Malaysian stocks seen gaining as ruling coalition wins in tight vote(update)

KUALA LUMPUR: Malaysian stocks could rise on Monday after the
National Front coalition extended its 56-year rule, seeing off a strong
challenge by an opposition alliance that had unnerved investors because
of the potential for political instability.
The National Front,
or Barisan National (BN), won 133 seats in the 222-member parliament in
Sunday's election, although it failed to regain the two-thirds majority
it lost for the first time in 2008.
"The market should rally
strongly as Barisan National won more than expected. Many had forecast
120 to 125 (seats) as a base case," said Chris Eng, head of research at Etiqa Insurance & Takaful Bhd.
Following
the opposition's unexpectedly strong gains at the last general election
in 2008, the Kuala Lumpur benchmark stock index fell more than 10
percent in a single day. Some polls had shown the opposition gaining on
the National Front in recent weeks, raising the prospect of a hung
parliament or even an opposition victory.
"The stock market doesn't like uncertainty," Pong Teng Siew,
head of research at Kuala Lumpur-based Inter-Pacific Securities, said
before the election results. "If BN wins or gets the two-thirds
majority, I think the market will rally." - Reuters
Earlier report
KUALA
LUMPUR: BURSA Malaysia is expected to see lacklustre trading this week
as most investors are likely to stay on the sidelines pending clarity
on post general election policy.
Affin Investment Bank vice-president/head of retail research Dr Nazri Khan
expected the FTSE Bursa Malaysia KLCI (FBM KLCI) to finally digest its
long rally over the last six weeks and go into profit-taking mode
following the resolution of the general election.
“The local
benchmark index is expected to consolidate after breaching an all-time
high of 1,718.44 on April 30, gaining 6.5% since March 18, 2013. This
will be dampened by the softer regional tone and weaker-than-expected
economic data from the US and China,” he told Bernama.
Nazri said further weakness in the top five largest stocks on Bursa Malaysia namely Maybank, CIMB, Axiata, Sime Darby and Petronas Chemicals would suggest more downside bias for the index this week.
However, the strength in global bourses however should provide cushion to the local weakness, he said.
He
said optimism in the US and Europe could eventually lift the local
market but there could be a selldown by investors who wish to
temporarily stay on the sidelines just after the general election.
“We reckon the magnitude of downside correction will correlate with the outcome of the general election.
“Our
view remains unchanged, we maintain that general election market
selldown due to political shock is temporary and will normalise within
weeks. We always believe that market performance over the medium term
is always dictated by fundamentals while political shocks only impact
short-term market performance,” he added.
Despite election
uncertainties, the local benchmark's ability to hit new record high
driven by aggressive foreign institutional buying was a testament to
positive local fundamentals, said Nazri.
He said local factors
such as healthy foreign reserves, ample local liquidity, banks' strong
capital base, moderating local inflation and Bank Negara Malaysia's accommodative monetary policy are prime key attractions to pull investors.
“As
for stock picks, we opt for quality blue chips that are well positioned
for the new government business model. As such, investors with longer
term investment horizon should capitalise on cyclical stocks especially
within the banks, construction, oil and gas, utilities and gaming
sectors as potential post general election play and investment themes,”
he added.
On a Friday-to-Friday basis, the benchmark FBM KLCI ended 16.52 points lower to 1,694.77.
The
Finance Index declined 81.78 points to 15,851.49, the Plantation Index
fell 143.91 points to 7,963.91 and the Industrial Index eased 3.28
points to 2,836.02.
The FBM Emas Index decreased 121.85 points
to 11,556.97, FBMT100 was down 110.68 points to 11,405.92, the FBM Ace
Index dropped 68.69 points to 3,902.12 and the FBM Mid 70 slipped
122.26 points to 12,761.38.
Weekly turnover fell to 3.235 billion shares worth RM7.97bil from previous week's 3.79 billion shares worth RM8.22bil.
Main
market volume declined to 2.788 billion shares valued at RM7.876bil
from 3.06 billion shares valued at RM8.09bil previous week.
The
ACE market volume dropped to 106.217 million shares worth RM10.309mil
from 571.28 million shares worth RM102.80mil previously.
Warrants
increased to 337.338 million units valued at RM66.747mil against
previous week's 151.92 million shares worth RM18.72mil.
The market was closed last Wednesday for the Labour Day holiday. Bernama