KUALA LUMPUR— Malaysia’s markets showed few signs of investor panic as trading reopened after Tun Dr Mahathir Mohamad swept to power in a surprise election outcome.
Stocks in Kuala Lumpur recovered from an early slump to fluctuate between gains and losses. While the ringgit weakened, its move was smaller than what was implied from forwards in the aftermath of last week’s result. Bonds fell.
“We have turned mildly positive over the short term,” said Danny Wong, chief executive officer at Areca Capital Sdn. “Most of the local funds have turned slightly positive with more clarity from Mahathir,” he said, citing the appointment of key ministers and the formation of a council of five elders. “Confidence is returning.”
Mahathir has sought to reassure the markets by appointing a finance minister seen as a safe pair of hands, while saying he would lead a business-friendly administration. CIMB Group Chairman Datuk Seri Nazir Razak, brother of ousted prime minister Datuk Seri Najib Razak, expressed optimism last week that financial markets can weather the political transition. Still, Moody’s Investors Service and Fitch Ratings have warned of risks to the budget if a consumption tax is abolished and not offset by other revenue-raising measures.
Here’s a recap on market moves:
The FTSE Bursa Malaysia KLCI Index of stocks fell 0.2 per cent after dropping as much as 2.7 per cent The ringgit weakened 0.9 per cent to 3.9860 per dollar. The yield on 10-year sovereign debt climbed 10 basis points to 4.23 per cent
On Saturday, the central bank reaffirmed the strength of the economy and said it’ll continue to ensure orderly conditions prevail in onshore financial markets. The ringgit will reflect Malaysia’s fundamentals over the longer term, with the economy backed by a current-account surplus, healthy reserves and low external debt, Governor Muhammad Ibrahim said.
“The appointment of Lim Guan Eng as the minister of finance, as well as the formation of the Council of Elders comprising eminent Malaysians to provide advice to the new government was well received in Malaysia,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd in Singapore. “While there will be near-term uncertainty over the fiscal impact of the new government’s policies, especially abolishing GST and reintroducing targeted fuel subsidies, higher oil prices will provide a boost to government revenues.”
Affin Hwang Asset Management Bh. said before markets reopened that it was expecting a decline of as much as 8 per cent in the first few days of trading post-election, while CGS-CIMB Securities lowered its end-2018 target for the benchmark index.
The Pakatan Harapan coalition had campaigned on a promise to scrap a consumption tax within its first 100 days in power, reintroduce gasoline subsidies and review toll road concessions. In a Thursday press conference, Mahathir emphasised his focus on expanding the economy and reducing debt.
Malaysian stocks had risen to a record close in April as global funds invested more than US$600 million (RM2.4 billion) into local equities this year. The ringgit has benefited from a recovery in crude prices and was the Asia’s best performer over the past year before trading was suspended for the election. — Bloomberg
POST-REGIME CHANGE: KLCI UP, BN-LINKED STOCKS DOWN
Financial markets have made marginal gains despite the first change of government in 61 years.
While BN-linked stocks crashed, this was offset by gains in stocks owned by personalities linked to Pakatan Harapan.
Initially falling by 40 points, the KLCI climbed back by 13 points as of 9.30am.
This has somewhat signalled confidence in newly minted Prime Minister Dr Mahathir Mohamad’s new measures which include establsihing a council of elders as well as promising business friendliness and deregulation.
As of 10.30am, Nestle and BAT were the top gainers. Nestle is up RM6 to RM141.60 while BAT is up RM3.80 to RM26.50.
PPB Group – founded by billionaire Robert Kwok – is up 84 sen to RM20.
Kwok was among those appointed to the council of elders to advise the government.
Opcom, whose CEO is Mokhzani Mahathir, is up 50 percent and now sits at 90.5 sen.
George Kent was among Bursa Malaysia’s top loser. Tan Kay Hock, who leads George Kent, is known to have been former prime minister Najib Abdul Razak’s “golfing buddy”.
Other top losers include Gamuda Bhd, Malaysia Airports Holdings Bhd, MyEG Services Bhd, Axiata Group Bhd and CIMB Group Holdings Bhd.
Gamuda fell 78 sen to RM4.32 while MyEG slumped 77 sen to RM1.81.
Shares in AirAsia Group Bhd also fell as much as 10 percent after its chief Tony Fernandes apologised for endorsing Najib in the election.
MyEG is known to have had been awarded various contracts by the BN government in the past. – MKINI
This is what Mahathir’s return just did to Malaysian stocks
KUALA LUMPUR — There’s one word to describe Malaysia’s stock market as it reopened today after a three-day break that saw the Opposition party win office for the first time in six decades: Volatile.
The nation’s benchmark FTSE Bursa Malaysia KLCI Index plunged as much as 2.3 per cent today and swung between gains and losses in the first hour of trading. The market was shut for three days last week as Tun Dr Mahathir Mohamad led an alliance to unexpectedly beat the ruling Barisan Nasional coalition. In his first remarks as prime minister of Malaysia, Mahathir said he’d lead a business-friendly administration and find ways to boost the nation’s equity market.
Gamuda Bhd, the nation’s largest construction company, fell as much as 19 per cent — the most since October 2008 — after the new government said it will review the projects by the previous administration. Nestle (Malaysia) Bhd, a unit of Nestle SA, added 5.2 per cent after Mahathir’s coalition pledged to abolish the nation’s current goods and services tax, along with fuel subsidies and minimum wage realignment.
Market watchers had expected equities to fall across the board, with government-linked companies, benchmark index stocks and infrastructure companies taking the brunt of a potential selloff. iShares MSCI Malaysia ETF, the biggest exchange-traded fund holding Malaysian stocks, fell 6.2 per cent last week. The FTSE Bursa Malaysia KLCI Index has corrected by 3.3 per cent after it reached a record on April 19.
Affin Hwang Asset Management Bhd expected a decline of as much as 8 per cent in the first few days of trading post-election, while CGS-CIMB Securities lowered its end-2018 target for the benchmark index. UOB Kay Hian Holdings Ltd and Nomura Holdings Inc are reviewing their views on the main measure and equities. On the flip side, Malayan Banking Bhd has expressed optimism for financial markets following the election.
Construction
Mahathir campaigned on a promise to review all infrastructure projects including the East Coast Rail Link project. IJM Corp fell as much as 15 per cent, Malaysian Resources Corp slid 17 per cent and George Kent Malaysia Bhd plunged 30 per cent.
Political ties
Here’s a list of companies with ties to either former Prime Minister Datuk Seri Najib Razak’s Barisan Nasional party or Dr Mahathir’s Pakatan Harapan.
Family ties: CIMB Bank Bhd (chaired by Najib’s brother Datuk Seri Nazir Razak) slid as much as 13 per cent; Opcom Holdings Bhd., whose CEO Mokhzani Mahathir is Mahathir’s son, rallied 50 per cent. Thriven Global Bhd more than doubled in value, while Eden Inc Bhd. surged 88 per cent. The two companies’ chairman Fakhri Yassin Mahiaddin is the son of Muhyiddin Yassin whom Mahathir named home affairs minister Saturday
Government services providers: My EG Services Bhd plunged 30 per cent; Datasonic Group Bhd slid as much as 14 per cent DRB-Hicom Bhd fell 7 per cent. The company sold a stake in national carmaker Proton Holdings Bhd last year to China’s Geely Automobile Holdings Ltd. Mahathir was opposed to giving foreign investors control over Proton.
Felda Global Ventures Bhd, the world’s largest palm oil producer and a vital cog in Malaysian politics, gained as much as 14 per cent
Media companies: Utusan Melayu (M) Bhd, Media Prima Bhd and Star Media Group Bhd all slid. Utusan and Star Media are owned by United Malays National Organisation and the Malaysian Chinese Association. Media Prima’s group managing director Kamal Khalid previously ran the communications unit in the Prime Minister’s office
Destini Bhd tumbled as much as 38 per cent. The defence services contractor is owned by Rozabil Rozamujib Abdul Rahman, a member of the United Malays National Organisation, a party in the outgoing ruling coalition
KUB Malaysia Bhd dropped 29 per cent: Majority shareholder Anchorscape Sdn Bhd’s director Abdul Rahman Mohd Redza is the incumbent state assemblyman who won the Linggi seat in the state of Negeri Sembilan
Consumer consumption
Mahathir’s campaign pledge to nullify the nation’s current goods and services tax, fuel subsidies and minimum wage realignment could benefit the consumer sector, according to Gan Eng Peng, director of equities strategy and advisory at Affin Hwang Asset Management.
Dutch Lady Milk Industries Bhd, Fraser & Neave Holdings Bhd, Heineken Malaysia Bhd, Carlsberg Brewery Malaysia Bhd, Padini Holdings Bhd all gained
Export oriented
The ringgit fell today to a four-month of 3.9865 per dollar. Export-driven companies with products from rubber gloves to technology climbed.
Inari Amertron Bhd gained as much as 8.2 per cent; Vitrox Corp Bhd rose 11 per cent; Unisem (M) Bhd added 11 per cent; Malaysian Pacific Industries Bhd rose 8 per cent; Globetronics Technology Bhd gained 11 per cent; Top Glove Bhd rose 5.9 per cent; Hartalega Holdings Bhd advanced 5.6 per cent.
Flying under the radar
AirAsia Group Bhd founder Tony Fernandes’s open support for former Prime Minister Datuk Seri Najib Razak’s Barisan Nasional coalition could impact the company’s shares, according to Vincent Khoo, an analyst at UOB Kay Hian. In a Facebook post yesterday, Fernandes apologised for his actions, adding that he “buckled” under pressure. AirAsia shares fell as much as 13 per cent, before narrowing losses to 5.1 per cent in recent trading. – — Bloomberg
BLLOMBERG / MKINI
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