Road to General Election 15: Assessing Potential Impact

The conventional wisdom was that our market would get excited with the mere mention of a general election, but for some time the market has been mixed when faced with parliament dissolution

Road to General Election 15: Assessing Potential Impact
Photo by Yusuf Sabqi / Unsplash

After months of murmurs and rumours, the King has consented to the request by Prime Minister and UMNO Vice President, Dato' Sri Ismail Sabri Yaakob to dissolve the parliament yesterday.

The voter turnout percentage in GE13 and GE14 were estimated to be 84.8% and 82.3% respectively.

"However, if we were to transpose the current voter age and registration law onto previous GEs, we estimate the voter turnout percentage will be lower at 57.9% and 56.3% respectively. We postulate that the percentage of voter turnout in GE15 may be similar to the levels seen in past GEs," says MIDF.

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There might not be any correlation between percentage of voter turnout and the eventual winners of a given general election. But MIDF believes that besides voting along party lines, bread and butter issues such as welfare, jobs and income will be more important factors.

Mixed Market Reaction To Election

The conventional wisdom was that our market would get excited with the mere mention of a general election.

"However, ever since the 2000’s, we observed that market performance (i.e. the FBM KLCI) prior to an election have been mixed, and price action seems to come in after an election.

"While GE15 may excite politically, for the equities market, we expect external factors to continue hold sway over equity market sentiment," says the analyst firm.

Moving towards the end of this year, the local equity market valuation is expected to crawl higher from current levels in line the expectation of continued positive GDP growth in 2023.

"Hence, our FBM KLCI end-2022 target at 1,520 points or PER22 of 14.8x

"Given that market sentiment may be weak in the run-up to GE15, tactically we believe that investors should look for sectors that are more agnostic towards the result of the election, such as the banking sector," the firm says.