Which Stocks Will Go Up Now?

Which stocks will go up now that the general election is over?

PETALING JAYA: The conclusion of the 13th general election (GE13) with Barisan Nasional returning to power has removed the political risk overhang that had been affecting market sentiment, said analysts.

The stock market rallied to reach a fresh record high of 1,826 points, as investors and traders returned to the market in full force.

Blue chips like CIMB Group Holdings Bhd, Malayan Banking Bhd,Tenaga Nasional Bhd and Genting Bhd shot up to multi-week highs, pushing the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) to close at 1,752, up 3.38%.

Research analysts also singled out sectors such as banking, construction, oil and gas, and media as likely to do well, going forward. This was based not only on the removal of the election risk but also as a result of forecast stronger consumer confidence and discretionary spending.

Hwang Investment Management Bhd chief investment officer David Ngsaid Hwang, which had been gradually buying Malaysian equities since the end of February, would add on equity weight in sectors that would do well post-GE13 such as those involved in the continuation of nation building and economic development.

In the banking sector, for example, analysts noted that in recent months, investment spending decisions by businesses had been put on hold as shown by recent banking statistics. RHB Research in a report noted that in February, business loan growth had slowed down to 8.7% year-on-year (y-o-y) from the 14.4% growth y-o-y registered in July 2012. The research house, however, expects loan demand from the business segment to pick up, and this would be positive for the banks. It noted that banking stocks, which have lagged regional peers in terms of share price performance, up 3.7% year-to-date, are poised to play catch-up.

Alliance Research banking analyst Cheah King Yoong believes that post-GE13, CIMB serves as the best proxy to capitalise on the expected relief rally, as the external risks and domestic political uncertainties subside.

And with concerns of cancellations or delays in the rollout of some big-ticket projects under the Economic Transformation Programme (ETP) removed, analysts said the construction sector was poised for a re-rating. Gamuda Bhd stood out as one of the biggest beneficiaries, said analysts.

RHB Research has upgraded the property sector to “overweight”, saying that with the GE13 results, sentiment is likely to buoy the high-beta property sector.

“Our upgrade is also supported by solid sector fundamentals, which include an uptick in population growth cycle, an influx of liquidity and consistent gross domestic product growth. Other catalytic developments are also substantial enough to boost property demand and prices in the related areas,” said RHB Research.

Meanwhile, CIMB Group chief executive officer Datuk Seri Nazir Razaksaid in a statement: “We would like to congratulate Barisan Nasional on winning GE13. The financial markets equities, bonds and currency have reacted very positively to the results, reflecting international investor confidence in BN's economic management and relief, as the long period of political uncertainty for Malaysia comes to an end. We look forward to, among others, the continued progression of the ETP agenda, including the gradual introduction of the New Economic Model. The rakyat has delivered some very important messages at the polls, so we anticipate that the new BN Government would enhance its emphasis on areas such as combating corruption, domestic security, education and improving the quality of life of the urban poor.”

Alliance Research chief economist Manokaran Mottain said the BN win at the very least means policy continuity for the ETP and the Government Transformation Programme.

However, he said there were several urban issues which needed attention, including the rising cost of living, affordable housing, urban poverty and transparency in Government policy.

Manokaran also said that any subsidy rationalisation would be easier to implement should leakages be addressed.

Fitch Ratings' Andrew Colquhoun, head of Asia-Pacific sovereigns, said this on Malaysia's election result: “Fitch looks forward to greater clarity on the Government's fiscal and economic policy programme following Sunday's election. The agency had previously highlighted that rising public debt ratios particularly when off-budget borrowing is taken into account and delayed structural fiscal reform to subsidy programmes and to lessen revenue dependence on the oil sector may eventually exert negative pressure on the ratings.”

--TheStar

Escaping The Middle-Income Trap

OVERCOMING LIMITATIONS: Transformation plan created to help Malaysia reach high-income nation status.

THE Middle Income Trap Hypothesis (henceforth, the MITH) has been the core ideology behind the attempted transformation of Malaysia's economy in recent times, and is considered by some to be one of the biggest problems of global economic development. 
At its heart is the question of why some countries reach developed status while others do not. Malaysia's national transformation plan is aimed squarely at overcoming the limitations and constraints identified with the MITH paradigm.

Yet surprisingly, there is little convincing research support in the economics literature for the MITH. In theory, economic growth and development is initially driven by increasing population, capital accumulation and a rising technological level. 

When growth in these "factors of production" slow, as they inevitably do as incomes rise, the only way countries can continue to grow is through improving the way these factors are combined to produce goods and services, or what's called "total factor productivity", or TFP. When a middle income country is unable to overcome this dilemma, this is termed the middle income trap.

For Malaysia, the evidence that the country is in a MITH appears compelling - growth in the last decade has been slower than in the 1990s while investment and population growth have been sharply down as well.

Other factors, like a workforce skewed towards low wage labour intensive industries, low value-added in manufacturing and a purported "Brain Drain", are also suggestive of an economy that hasn't been able to make the leap forward needed. 

Hence, the importance of the economic transformation.

Yet, other evidence suggests that there is more to this story than that. On a per capita basis, growth hasn't slowed as much as suggested by overall growth, which means slowing population growth has been a bigger factor than productivity. 

Living standards have continued to converge towards high income status almost without pause since the the 1997-98 crisis. Productivity growth, whichever measure one cares to use, hasn't dropped significantly either. 

Taking a longer term view, the growth takeoff of the 1990s appears to have been the period outside the norm, and the period of slower growth that has followed is in reality a return to normalcy.

Recent research at the International Monetary Fund suggests that a MITH-driven growth stagnation in Malaysia really only occurred in two distinct periods - the early 1980s, and the late 1990s. Both these periods encompassed deep and damaging recessions that put back economic progress for six years to eight years. 

Otherwise, Malaysia's drive towards developed status has been unhindered. In other words, Malaysia is not in a middle income trap.

Be that as it may, the transformation plan remains relevant even as we make progress towards high income status. Improving the structure and efficiency of the economy is hardly harmful, and could help sustain growth even if we run into another crisis. The historical record is replete with cautionary tales of countries poised for prosperity but due to one circumstance or another, fail to advance or even fall back. 

Even if the MITH is truly a myth, taking national development seriously still requires constant vigilance and flexibility.

The writer is vice-president of Economic Research with the Malaysian Rating Corporation Berhad (MARC). The article represents the author’s personal views and opinions and do not necessarily represent those of MARC.

--BusinessTimes

KLCI: Post Election Rally

In my previous coverage: Nov 2012: Worse Yet To Come, I mention that index will have potential to hit 1500 points. But this was not materialized as the buying support looks strong at 1600! This points level was hitting 7 times from Sep/2012 - Mar/2013. Seem a good sign that market will be charging more upside for the rest of the year. My target of 2000 points mention in 2011: Marching Towards 2000 looks promising now. 

Well it was really a long long roller coaster ride since Oct/2010 from 1500 to reach 2000 target. I would say KLCI is non performing well during this period and our market is crawling and struggling! Can KLCI hit 2000 by Oct/2013 (3 years time) or by year end? Looking forward in post election, I foresee there will be more synergy for the market to run up as there should be more changes going to happen towards a better Malaysia. Let us see how is going to play up in coming months and this will be interesting!

Above is my optimistic view. How about some pessimistic side? Hmmm... There will not be that severe if I would say. The important now is look at support 1620 - 1650 possible can retest. If this level can hold up well there will not much to worry about. The time we need to cautions or ready to jump out is when 1600 support broken and violated. Than my 1500 target will eventually come true! But I still believe and hopefully this will not happen!

Lets looks at some of counters: TAKASO still in accumulating phase, as long as can break out from 25cts will be a good sign to hit my old target of 65cts ~ 80cts, do beware of possible dive to 15cts. PERDANA still doing well and already hitting my 1st target of RM1.50. Now looking for next target which is RM2.00, better to collect below 1.30 if possible. INCKEN look for major support at 0.88/0.90. Target 1.40-1.50 still looks promising. ALAM still prefer to goyang here and there, may correct to reach 0.85-0.90. Target 1.50 still looks promising. IRMGRP got potential to reach double top at 0.40 which was hit on Feb/2013. TEBRAU time to accumulate some as well look at important support RM1.00 with target of RM2.00 . ITRONIC be patient, time will come and target is RM1.35.

Happy Trading and Cheers!

Malaysia’s Developed Nation Target On Track

KUALA LUMPUR: Malaysia is on its way to achieving developed nation status by 2020, just like what Barisan Nasional chairman Datuk Seri Najib Razak had set out, said London School of Economics' professor of economics Danny Quah.

“I think provided Malaysia kept on the path of continued market liberalisation, engaged with the rest of the world in sensible guided streams of globalisation, and investments remained healthy, there would be no mechanical obstacle for Malaysia to achieve its aspirations,” he told StarBiz after delivering a lecture entitled, “Nobody's world, everybody's problem? Who's afraid of a little global hegemony?” organised by the University of London.

He said that people should be well taken care of and recognised, as well as being provided with continued opportunity to keep rising up the economic ladder.

On the upcoming general election, he said it would be a difficult question to answer, as both the ruling coalition and opposition had their own manifestos.

“Malaysians have to work through these and decide, but it's clear that the ruling coalition has a track record in economic management and expertise built up over the years,” Quah noted.

He said most people would be supportive of the transformation programmes, and Malaysia as a whole needed to keep a perspective of what it wanted to achieve, i.e, to be a developed nation by 2020, and economic prosperity for everyone, inclusive of the bottom 40% of society.

“The middle-income trap is being faced by many Asian economies, including Malaysia, and many other regional countries. The trap refers to the possibility that when a country reaches a certain level of income, it would be unable to keep growing after that,” he explained.

He said things looked pretty grim according to what the World Bank had documented.

“The World Bank has documented the growth of about 200 developing countries, and in the last 30 years only 13 of them have been able to evade the mechanics of the middle-income trap. That's bad news. The other piece of bad news is that one of them is actually Cyprus and other not-so-performing European countries at this point,” he said.

In his lecture, Quah projected the shift of the economic centre of gravity over the decades to the East by 2049.

“The axis is already near Kuwait and would move to the East soon enough. Malaysia would be near the centre of the world economy, and there would be greater attention paid to different economic opportunities.

“The country would see more inflow of capital and ideas, and much more entrepreneurial economic activities. Malaysia needs to stand ready to face East,” he said.

However, despite the economic centre of gravity moving over to the East, he said the centre of political power would still remain in the West, causing economic and political fractures in its course of shifting.

“This is not something we cannot fix, but is something we have to look at thoroughly in every system of decision-making, and re-examine affirmative actions and programmes.

“What matters more than just processes and mechanisms is the delivery of results, like China delivering its economic reforms, despite not having a political structure like the West,” Quah said.

--TheStar

GE13: Historical Moment In The Making?

DAP’s symbol woes rockets PAS moon’s popularity in GE13, say analysts

KUALA LUMPUR, April 20 — The DAP’s willingness to use the PAS moon symbol in Election 2013 over a legal wrinkle could make the Islamist party have a wider appeal to non-Malays who have long feared its conservatism, say analysts.

The DAP’s move is seen as audacious and historic as both broke an earlier pact more than a decade ago over strict implementation of Islamic law in Terengganu which later led to the socialist party’s worst showing in both the 1999 and 2004 elections when the Chinese community punished it for its alliance with PAS.

But in a sign of the times, the party will know by 10am today if it can use its iconic Rocket symbol or opt for allies PKR and PAS symbols in east and Peninsular Malaysia respectively when its candidates file their nomination papers for the May 5 election campaign.

While the impact of the DAP’s decision has yet to be felt on the ground, analysts say the move is pushing the three parties’ loose coalition unwittingly into getting an identifiable common symbol against the ruling Barisan Nasional (BN) government.

“The decision cuts both ways. On the one hand the possibility that it might scare potential voters away from the DAP.

“But on the other hand there is also the possibility that the symbol of the moon becomes an empty signifier, that it stands for more than one party,” political scientist and lecturer Dr Farish A. Noor told The Malaysian Insider.

The three parties — the DAP, PAS and PKR — formed Pakatan Rakyat (PR) after the last general election in 2008 when they agreed not to contest each other. The pact has yet to be formalised and does not have a common symbol despite their close co-operation.

The DAP is contesting in 51 federal and 103 state seats across the country while its allies take the remaining share of the 222 federal and 505 state seats up for contest from today.

The decision on symbols for the election came over 48 hours before Nomination Day today when the Registrar of Societies (RoS) wrote to the DAP, saying it won’t recognise the current leadership due to complaints of irregularities in a party election last December. Party officials then concluded it had no power to authorise candidates to use its registered symbol in Election 2013.

“If that is the case, the Pakatan Rakyat now has a symbol to stand for the whole because the symbol doesn’t just stand for PAS but also for its allies,” Farish said, referring to the PAS moon symbol being used in Peninsular Malaysia.

“The moon is now equal to the dacing (weighing scales),” he added, referring to BN’s ubiquitous symbol. The BN is made up of 13 component parties led by chairman Datuk Seri Najib Razak’s Umno party.

Monash University Malaysia’s Professor James Chin said the RoS move will led to a “massive sympathy vote for the DAP”, adding that voters will see it as harassment.

He acknowledged that there were pockets of Chinese voters who might refuse to cast their ballots for the PAS moon as it symbolised strict Islamic laws and social limits but said they have changed their mind over the past decade.

“So now the DAP can say it has landed on the moon and this is the group that will support the coalition, not symbols,” Chin said, adding the analysis that old Chinese voters will not support PAS is “no longer valid”.

He also noted that PAS was playing the Islamic state card in 1999 and 2004 that alienated a number of voters but has now gone to the stump on an Islamic welfare state model that was attractive to a wider audience.

“The real danger is in post-election if the candidate using the moon logo wins big. Then officially PAS has the larger bloc of seats compared to PKR to decide the pact’s leadership,” said Chin.

Yesterday, PAS spiritual leader Datuk Nik Aziz Nik Mat hailed the DAP’s move to use the PAS logo as a “great blessing” for his party, saying the move would lead to the death of Islamophobia in Malaysia.

“Be confident that this historic decision will be remembered throughout the ages. This is the moment when the rocket lands on the moon,” he said, referring to the DAP’s rocket symbol and PAS’s moon.

Some DAP members have also indicated the move could help the predominantly ethnic-Chinese party pick up more votes among the majority ethnic-Malay population.

“This will be a game-changer,” the DAP’s chief election strategist Ong Kian Ming was quoted as saying in the Wall Street Journal, adding: “We expect non-Malays to see through BN’s move to deny us a right to our party symbol. Campaigning under the PAS flag could help us secure more Malay votes.”

A total of 13.3 million voters, including 5,200 registered to vote from abroad, are eligible to cast their ballots for the 13th general election that is said to be the tightest since 1969.

--TheMalaysiaInsider