Investors should buy CIMB Group Holdings Bhd. (CIMB) and Sime Darby Bhd. (SIME) that are seen as shielded from volatility ahead of Malaysia’s general election, according to Bank of America Corp.
Prime Minister Najib Razak dissolved parliament yesterday to prepare for the nation’s 13th general election. The FTSE Bursa Malaysia KLCI Index (FBMKLCI) closed little changed yesterday after plunging as much as 3.1 percent while its 30-day volatility, a gauge of price swings, rose to a one-month high.
“The upcoming election will be very close,” Melvyn Boey and Angeline Ooi, analysts at Bank of America Merrill Lynch, wrote in a report dated April 3. There are “buying opportunities in this volatile period.” They favor “domestic- oriented” stocks that have underperformed the MSCI Asia Pacific ex-Japan Index (MXAPJ) this year, including CIMB and Sime.
The elections will determine whether Najib’s ruling coalition can extend its unbroken hold on power since the country won independence from the U.K. in 1957. His 13-party Barisan Nasional coalition, which won the 2008 national vote by its slimmest margin, faces a resurgent opposition alliance led by former deputy prime minister Anwar Ibrahim.
Among Bank of America’s other picks are Axiata Group Bhd. (AXIATA), AMMB Holdings Bhd. (AMM), Telekom Malaysia Bhd. (T), SapuraKencana Petroleum Bhd. and Astro Malaysia Holdings Bhd. (ASTRO), according to the report.
CIMB, the nation’s second-biggest lender by market value, advanced 0.5 percent at 11:06 a.m. in Kuala Lumpur, poised for its highest close since Oct. 10. SapuraKencana added 1 percent. Sime Darby, the world’s biggest listed palm-oil producer, gained 0.4 percent to a two-month high. The KLCI rose 0.1 percent.
The prospect of the ruling coalition losing seats in the election has helped make the KLCI index Southeast Asia’s worst performing benchmark this year. The gauge has fallen 0.1 percent in 2013, compared with the MSCI South East Asia Index’s 5.8 percent gain.
Najib’s approval rating slipped to 61 percent in February from 63 percent in December, according to a survey of 1,021 voters conducted Jan. 23 to Feb. 6 by the Merdeka Center for Opinion Research.
“Any predictions provided will probably lack conviction, especially with the sharp 25 percent increase in first-time voters,” according to the BofA report.
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