KUALA LUMPUR (BLOOMBERG) - Brace for a volatile day when Malaysia's stock market reopens on Monday (May 14) after a three-day break that saw the opposition party win office for the first time in six decades.
Malaysia's FTSE Bursa Malaysia KLCI Index 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, Dr Mahathir said he would lead a business-friendly administration and find ways to boost the nation's equity market.
Even so, market watchers expect 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 this week. The FTSE Bursa Malaysia KLCI Index has corrected by 2.6 per cent after it reached a record on April 19.
Affin Hwang Asset Management is 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. UOB Kay Hian Holdings and Nomura Holdings are reviewing their views on the main measure and equities.
On the flip side, Malayan Banking has expressed optimism for financial markets following the election.
Setting aside the main gauge's potential move, here are the stocks to watch.
With Dr Mahathir's campaign promise to review all infrastructure projects including the East Coast Rail Link project, keep an eye on Gamuda, IJM, Malaysian Resources, and George Kent Malaysia.
Companies with ties to either former prime minister Najib Razak's Barisan Nasional party or Dr Mahathir's Pakatan Harapan might also get some trading interest.
- Family Ties: CIMB Bank, chaired by Mr Najib's brother Nazir Razak; Opcom Holdings' chief executive officer Mokhzani Mahathir is Mahathir's son; Eden Inc and Thriven Global chairman Fakhri Yassin Mahiaddin is the son of Mr Muhyiddin Yassin whom Dr Mahathir named Home Affairs Minister on Saturday
- Government services providers: My E.G. Services, Datasonic Group
- DRB-Hicom sold a stake in national carmaker Proton Holdings last year to China's Geely Automobile Holdings. Dr Mahathir was opposed to giving foreign investors control over Proton
- Felda Global Ventures, the world's largest palm oil producer and a vital cog in Malaysian politics
- Media companies: Utusan Melayu, Media Prima, and Star Media Group. 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, a defence services contractor owned by Mr Rozabil Rozamujib Abdul Rahman, a member of the United Malays National Organisation, a party in the outgoing ruling coalition
- KUB Malaysia: Majority shareholder Anchorscape's director Abdul Rahman Mohd Redza is the incumbent state assemblyman who won the Linggi seat in the state of Negeri Sembilan
Dr 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.
Stocks to watch include Nestle Malaysia, Dutch Lady Milk Industries, Fraser & Neave Holdings, Heineken Malaysia, Carlsberg Brewery Malaysia, Padini Holdings.
Any impact on the ringgit will affect export-driven companies with products from rubber gloves to technology. Attention should be paid to to semi-conductor manufacturers Inari Amertron, Vitrox Corp, Unisem, Malaysian Pacific Industries, Globetronics Technology, glove manufacturers Top Glove, Hartalega Holdings.
FLYING UNDER THE RADAR
AirAsia founder Tony Fernandes' open support for former prime minister Najib Razak's Barisan Nasional coalition could impact the company's shares, according to Mr Vincent Khoo, an analyst at UOB Kay Hian.