M&A Securities: Start taking profit immediately after the dissolution of Parliament
Business & Markets 2013
Written by theedgemalaysia.com
Wednesday, 03 April 2013 14:31
KUALA LUMPUR (April 3): M&A Securities Research has advised investors to start taking profit or sell on the market immediately after the dissolution of Parliament today.
In a strategy note Wednesday, the research house said although it expects the market to be down after the dissolution of Parliament, it also expects there would be some artificial support on the market to cushion the fall so that the fall of the index is not too steep.
“This provides good opportunities for investors to take profit on the index linked stocks due to the existence of artificial support on the index,” it said.
M&A Securities said that based on the results of the percentage of seats that the incumbent government BN won in the previous six previous general elections in Malaysia and the performance of KLCI, there had been low correlation of only 0.4 between the performance of the stock market and the results of the general elections. ‘
“Therefore, we can surmise that the performance of the stock market does not have much bearing on the outcome of general elections in so far as the Barisan Nasional (BN) is concerned,” it said.
The research house said the “feel good wealth factor” from a good stock market performance does not necessarily translate into a better General Election performance for the incumbent BN government.
“The quite heavy artificial support on the index in the past two weeks have been done by local funds which are farmed out to foreign fund managers and therefore has been classified as foreign funds,” it said.
The research house said if investors’ expectation is for BN to win with a better performance in GE13 than in 2008, the time to buy back is just before the election results come out.
“If BN is expected to win with a lesser majority in GE13 or if the unthinkable happens, Pakatan Rakyat unexpectedly wins GE13, the time to buy back into the market is after the results of GE13 has been announced, because we expect more selling to be done on the stock market in the event these two incidents occur.