Malaysian Election - Stunner!
Brexit, Trump, Macron….Mahathir. The most unlikely of all twists in the global rejection of ruling elites has just been delivered in Malaysia, of all places.During our trip to Kuala Lumpur in January ALL of our contacts were resigned to Prime Minister Najib retaining power, no matter how distasteful that prospect was. Some of them were even of the view that he might return Barisan Nasional, the coalition that has ruled Malaysia for the entirety of its independence, to a two-thirds ‘super’ majority.
But yesterday the Malaysian people kicked out Asia’s biggest kleptomaniac (and the reason that we were reluctant to go overweight the KLCI even as the economic cycle turned positive). Najib’s career is now in tatters and whether he and his wife will stay out of jail is highly questionable. It is an election result to enjoy (even if it means that Donald Trump, and Barack Obama, will no longer have a natural golf partner as the prime minister of Malaysia) following the appalling 1-Malaysia Development Berhad scandal.
But what does it mean for the market? As we write the Malaysia Composite ETF is reportedly down 9.1% in out-of-hours trading. If the carnage in the market is delivered on opening this morning it will probably constitute the biggest buying opportunity in Asia this year. We went Overweight the market in our year-end strategy report because of the cyclical signals being sent by profits, investment and real lending rates. That did not change yesterday.
Moreover, the economy is doing very well and Chinese investment flows – although Beijing has clearly backed the wrong horse – will not stop because of this setback.
Now, it has to be admitted that Pakatan Harapan’s policy manifesto is economically illiterate. The same was true when Anwar Ibrahim headed the opposition surge five years ago (and we welcome the prospect of him taking over as Malaysian prime minister following his release from jail in June). The likelihood is that the worst aspects of the proposed policy programme will be ditched as politics clashes with economic reality. However, the much-hated GST (even at a paltry 6%) will be ditched.
And then there is Mahathir. 92-year olds rarely win elections, especially when they return to lead parties in opposition to the one they once dominated, but he has done it, albeit as a proxy in Anwar’s absence. We can only hope he hands over the reins to the true opposition leader as soon as possible (his tenure in the 1980s and 1990s was far from corruption free). But in any case, his giant shadow once again falls over Malaysia.
We would advise buying on weakness – it will be short-lived.
Jim
Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.
The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.
Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.
Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers.
Previous successful calls include:
- In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
- Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
- Called early the upswing in the Indian stock market in the final quarter of 2013.
Recent Recommendations:
- Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
- Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
- Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
- Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.