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KUALA LUMPUR (Oct 26): CGS-CIMB Research said while Yang di-Pertuan Agong Al-Sultan Abdullah’s decision Ri’ayatuddin Al-Mustafa Billah Shah to reject the government’s request for emergency powers to combat the Covid-19 pandemic is a major relief for the market and could lead to a reduction in political noise in the short term, unlikely to alleviate the concerns of foreign investors.
In a strategy note today, CGS-CIMB analyst Ivy Ng Lee Fang said that foreign investors were net sellers of Malaysian stocks for most of this year due to concerns about political uncertainties and weak earnings. corporate.
She said this was offset by net purchases by local institutions and local retailers.
Ng added that the King’s decision likely prevented a large sell-off in the market stemming from concerns about the negative impact an emergency decree would have on the economy and corporate profits.
He said that the king had reiterated his reminder to all politicians to stop all forms of politicking that can disrupt the country’s administration.
“The king’s advice to MPs (MPs) not to pursue any irresponsible action that may undermine the stability of the current administration could silence political noise in the short term, while his reminder of the importance of the 2021 Budget is present in Parliament, reduces the possibility of the budget being rejected for lack of support.
“Overall, this is a more favorable outcome for the Malaysian stock market than an emergency decree, but it may not be sufficient to reverse net sales by foreign investors due to prevailing political uncertainties,” he said.
Ng maintained his KLCI FBM target of 1,520 points by the end of 2020.
Notable stocks include Malaysia Pacific Industries Bhd (MPI), Public Bank Bhd and Tenaga Nasional Bhd (TNB).
“We like MPI’s strategy of investing in new technologies such as silicon carbide and radio frequency testing for 5G network infrastructure and electric vehicles (EV).
“We also like MPI as an indicator of the growing demand for local semiconductor service providers in China following the US-China trade war.
Ng said that Public Bank is CGS-CIMB’s top pick among Malaysian banks, as the research house believes the bank is the most defensive against credit risk arising from the Covid-19 outbreak.
“Your guide to a 20-25 basis point (bps) credit cancellation rate for fiscal year 20 (the financial year ending December 31, 2020) is the lowest in the industry,” he said.
At TNB, Ng said she is positive about the utilities giant in light of anticipated lower regulatory risk and its supporting dividend yield of about 4% forecast for fiscal 2020.
“The group projects better performance from joint ventures (joint ventures) / associates and higher regulated profits from a larger allowable regulated asset base in FY20,” he said.
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