Tuesday, December 18, 2012

General Election May Rejuvenate Local Stock Market

THE upcoming 13th general election may rejuvenate Malaysia's weak stock market and continue bucking the trend in the first half of 2013.

Malaysia has until April next year to dissolve Parliament and until June to hold a general election.

Nomura International (Hong Kong) Ltd managing director and chief Asia equity strategist and global head of equity strategy Michael Kurtz said the long awaited 13th elections should be the key driver for Malaysian equities in the first half of 2013 overshadowing other challenging macro global factors.

The global factors, including slower economic growth prospects in China and Europe, the Greece debt crisis and the US economic slowdown, could result in near-term volatility for the market.

"In our view, the uncertainties surrounding the election outlook, coupled with the investors' unwillingness to take risk ahead of the elections, could result in extreme volatility in equity prices," Kurtz said here yesterday at a media briefing on its Asia Pacific outlook 2013.

Kurtz said Nomura Equity Research is maintaining its assumption that the ruling government would win by a majority similar to what it holds currently and any weaknesses in the market would present a good buying opportunity.

He said Malaysia's stock market has been soft over the past nine months as investors' exposure to Malaysia is relatively lower compared to other Asian markets which are more sought after.

To ride through the volatility period ahead of the elections, Kurtz said investors should be well positioned in the defensive sectors such as telecommunications stocks, which Nomura has raised to overweight from neutral, and maintains a bullish stance on banking, construction, plantations, and oil and gas sectors.

The Japanese research house has selected stocks such as Axiata, Maybank, Sime Darby, AirAsia, WCT, SapuraKencana, CIMB, Genting, Media Prima and MMC Crop as its top picks.

Nomura said Malaysia's better-than-expected third quarter gross domestic product (GDP) growth and the expected resilient fourth quarter estimates would continue to support further upward revisions in the next few months.

"As a result of the good third quarter, we now expect full-year 2012 GDP growth of 5.3 per cent (up from 4.8 per cent last year) and we believe this is achievable as China is expected to rebound in the fourth quarter of this year, which should benefit commodity exporters such as Malaysia."

On Asia, Nomura Equity Research is bullish on Asia's stock markets but it gave "underweight" outlook on Southeast Asian countries which include Malaysia.

Kurtz said it's not that Asian stocks are not good but equity markets in North Asia are looking more attractive in terms of value, in line with an improved global economic outlook.

Kurtz said North Asian markets such as in South Korea and Japan have been shunned for the past few years due to their cyclical nature and volatility but with the change in economic factors, they are working in favour for these markets compared to Asean which has always been perceived as defensive in nature. 

-- By Zaidi Isham Ismail 


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