KUALA LUMPUR, Nov 21 — Stock market analysts have cut their FTSE Bursa Malaysia KLCI (FBM KLCI) target for end-2022 to as low as 1,450 points in the absence of any coalition securing a simple majority in the newly concluded 15th general election (GE15).

Kenanga Research said Malaysia will only usher in another joint government or minority government, thus making it extremely challenging for new policy initiatives and reforms to be pushed through.

In a research note today, it said a knee-jerk market selloff is expected due to the country having at best a joint government. That is assuming a deal could be struck between two or more coalitions to form a joint government.

"During late-February 2020 in the aftermath of the ‘Sheraton Move’ that brought down the Pakatan Harapan (PH) government, leaving the country without a functioning government and a prime minister, the FBM KLCI fell as much as 4.6 per cent from 1,537 points in mid-February to a low of 1,467 points on March 2, 2020,” it added.

Hence, Kenanga Research cut its end-2022 FBM KLCI target by three per cent to 1,450 points from 1,500 points previously to reflect the new reality.

"Nonetheless, we continue to advocate investors to seek refuge in domestically-driven sectors including banks, telecommunication companies (telcos), automotive makers/distributors and mid-market retailers amid rising external headwinds. We believe the government of the day post-GE15 will continue to be highly supportive of domestic consumption,” it added.

Meanwhile, CGS-CIMB Securities also lowered its FBM KLCI target for end-2022 to 1,484 points from 1,556 points previously to reflect short-term political uncertainties.

It said the market will likely react negatively due to, among other reasons, GE15’s failure to resolve Malaysia’s political instability which may even lead to more uncertainty.

Further, the brokerage said, the market may have partially priced in a win for the incumbent Barisan Nasional (BN) and investors may have concerns over the strong showing by Islamist party PAS.

"There could also be concerns, similar to those in the past, of the fragility of potential alliances due to their differing ideologies.

"Taking a leaf from history, when the opposition parties did well against BN in 2008 and 2018, the FBM KLCI fell three per cent and six per cent one month after GE12 and GE14, respectively,” it said.

CGS-CIMB said if a Perikatan Nasional (PN)-led government comes into power, it expects potential negative share price reactions for banking, gaming, construction and brewery sectors.

If a PH-led government is formed, it could be negative for the telco sector, it said.

However, the manifestos of both potential governments are friendly to consumers, pharmaceutical and infrastructure spending in Sarawak, it said.

"We expect significant stock market volatility. In the longer term, we will be positive if the new government takes steps towards institutional and political reforms,” it added.

In GE15, the PH coalition emerged the biggest winner with 82 seats (a slight reduction from 90 immediately before the dissolution of Parliament), followed by PN with 73 seats (a sharp increase from 46 immediately previously), BN with 30 seats (from 43 previously) and Sarawak-based Gabungan Parti Sarawak (GPS) with 22 seats (from 19 seats previously).

The palace has instructed leaders of political parties and coalitions that command a large number of seats in Parliament to inform Istana Negara by 2 pm today of the agreed combination of political parties to form the next government and the prime minister candidate.

At 11.02am, the FBM KLCI was down 9.5 points to 1,439.82 from Thursday’s close at 1,449.32. — Bernama