Asset management company AHAM Capital hopes the new Cabinet would be able to deliver on its reform agenda including important fiscal and institutional reforms that would help “drive foreign inflows”.
Such reform would include longstanding issues such as subsidy rationalisation, broadening the country’s narrow tax revenue base, and addressing the labour shortage.
“With emerging clarity as well as successful execution of policies, we could see markets climb higher given low foreign positioning,” AHAM Capital, formerly known as Affin Hwang Asset Management Bhd, said in an investment brief to clients.
Markets surged on Anwar’s appointment as prime minister on Nov 24, ending the political deadlock from a hung Parliament, with the ringgit posting its best day in two weeks and equities rising 3%.
However, the euphoria quickly dissipated as Anwar took eight days to unveil his Cabinet, last Friday. Since then, the market has been trending lower.
Anwar’s much touted reform agenda got off to an uninspiring start when he was roundly criticised for taking the post of finance minister. Likewise, his appointment of Tengku Zafrul Aziz as international trade and industry minister was also not well received in some quarters.
In its note, AHAM Capital said the conclusion of Bursa Malaysia’s Q3 2022 earnings season saw “an overall positive trajectory of results”.
“Banks, which make up 40% of the KLCI, delivered results which were mostly in-line or above expectations. More importantly, forward guidance was also positive.
“On the flipside, the glove sector reported underwhelming results, though this was largely expected by markets.”
On portfolio positioning, it is cautiously optimistic and taking a selective approach to position for the upside.
“These include sectors like banks, property and healthcare which could benefit from reformist policies and foreign flows. We also added exposure in Tenaga Nasional Bhd as a potential beneficiary of subsidy restructuring,” it added.
It noted the Malaysian bond market extended its rally last week, led by the medium to longer end of the curve whose yields trended lower by some 7 to 13 basis points (bps), mainly supported by stronger foreign participation while local investors were reluctant to trim positions.
Notably, the 10-year MGS benchmark yield ended the week 8 bps lower to 4.02% while the 30-year ended Friday 7 bps lower to 4.45%, it said.
On primary news flow, markets were introduced to the reopening of the 30-year GII (RM5 billion size with RM2.5 billion allocated for public auction) which was priced at an average yield of 4.77%.
“We participated in this deal for some of our local fixed income portfolios, to which the issuance continued to trade strongly post-primaries to close the week at 4.7%,” it added.
“In terms of portfolio action, we continue to deploy some cash to trade the rates market last week. Currently, our cash level sits around 3%-10% across our Malaysian fixed income portfolios.”