Morgan Stanley: Shock Malaysia election outcome could boost foreign interest in market

Malaysia ringgit notesMalaysia ringgit notes

Malaysia’s shock election outcome could boost foreign interest levels in the market, Aarti Shah, equity analyst at Morgan Stanley, said in a note on Wednesday.

“For equities, we expect market volatility to rise but we cannot rule out this raises the interest level for foreign investors (typically underweight the market) anticipating change,” she said, adding this could be a positive for multiples, which are currently at 16 times price-to-earnings, above the five-year average.

Malaysia has been Southeast Asia’s second-best performing market so far this year, outperforming the MSCI Asia ex-Japan index by 4.2 percent on foreign inflows of US$900 million into equities, she said.

She noted that the key policy differences for the new government included rolling back the goods and services tax, introducing some fuel subsidies and reviewing some infrastructure projects.

Morgan Stanley was overweight on banks, healthcare and telcos, but while the bank was also overweight on industrials, potential infrastructure policy changes could be a headwind, she said.