This Is What Mahathir’s Return Just Did to Malaysian Stocks

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(Bloomberg) -- There’s one word to describe Malaysia’s stock market as it reopened Monday after a three-day break that saw the opposition party win office for the first time in six decades: Volatile.

The nation’s FTSE Bursa Malaysia KLCI Index rose 0.2 percent after earlier plunging as much as 2.3 percent Monday, as the benchmark fluctuated between 79 points.The market was shut for three days last week as Mahathir Mohamad led an alliance to unexpectedly beat the ruling Barisan Nasional coalition. In his first remarks as prime minister of Malaysia, Mahathir said he’d lead a business-friendly administration and find ways to boost the nation’s equity market.

Read more on Malaysia’s markets reaction here.

Gamuda Bhd., the nation’s largest construction company, fell 17 percent -- the most in a decade -- after the new government said it will review the projects by the previous administration. Nestle (Malaysia) Bhd., a unit of Nestle SA, added 4.2 percent after Mahathir’s coalition pledged to abolish the nation’s current goods and services tax, along with fuel subsidies and minimum wage realignment.

Market watchers had expected equities to fall across the board, with government-linked companies, benchmark index stocks and infrastructure companies taking the brunt of a potential selloff. iShares MSCI Malaysia ETF, the biggest exchange-traded fund holding Malaysian stocks, fell 6.2 percent last week. The FTSE Bursa Malaysia KLCI Index has corrected by 2.4 percent after it reached a record on April 19.

Affin Hwang Asset Management Bhd. expected a decline of as much as 8 percent in the first few days of trading post-election, while CGS-CIMB Securities lowered its end-2018 target for the benchmark index. UOB Kay Hian Holdings Ltd. and Nomura Holdings Inc. are reviewing their views on the main measure and equities. On the flip side, Malayan Banking Bhd. has expressed optimism for financial markets following the election.

Construction

Mahathir campaigned on a promise to review all infrastructure projects including the East Coast Rail Link project. IJM Corp. fell 14 percent, Malaysian Resources Corp. slid 22 percent and George Kent Malaysia Bhd. plunged 30 percent.

Political Ties

Here’s a list of companies with ties to either former Prime Minister Najib Razak’s Barisan Nasional party or Mahathir’s Pakatan Harapan.

  • Family ties: CIMB Bank Bhd. (chaired by Najib’s brother Nazir Razak) slid 5.1 percent; Opcom Holdings Bhd., whose CEO Mokhzani Mahathir is Mahathir’s son, rallied 50 percent. Thriven Global Bhd. more than doubled in value, while Eden Inc. Bhd. surged 171 percent. The two companies’ chairman Fakhri Yassin Mahiaddin is the son of Muhyiddin Yassin whom Mahathir named home affairs minister Saturday
  • Government services providers: My E.G. Services Bhd. plunged 30 percent; Datasonic Group Bhd. slid as much as 8.4 percent
  • DRB-Hicom Bhd. fell 7 percent. The company sold a stake in national carmaker Proton Holdings Bhd. last year to China’s Geely Automobile Holdings Ltd. Mahathir was opposed to giving foreign investors control over Proton
  • Felda Global Ventures Bhd., the world’s largest palm oil producer and a vital cog in Malaysian politics, gained 12 percent
  • Media companies: Utusan Melayu (M) Bhd., Media Prima Bhd. and Star Media Group Bhd. all slid. Utusan and Star Media are owned by United Malays National Organisation and the Malaysian Chinese Association. Media Prima’s group managing director Kamal Khalid previously ran the communications unit in the Prime Minister’s office
  • Destini Bhd. tumbled 41 percent. The defense services contractor is owned by Rozabil Rozamujib Abdul Rahman, a member of the United Malays National Organisation, a party in the outgoing ruling coalition
  • KUB Malaysia Bhd. dropped 20 percent: Majority shareholder Anchorscape Sdn Bhd.’s director Abdul Rahman Mohd Redza is the incumbent state assemblyman who won the Linggi seat in the state of Negeri Sembilan

Consumer Consumption

Mahathir’s campaign pledge to nullify the nation’s current goods and services tax, fuel subsidies and minimum wage realignment could benefit the consumer sector, according to Gan Eng Peng, director of equities strategy and advisory at Affin Hwang Asset Management.

  • Dutch Lady Milk Industries Bhd., Fraser & Neave Holdings Bhd., Heineken Malaysia Bhd., Carlsberg Brewery Malaysia Bhd., Padini Holdings Bhd. all gained

Export Oriented

The ringgit was little changed at 3.9507 per dollar, after sinking as much as 1%. Export-driven companies with products from rubber gloves to technology climbed.

Inari Amertron Bhd. gained as much as 7.6 percent; Vitrox Corp. Bhd. rose 2.8 percent; Unisem (M) Bhd. added 10 percent; Malaysian Pacific Industries Bhd. rose 11 percent; Globetronics Technology Bhd. gained 11 percent; Top Glove Bhd. rose 3.3 percent; Hartalega Holdings Bhd. advanced 2.4 percent.

Flying Under The Radar

AirAsia Group Bhd. founder Tony Fernandes’s open support for former Prime Minister Najib Razak’s Barisan Nasional coalition could impact the company’s shares, according to Vincent Khoo, an analyst at UOB Kay Hian. In a Facebook post on Sunday, Fernandes apologized for his actions, adding that he “buckled” under pressure. AirAsia’s shares declined 5.4 percent at the close.

©2018 Bloomberg L.P.

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