SPECULATION of an early general election grew in intensity after the tabling of Budget 2023, which was originally slated to take place at end-October, was brought forward to Oct 7.

Further reinforcing the sentiment was the Umno supreme council’s announcement at the start of October that Prime Minister Ismail Sabri Yaakob would seek an audience with the Yang di-Pertuan Agong to propose that parliament be dissolved soon. A meeting was reported to be on the cards last week, but the palace announced on Friday that it was merely a routine weekly pre-Cabinet meeting between the Agong and prime minister.

Notably, the local stock market has been rising of late, as reflected by the benchmark FBM KLCI and the FBM Emas Index. Are investors are positioning themselves for the 15th general election (GE15)?

Having fallen steeply following a rout on Wall Street on the back of aggressive interest rate hikes, the local benchmark had gained 2.3% from Sept 30 to Oct 6, whereas the FBM Emas Index had increased 2% to 10,163.04 points between Oct 3 and 6.

Even so, experts believe the increase is not likely due to the anticipation of a potential general election but rather due to the recent rally on Wall Street, which has helped to lift local equities.

As with previous elections, an imminent general election usually results in some stocks that could bear more watching or generate more interest than others. This may happen because those counters are perceived to be linked to a certain political figure or party.

Or, it could be due to the perception that these stocks may be able to benefit from the outcome at the ballot box, by way of government contracts or new policies put in place. Conversely, there are counters that may be shunned by investors if they believe that a negative outcome is on the cards.

“We don’t think there will be a pre-GE rally this time, but there may be interest in some stocks, especially in the construction sector, as well as those that are seen to benefit from government contracts,” says a head of research who wishes to remain anonymous.

In GE14, the Pakatan Harapan coalition succeeded in staging the biggest upset in Malaysia’s electoral history when it got the better of the previously undefeated Barisan Nasional coalition.

MyEG Services Bhd was at the receiving end of that defeat as it was perceived to be negatively affected. A government e-service provider, the company was a darling among investors because of the steady stream of income from Putrajaya. However, because of its perceived reliance on government contacts, it lost more than RM5 billion in market capitalisation in the week after GE14, and continued to be hammered in subsequent weeks. From RM1.21 on May 8, 2018, the stock plunged to a low of 32.3 sen on June 4.

Investors feared that MyEG — perceived to be closely linked to the previous administration — would be dropped from the government’s contract list. But their fears proved unfounded. In fact, the company even managed to make the most out of the Covid-19 pandemic by inking an agreement with the Ministry of Health to provide an online channel for inbound travellers to register and pay for mandatory Covid-19 swab tests and choose their preferred location to be quarantined prior to their arrival.

MyEG’s share price has since rebounded. At last Thursday’s closing price of 90.5 sen, the company was valued at RM6.74 billion.

MyEG’s largest shareholder is its founder, Wong Thean Soon, who holds an indirect stake of 18.12% through his investment vehicle Asia Internet Holdings Sdn Bhd and a direct stake of 13.12%. The Employees Provident Fund (EPF) has a 6.21% stake in MyEG while Kumpulan Wang Persaraan (Diperbadankan) (KWAP) holds 6.17%.

MyEG executive chairman Datuk Dr Norraesah Mohamad, who has 0.73% equity interest in MyEG, used to be an Umno supreme council member from 2000 to 2003.

Datasonic Group Bhd is another counter that has benefited from government contracts as it is the supplier of the polycarbonate MyKad to the National Registration Department (NRD) and the polycarbonate datapage of passports to the Immigration Department of Malaysia.

Although its share price did not fall like a rock immediately after GE14, it slipped in the following days from around 47 sen to a low of 13.7 sen by Oct 29, 2018. Nevertheless, its contracts with the two government departments were renewed despite the change in administration, and by Jan 23, 2020, the stock had rebounded to 79.7 sen.

At market close last Thursday, Datasonic’s share price stood at 49.5 sen, valuing the company at RM1.41 billion. The counter had been on a decline during the Covid-19 pandemic given its earnings contraction, as demand for passports and MyKad came to a standstill.

Datasonic executive chairman Datuk Abu Hanifah Noordin, who was previously managing director and CEO of the company, is said to be linked to Umno. He holds an 8.1% stake in Datasonic.

Hanifah admitted in court in his witness statement that Sarana Kencana Sdn Bhd, a company owned by him, had donated RM6 million in political funds to Umno and Barisan Nasional, paid through Lewis & Co — a trustee of Yayasan Akalbudi, which is owned by former deputy prime minister Datuk Seri Dr Ahmad Zahid Hamidi.

Politically linked stocks

There are some stocks, however, where clear lines can be drawn to a specific political party or politician. These counters could see some action in the days leading up to GE15.

“There are some companies linked to politicians or political parties that may need to make political contributions and are usually favoured during election time. Some penny stocks could also be roped in to help raise political contributions for certain parties,” says a fund manager.

It should be noted that the political landscape today is vastly different from that prior to GE14, and the politically linked stocks have also changed.

Stocks where a clear link can be drawn to a politician or political party include Matang Bhd. It is a smallish plantation company with 1,094ha of plantation land and three buildings on a 3.2-acre leasehold parcel in Kawasan Perindustrian Larkin in Johor Baru.

Matang’s largest shareholder is Huaren Holdings Sdn Bhd, with a 16.28% stake. Huaren is the investment arm of the Malaysian Chinese Association (MCA), which is part of the Barisan Nasional coalition.

Other shareholders include Ang Kian You (8.1% stake). He emerged as a substantial shareholder of the company on April 22 after accumulating 110.16 million shares, or a 5.07% stake, on the open market.

Tan Sri Kuan Peng Ching holds a 2.45% stake in the company. He is currently non-independent, non-executive director and deputy chairman of Star Media Group Bhd.

Matang’s share price has been on a decline, hovering between 8.5 and 12 sen over the past year. At market close last Thursday, the stock was at a one-year low of 8.5 sen, valuing the company at RM191.8 million.

Star Media Group is 43.23% owned by MCA. Its other shareholders include Amanah Saham (7.51%), EPF (4.11%) and Huaren (0.67%).

Some analysts believe that the media group could benefit from the upcoming general election, not merely by virtue of having political party owners, but also from the increase in advertising expenditure as the polls loom.

The group’s share price closed at 28.5 sen last Thursday, which translates to a market capitalisation of RM206.6 million. The counter had shed 20.8% of its value over the past year, from 36 sen on Oct 11, 2021.

Construction and property company Fajarbaru Builder Group Bhd is also known to be politically linked. Sitting in the chairman’s seat is former transport minister Tan Sri Chan Kong Choy. Kuan, who is deputy chairman, holds a 7.88% stake in the company, while Tan Sri Yan Ta Kin holds 11.72%.

The stock has seen an increase in price and trading volume recently. It gained 13.5% from 26 sen to 29.5 sen between Sept 27 and Oct 6.

Pecca Group Bhd, a manufacturer of automotive leather seat interior, is 48.47% controlled by MRZ Leather Holdings Sdn Bhd — the investment vehicle of founder and group managing director Datuk Teoh Hwa Cheng and his family. Recently, MCA’s Huaren emerged as a substantial shareholder after acquiring 6.18% of the company. Teoh’s wife Datin Sam Yin Thing has 6.75% equity interest while other substantial shareholders include Lim Cheng Ling (5.8%) and KWAP (5.14%).

Property developer Jiankun International Bhd made waves recently after the company redesignated executive director Datuk Saiful Nizam Mohd Yusoff as the group’s deputy executive chairman. Saiful, who is the son-in-law of former deputy prime minister Ahmad Zahid, has an 8.57% stake in the company.

Meanwhile, executive deputy chairman Datuk Lim Siang Chai was redesignated as executive director. He was appointed to the board as executive chairman in July 2013. Lim is a former member of parliament for Petaling Jaya South under the MCA banner and a former deputy finance minister. He has held other political portfolios as well.

Central Global Bhd, which is involved in manufacturing and construction, saw the emergence of businessman Chiew Hian Tat as a substantial shareholder in February 2021. He has since upped his stake to 26.36% and has taken over the role of group managing director. The businessman was also a candidate for MCA during the previous election where he contested in Petaling Jaya under the BN banner.

Then there is Media Prima Bhd, which is linked to businessman and politician Datuk Seri Johari Abdul Ghani, who was second finance minister from 2016 to 2018. His private vehicle, Jag Capital Holdings Sdn Bhd, has a 20.08% stake in the media group.

It is also worth mentioning that Aurora Mulia Sdn Bhd, which is said to be related to tycoon Tan Sri Syed Mokhtar Albukhary, holds a 31.9% stake in Media Prima.

The share price of the media group has climbed a little of late, from 39 sen on Sept 28 to 43 sen last Thursday, valuing the company at RM476.96 million. However, trading volume was tepid.

Jag Capital also holds a 32.96% stake in C.I. Holdings Bhd and KUB Malaysia Bhd.

KUB Malaysia’s share price had climbed about 4.8% between Oct 4 and 6. Last Thursday, the stock closed at 55 sen, valuing the company at RM306.06 million.

While the list is not exhaustive, market savvy investors will keep a close eye on these counters and others that may spring a surprise when the election date is announced.