OCBC share price recovers from Dr Mahathir effect

LIFETIME MEMBERSHIP It seems that OCBC share price has a strange affinity with Dr Mahathir. When Mahathir became the Prime Minister of Malaysia for the second time in May 2018, it promised to be a political fairy-tale that will be remembered for generations to come. But surely no one in his right mind could have predicted the kind of impact it would have on OCBC share price, which tumbled from a high of $13.65 in May 2018 to a low of $10.40 in October 2018.

Even more bizarrely, when Dr Mahathir announced his resignation on 24 February 2020, OCBC share price crashed from $11.00 in February 2020 to a low of $8.35 in March 2020. For unknown reasons, it appears to me that Dr Mahathir has that TVB drama “Ting Hai” stock market effect, at least for OCBC share price. Although I am not exactly sure about the correlation between OCBC share price and the venerable leader, one thing for sure is that Dr Mahathir’s B40 policy has a massive impact on OCBC’s Great Eastern Holdings.

When Dr Mahathir returned to power in 2018, one of his many initiatives was the B40 Health Protection Fund, which was meant to address social welfare protection coverage for the lower income group in Malaysia. Great Eastern Holdings, the crown jewel of OCBC Bank, was affected by this policy as the insurer was required to contribute a whopping RM2.0 billion in lieu of the local shareholder requirement imposed on its subsidiary, Great Eastern Life Assurance (Malaysia) Berhad.

In my view, it is not uncommon for Singaporean companies to “pay a price” for doing businesses in foreign countries. Singtel’s billion dollar fine by India Supreme Court in 2019 was a classic example. Nevertheless, the RM2.0 billion donation by Great Eastern had weighed on OCBC share price for most of 2020. Then COVID-19 came along to wallop OCBC share price left, right and centre. Suffice to say, these events combined to cause OCBC share price to lose its way for the past couple of years.

So why am I bringing this issue up now? After all, past performance does not provide an indication of future performance. The reason is because based on recent financial data, Great Eastern had turned the corner. Not only did Great Eastern pay the full RM2.0 billion to the Malaysia government in 2020, the insurer also recorded a stellar 1HFY2021 result that saw net profit surged 100% to $682 million. As OCBC holds 88% stake in Great Eastern, the turnaround is likely to set OCBC share price towards the end of the year.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter (holding 6000 shares at an average OCBC share price of $12.38), so my views on OCBC share price may be biased.

OCBC share price in titanic rescue mission

Apart from subduing the downsides from Great Eastern’ slump, the new Group CEO Helen Wong is going all out to defend OCBC share price. For the past two weeks, the management had been conducting shares buybacks on a daily basis. As of 9 September, a stunning [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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