Investors await Cabinet line-up for leads

Once this episode is over, people will sell away the politically-linked counters 

By HARIZAH KAMEL / Pic Source:

THE political developments in Malaysia this week appear to have little impact on investor sentiment but analysts opined that stocks linked to political parties are a cause of concern as well as an opportunity. 

With Datuk Seri Ismail Sabri Yaakob on track to become the ninth prime minister, investors turned net sellers with the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) ending 10.3 points lower at 1514.9 points on the selling of glovemakers and banks stocks in anticipation of fresh demand set to be made on the incoming administration for voting support. 

While there was little trading interest in many of the former party/ leader-linked counters yesterday, economic analyst, Associate Prof Dr Baharom Abdul Hamid told The Malaysian Reserve (TMR) at this very moment, political-linked stocks could offer good returns or mitigate losses. 

“Investors may have adopted a ‘wait and see’ on the next line up of the Cabinet, especially the critical positions such as the Finance Ministry and ministerial posts,” he said. 

Putra Business School Associate Prof Dr Ahmed Razman Abdul Latiff said stocks with political linkage could be more a speculative factor instead of actual long-term fundamental change in prospects. 

“Political linkage can be useful but used as a speculative factor by investors instead of contributing to a real and tangible long-term benefit to the company,” he said. 

Malacca Securities Sdn Bhd head of research Loui Low believes investors should focus on non-political stocks in this corporate earnings reporting season instead. 

“Once this episode is over (new government appointment), people will sell away the politically-linked counters. These are just short-term catalysts only,” he warned. 

Certain counters linked to political parties that were actively traded were Barisan Nasional (BN)-linked MyEG Services Bhd, which rose 17 sen to RM1.82 at market close yesterday. 

In a bourse filing on Aug 18, its group MD Wong Thean Soon acquired 2.2 million shares to take his stake to 32.177% or 1.15 billion shares. 

Retirement Fund Inc has used the rise in MyEG shares to cut its stake by 700,000 shares on Aug 17, according to the company’s exchange filing. 

Several Umno or BN-linked counters showed little reaction, including KUB Malaysia Bhd.

The company’s substantial share-holder is Umno-linked JAG Capital Holdings Sdn Bhd, controlled by former Finance Minister II Datuk Seri Johari Abdul Ghani.

Integrated travel and hotel group Avillion Bhd has risen across the bourse and is now the most actively traded stock. It is not clear if the group has any political ties. 

Stocks often linked to opposition leader Datuk Seri Anwar Ibrahim, such as Advance Synergy Bhd and Malayan United Industries Bhd retraced gain in the past week to close lower as his chances of becoming the country’s ninth PM eased.

Development externally could provide a catalyst for Bursa Malaysia to inch higher in the future according to analysts at RHB Banking group. 

In a recent research report, RHB Bank group chief economist and market research head Dr Sailesh K Jha and rates/foreign exchange strategy head Dr Suresh Rama noted foreign investor sentiment towards Malaysia, from a tactical perspective, could be turning as they observed allocation of capital to the local equity market and away from the local currency government bond market. 

Despite media reports of further fiscal stimulus in China potentially being announced, Jha and Rama expect risk sentiment towards the market has cooled and remain weak in the second half leading to funds seeking opportunities elsewhere including Malaysia despite the negative news headlines in the country. 

The ringgit greenback trade could also favour the local unit, they added. 

“The currency market implications are that we are tempted to short the US dollar/ringgit on a tactical basis as it seems the 4.24-4.25 range could be a short-term top. We await further confirmation that this range will hold before going short US dollar/ringgit. In global currency markets, risk aversion once again grips spot foreign exchange markets as Japanese yen and Swiss Franc are bid,” they noted.