Australian rare-earth miner Lynas soars 18% on Malaysian election results

05/06/2013 7:52 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Whether or not the victory on Sunday of Prime Minister Najib Razak and the ruling Barisan Nasional coalition is good for Malaysia democracy or not—and it’s hard to believe that 55 years of uninterrupted rule by one party is a good thing—investors in Lynas (LYC.AU in Sydney or LYSDY in New York) clearly breathed a sign of relief today. Shares of the rare earth mining company closed up 18%. The victory by the Barisan Nasional government, which has already approved an operating permit for Lynas’s plant to process rare earth minerals mined in Australia in Malaysia, just about guarantees that the courts won’t over-turn the decision and that a new government wouldn’t rescind the permit. (Lynas is a member of my Jubak Picks 50 long-term portfolio http://jubakpicks.com// )

The victory gave Barisan Nasional a majority with 133 seats in the 222-member parliament—but this is the second election in a row to deny the party its customary two-thirds super-majority. The relatively narrow victory is likely to push the government to move full-steam ahead on the $444 billion in infrastructure spending and investment by 2020 that the company had promised during the campaign. Plans include the construction of a high-speed rail link between Kuala Lumpur and Singapore and the construction of a new shopping district to rival Singapore’s Orchard Road.

Stocks that moved up on the election results include CapitaLand (CAPL.SP in Singapore), Southeast Asia’s biggest developer and construction company Gamuda (GAM in Kuala Lumpur.)

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares in Lynas as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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