Finally, Malaysian PM Najib has dissolved the parliament setting the way for the 13th Malaysian GE. By law, the GE must be held within 60 days from now. Now we wait for the Election Committee to announce the nomination and polling dates. So are there investment opportunities from the GE?
So far the effect on the stocks have been subtle, with couple of stocks dropping on the first day of announcement and some have recovered since. In 2008, the KLCI dropped 8.9% between the dissolution of parliament and polling day. However, analysts don’t think that the weakness in stock market will be as severe this time round. According to Maybank research, the 12th GE KLCI was at 18x forward PE while this time round its only 14x forward PE.
If BN wins, the current policies will continue and stocks would probably have a major rally as the uncertainty is out of the way. Developers, construction, banks, oil & gas would benefit significantly. If the opposition wins, policy risks may cause these stocks to drop. Especially a lot of construction and infrastructure projects may be reviewed by the new government.
Personally, I am looking for stocks which are less likely to be affected by politics, such as MREITs, consumers which are more stable but drop in prices due to overall market volatility. Foreign businesses such as Nestle and British American Tobacco are also less likely to be negatively affected regardless of which side wins.
Looking at the indexes across Asia, KLCI does not look expensive, it is not that cheap either. On the other hand Korea and China both look interesting with P/E below 10x. Especially Korea which has high earnings growth.
In the meantime, we will see if the Malaysian GE provides any investment opportunities.
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