KUALA LUMPUR (Nov 22): Hong Leong Investment Bank Research (HLIB) said that as a hung parliament election outcome is unprecedented for Malaysia and the possibility of higher political risk premium and regulatory risks (due to the unexpected strong showing by PAS), the FBM KLCI may witness further volatility ahead (compounded by ongoing results season).
In a traders’ brief on Tuesday (Nov 22), the research house said this is premised on the duration of the power vacuum (PM and its alliances are ikely to be named by the Agong at 2pm today ), the quality of the Cabinet team, and the parliamentary majority of the eventual government that could institute further institutional and political reforms.
Commenting on the market on the first trading after the election, HLIB said the knee-jerk selldown due to an unprecedented hung parliament election outcome and pending a new government formation witnessed the KLCI tumbling as much as 22 points before trimming the losses to end 1.3 points at 1,448.
On funds flow, it said foreign investors were the major sellers (-RM167 million, Nov: -RM282 million) for a fourth consecutive day followed by local institutions (-RM22 million, Nov: +RM 88 million) while retailers (+RM 189 million, Nov: +RM19 4 million) were the major net buyers in the last four sessions.
HLIB said immediate supports are situated at 1,400-1,420 whilst a more solid supports are situated at 1,362-1,373 zones (resistance: 1,454-1,469-1,482).
“Nevertheless, we believe the current impasse won’t be long drawn.
“We would nibble on any weakness to bet on the probability of a positive Dec from the “window dressing effect,” it said.