Malaysia Stocks to Rise as Political Woes Ease, JPMorgan Says

By Chan Tien Hin

July 14 (Bloomberg) -- Bumiputra-Commerce Holdings Bhd., Bursa Malaysia Bhd. and WCT Bhd. are among stocks recommended by JPMorgan Chase & Co. to benefit from a rebound in Malaysia's market as concern about a government leadership struggle abates.

Prime Minister Abdullah Ahmad Badawi, who led the ruling coalition this year to its worst electoral performance, last week set June 2010 to hand over power to his deputy, Najib Razak. The Kuala Lumpur Composite Index has fallen 12 percent since the March 10 elections, pushing the benchmark into a bear market.

``The Malaysian market is poised for a bounce,'' Chris Oh, an analyst at JPMorgan, wrote in a report today. The move is an ``optimal outcome'' and provides a ``calming effect'' for investors who have ``steered away from the equity market,'' he said.

Announcing the handover date may thwart a leadership challenge this year and ease Malaysia's political turmoil after Abdullah's National Front coalition in March lost its two-thirds parliamentary majority and ceded control of almost half the contested states.

The index has tumbled 25 percent since its Jan. 11 record high, more than the 20 percent threshold many consider to signal a bear market. The index dropped 0.7 percent to 1,142.59 as of 11:06 a.m. local time.

The leadership transition allows for Abdullah to focus on ``policy making and structural reform as the infighting abates,'' Oh said in the report.

Abdullah's announcement gives him time for an ``orderly transition and enables proper restructuring of the party leadership to be more relevant to the public in the run-up to the next election,'' he said.

Bumiputra-Commerce, Malaysia's second-biggest bank, fell 5 sen, or 0.6 percent, to 7.75 ringgit at 10:58 a.m. local time. It has fallen 30 percent this year. Bursa, the stock exchange manager, lost 2.2 percent to 6.75 ringgit. It's down 53 percent this year. WCT, a builder that's fallen 32 percent this year, slid 1 percent to 2.85 ringgit.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net