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Malaysian Dissolves Parliament, Opportunities During Election Period

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.

img klci ge performance

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.

img asian equity mar 2013

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.

 

For more information, you may be interested in:

Malaysia and Singapore Agrees To High Speed Rail

Bank Negara Measures Taking a Toll On Housing Prices

Official Statement from Bank Negara on Genneva Gold Trading Schemes

Malaysia Budget 2013

IGB REIT IPO Owner of KL MidValley and Gardens

My Malaysia Stock Portfolio September 2012

6 Responses to “Malaysian Dissolves Parliament, Opportunities During Election Period”

  1. Hi Calvin,
    You mention Korea and China both look interesting with low P/E. Do you invest in them? What is your advice on how to invest in both these countries?

    • Hi TL, at this moment I am not invested in them. The easiest way to get exposure is through ETFs, for China there is db X-trackers CSI 300 and United SSE50.

      For Korea there is Lyxor MSCI Korea and db X-trackers MSCI Korea.

      If you want to buy individual securities, Philips provide access to both Korea and China while OCBC provides access to China stocks.

      • Thanks for the advice. I have bought SSE50 and unit trust before the index bottom so still at a loss. Most probably, I will still go for the ETFs since I have no knowledge of the individual stocks.

  2. Hi Calvin,

    Any good Malaysia stocks you would want to recommend for this coming election?

    Which sectors shall we focus on?

    On top of that, recently the share price of SMRT had dropped by so much. I’m quite interested with it for long time. Is now the right timing to buy in?

    Looking forward for your advise. Thanks.

    • Hi Mee, as of now, the prices for the Malaysian stocks still look relatively stable. Should there be a correction, I would be looking mainly at consumers and possbily REITs.

      I am still uncertain with SMRT as the capital expenditures for both upgrading and maintaining are still relatively unknown. I would prefer for the company to stabilize with a long term sustainable maintenance capital expenditure and dividend payout before deciding.

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