Analysts: Stock Rally Unlikely Although Long-Term Fundamentals Sound

The dissolution of the Sarawak State Legislative Assembly appears not to have made any impact on Sarawak-linked stocks on Bursa Malaysia so far although analysts chimed in to say that it may be too early to discount a rally at a later stage.

Others have chimed in to say that irrespective of the rally following the impending state elections, many of the Sarawak linked stocks have been beaten down due to the pandemic and may see an increase in their price over the medium to long-term

The 12th Sarawak state election will be held on Dec 18, the Election Commission (EC) announced on Wednesday (Nov 24). The nomination for the polls will be on Dec 6 and early voting on Dec 14.

Alexander Chia, head of research of RHB Research said that there is nothing now that fundamentally can drive up the Sarawak linked stocks as the market is subdued.

He said that the recently announced Budget 2022 which had sprung a surprise prosperity tax also does not bode well for the overall market sentiment including Sarawak linked stocks.

In addition, he said that governance issues in Cahya Mata Sarawak also do not help the overall sentiment of Sarawak-linked stocks.

Another analyst in a bank-based broking house said that the trading volume of 3 billion shares is not likely to bolster Sarawak-linked stocks adding that there is no catalyst really to justify a significant lift for the stocks.

Among the catalysts, he said that could likely trigger “a rally of a sort” was corporate earnings which are not looking good for next year coupled with looming inflationary concerns which is likely to keep the market subdued.

Areca Capital Sdn Bhd CEO Danny Wong believes the irrespective of whether share prices of Sarawak counters are likely to rally ahead of the elections or not, many of the Sarawak linked counters are likely to do well over the next two to three years

He said that this was mainly due to the various infrastructure projects that are planned for the state that is likely to bode well for Sarawak-linked stocks.

Under Budget 2022, the government will inject RM4.6 billion in development expenditure into Sarawak, bringing the total development allocation for the state to almost RM12 billion.

Chief Minister Datuk Patinggi Abang Johari Tun Openg says Sarawak can afford to spend about RM1 billion a month to support development in the state next year.

An analyst said that Sarawak-linked stocks such as Cahya Mata Sarawak Bhd, Hock Seng Lee Bhd, Zecon Bhd, and TRC Synergy Bhd are certain stocks that are worth watching and might stage a rally before the year-end window dressing.

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