13 April 2011

Sarawak state election 2011: BN to lose 2/3 majority?

Coming this Saturday, 16th April 2011, the Sarawak state elections will be held and Malaysians will be watching closely on the outcome. Of course, I do not know the outcome yet. In fact, I am afraid to predict it, as the "not so good" result will jeopardize my share investments. I am not a Sarawakian either, what should I gauge against? As Chinese said, outsiders tends to be clearer than insiders. As such, Finance Malaysia refer to the following article taken from Credit Suisse as a reference, a view from foreigners.

BN's 'fixed deposit' will be put to test?
The Sarawak state elections will be a key barometer for Prime Minister Najib to gauge the support for Malaysians for the incumbent Barisan Nasional (BN). While previous state elections were seen to be non-events, as Sarawak has always been BN stronghold, these particular polls will likely be the most hotly contested. This round, for BN to lose the 2/3 majority, it will need to lose 24 seats or an additional 15 seats.

4 Disadvantages to BN
  1. "Bible"
    • On the surface, the 'Bible' issue has been resolved, but this issue could have hit a sour note with the Christian voters. To recap, the row over the use of Malay-language Bibles centers on the use of word 'Allah' for God.
    • 43% of Sarawakians are Christians
  2. "Native customary rights"
    • There are supposedly over 200 pending cases over the 'native customary rights' land problems. These cases are seeking to overturn the directive made by the Minister for Resources Planning in Sarawak to extinguish their native customary rights and revert the land to the Sarawak government.
    • 56% of total voter population in Sarawak are natives
  3. Taib's alleged immense wealth
    • Chief Minister of Sarawak, Taib has ruled Sarawak for 30 years. The opposition has highlighted Taib family's alleged immense wealth and businesses. The key Chinese party in Taib's stable, SUPP, will likely be taking the brunt of the Chinese's hostile sentiment towards Taib.
  4. Poverty in Sarawak
    • Accusations of money politics and corruption could surface during the Sarawak state elections, as the level of poverty is one of the highest in Malaysia, although Sarawak is one of the riches states in natural resources (oil, gas, timber and palm oil).
What would be the outcome?
BN currently has 87% of the state seats. Credit Suisse believe that BN will lose more seats but will unlikely lose the 2/3 majority. This suggests that BN will hold the General Elections in 2012 (and not 2011), which is good news for the stock market, as the government will have to dish out more 'goodies' and continue spending.

What if there's a political tsunami?
It would be a buying opportunity. If the voters swing significantly to the opposition, we look to the 8 March 2008 general elections to gauge the impact on the stock market. If the unexpected happens, we conclude that a knee-jerk downward reaction would provide a buying opportunity for fundamentally-strong stocks as they should outperform once the shock wears off.

Credit Suisse Top Picks
PetChem, CIMB, Axiata, Genting, Gamuda, AirAsia, IJM Corp, UEM Land and RHB Cap.

Source: Credit Suisse

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