Malaysian Stocks Snap Five-Day Slump After Valuations Drop

Malaysian stocks rose for the first time in six days as speculation elections will be held soon dragged the benchmark index’s valuations to the lowest level in more than seven months.

The FTSE Bursa Malaysia KLCI Index gained 0.4 percent at the trading close in Kuala Lumpur after a five-day, 3.4 percent slump. It fell to the lowest level since Dec. 7 yesterday on concern the ruling coalition may lose seats in an impending election. 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 Inc., wrote in a note today.

The KLCI index’s valuation fell to 14.5 times estimated profit yesterday, 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 10.1 today.

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

Top Picks

UEM Land, Malaysia’s biggest property developer by market value, traded at 21.6 times estimated profit, lower than its one-year average of 26.4, data compiled by Bloomberg show. IJM’s multiple dropped to an eight-week low of 13.9 yesterday before its share price rebounded today. Genting Malaysia traded at 12.2 times, lower than its one-year average of 12.8.

IJM rose 1.2 percent at the close, its first increase in nine days. Genting Malaysia gained 1.4 percent, while UEM Land fell 0.5 percent. Maxis added 0.5 percent, while Telekom was unchanged.

UEM Land and Genting Malaysia are among Deutsche Bank AG’s top five picks, according to a report from the brokerage dated yesterday. CIMB Group Holdings Bhd., Malayan Banking Bhd. and Tenaga Nasional Bhd. after the other three picks, according to the report.

Relief Rally

“A relief rally post elections is likely,” Joe Liew and Cameron Robson, Singapore-based analysts at Deutsche Bank, wrote. “We would advise investors to focus on stocks trading at valuations below historical averages.”

Both Malayan Banking, the country’s largest lender better known as Maybank, and CIMB, the second-biggest, climbed 0.3 percent. Tenaga Nasional added 0.6 percent before its quarterly earnings report.

Prime Minister Najib Razak must dissolve the nation’s parliament by April 28 as his Barisan Nasional, or National Front, coalition attempts to regain a two-thirds parliamentary majority it lost in 2008. The KLCI slumped 39 percent that year, the most since 1997, amid concern a stronger opposition would stymie government investment plans and the global financial crisis deepened.

Najib’s approval rating slid to the lowest level in 16 months, the Merdeka Center for Opinion Research said in a Jan. 10 statement. Barisan has ruled the country for 55 years.

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