Monday, January 21, 2013

General Election - Crisis or Opportunity?

Yesterday KLCI plunged 40 points (2.5%) to 1635, while the KLCI futures plunged almost 60 points to 1624! Technically speaking, KLCI has violated 50 day and 100 day moving averages, and looks like the next supporting level 1620 (200 day moving average) is shaky. 

All these happened because the latest speculation on the election date is March 30th 2013 which has caused investors highly uneasy as they are worried about the outcome of the election.

In my personal opinion, (no offence to any party), that there are 2 possible scenario: either the BN will win by marginally or lose by marginally, assuming the opposition party increases their parliamentary seats from 20% to 40%, ie, from the current 82 seats increases 20% to 98 seats based on the assumption that the MCA (Malaysia Chinese Association) will lose majority of its 15 Parliamentary seats plus several seats from other BN parties. Or for the opposition party to win marginally, they need to secure 112 seats out of the 222 parliamentary seats, in other words, 14 more seats on top of the above scenario. 

Given the above scenario, in either case, most likely we shall see the opposition party gaining more seats in the parliament. In the eyes of the foreign investors, this is good news because this may mean there are more checks and balances in the country. For Malaysians, this is good for us too as no matter which party win, the winning party will work extra hard to gain the people's votes so that in the next election they can retain the power; while the losing party will also try their best so that they can win the next election. 

Currently, as the EU and US economies are weak, Asia is still the no.1 choice for the multi billion international funds. Not only that, as the global interest rates remain low, rich investors from Japan, Korea, China and Singapore will buy up the properties and shares in the ASEAN countries and they will even set up factories here. 

Rosy picture like this is happening but it is slow due to the uncertainties in our election. However, once the election is over, foreign investors will come in big wave if they see that both the ruling and the opposition party work together to fight against corruptions, reform the education system, bring in more FDI, and to build a truly 1 Malaysia for its people. 

So from now till the polling date, the KLCI will continue to be volatile, political linked stocks will sell down, but I believe in any crisis there is an opportunity. Warren Buffett said, "Be fearful when others are greedy; and be greedy when others are fearful".

Happy investing,
Pauline Yong


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