‘BULLISH ON BN’
Coalition victory will be viewed positively by market, says research firm
STOCK market investors expect the ruling Barisan Nasional to win comfortably in the 14th General Election (GE14), CIMB Research said.
The win would be viewed positively by the market, the research firm said yesterday.
“BN currently has 133 out of 222 seats in the House of Parliament. We view BN’s widely expected win as neutral to positive for the market.
“The stock market’s performance post the election will depend on the degree of selling pressure during the campaigning period and the polls results.”
CIMB Research expected Bursa Malaysia to remain volatile during the campaign period, largely because of the United StatesChina trade tensions.
It kept Bursa’s key FBM KLCI index year-end target at 1,880 points.
Parliament was dissolved on Saturday. On the same day, Prime Minister Datuk Seri Najib Razak unveiled BN’s election manifesto with pledges for broad voter bases.
Local and foreign analysts said BN’s social and economic pledges were not expected to significantly affect the government’s financial position.
However, Pakatan Harapan’s manifesto, especially its promise to abolish the Goods and Services Tax (GST), might lead to a wider budget deficit.
Hong Leong Investment Bank Bhd (HLIB) noted that BN’s manifesto boasted 14 major points, with a focus on employment ( jobs creation and enhancing employability), cost of living, affordable housing, 1Malaysia People’s Aid enhancement and a higher minimum wage.
“BN’s manifesto is focused on employment and cost of living, with financing of these measures likely to come from higher oil price. Easing the cost of living burden is a heavily-weighted theme in PH’s manifesto, which may increase the budget deficit from 2.8 per cent of GDP to four per cent,” HLIB said in a report yesterday.
The firm said as most of BN’s promises would be implemented over five years, there should be no significant impact to its 2018 economic headline projections. Its forecasts included a 5.3 per cent gross domestic product (GDP) growth, a 2.7 per cent inflation and no further interest rate hike for the year.
“We believe that most of the incremental cost this year from the proposed manifesto measures can be somewhat offset by higher oil revenue,” it said, adding that oil price had so far this year averaged US$67.2 (RM260) per barrel versus the Finance Ministry’s assumption of US$52 per barrel.
“We estimate that every US$1 increment would add RM300 million to the government’s coffers,” HLIB said.
Elaborating on PH’s manifesto launched early last month, HLIB estimated that PH’s proposed GST abolishment would cause a loss of RM43.8 billion in government revenue. This would be partially offset by the reintroduction of the sales tax.
“PH plans to further fill this ‘GST gap’ by eliminating leakages, wastage and corruption, which it estimates at RM15 billion to RM20 billion. Under this scenario, we estimate (albeit simplistically) that Malaysia’s 2018 budget deficit target of RM39.8 billion (2.8 per cent of GDP) would increase to RM56.6 billionn (four per cent of GDP),” HLIB explained.
HLIB expects a status quo political outcome for GE14 premised on heightened threecornered fights.
Its benchmark FBMKLCI target of 1,880 is unchanged based on 16.5 times price earnings on 2018 earnings or equivalent to a 7.8 per cent year-on-year growth.
Moody’s Investors Service said although domestic political risks had increased in recent years, they had not adversely affected policy reform.
This was because the government had demonstrated commitment to its fiscal deficit reduction goals through past electoral cycles, Moody’s lead sovereign analyst for Malaysia Anushka Shah said.
Anushka said both BN and PH had unveiled specific spending programmes targeted at key voter bases.
They included raising minimum wage, greater cash handouts and relief for Felda settlers.