(CHOIVO CAPITAL) PH Win, I Called It!! Whats next?


What a day! Boy does it feel good to be right. For the record, I called the Pakatan Harapan win on 2nd April 2018!

https://klse.i3investor.com/blogs/PilosopoCapital/152520.jsp

Ok, enough gloating.

I’d like to think it was my superior thought process that is wholly responsible for this correct prediction, but let’s be honest with one another, quite a bit of luck was involved.

As it turns out, PAS took away more votes from BN than they took away from PH, and they won less than expected. Just 2 states!

Now, enough about this, let’s get down to brass tacks. This is an investment site after all, how will this affect the Malaysian economy and stock markets.




Pre-Election

Prior to the elections, as I expected a PH win, I decided to save up cash, and at one point held almost 20% in cash compared to zero previously.

However, a day before the elections, I noticed that everyone is saving up cash and waiting for the post-election discounts. Which means, PH’s win was probably mostly priced into the markets. And so, I spent most of it, buying some export companies, and property development companies.



Post Elections

General and Macro Overview

For a while, there may be some volatility in the markets. But I doubt any downtrend will last more than a day. The sheer amount of optimism and dry powder available will very quickly soak up any selling by foreign funds. In addition, as we have that 2 day public holiday, Tun M will have 4 days to restore stability and confidence, which should be more than enough, especially since he has the Sultans approval to form the government.

Long term wise, the future is bright. Tun M will likely make a speech about how Wawasan 2020 is back on track, and this will fire up a trump like 6 month to one year rally.



Companies that will get whacked

Airasia and Supermax. Nothing much more need to be said. Airasia should do fine long term wise as it is one of the best managed airlines in the world. Supermax, well, like all glove companies is a little overvalued to begin with. It will take some time to recover from its more than 10% drop. I’m betting a limit down.

Toll concessionaires should get whacked (GAMUDA, IJM, LITRAK, EKOVEST, WCE). Ekovest particularly. For the most part, it will just be a sentiment based movement. A contract signed must be implemented. The govt have 2 ways about it, buy out the contract (good) or nationalize. And the second is not even an option, do that and business in Malaysia dies.

As long as your contracts is signed, you should be safe. Do note that Duke 2a contract for Ekovest is not signed.

For GAMUDA, they are going to need to forget about that RM4.22 billion lawsuit, and the SPLASH sale at RM3.2 bill. They should get a decent amount for it, but not that much. KPS by extensions should also kena whack.

Construction companies will also get whack properly. But again I think this will mostly be a sentiment thing. Najib’s plan for the LRT’s and MRT’s are a very good thing, at best some contracts may be renegotiated.

ECRL and HSR is unlikely to be cancelled, deals signed with China cannot be cancelled. You can at best renegotiate. Using the funds retrieved overseas relating to the 1MDB scandal, Malaysia should be able to pay off most of the debts owed to China. Especially since we will be fighting a lot harder to get everything back! Shinkansen or Japan will probably get the ECRL.



Companies that will do well

Country Heights Holding Berhad, Lim Kim Yew defended and help Tun M through and through. All stupid tax charges likely to be cancelled. AEONCR and MAGNUM will probably be happy as well.

Export stocks should do very well too, as the Malaysian currency is likely to weaken a bit for a while, especially with the USD rates going up.

Many inefficient GLC’s, FGV etc should go down initially due to sentiment, before people wake up to what good management will do to wake up the power of these companies.

Government employee size likely to remain, but salaries should go up, Selangor government employees did get larger bonuses than most after PKR took over. Other than maybe very top level, everyone will keep their jobs. There is no government that survives the next election after shrinking the civil service.

Mukhriz stocks like OPCOM and SAPRNG. But to be honest, these companies are a gamble as investments.

And i think, Property Development companies will start to really shoot again. With optimism and a brighter future, comes spending and inbesting, and as asians, most of us love buying property. All that foreign malaysian money will start flowing back into malaysian properties.





Danger Points

    How well will the new government be able to work together? I honestly give it 6 months before infighting starts. Just like a new relationship.

    There is a lot of difference in philosophy. I can see PPBM leaving to rebuild BN afterwards. At the end of the day most people voted against BN no because they didn’t like BN, but because they didn’t like Najib.

    I’m fairly certain BN is likely to win the next election unless PH somehow find a way to work together very very well.

    It’s easy to work with one another when you have a large and powerful common enemy. But now that you are in power, and that unifying factor is gone, things are going to get tough.



Conclusions

Its mainly a pro. Long live harapan!

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