More moderate approach by new govt can alleviate regulatory risk - RHB

KUALA LUMPUR, Nov 24 (Bernama) -- RHB Research believes that the new government is a good representation of the cross-section of society and that a more moderate approach will alleviate regulatory risk.

The research house said in its market strategy titled “15th General Election (GE15): A Brave New World” that the government will have key priorities, including establishing an incredible cabinet, to gain the confidence and trust of the business community and win over both foreign and local investors, a swift re-tabling of Budget 2023, and government economic priorities.

“While we cannot rule out the risk of the government retaining a propensity to continue dishing out populist measures, the new leadership needs to understand that some hard decisions will need to be taken in the country’s long-term interest.

“We also believe that the Pakatan Harapan leadership has taken lessons from its 22-month stint in Putrajaya from 2018 and will avoid making the same mistakes,” it noted. 

RHB Research also sees the need to implement fiscal and economic reforms, initiatives to rationalise subsidies, and measures to unite the country given the deep-seated political divisions that have emerged post-GE15.

As for Bursa Malaysia, it expects the relief rally to be extended as equities play catch up to build on the recent tentative shift in investor sentiment.

It said that this comes on the back of rising hopes that the pace of monetary tightening will begin to ease as the market looks ahead to a more pragmatic approach by China’s government to contain COVID-19.

“In the short-term, however, we caution investors not to get too carried away, especially after the initial euphoria. The new unity government needs to prove its ability to work together as a team, something unimaginable just a week ago.

“We think subsidy and fiscal reforms will be the acid test. The presence of the Borneo bloc in the new administration will be positive for infrastructure programmes in East Malaysia.

“Another spike in markets should invite some short-term profit taking but further out, investors ought to re-focus on fundamentals with a preference for large-cap value stocks,” it said.

RHB Research added that the FBM KLCI should end the month above the 1,500 level to form a strong bullish candlestick.

“In the event that the index retraces below the 1,452 level, the sentiment would become negative again. Meanwhile. falling below the 1,394 support would deem the bears taking control again,” it said.

-- BERNAMA