some apprehension in local markets.
“It is difficult to forecast when there is to be a disruption. We have seen fresh intention by the new government to eliminate the Goods and Services Tax, so we will have to see how it pans out,” he said.
Nevertheless, Pong sees it as a good change as there is optimism and market investors are in buying moods.
“I believe foreign funds will sell because they will be able to feel the change (in government). International media have picked up on the news that has made history in the country. I think local investors are also going to be very optimistic,” he said.
RHB Bank Bhd expects a knee-jerk sell-off today when the market reopens as Malaysia will see risk premium spike higher.
“We believe investors and foreign portfolio funds, in particular, will choose to exit first as there will likely be selling pressure on the ringgit,” it said in a report.
The report added that international rating agencies may need to be convinced that the new government has a viable and coherent economic strategy.
The construction sector may be vulnerable as infrastructure projects are reassessed, while exporters benefit from a weaker ringgit.