KUALA LUMPUR (Sept 15): Measures announced by Prime Minister Datuk Seri Najib Tun Razak appear to be skewed towards supporting the stock market, rather than boosting the economy, according to CIMB Investment Bank Bhd.

In a note today, CIMB said the spotlight was on the RM20 billion allocation for government-owned Valuecap Sdn Bhd to buy undervalued shares here.

"The measures announced by the PM  have two broad objectives, i.e. stabilise financial markets and support domestic businesses. Just like any other measure to  support a beleaguered stock market, the impact was immediate and the ringgit recovered slightly.

“The measures to support the real economy pale in comparison, given the size of funds. The intended impact on the markets may not last, amidst prevalent volatility.  Any sustained positive effects would be reflected more in the domestic real economy; albeit marginally and with a time lag," CIMB said.

According to Valuecap's website, the company is equally-owned by Khazanah Nasional Bhd, Kumpulan Wang Persaraan (Diperbadankan) and Permodalan Nasional Bhd.

Valuecap operates via two subsidiaries. They are VCAP Asset Managers Sdn Bhd — a conventional fund management entity; and i-VCAP Management Sdn Bhd, which manages funds based on Islamic principals.

Yesterday (Sept 14), Najib also announced measures to strengthen the domestic economy. These include establishing more goverment-owned convenience stores and clinics and encouraging Malaysian companies abroad to repatriate their profits and invest the money here.

Today, CIMB said the economic measures were not enough to catalyse the domestic economy, as consumers contended with the impact of the goods and services tax (GST) and weakening ringgit.

Both factors have led to costlier goods here.

“As the economy is not facing any threat of a sharp slowdown like that seen in the last global financial crisis and asian financial crisis, the government is not under pressure to act with big economic stimulus.

"Nonetheless, with the rapid decline in the ringgit, some businesses, especially the SMEs, are feeling the pinch at a time when they are still struggling with costs associated with the GST. Hence, the measures announced are more targeted towards this group," CIMB said.

Meanwhile, Hong Leong Investment Bank said in its note that value big cap stocks could be in focus, following Najib's announcement yesterday.

Hong Leong said the list included Axiata Group Bhd, DiGi.Com Bhd, IJM Corp Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd.

"This would expedite our expectation of switch in focus to value big caps (albeit yesterday’s surge).

"Repatriation of GLCs (government-linked companies) funds could result in more stable MYR, culminating in lower appetite for export-oriented stocks," Hong Leong said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)