Credit Suisse: BN will prevail

KUALA LUMPUR: Barisan Nasional (BN) is expected to win a stronger mandate from the people in the upcoming general election, which is expected to be held in the middle of this year, said Credit Suisse in a note to its clients.

“Our base case is for Prime Minister Datuk Seri Najib Tun Razak to be re-elected with a stronger mandate than his predecessor,” Credit Suisse analyst Adam Quek said in his report.

Quek said that although a two-thirds majority might be “difficult to regain”, the probability of the opposition being voted into power and where Najib was unable to secure a sequentially better mandate resulting in a challenge to the presidency of Umno was low.

Credit Suisse said that based on the latest Merdeka Centre survey, Najib's approval rating climbed to 69% from 59% in August 2011, noting the improvements in approval rating across all racial groups, and in particular, among the Chinese voters who were the key driving force behind the previous decline.

“The political risk has receded somewhat as Najib's approval ratings have rebounded strongly from a sharp drop after being associated with the Bersih 2.0 rally in July last year following the arrest of 1,667 demonstrators,” the report stated.

The rise in approval ratings for Najib was due to him tackling several key issues ahead of the elections to consolidate support, including the scrapping of Public Service New Remuneration Scheme that drew criticism because it unfairly favoured top civil servants.

The scheme had been replaced by the improved version of the Malaysian Remuneration Scheme, which will see civil servants receive a salary increase of 7%13%, with salary hikes backdated to Jan 1.

“Lower-grade civil servants will receive relatively large percentage increments.

“The revisions should help bolster support for Prime Minister Najib in the civil service,” Quek said in his report.

Credit Suisse added that the recent case where Datuk Seri Shahrizat Abdul Jalil had decided to relinquish her post as the Women, Family and Community Development Minister when her senatorship ended on April 8 would reduce the negative publicity surrounding the issue, although it might still take several months for it to be decisively laid to rest once and for all.

“Significant key issues still remain unresolved, including the planned initial public offering of Felda Global Ventures, the implementation of a minimum wage policy, and a follow-through of the Internal Security Act reform,” it said.

On the impact of the pending general election on the local stock market, Credit Suisse said it still expected the Malaysian market to underperform and trade sideways until the overhang of political risk was resolved after the elections.

“Given its valuation premium relative to the region after a resilient performance in 2011, as well as elevated political risks in the run-up to the elections, Malaysia has underperformed Asian equities during the rally this year,” it added.

After the election, it expects investor interest to shift back to the successful implementation of the Economic Transformation Programme (ETP) and the improving Singapore-Malaysia relationship.

The research house recommends that investors focus on stocks that stand to benefit from increased infrastructure spending from the ETP and domestic companies leveraged to resilient consumption within Asia.

Its top stock picks are IJM Corp Bhd, AirAsia Bhd and Genting Bhd.

i hope Credit Suisse help to bail out Malaysia next time if BN prevail


Credit Suisse