Outcome of general election will have impact on economy, says expert

 

(The Star) – The outcome of the general election will determine the focus on reform and the intention of the government to pare down debt, and this will have an important impact on the Malaysian economy, said Nomura International (HK) Ltd chief Asia equity strategist Michael Kurtz.

He said in that sense, the outcome of the general election would be crucial to the local equity market.

“Malaysia is one of those markets where the shape of the government with the reform orientation and the fiscal intentions matter a lot to the economic performance.

“So I think as a general answer, yes, the outcome is going to matter a lot for specific stocks or sector emphasis in the second half, but we are not going to go out on a limb to forecast the outcome of the general election,” Kurtz said.

He said a substantial amount of the country’s economic growth in 2012 had been either a direct consequence of or a lateral effect of government investment or policy.

Kurtz was relatively cautious on local equities for the first-half of the year based on the “worth” of the market, due to investor concerns about the outcome of the election.

“This will keep the market on a backfoot,” he said.

Furthermore, an improving global environment would have a positive impact on Malaysia’s growth, with a pick-up in global demand especially for soft commodities to play into the country’s strengths.

“We do think that weakness in the Malaysian equity space presents an opportunity to accumulate stocks in anticipation of a better outlook, post-election in the second half,” Kurtz said.

Specifically, he said the group favoured stocks that were perceived as defensive, in order to provide a downside insurance ahead of the election, like telecommunication stocks.

“In the medium term beyond the election, we like a bit more cyclical stocks in the plantation, oil and gas and finance sector,” Kurtz said.

Recently, several other big names in the financial industry also highlighted the impact arising from the general election.

JP Morgan Securities (M) Sdn Bhd executive director of equity research Mak Hoy Kit said the equities market and economic outlook next year would be positive if Barisan Nasional continued to remain in power.

Eastspring Investments Bhd chief investment officer (Equities) Yvonne Tan Hong Yean cautioned that foreign funds might opt to stay out of Malaysia if there was a change in the government after the general election.