This article first appeared in The Edge Financial Daily on June 8, 2018

KUALA LUMPUR: The local bourse extended its gain for a second consecutive day as local investors take a positive view on potential reforms and rejuvenation of government-linked companies (GLCs) following news of the resignation of Telekom Malaysia Bhd (TM) managing director and group chief executive officer (CEO) Datuk Sri Mohammed Shazalli Ramly.

The FBM KLCI closed 8.68 points or 0.49% higher at 1,785.81 points yesterday. On Wednesday, the benchmark gained 21.99 points or 1.25% to close at 1,777.13.

According to Danny Wong, Areca Capital Sdn Bhd CEO, the market has viewed the changes as positive given the potentially new candidate is likely to be more aligned with the direction of the new government.

“People are optimistic about a new Malaysia and believe the government is determined to change for the better — better governance, more transparent GLCs, all these are the positive changes that the market is expecting with these changes,” Wong said.

He also believed that the institutionalisation of GLCs is the right way forward and that regardless of the top brass in the GLCs, they will be guided by a set of policies and guidelines, led by management.

Similar to Wong, Rakuten Trade Sdn Bhd vice president of research, Vincent Lau, said that the changes will rejuvenate the GLCs in the country, bring about more transparency which is beneficial to the economy as well as Malaysian corporates as a whole.

“If you look at TM, the market is optimistic that changes at the helm will be positive … While foreign investors have been selling, the selldown has eased. I believe foreign investors are watching and waiting for more clarity. It’s understandable that they didn’t want to be caught off guard with some of these changes as it would create some short-term uncertainties but the local institutions and retailers are positive about these changes. The long-term benefits are also significant as cost savings from more transparent and accountable policies will be good for the country,” Lau said, adding that it (market) will only get better from here.

Following the news of Shazalli’s resignation, there have been whispers of more heads of GLCs stepping down. However, instead of turning negative on these uncertainties, the market appears to be optimistic about reforms, which will benefit the country in the long term.

Recall that Prime Minister Tun Dr Mahathir Mohamad had said in April that GLCs had grown to become “monsters” and did not serve their original purposes. He had also made clear that certain heads must fall after his coalition’s historical win on May 9, which saw a change of government for the first time in Malaysia’s history since independence from the British more than six decades ago.

Since the Pakatan Harapan government took power, both Tan Sri Mohamed Apandi Ali and Tan Sri Irwan Serigar Abdullah had stepped down from their roles as attorney-general and secretary-general of the treasury, respectively. Tan Sri Muhammad Ibrahim has also resigned as central bank governor.