This article first appeared in The Edge Financial Daily on May 15, 2018
KUALA LUMPUR: The stock market had a volatile ride yesterday as expected, with politically linked stocks related to the two coalitions of Pakatan Harapan and Barisan Nasional (BN) or their leaders going their separate ways.
Investors pounced on stocks with political alliances to the ruling Pakatan government or those connected to its chairman Tun Dr Mahathir Mohamad and deputy chairman Tan Sri Muhyiddin Yassin at the opening bell, after a three-day break that saw the opposition coalition breaking BN’s 60-year rule in the 14th general election (GE14).
Eden Inc Bhd was among the leading gainers across Bursa Malaysia, as investors see the company benefiting from the Pakatan regime. Eden is linked to Datuk Fakhri Yassin Mahiaddin, who is the son of Muhyiddin — the newly minted home affairs minister.
Eden’s share price surged as much as 176% to hit its intraday high of 47 sen in early trade before closing at 46 sen, up 29 sen or 170.59% from the previous close. A total of 280.69 million shares were traded, making it the second most active stock.
Thriven Global Bhd, in which Fakhri is the executive chairman, also saw its shares jump by 120% or 30 sen to close at its one-year high of 55 sen, with about 21.2 million shares changing hands.
Shares in Opcom Holdings Bhd, which is led by Prime Minister Dr Mahathir’s son Tan Sri Mokhzani Mahathir and controlled by his brother and newly appointed Kedah Menteri Besar Datuk Seri Mukhriz Mahathir, also rose 30 sen or 49.59% to close at its one-year high of 90.5 sen yesterday, with 51.8 million shares traded.
An analyst with a local asset management told The Edge Financial Daily that investors are positioning themselves into companies that are likely to benefit from the new cabinet line-up under Dr Mahathir.
“If you look at the corporate history in Malaysia, it is very much connected with politics. As most have priced in a scenario where BN retained control over the government, the unexpected outcome has led to a rush into these companies that are said to be connected with PH (Pakatan),” he said.
The analyst, however, warned that given the reform promises by the new government, these companies might not be able to benefit as much as anticipated.
Other than the politically linked counters, consumer shares saw some of the biggest gains on hopes that the sector will benefit from the new government’s manifesto for GE14 which promises the removal of the goods and services tax (GST), among others.
Shares in Nestle (M) Bhd rose 4.17%, while British American Tobacco Malaysia Bhd (BAT Malaysia) was 25.02% higher. Heineken Malaysia Bhd shares were up 11.5%. The stocks were the top three gainers on Bursa yesterday.
According to Areca Capital Sdn Bhd chief executive officer Danny Wong, Pakatan’s manifesto to remove the GST could give a boost to consumption growth in the country, benefitting consumer stocks such as Padini Holdings Bhd and AEON Co (M) Bhd.
“While the initial reaction to the removal of [the] GST was negative, analysts are feeling more confident that the government could deliver with savings from megaprojects and other reforms,” Wong said, adding that the higher consumption growth could spur the local economy and benefit the financial sector as well. Most of the banking stocks were also on an uptrend yesterday.
CIMB Equity Research analyst Walter Aw sees BAT Malaysia benefiting from the new government’s policy.
“The new government plans to increase enforcement efforts to combat [the] illicit cigarette trade. This is positive for BAT Malaysia, which may lead to higher sales volume,” he said in his report.
Nonetheless, not everyone is positive of this economic agenda including the removal of [the] GST. Moody’s Investors Service said in a statement that there is little clarity on the Pakatan’s economic policy agenda, apart from a few specific campaign pledges that are credit negative at the outset, but lack details that would allow a full assessment of budgetary and macroeconomic effects.
The broader market, meanwhile, closed 3.91 points or 0.21% higher at 1,850.42 points. There were 930 gainers against 405 decliners, with the remaining 180 counters traded unchanged.