Malaysian Stocks to Be Volatile Until Elections, Citigroup Says

Malaysian stocks, which fell to a six-week low yesterday on speculation elections will be held soon, will probably stay volatile until polling day, according to Citigroup Inc.

The benchmark FTSE Bursa Malaysia KLCI Index (FBMKLCI) slumped 2.9 percent in the past two days on concern the ruling coalition may lose seats. There was speculation the vote would be held during school holidays at the end of March, Fiona Leong, a Kuala Lumpur-based analyst at Citigroup, wrote in a note today.

The KLCI index gained 0.3 percent as of 10:23 a.m. in Kuala Lumpur after valuations fell to 14.5 times estimated profit, the lowest level since June 5, data compiled by Bloomberg show. The gauge rose to a record on Jan. 7 after gaining 4.9 percent last month, the most since October 2011.

“We see selling pressure easing but stock prices are likely to remain volatile until polling day,” Leong wrote. “The heightened speculation and the KLCI’s strong performance in December 2012 and early January triggered broad-based de- risking by investors.”

The stock index’s 30-day historical volatility climbed to 10.4 on Jan. 21, surpassing the MSCI Emerging Markets Index for the first time since May 2008, data compiled by Bloomberg show. The gauge’s volatility reading was at 10 today.

Value is emerging in UEM Land Holdings Bhd. (ULHB), IJM Corp. and Genting Malaysia Bhd. (GENM), which Citigroup rates buy, the analyst said. The bank recommends selling Telekom Malaysia Bhd. (T) and Maxis Bhd. (MAXIS) on slowing growth and “stretched” valuations, Leong wrote.

To contact the reporter on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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