Malaysia investors shift to Mahathir's camp from Najib-linked losers

Malaysia investors shift to Mahathir's camp from Najib-linked losers
PHOTO: Reuters

KUALA LUMPUR - Investors sorted Malaysia's political haves from the have-nots on the first trading day after a shock election result, dumping shares in firms associated with supporters of ousted prime minister Najib Razak and projects backed by his government.

Veteran politician Mahathir Mohamad came out of retirement to lead the opposition Pakatan Harapan (Alliance of Hope) to a stunning victory over a ruling party he had once led, defeating Najib, a former protege he had accused of corruption.

As Malaysian markets reopened for trading after being shut for two days last week, one of the biggest losers in the equity market was AirAsia Group Bhd, whose chief executive Tony Fernandes endorsed the incumbent Najib during the campaign. Shares of CIMB Group Holdings Bhd, whose group chairman Nazir Razak is Najib's younger brother, also plunged.

Among Monday's biggest winners was the Robert Kuok-controlled PPB Group Bhd, which rose over four per cent following the appointment of Kuok, one of Asia's richest tycoons, as an adviser to the new administration.

More broadly, construction companies were the biggest underperformers after Mahathir's pledge to review large-scale infrastructure projects sponsored by the Najib administration, particularly those that would expand China's economic interests in Malaysia.

Shares of YTL Corp, the conglomerate which was awarded the contract to build the Kuala Lumpur-Singapore high-speed railway line, fell more than 8 per cent.

Mahathir scores shocking win in Malaysian Election

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    Pakatan Harapan chairman Tun Dr Mahathir Mohamad has officially been sworn in as Malaysia's seventh Prime Minister.

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    Dr Mahathir took his oath of office as Prime Minister before Yang di-Pertuan Agong Sultan Muhammad V at the Istana Negara at 9.57pm Thursday (May 10).

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    The 92-year-old was accompanied by his wife Tun Dr Siti Hasmah, DAP stalwart Lim Kit Siang, PKR president Datuk Seri Dr Wan Azizah Wan Ismail, vice-president Nurul Izzah Anwar, Parti Amanah Negara president Mohamad Sabu and Parti Pribumi Bersatu Malaysia president Tan Sri Muhyiddin Yassin.

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    This means that Dr Mahathir will be the world's oldest prime minister and the first Malaysian to be premier twice.

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    At a press conference earlier, Dr Mahathir said he would appoint Dr Wan Azizah as deputy prime minister once he is sworn in.

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    Dr Mahathir received the mandate to form the government through Pakatan, which managed to wrest 113 out of 222 federal seats in GE14.

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    Former Prime Minister Mahathir Mohamad speaks to reporters during a press conference at the Sheraton Petaling Jaya Hotel on 10 May 2018.

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    Mahathir Mohamad holds up a document with the signatures of alliance party leaders naming him as the prime minister during a news conference following the general election in Petaling Jaya, Malaysia, May 10, 2018.

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    Najib leaves after a news conference on May 10.

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    Malaysia's outgoing Prime Minister Najib Razak (R) speaks during a press conference in Kuala Lumpur, Malaysia, 10 May 2018.

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    Mahathir's stunning defeat of the coalition that has ruled the Southeast Asian country since independence from Britain six decades ago means that, at the age of 92, he will become the oldest elected leader in the world.

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    Official results showed that Mahathir's Pakatan Harapan (Alliance of Hope) had won 113 of parliament's 222 seats, clinching the simple majority required to rule.

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    Najib's ruling coalition, Barisan Nasional (BN), had 79. Pic: Barisan Nasional party members watch election results updates at the Barisan Nasional coalition headquarters in Kuala Lumpur, Malaysia, on Wednesday, May 9, 2018.

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    Supporters of Mahathir Mohamad, former Malaysian prime minister and opposition candidate for Pakatan Harapan (Alliance of Hope), celebrate outside the hotel, where Mahathir Mohamad held news conference, in Petaling Jaya, Malaysia, May 10, 2018.

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    Mahathir told a news conference he expected to be sworn in as prime minister later on Thursday.

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    Few had expected Mahathir to prevail against a coalition that has long relied on the support of the country's ethnic-Malay majority.

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    Mahathir has promised to seek a royal pardon for Anwar if they won the election and, once Anwar is free, to step aside and let him become prime minister.

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    Ethnic-Malay Muslims have long tended to support BN for affirmative-action policies that give them government contracts, cheap housing and guaranteed university admissions.

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    Mahathir's alliance, which counts on urban votes and support from the minority ethnic Chinese and Indian communities, had hoped the veteran Malay leader would win over voters usually loyal to BN. That strategy appeared to have paid off.

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    Mahathir's opposition wrested control of key states Johor and Kedah, and reduced BN's grip in strongholds like Sarawak.

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    Tun Dr Mahathir Mohamad arrives at SK Titi Gajah in Alor Setar at 10.55am to cast his vote.

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    The Election Commission said voter turnout was at 55 percent out of the total 14,449,200 voters in GE14 as of 1pm on May 9.

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    Dr Mahathir Mohamad is keeping a positive outlook on voter turnout throughout the day.

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    By 5pm May 9, some 70 per cent of voters had cast their ballots for what has been dubbed "the mother of all elections". The latest polls show a neck-and-neck race to the finish for ruling coalition Barisan Nasional (BN) and opposition pact Pakatan Harapan (PH).

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    Voters still queuing up within the compounds of polling stations nationwide for GE14 were not allowed to vote after the 5pm cut-off time but any voter affected can file a petition to demand a re-election.

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    Malaysian Prime Minister Najib votes at a polling station during the 14th general elections in Pekan on May 9, 2018.

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    Malaysians went to the polls on May 9 in one of the country's closest ever elections which pits scandal-hit Prime Minister Najib Razak against his one-time mentor, a 92-year-old former authoritarian leader.

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    The Barisan Nasional chairman arrived at his polling station Sekolah Sains Sultan Ahmad Shah at 9.20 am together with his wife Datin Seri Rosmah Mansor. Najib was all smiles when he was greeted by other voters who were present at the station.

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    9.29am: PKR president Datuk Seri Dr Wan Azizah Wan Ismail voted in SK Seri Penanti in Permatang Pauh. After casting her vote, she immediately left and returned to Selangor where she is contesting for Pandan parliamentary seat there.

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    The Barisan chief is in a four-cornered fight for the Pekan seat. (Pic) Barisan Nasional deputy chairman Datuk Seri Dr Ahmad Zahid Hamidi and his wife Datin Seri Hamidah Khamis successfully cast their ballots at the Madrasah Manbail Ulum voting centre at Sungai Nipah Darat.

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    Datuk Seri Liow Tiong Lai and Datin Seri Lee Sun Loo cast their vote at SK Sulaiman in Bentong.

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    PAS president Datuk Seri Abdul Hadi Awang, who is defending his Marang parliamentary seat, arrives at SK Rusila in Marang to cast his ballot.

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    EC staff making final preparations at a polling station at Stadium Titiwangsa in Kuala Lumpur.

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    An instruction notice for voters is seen at a voting center on the eve of the 14th general election in Pekan, Pahang on May 8, 2018.

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    Malaysia's Prime Minister Najib Razak (C) offers special prayers a day before the 14th general election at a mosque in Pekan, Pahang, Malaysia, May 8, 2018.

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    Women vote during the general election in Alor Setar, Malaysia, May 9, 2018.

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    People boarding buses back to Malaysia. at Singapore's Golden Mile complex on May 8.

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    Supporters listen to a speech by former Malaysian PM Mahathir Mohamad

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    This picture taken on May 8, 2018 shows Malaysians gathering at an election rally in Petaling Jaya to watch a telecast of 92-year-old former authoritarian leader Mahathir Mohamad.

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    Voters queue up in the early morning to cast their ballots at a polling station during the 14th general election in Alor Setar on May 9, 2018.

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"Near-term performance may be constrained by a potential flux in capex plays and government-linked stocks, both prominently represented in institutional portfolios, in our view, as policy risks are repriced," said Hoy Kit Mak, head of Malaysia equity research at JP Morgan.

Mak said his stance was to stay in consumer and defensive sectors, including healthcare and telecommunications.

The main stock index, one of Asia's top three performers this year in dollar terms, recovered quickly from an early drop, even as the utilities sector remained a drag. The construction sector fell nearly 13 per cent.

"The opposition party's victory has also put into question the future of Chinese investment in the infrastructure sector, which could affect construction stocks," Credit Suisse said in a note to clients.

SONS OF THE SOIL

Malaysia was second only to Russia on a "crony capitalism" index published two years ago by the Economist magazine, showing how closely business fortunes have relied on political connections in the Southeast Asian economy.

Successive Malaysian administrations have persisted with statist policies, embodied in five-year plans, that have seen mega-contracts awarded to government-friendly businessmen.

Thus, the end of six decades of rule by the UMNO bloc saw shares of My E.G. Services, a company whose incomes come mainly from government contracts, fall 30 per cent.

Shares in AirAsia fell as much as 10 per cent after its chief Tony Fernandes apologised for endorsing former prime minister Najib Razak in the election.

Meanwhile, 10-year bond yields spiked to 4.25 per cent, their highest levels since early 2017, as investors worried that foreign investors who hold nearly half the outstanding government bonds, will sell down.

Investors had anticipated the bearish reaction to the 92-year-old Mahathir becoming prime minister once more - he had retired in 2003 after 22 years in power.

Mahathir's poll promises to roll back a goods and services tax, scrap toll fees, reinstate fuel subsidies and raise minimum wages also raise the spectre of Malaysia's fiscal deficit widening again.

The ringgit hit a four-month low of 3.9850 per dollar, but stabilised off those lows fairly early.

"Banks are significantly vulnerable and could come under pressure given their high foreign ownership and sharp rally in the sector over the past few months," Credit Suisse said.

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