KUALA LUMPUR (Aug 7, 2012): Uncertainty over when the 13th general election (GE) will be held and its results has prompted investors to pull back, said Citi Asia-Pacific senior investment strategist for wealth management, Haren Shah.
“There’s a lot of uncertainty and changes on a global scale, and Malaysia’s election is one of them. 2012 is a year of politics, especially in the second half where large economies are going into elections or leadership transitions including Malaysia, China and the US,” he told reporters at the Citibank 2012 mid-year investment outlook here today.
As the GE result could go either way, Haren said the uncertainty has led some consumers and businesses to hold back on spending and investments, especially on big-ticket items such as property and cars.
He believes that Malaysia’s election results will have an impact on the local economy in the short term and thus, he advises investors to turn to defensive stocks as market volatility is expected to remain in the second half of the year.
“Although Malaysia is domestically driven, it is still affected by global sentiments but the impact is less compared with other countries,” he said, adding that Citi has revised downwards its gross domestic product growth estimate for Malaysia in 2012 to 5% from 5.2%.
Citibank Bhd head of research and investment strategist David Chua said investors are concerned about how the election results will affect the capital markets, but expects listed government-linked companies to be the most affected by sentiment if there is a big change in election results.
“But this (concern) is temporary because at the end of the day, domestic funds like the Employees Provident Fund are heavily vested in the local markets…You do not see a big fund outflow. You may have foreign fund managers moving out a bit which may cause markets to drop a little, but after that, they’ll probably see value and start buying again,” he said.
Chua also said Malaysia continues to see inflows of foreign direct investments due to its cheaper operating costs compared with other countries in the region like Singapore and the unemployment rate here is low.
“You can see more foreign investors coming in for stability of the ringgit, more opportunities in the manufacturing, oil and gas sectors. With stability of the ringgit and higher interest rates, you will see more money coming into Malaysia. That’s why we’re positive for Malaysia.”
Chua said the GDP forecast was revised downwards due to lower manufacturing exports, which have been affected by China’s slowdown, especially the export of manufactured electrical and electronics goods.
“The good thing about the Asia-Pacific is its governments have a strong cash position. Companies are also relatively strong in cash and there is low unemployment, thus they are less exposed to the European debt crisis. If Greece does leave (the European Union), it will have little impact on Malaysia because we are much more domestic-oriented. If anything, we are much more dependent on countries such as China and Taiwan,” he said.
Citi is reiterating its FBM KLCI year-end target of 1,640 points.
By: Eva Yeong
Published: Tuesday, August 7, 2012