Led by the 93-year old former Prime Minister (PM), Tun Dr Mahathir Mohamad, Pakatan Harapan (PH) won 54.5 percent of the parliamentary seats of Malaysia. Now, how should investors navigate under the new establishment?

Campaign Promises

In the first 100 days, PH have started delivering on its campaign promises. From abolishing the goods and services tax (GST) to re-studying mega projects awarded to foreign countries, there have been no lack of sweeping changes from the PH coalition government. The government also started taking action against possible corruption cases against former Prime Minister Najib.

The Five-Man Council

Saving the country’s economy has also been given top priority by the new government. In order to save the country’s economy, the reappointed PM Mahathir appointed a council of five elders with tons of experience. The council consists of Tun Daim Xainuddin (former Finance Minister during Mahathir’s premiership and renown businessman), Tan Sri Zeti Akhtar Aziz (former governor of BNM), Tan Sri Hassan Marican (former President of Petronas), Tan Sri Robert Kuok (Malaysian business magnate) and Professor Jomo Kwame Sundaram (Malaysian economist).

Knee-Jerk Reactions

As the sweeping changes in the country take place, the Malaysian stock market has been taking a hit from the knee-jerk reactions, especially stocks linked to Barisan Nasional. UOBKH believes that the best strategy moving forward will be to focus on defensive stocks, apolitical growth stocks and selected mega project plays.

Investors Takeaway: Recommended Strategies From UOBKH

  1. High-Yield Defensive Plays

For starters, UOBKH recommends investors to invest in high-yielding defensive stocks with relatively low foreign portfolio ownership. UOBKH believes that this group of stocks should gain appeal among investors in the 2H18. These stocks include like BAT, DiGi, Magnum, Genting Malaysia and YTL Power.

BAT: BUY, TP RM36.00
DiGi: BUY, TP RM5.40
Genting: BUY, TP RM11.80
Magnum: BUY, TP RM2.00
YTL Power: BUY, TP RM1.40

  1. Apolitical Growth Plays

For apolitical growth stocks, UOBKH’s preference is to invest in stocks that have a good earnings growth momentum heading into 2H18. This group includes stocks like Inari Amerton, Globetronics, VS Industry, Bumi Armada and Yong Tai.

Inari Amerton: BUY, TP RM2.45
Globetronics: BUY, TP RM5.60
VS Industry: BUY, TP RM2.90
Bumi Armada: BUY, TP RM 1.06
Yong Tai: BUY, TP MYR 2.36

  1. Selective Mega Project Plays

The third group of stocks that UOBKH recommends investors to invest in includes a selected list of beneficiaries of mega projects. Despite the new government’s pledge to review mega projects, UOBKH is confident that most of the ongoing and planned mega projects would be implemented. This is because of the crucial fiscal stimuli and enhancement to the country’s logistics infrastructure.

Under this group of stocks, Malaysian Resources Corporation Berhad (MRCB) has been identified by UOBKH as a target to accumulate on its recent share price weakness. Another play that UOBKH recommends is Gamuda, which could start to materialise the long-deferred sale of water treatment company Splash.

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