New govt would benefit from vaccination works, economic reopening

In a research note today, Affin Hwang Capital Asset Management said the new government would also benefit from less selling pressure by government-linked investment companies (GLICs) from the expiry of the various withdrawal schemes.

"The PM's resignation both lengthens and increases uncertainty as the eventual coalition formed can create policy delay, changes as well as the coalition being unstable itself. This might or might not be clarified soon, therefore we need to keep reassessing new developments to adjust our views and strategy accordingly," it said.

It said the market would get the least negative impact if the continuation of the current administration either under former deputy prime minister Datuk Seri Ismail Sabri or even Muhyiddin as the party could have the largest minority coalition.

Meanwhile, for conventional funds, coming from a heavily invested level, the research firm believes reducing some weights for cash optionality is prudent in this environment.

"Shariah funds have higher cash levels going into this crisis due to less reopening play options and significantly weaker market compared to conventional funds. Technology, retail, healthcare and manufacturing sectors offer the least political risk although not from a valuation perspective.

"Banks, government-linked companies and politically linked stocks are at risk now due to potential formore national duty given the limitation of our fiscal and monetary policies to stimulate the economy. This is a risk and not an eventuality as a new coalition might not go down this route or it might not be necessary if the economy opens with pent-up private sector consumption," it added.

If politics can stabilise, combined with economic reopening, it said, there is potential for a 5.0 per cent to 10 per cent bounce towards year-end.

"We favour reopening plays like banks, retail, property, healthcare; global growth plays like technology, manufacturing; as well as digitalisation theme like telecommunications and payment companies," it said.