by: Tam Ging Wien
Edited by Dean Goh for ProButterfly.
All examples and stocks quoted here in this article and on the ProButterflyTM site are for learning purposes; it does NOT constitute financial advice or a Buy/Sell recommendation. Contents are reflective of personal views and readers are responsible for their own investments and are advised to perform their own independent due diligence and take into account their own financial situation. If in any doubt about the investment action you should take, you should consult a professional certified financial advisor.
The "Malaysian General Elections (GE14) – An Investors Perspective" series is intended to discuss and generate investment themes and ideas, but it should NOT be misconstrued or otherwise interpreted as financial advice.
In our previous articles in this series, we covered a summary of the major points of the new Pakatan Harapan government manifesto.
In summary, the Pakatan Harapan (PH) has campaigned with a very clear message of hope for the people of Malaysia in their manifesto entitled Rebuilding Our Nation Fulfilling Our Hopes. The manifesto sets out the following pledge:
The manifesto sets out the following promises that the new government intends to fulfil within the first 100 days of taking office:
In addition to the 10 promises within 100 days, there are also 5 major pillars of reforms that the PH government promises to achieve within the next 5 years:
Taking the 10 promises and 5 key pillars at face value and assume that the new PH government will see through its promises and implement them in the most efficient and practical way.
We we 6 major (non-exhaustive) groups of stocks which will be impacted as a result of the implementation of the PH Manifesto:
This week, we will cover stocks in Group 2 which could potentially be impact by the Review of Megaprojects.
In the 10th promise of the PH manifesto, PH promised that within the next 100 days, they will “Initiate a comprehensive review of all megaprojects that have been awarded to foreign countries”. This is further elaborated in Promise 23 which seeks to“ensure(s) government procurement produces the best value for taxpayer’s money” where the new government will review and make improvements to the current procurement and tendering systems. On top of that, the Ministry of Finance will be tasked to review all giant infrastructure projects with foreign countries so that its benefits can be shared by the Bumiputeras and all Malaysians in an equitable manner.
While the list of “megaprojects” was not explicitly called out in the manifesto, we could take an educated guess as to which infrastructure projects with foreign partner companies are likely to be classified as “megaprojects”. For the purpose of this article, we will define “megaprojects” as projects whose value is close to or exceeds US$1billion. These projects could potentially run into delays pending the review process or may have their scope and cost renegotiated.
Here are our guesses of “megaprojects” with the corresponding estimated investment amount and expected completion year:
Just shortly after writing this article, news broke that the newly sworn in Economic Affairs Minister Azmin Ali has announced that the government is currently reviewing the megaprojects and specifically singled out the review of High-Speed Rail and the East Coast Rail Line projects. Later, Dr Mahathir confirmed that they plan to scrap the High-Speed Rail leaving the Singapore side in a lurch. The Singapore Ministry of Transport is currently awaiting clarification with regards to the project. Just a short while later, Dr Mahathir clarified that the High-Speed Rail project is merely postponed and not scraped.
The quick actions show that the PH government is determined to show that it is delivering on their manifesto promises.
The financing deal and construction agreement for the East Coast Rail Line was signed in November 2016 between the Malaysia Government and state-owned China Communications Construction Co Ltd (CCCC) (HKG:1800).
In July 2016, both the Prime Ministers of Malaysia and Singapore signed a MOU for the joint KL-Singapore HSR project. In April 2018, it was announced that the consortium of Malaysian Resources Corporation Bhd (MRCB) and Gamuda Bhd (GAMUDA) had been selected to construct the northern portion of the HSR track on the Malaysian side. The southern portion of the contract was awarded to Syarikat Pembenaan Yeoh Tiong Lay, subsidiary of YTL Corporation Bhd (YTL) and TH Properties, a wholly owned subsidiary of Lembaga Tabung Haji (or the Pilgrims’ Fund Board in English).
Other notable projects such as the Kuantan Port Expansion consortium partners are IJM Corporation Bhd (IJM) and China’s Guangxi Beibu Gulf International Port Group Co Ltd. Hong Kong-listed
Metallurgical Corp of China Ltd (HKG:1618) (MCC) is among the significant players in the Samalaju Industrial Park Steel Complex costing approximately US$3.3bil in Bintulu, Sarawak. The US$100bil Forest City township is currently under construction in the Iskandar Region of Johor. It will consist of a network of 4 artificial islands built by Chinese developer Country Garden Holdings Co Ltd (HKG:2007). The Merdeka PNB 118 skyscraper contact was awarded to the joint venture between South Korea’s Samsung C&T Corp (KRX: 028260) and Malaysia’s UEM Group Bhd, a wholly owned subsidiary of Khazanah Nasional Bhd. While UEM Group is not publicly traded, one of its development subsidiaries UEM Sunrise Bhd (UEMS) is listed on the Bursa Malaysia stock exchange.
We will be watching the political developments in Malaysia very closely over the coming weeks.
In our previous articles on the Malaysian GE14, we discussed the results of the election and the immediate impact on the markets as well as the potential stocks directly impacted by the leadership change. Do catch this article if you haven't done so!
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