M'sian parliament dissolution gives clearer stock market direction

Petaling Jaya (The Star/ANN) - Malaysians likely heaved a collective sigh of relief in reaction to Prime Minister Najib Razak's announcement on the dissolution of Parliament yesterday morning, following months of intense speculation.

For both investors and business alike, the announcement may provide more clarity on the outlook for the stock market going forward, although analysts and fund managers remain cautious.

Most in the investing fraternity agree that trading in the market had been listless over the last few months, with almost no buying interest or rotational plays.

They noted that most market players could not look beyond the election period, and were unable to make a firm decision until the polls had been held.

Analysts believe that the election risk premium has been well priced into the market, notwithstanding the knee-jerk reaction during the early morning trading hours, when the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) fell by 53 points. The market, however, quickly recovered to close flat with the index up 0.4 point to 1,685.4 points.

Volume was heavy at 1.35 billion shares with a total turnover of 2.89 billion ringgit (US$938 million).

"We are now buying some big caps on dips. It's not easy to buy in big quantities, as the volumes are not there," said Areca Capital Sdn Bhd chief executive officer Danny Wong.

While admitting that there would still be downside risks to the market, Wong added that if the index continued to rise over the next one week, local funds would feel the need to start buying so as not to underperform.

He pointed out that most local funds were currently high on their cash holdings.

The FBM KLCI had been mainly propped up by foreign funds over the past 13 weeks, with local funds taking the position of net sellers.

Last week alone, foreign investors bought 2.4 billion ringgit net of Malaysian equities in the open market. This was a surge in buying activities compared with only 193 million ringgit the week before.

"We are a step closer to clarity. In the bigger picture, the FBM KLCI is attractive relative to the market. Hence, we would be buying the oil and gas and banking stocks, where earnings have been quite good. We will also look at Economic Transformation Programme stocks. These are stocks which already have earnings, and it doesn't matter which party wins. When the picture becomes clearer, these stocks will be upgraded," said Wong.

CIMB Research Head Terence Wong said his "neutral" rating was unchanged. He remains cautious on the period leading to polling day, which is likely to fall some time in end-April.

"Despite the Prime Minister's relative popularity at 61% at last count, investors should stay on the sidelines, as election risks could weigh down the market. During the Sarawak state election in 2011, there was widespread concerns about the outcome, causing selling pressure in the market.," he stredded.

"This time, the stakes are even higher, and therefore, the impact could be magnified."

His pre-election preference would be to continue staying defensive and buying high-yielding, non-cyclical sectors and stocks, such as breweries, REITs and utilities.

"Post-election, we are likely to turn more bullish and prefer higher-beta cyclical laggards," he added.

M&A Securities analysts, meanwhile, have advised investors to start taking profit or selling on the market immediately following Parliament's dissolution.

They concurred that there had been artificial support for the market two weeks prior to yesterday's announcement, with low correlation between the performance of the stock market year-to-date and general election results.

While they expect the market to have a knee-jerk reaction following the announcement, artificial support would cushion the fall.

"This provides good opportunity for investors to take profit on index-linked stocks due to the existence of artificial support in the index," they said.

They added that investors who expected the Barisan Nasional to do better than the last general election should start buying just before the announcement of the results.

Meanwhile, Reuters said in a report that the ringgit had started the day weaker but turned higher as investors covered short positions after the announcement.

The newswire said the currency had been under pressure from uncertainty over the vote, widely expected to be held on the last weekend of April.

However, it noted that political concerns on the currrency had been priced in.

It said the ringgit could appreciate further as the announcement had reduced the uncertainties.

"Dollar/ringgit would have fallen further without the election factor. There is a lot of foreign direct investment coming," a bank trader said.

*US$1=3.0 ringgit

COPYRIGHT: ASIA NEWS NETWORK

  • Look, don't touch: Flickr photo of the day 2 hours 0 minutes ago
    Look, don't touch: Flickr photo of the day

    If there's one car that's particularly sought-after among today's well-heeled car collectors, a Ferrari 250 would be it. Usually it's the GTO variant, like the 1963 that sold for a record $52 million last year. A 250 of any sorts demands unfathomable cash, however, which is why we can but gawk at this 250 Testa Rossa. It's as close as any mere mortal will ever come to owning one.

  • Peeling out at Octane Academy, the free driving school for Ford ST owners 2 hours 56 minutes ago
    Peeling out at Octane Academy, the free driving school for Ford ST owners

    Buyers of Ferraris or Jaguars are used to perks from manufacturers – including racetrack lessons to help master their exotic machines. But for enthusiasts on a tighter budget, the Ford ST Octane Academy might be the sweetest deal in motoring: Buy a Ford Fiesta ST or Focus ST hatchback, and the reward is a free day of training at one of America’s longest, most-lavish road courses.

  • Why you can't buy America's greenest car 6 hours ago
    Why you can't buy America's greenest car

    Ask me or any auto expert what's the fastest car you can buy for any given amount, and we could easily cough up several options. Same for most luxurious, or off-roadable, or any other measurement. Yet there's one type of question that's far harder to answer: What's the greenest, most environmentally friendly car you can buy today?

  • Pirates kidnap three on Singapore tanker off Malaysia
    Pirates kidnap three on Singapore tanker off Malaysia

    Armed pirates boarded a Singapore-managed oil tanker in the Strait of Malacca, kidnapping three Indonesian crew and stealing some of the vessel's shipment of diesel fuel, the International Maritime Bureau said Wednesday. The attack occurred early Tuesday off Malaysia's west coast, said Noel Choong, head of IMB's Kuala Lumpur-based piracy reporting centre. The diesel oil tanker was believed to be en route to Myanmar. "IMB is aware of the attack on the Singapore-managed ship in the Malacca Straits.

  • McDonald's Hello Kitty sale site temporarily suspended due to fresh wave of Kitty mania
    McDonald's Hello Kitty sale site temporarily suspended due to fresh wave of Kitty mania

    It may not be safe to enter a McDonald’s restaurant in Singapore on Mondays starting 28 April. To celebrate the iconic Japanese character Hello Kitty’s 40th anniversary, the fast food chain announced last Friday that it would be releasing a new collection of Hello Kitty toys in McDonald’s restaurants island wide next Monday.

  • First sign of S.Korea ferry disaster was call from a frightened boy
    First sign of S.Korea ferry disaster was call from a frightened boy

    He called the emergency 119 number which put him through to the fire service, which in turn forwarded him to the coastguard two minutes later. That was followed by about 20 other calls from children on board the ship to the emergency number, a fire service officer told Reuters.