Impact of Malaysia General Election (GE14) on Investment Portfolio

The world has just witnessed an orderly transition of power in Malaysia following the result of GE14.  A change in federal government after 6 decades!

As an income investor, the ultimate question that cross my mind is,  how would the change in government impact the various sectors? 

1) We have seen the sharp plunge in share prices on stocks whose fortunes are perceived to be linked to various contracts dished out by the previous BN government such as MYEG, Destini, Gamuda etc. Imagine you hold MYEG and the price plunged from RM2.6 before GE to RM0.9 level as at end-May 2018, that is 65% paper loss. I will usually stay out from political linked counters, although certain political linked counters could generate handsome return.

2) With the zerorisation of Goods & Services Tax in June onwards and Sales & Services Tax scheduled to be implemented in September, there will be 3 months of tax holiday, I suspect consumers may ramp up their spending again. Consumers have more income in the pocket to be saved or consumed. Consumer sector will rejoice, if the GST abolishment results in revenue shortfall of around RM20 bil to government coffer, it means additional RM20 bil in the domestic system that could be spent. 

Source: ET Strategic Marketing

Besides, fixing RON95 at a fixed level while RON97 to float, is also a welcome mechanism for most consumers amidst the higher oil prices now. Consumer sectors i.e. Auto sector, Brewery, Apparel makers , Retail Mall REITs will be the key beneficiary, no doubt about it.

3) With toll abolishment manifesto, expect this to be a very gradual development as government will need to balance the manifesto agenda vis-a-vis financial position. If tolls are being abolished, there shall be compensation to toll concessionaire. Stocks that are impacted e..g. Litrak & Gamuda (one of the shareholders of Litrak). Shareholders who invested in Litrak stocks for dividends will need the consider if the toll is being abolished in the interest of the nation, what sort of equity value will accrue to the shareholders?

4) Tenaga Nasional, a monopoly in the domestic electricity distribution business, may be impacted if the new government disagree with the implementation of ICPT (imbalance cost pass through) mechanism. With higher fuel prices & other generation cost, the rising cost will be passed to the consumers if electricity tariff is being increased under ICPT mechanism so that the higher cost will not impact Tenaga Nasional's financials adversely. With new government's objective to address the concerns of rising cost of living, it remains to be seen if the electricity tariff can be increased in June since the tariffs are being reviewed every June and December. If ICPT cannot be implemented, how would TNB shoulder the higher cost? will government provides enough subsidy to assist TNB?

The abovementioned impact is not meant to be exhaustive, the clear winner from my quick thought?

Consumer sectors, higher consumer income will support the sector's earning sustainability and growth moving forward.