Malaysia’s Developers, Banks to Gain After Vote: Southeast Asia

Malaysia’s property companies and banks including UEM Land Holdings Bhd. (ULHB), CIMB Group Holdings Bhd. (CIMB) and IJM Corp. (IJM) are set to benefit as Prime Minister Najib Razak’s election victory may spur more infrastructure spending. 

Companies that have government ties including Astro Malaysia Holdings Bhd. (ASTRO) and SapuraKencana Petroleum Bhd. (SAKP) may also gain from the poll outcome, according to a report by Bank of America Corp.’s Merrill Lynch unit. CIMB (CIMB), the nation’s second- biggest bank by market value, is headed by Najib’s brother Nazir Razak.

The premier’s ruling Barisan Nasional coalition won 133 seats in the 222-member parliament at the May 5 polls, giving him the mandate to deliver on $444 billion of infrastructure and other investment plans by 2020. The Malaysian stock gauge and currency surged the most in Asia yesterday following the election results, with the benchmark FTSE Bursa Malaysia KLCI Index (FBMKLCI) rising to a record.

“Najib and his government can push through the reforms and pump in the fiscal infrastructure,” David Poh, Singapore-based regional head of portfolio-management solutions at the private banking unit of Societe Generale SA, which manages the equivalent of $113 billion. “The whole economic growth is going to be positive.”

Idris Jala, who oversees the country’s economic transformation, said Malaysia’s pipeline of investment is “very healthy.” The country should have “very robust growth” following the elections, Jala, minister in the Prime Minister’s department in Najib’s Cabinet before the election, said in a Bloomberg Television interview with Haslinda Amin.

Best Performers

UEM Land (ULHB) jumped 13 percent, the most since January 2011, to close at 2.98 ringgit in Kuala Lumpur yesterday. The company was the best performer on the benchmark index, followed by CIMB’s 9.7 percent increase. All 30 stocks on the gauge climbed.

The government said in 2010 it will build a mass rail network, create a shopping district to rival Singapore’s Orchard Road and add oil storage facilities as part of the $444 billion investment plan led by the private sector to help the country achieve developed nation status by 2020.

Malaysia agreed on a high-speed railroad in February linking the capital Kuala Lumpur to its southern neighbor Singapore that may be completed by 2020. The project will help shorten the travel time between the two cities with a similar distance as New York and Washington.

Train Connection

The accord was the first definitive agreement to proceed with the rail project since Malaysia’s YTL Corp. (YTL) said in 2006 it was in talks with the government on a proposal. Francis Yeoh, managing director of construction and utilities group YTL, said in 2006 that he would take the rail unit public to raise as much as 8 billion ringgit ($2.7 billion) to fund the project if he won the contract.

CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, said in February that it will build a S$3.2 billion ($2.6 billion) township project in Malaysia’s Iskandar region with a business partly owned by the Johor state government and Temasek Holdings Pte (TMSK), Singapore’s state-owned investment company.

Still, the “narrow” election results “indicate an increasing polarization of the electorate,” said Tim Condon, head of research at ING Investment Management.

Najib’s coalition also faced an exodus of the minority ethnic Chinese voters in what he described as the “Chinese tsunami.” Among them was businessman Stanley Thai, owner of medical glove-maker Supermax Corp.

Ethnic Divide

Chinese, who make up about a quarter of Malaysia’s population, are growing intolerant of affirmative-action programs for Malays propagated by Najib’s alliance of parties, according to the national poll last month.

After 1969 race riots that killed hundreds of people, Najib’s father, Abdul Razak Hussein, implemented a system of racial preferences for Malays as the second prime minister that remains in place.

“Why are the Chinese against the government -- it’s simple,” Thai, 53, said in an interview. “We don’t want our children to suffer what we suffered, deprived from education, from career opportunities, from business opportunities.”

Supermax (SUCB) shares fell 2 percent to 1.96 ringgit yesterday, the lowest since April 4. The stock has declined 5.8 percent since April 26, when his comments were published, compared with a 2.7 percent gain in the benchmark index.

Builders such as IJM and Gamuda Bhd. (GAM) are expected to gain as most of the domestic companies should have “plenty” of new jobs on their plate for the next few years, including mass rail projects, Nomura Holdings Inc. wrote in a note yesterday. 

UEM Land, the country’s biggest property developer by market value and majority-owned by Khazanah Nasional Bhd. (KNBZ), will continue to deliver strong results because of its projects in the country’s southern region of Iskandar, Nomura analysts led by Wai Kee Choong and Julian Chua wrote in the note. 

“Broad policy continuity under Barisan Nasional should sustain Malaysia’s growth momentum over the medium term,” Terence Wong, the Kuala Lumpur-based head of research at CIMB, wrote in a report yesterday. “Businesses and investors will breathe a sigh of relief as Malaysia will have another four to five years of Barisan Nasional.” 

(Source: Business Week)