Report: BN poised for big win

OSK Research predicts a March 2012 general election in which BN will take an even larger slice of the pie.

PETALING JAYA: OSK Research has predicted that Barisan Nasional stands a strong chance of a greater victory in the next general election following indications of support returning to the ruling coalition since early last year.

In a report released yesterday, the investment bank noted that Pakatan Rakyat dominates the urban areas, west of Peninsula Malaysia and conservative heartland of north Malaysia while BN’s strength is in the south of Peninsula Malaysia and East Malaysia.

“Pakatan’s areas of dominance is a reflection of its alliance of components comprising Islamic fundamentalists, secular urbanites and moderate reformers,” OSK said. “BN’s areas of dominance reflect its more development focused agenda.”

Based on the 2008 general election results and the current news flow, OSK anticipated the fiercest battles to take place in Kedah, Perak and Selangor.

“While we cannot predict the number of seats that BN may clinch, we believe that it will be an improvement over the 63% secured in 2008,” it stated.

OSK, however, expressed doubt over its earlier prediction that polls would be called in November seeing as Prime Minister Najib Tun Razak has yet to call for the dissolution of Parliament. As such, investors are putting their money on a March 2012 election.

Wait for profit taking

The report also said that the stock market’s historical performance has determined that buying into the market just prior to an election and selling out a month after is still the most consistent strategy.

“Such a strategy will provide the second highest probability of positive returns, coupled with the second highest average performance in the KLCI,” OSK said.

“Of course, this was not the case in the 2004 and 2008 elections but this time around we believe that the BN will do better which may give the market a boost.”

It added that political uncertainty is expected to clear up if there is no unrest post election which would prompt a better performance from equity markets as seen in Indonesia, Thailand and Singapore.

“The election trading strategy will be to keep it short and tight,” OSK advised. “Investors should remember that elections are in general a short term localised driver.”

The report further recommended that investors wait for profit taking ahead of the general election before entering the market and focus on blue chips in the banking, oil and gas, and construction sectors.

“Outside of this localised trading strategy, we remain defensive on the longer term and maintain our 1466-pt KLCI fair value for 2012,” OSK concluded.