Â April 6 (Bloomberg) — Malaysian stocks may enter a “near- term political rally” amid speculation Prime Minister Najib Razak will introduce measures to boost investor confidence after he took office last week, Deutsche Bank AG said.
The benchmark Kuala Lumpur Composite Index “is likely to ignore fundamentals near term as Malaysia ushers in a new prime minister,” Su-Yin Teoh, a strategist at Deutsche Bank in the Malaysian capital, said in a note today. “Watch out for potential market-friendly policies.”
Tenaga Bhd., Malaysia’s state utility, and banks including Bumiputra-Commerce Holdings Bhd. and AMMB Holdings Bhd. are among the most widely owned stocks that are likely to rally, Deutsche Bank said. Malaysian stocks typically perform better before a power transfer than afterwards, and investors should lock in any gains at the end of the second quarter, Teoh said.
Najib, 55, replaced Abdullah Ahmad Badawi on April 3, inheriting the weakest economy in a decade and waning public support for the ruling coalition. Unless he overhauls the Cabinet and executes without delay a previously announced 60 billion-ringgit ($17 billion) stimulus plan, the government’s longer-term hold on power may be in jeopardy, Deutsche Bank said.
The Kuala Lumpur Composite Index, which has jumped 9.8 percent in the past three weeks, rose 2.1 percent to 926.21 at 11:08 a.m. local time today. The gauge fell 39 percent last year.
Najib’s “near-term’ priorities should be to award infrastructure projects, liberalize ownership of the domestic services industry and review any “underperforming” government- controlled companies, according to Deutsche Bank.
The new prime minister’s focus on the services industry may bring a “long term” benefit to companies in the financial services, retail and tourism industries, the bank said in its report. At the same time, the country’s construction industry, used by the government to buoy the economy since the Asian financial crisis a decade ago, will lose out, Deutsche Bank said.
In his first televised address to the nation as premier, Najib on April 3 lifted a ban on two opposition publications and freed 13 people detained under Malaysia’s Internal Security Act, which allows for detention without trial.
Deutsche Bank called the move a “positive first step.”
–Editors: Reinie Boosyen, Alan Soughley
Source : Bloomberg