GE risk oh GE risk

CIMB Research: General election risks foremost on investors’ minds
Business & Markets 2013
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Monday, 18 February 2013 11:13

KUALA LUMPUR (Feb 18): The upcoming 13th general election and the risks associated with it are foremost on investors’ minds, said CIMB Research in a strategy note following its Malaysia roadshow speaking to investors in Asia, Europe and America.

“As we have been highlighting since early-2012 when we downgraded Malaysia from Overweight to Neutral, there are considerable election risks that we believe the market has yet to fully factor in.

“Our view remains unchanged, as is our end-2013 KLCI target of 1,670 points,” it said.

In a strategy note Feb 15, the research house said Malaysian and Singaporean investors were the most cautious with concerns over election risks topping the agenda.

But elections and Malaysian politics were also top-most on the minds of investors from Europe to the US as the KLCI's 41-point plunge on 21 Jan came as a wake-up call for many.

It said many investors’ key question during the roadshow was why did the KLCI fall so sharply on 21 Jan when it is widely known that elections will be held soon and when many investors were already underweight and held significant cash holdings.

“But overall there were few disagreements with our views and various election scenarios and many investors were looking forward to buying opportunities in the coming months.

“Many liked Malaysia's underlying economic fundamentals and were looking at the right time to enter into stocks. This pent-up demand could give stocks a big lift after elections are over.

CIMB Research said that in the pre-election period, its preference continued to lie in defensive and high-yielding sectors, such as brewery, REITs and utilities.

“But post elections, we are likely to shift our preference to higher-beta cyclical sectors and laggards. This is likely to include CONSTRUCTION [] and property stocks that have languished for the past 12-18 months,” it said.