Elections: Malaysia stock market set to dive

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Malaysia’s prime minister Najib Razak has come under pressure in this year’s elections

With over 13 million casting their vote in the tightest national elections ever in Malaysia today and with no official projections at hand as of early afternoon, only one thing seems clear: Malaysian financial markets will take a nosedive on Monday regardless who wins the polls.

Only the extent of a fall is in question. A surprise opposition victory could trigger market carnage as investors dump shares and bonds fearing policy uncertainty, while the damage would be moderate if the ruling Barisan Nasional coalition retains power with a slimmer majority in parliament, which is more generally expected and already priced in.

However, analysts say that for the first time since Malaysia’s independence in 1957, there is a real possibility that the opposition may be able to unseat the ruling party. Opinion polls suggest support for the two sides is evenly matched. Debates about corruption, racial politics, sex scandals and economic stability haven’t helped the ruling elite either.

Malaysia’s stock markets are quite vulnerable to political risks. A surprise showing by the opposition in the 2008 general elections, when it denied the Barisan Nasional its traditional two-thirds majority in parliament, triggered the first-ever trading halt in the Malaysian share market, when the benchmark Kuala Lumpur Composite Index went down to the 10 per cent limit.

In three of the past five elections, the Malaysian market underperformed the region in the three months after the polls.

Citigroup has warned an opposition victory may spark doubts over the fate of several big-ticket investment projects that are included in the National Key Economic Area programmes.

 

 

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Reading Time: 1 minute

Malaysia’s prime minister Najib Razak has come under pressure in this year’s elections

Reading Time: 1 minute

Malaysia’s prime minister Najib Razak has come under pressure in this year’s elections

With over 13 million casting their vote in the tightest national elections ever in Malaysia today and with no official projections at hand as of early afternoon, only one thing seems clear: Malaysian financial markets will take a nosedive on Monday regardless who wins the polls.

Only the extent of a fall is in question. A surprise opposition victory could trigger market carnage as investors dump shares and bonds fearing policy uncertainty, while the damage would be moderate if the ruling Barisan Nasional coalition retains power with a slimmer majority in parliament, which is more generally expected and already priced in.

However, analysts say that for the first time since Malaysia’s independence in 1957, there is a real possibility that the opposition may be able to unseat the ruling party. Opinion polls suggest support for the two sides is evenly matched. Debates about corruption, racial politics, sex scandals and economic stability haven’t helped the ruling elite either.

Malaysia’s stock markets are quite vulnerable to political risks. A surprise showing by the opposition in the 2008 general elections, when it denied the Barisan Nasional its traditional two-thirds majority in parliament, triggered the first-ever trading halt in the Malaysian share market, when the benchmark Kuala Lumpur Composite Index went down to the 10 per cent limit.

In three of the past five elections, the Malaysian market underperformed the region in the three months after the polls.

Citigroup has warned an opposition victory may spark doubts over the fate of several big-ticket investment projects that are included in the National Key Economic Area programmes.

 

 

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