Investors Ignore Malaysia Politics, See Value, Macquarie Says

By Chan Tien Hin

Aug. 22 (Bloomberg) -- Digi.Com Bhd. and TM International Bhd. are among Malaysian stocks recommended by Macquarie Group Ltd. as cheap valuations outweighing political concerns to lure investors, the investment bank said.

``Investors are finally beginning to look past politics and shifting their focus back to fundamentals and finding value in Malaysia,'' Macquarie said in a report dated Aug. 21. Based on investor feedback, ``politics has declined as a concern,'' it said.

The Kuala Lumpur Composite Index has slumped 17 percent since opposition parties won almost half the states in the March 8 election and denied the ruling coalition a two-thirds majority in parliament for the first time since 1969. Prime Minister Abdullah Ahmad Badawi, facing a weakened government, has said he'll transfer power to his deputy Najib Razak after the party's annual meeting in December.

The benchmark stock index is valued at 12 times reported earnings and traded at 16 times at the start of the year, according to data compiled by Bloomberg.

``As politics in Malaysia stabilizes, the KLCI will have a modest re-rating,'' the report said. Clients from Hong Kong recently ``asked about high beta sectors such as construction and bombed-out value stocks'' such as Genting Bhd., it said. Beta is an indicator of volatility.

Macquarie said investors should buy Public Bank Bhd., Malaysia's third-largest bank, Genting, Asia's biggest listed casino operator, lottery rival Berjaya Sports Toto Bhd., KNM Group Bhd. and banking group AMMB Holdings Bhd.

The Kuala Lumpur Composite Index rose 0.9 percent at 11:36 a.m. local time, set for its biggest advance since July 28.

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