Beyond 100th day: Investors await govt’s pro-growth policies
Pakatan Harapan’s direction post-100 days in office to set investment theme
THE Pakatan Harapan government’s beyond 100 days in the office may set the tone for a new investment theme, as investors await pro-growth policies to deploy capital amid the current economic uncertainty.
A fund manager said new opportunities in Malaysia would be defined by the new government and government-linked companies’ (GLCs) efficient capital expenditure (capex) and strong expense control.
However, it said opportunities would lie in Malaysia 2.0 once the government came up with more pro-growth policies.
“The way we look at this government is like a new management coming in, taking over and kitchen-sinking. Thus, the first 100 days are about pressing the reset button. But eventually, we need to move beyond that phase.
“We are looking to deploy some cash, but selectively. All investors like higher dividends and there are some GLCs, such as Petroliam Nasional Bhd-linked companies, which have the capacity to stream up the excess cash on their balance sheets,” said Gan Eng Peng, director of equity strategies and advisory at Affin Hwang Asset Management Bhd.
Gan said the risks of high debt and a narrower revenue base would subside significantly when economic growth gained momentum.
“The key concern of the market is whether Malaysia can continue to grow amid all the kitchen-sinking. Investors are very clear about what’s wrong with the country — the 1MDB (1Malaysia Development Bhd) scandal, high debt levels and the fiscal deficit.
“For more clarity on government policies, we have to wait for the 100-day Government of Malaysia Symposium and 2019 Budget,” he said.
The symposium will be held for the first time in September and 2019 Budget will be tabled on November 2.
Gan said the concern was more for next year because it remained to be seen if government expenditure could be cut without affecting growth, which means the consumer and export sectors need to fill this gap.
The other important issue for the market was earnings, he said.
“Prior to last year, the market had experienced three years of contracting earnings. The recent results season was tepid and many analysts have been revising down their numbers.
“We could end 2018 with only two to three per cent growth versus seven to eight per cent expected at the beginning of the year.”
Gan said curbing wastages and leakages would allay concerns over Malaysia’s high debt and narrower revenue base, adding that this could involve sweating existing assets.
For example, he said, Telekom Malaysia Bhd had announced it was able to offer 10 times higher broadband speeds while significantly lowering its capex.
“We may also see a more efficient allocation of investments, especially when a company does not have the expertise to venture overseas. Localisation could be an interesting theme,” he added.