Photographer: Sanjit Das/Bloomberg

Malaysia Stocks on Path to Fulfill Historical Rally Before Polls

  • Nation received the highest foreign inflow in region last week
  • Government-linked companies rose as much as 25% last week

The impending government elections and a strengthening ringgit are pushing investors in the Malaysian stock market into overdrive.

The nation’s benchmark FTSE Bursa Malaysia KLCI Index posted its best monthly performance in five years in December and the gains extended last week by 1.2 percent. Behind the euphoria were bets that government-linked companies would benefit from the outcome of elections, which must be held by August, according to Danny Wong, chief executive officer at Areca Capital. Government-linked companies including Sime Darby Bhd., Felda Global Ventures Bhd. and UMW Holdings Bhd. advanced at least 11 percent last week.

The move is similar to the past four rallies that started a year before Malaysia’s national elections as investors purchased shares of government-linked companies. Gains of as much as 49 percent were recorded over a 12-month timeframe before the nation held its 10th general election in November 1999, compared to a 6.5 percent rally in the most recent election held in 2013.

Malaysia Market

Nation's equities historically starts rallying a year before elections

Source: Bursa Malaysia

The ringgit’s break below the psychological level of 4 to the dollar for the first time since August 2016 also helped pave the way for a rally. Foreign investors continued buying Malaysian shares with the country recording the biggest foreign inflows in Southeast Asia last week.

    Before it's here, it's on the Bloomberg Terminal.