The King today consented to the appointment of Datuk Seri Anwar Ibrahim of the Pakatan Harapan coalition as Malaysia’s 10th Prime Minister (PM) to lead a “unity” government based on a “power sharing” model. We expect the continuation of prevailing policy inclinations including pro business, protectionism for local industries, business-as-usual for government-linked companies, strong fiscal support to the economy with cash handouts, fuel and food subsidies, and pump priming. We continue to advocate investors to seek refuge in banks, telcos, auto makers/distributors, mid-market retailers and construction as we believe the “unity” government will be supportive of domestic consumption. We raise our end-2022 FBM KLCI target back to 1,500 pts from 1,450 pts.

A “unity” government led by Datuk Seri Anwar Ibrahim

Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah today consented to the appointment of Datuk Seri Anwar Ibrahim of the Pakatan Harapan coalition as Malaysia’s 10th PM, after a special meeting of the Malay rulers in the morning. Datuk Seri Anwar Ibrahim will lead a “unity” government based on “power-sharing” with other coalitions that won parliament seats in the just concluded 15th General Election (see Exhibit 1).

A relief rally as political deadlock finally ended

The market rallied ahead of the news in the morning session and we expect it to end the day on a positive note as the impasse that had lasted for days finally came to an end.

After the initial euphoria, we believe the market will assess the effectiveness of the “unity” government, which is unprecedented in Malaysia, and in uncharted waters. We hold the view under a “power sharing” model, that the mostly like outcome is the continuation of prevailing policy inclinations at least over the immediate term including pro business, protectionism for local industries, business-as-usual for government-linked companies in the economy, strong fiscal support to the economy including cash handouts and fuel and food subsidies (to cushion the consumers from the rising cost of living amidst sustained high inflation globally), and pump-priming via the rollout of public infrastructure projects (to shield the economy from external slowdown and headwinds).

Source: Kenanga Research - 24 Nov 2022