Stocks To Watch GLCs, politically-linked stocks, construction, ringgit

Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Friday, 03 May 2013 20:55
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KUALA LUMPUR (May 3): The performance of the stock market on
Monday (May 6) and individual counters will depend largely on the
outcome of the general election on Sunday (May 5).
Stocks that are most likely to be in the spotlight are companies linked to
the government (GLCs), political parties and the CONSTRUCTION []
sector, which has been given substantial infrastructural jobs from the BN
government.
The ringgit will also be in focus, depending on how foreign investors
react to the outcome of the Federal and state elections.
Many stock market players believe that the market and the ringgit will
rise if incumbent Barisan Nasional (BN), led by caretaker Prime Minister
Datuk Seri Najib Razak, wins the 13th general election (GE13) as there
is certainty that the current investment-friendly policies will continue.
The stock market is expected to fall if the opposition coalition Pakatan
Rakyat (PR), which has no track record in running the Federal
Government, wins the general election and takes over control of
Putrajaya.
But the market could recover quickly from this knee-jerk reaction if PR,
also seen as business-friendly, could decide fast who the prime minister
is and form the Cabinet quickly.
According to Credit Suisse, if BN wins, companies seen benefiting from
a continuity in the nation’s leadership include CIMB Group, Gamuda,
IJM Corp, IJM Land, GENTING BHD [], Genting Malaysia, Bumi Armada, Tenaga Nasional and UEM Land.
A BN win could also lure investors into sectors such as construction, property, oil and gas (O&G) and healthcare industries
that are being promoted by Najib’s government.
Other stocks to watch include SapuraKencana Petroluem, IHH Healthcare and Faber Group, as well as companies with
Iskandar Malaysia theme.
Stocks linked to billionaires T. Ananda Krishnan and Syed Mokhtar Al-Bukhary, who are close to Najib, may have a relief rally
if BN wins. These firms include Astro, DRB-Hicom, Maxis, MMC, Padiberas and Tradewinds.
Stocks that were sold down today due to fear that BN might lose could see a rebound if BN wins. These include Axiata,
CIMB, KLK, Genting, BAT, Petronas-linked counters, PPB, Tasek, UMW, TAHPS, Allianz-PA, Pharma and Bintulu Port, as well
as Top Glove.
While politically-neutral glove stocks may not be negatively affected if BN wins, SUPERMAX CORPORATION BHD [] may
take a hit as its controlling shareholder Datuk Seri Stanley Thai has openly stated he does not support the BN. His stock was
sold down after he declared his political stand.
But if PR wins the election, the FBM KLCI could be bashed. Companies that will dance with the BN win may come under
selling pressure.
In the March 2008 general election in which PR denied BN of two-thirds majority in Parliament and grabbed 5 out of 13
states, the benchmark stock index plunged on its first trading day after the results were released.
On March 10, the KLCI fell 10% and this triggered a circuit breaker that suspended the index for an hour.
Stocks that fell sharply on March 10 and continued to decline included MRCB, DRB-Hicom, TNB, Prima Media, KUB,
Punchak, Pos, CIMB, TM, MMC, MAS, Star, Scomi, IJM, Sime Darby, Sime Darby, Gamuda, Naim and Airports.
Perhaps, this round it may also include UEM, FGV and SapuaraKencana.
And companies with monopolies and concessions with terms seen unfair to the government may also come under scrutiny.
However, companies of self-made businessmen or politically neutral stocks may continue to thrive.
In the last election, the ringgit also came under pressure as foreign investors sold down their holdings in stocks and bonds for
fear of political instability.
Come Monday, the palm oil market may also react to the election outcome.
Reuters reported that Malaysian palm oil futures slipped to a near five-month low today (May 3), posting a weekly loss of
2.7%, as many investors left the on the eve of the polls.
"People are worried the stock market is going to go down. A weaker ringgit will be good for palm oil, but a weaker stock
index is bad. So we're not sure which way palm will move -- it depends on the results of the elections," a trader told Reuters.
Investors also avoided taking risks as they waited for further trading clues from official data on palm stocks and output levels
due next week.
The benchmark July contract on the Bursa Malaysia Derivatives Exchange fell 0.3% to close at RM2,254 (US$743) per tonne.