Pakatan Rakyat policies will cause a “painful” shock for the stock market but the successful implementation will have long-term positive impact on the whole economy, TA Research said.
“If these measures are able to produce the intended or promised results, it would be long-term positive for the economy as well as the capital market.
“While we reckon that the current administration is mindful of many of these shortfalls, the progress in addressing some of these issues so far was not compelling,” it said in a report.
However, it noted, a strong mandate for BN would allow Prime Minister Najib Abdul Razak to “crack the whip to quash internal revolts against (the) change process and produce good results”.
This would be a positive for the economy, it said, as the Najib-led Economic Transformation Programme had driven tremendous growth in private investment in the country.
Terming the general election the biggest risk of the second quarter, the research house nonetheless expects the BN to win 120 to 125 seats in Parliament, leaving it with a slimmer majority compared to 2008, while the status quo in Selangor, Perak and Negri Sembilan hangs in the balance and
could spring surprises.
“A narrow win for Barisan Nasional (BN) is likely to lead to a leadership challenge within UMNO as some old guards are already raising the ante for heads to roll if the victory is less inspiring than 2008.
“Thus, do not expect a major run-up in the index although anticipate the all-time high of 1,699 being taken out,” it said.
Highway jobs on the line
In the event that Pakatan takes over Putrajaya, TA Research said, the pain will mostly be felt by companies perceived to be linked to the government, like MMC and DRB Hicom. Shocks in the market will come through these companies.
On the flipside, it said, Pakatan’s proposed policies, if implemented successfully could see a drop in fiscal deficit and rise in income levels.
It said that six multi-billion highway projects could be affected if Pakatan takes over. They include the West Coast Highway, Kinrara-Damansara Expressway and the East Klang Valley Expressway.
“Even if the concession agreement is renegotiated, earnings from the toll highways are expected to drop significantly,” it said.
It added that the proposed halving of toll rates for the North-South Highway could push down other infrastructure costs and signal margin compression but lower toll rates will have positive impact on the supply chain.
All lines of the MRT project is expected to stay as awards have been done through competitive tender and this would benefit Gamuda, WCT and IJM, it said.
However, it said, projects like the Langat 2 and the Singapore-Kuala Lumpur High Speed Rail will likely be shelved by Pakatan.
Pakatan’s gradual excise duty cut proposal was given the thumbs up by TA Research, which said that it will bring about positive growth for the auto sector.
The research house also said that the Pakatan policy proposals for the power sector will not be much different from the BN’s recently implemented policy.
“However, we note that the PM’s recent statement that Tenaga’s transmission & distribution assets will not be unbundled puts in limbo the prospect of a fully liberalised power sector in Malaysia,” it said.
It added that the BN and Pakatan’s seeming consensus on scaling back power sector subsidies implies a rise in tariffs which is positive for Tenaga.
“Perhaps, the only difference between both sides of the divide (in the power sector) is the fate of 1Malaysia Development Bhd.
“An opposition rule will likely spell an end of the sovereign fund as they have the intention to liquidate 1Malaysia Development Bhd and transfer the assets to Khazanah.” it said.