KUALA LUMPUR: Political wrangling could add a burden to the country’s economy, economists said, as the stock exchange closed at its lowest point yesterday since late 2010.
The experts believe the collapse of the Pakatan Harapan government could deter investors looking for stability at a time when the coronavirus outbreak and trade war between the United States and China were hurting global growth.
Bursa Malaysia’s benchmark index was down as much as 45 points or 2.85 per cent yesterday, to end its 12-year reign as the world’s longest stock market bull run.
Before yesterday, the FBM KLCI had dropped more than 20 per cent from its 2018 peak.
The index, which is made up of Malaysia’s 30 largest stocks, such as Tenaga Nasional Bhd, Malayan Banking Bhd and Public Bank Bhd, settled the day 2.7 per cent lower at 1,489.99 points.
FBM KLCI had hit a 1,486.71-point low, the lowest since Nov 23, 2010, immediately after confirmed reports of Prime Minister Tun Dr Mahathir Mohamad submitting his resignation letter to the Yang di-Pertuan Agong.
The ringgit, meanwhile, slipped past the RM3 mark against the Singapore dollar for the first time in two weeks while depreciating past the RM4.20 level against the United States dollar. The local currency hit as low as RM4.23 against the US dollar at 5.45pm yesterday.
However, the analysts said it was premature to predict the country’s economic outcome.
“If I were to measure the economic and political uncertainty, then yes, all local and global investors would monitor the situation closely to see the impact.
“But it is premature to say what the economic outcome would be in the next 24 to 72 hours.
“In my opinion, all investors are cautious and hope that economic normalcy would return, and policy continuity would prevail in the end,” Juwai IQI Global chief economist Shan Saeed told the New Straits Times.
Shan said the government looked focused on delivering economic outcomes based on a value-driven approach to lift the masses and provide a better standard of living.
“It is not an easy task. The global economic volatility, trade war, Covid-19, struggling European market, tail-end risk in the US dollar and above all, the diminishing confidence level in advanced economy markets, are major concerns for many decision-makers in the emerging market.
“Global financial markets are uncertain due to exogenous factors, including geopolitical, undiversifiable and currency risks, causing investors to retreat from the marketplace. This is not helping to restore confidence in the global economy,” he said.
AxiCorp chief market strategist Stephen Innes said uncertainties over the local political landscape had weighed heavily on the local market yesterday.
“The sell-through is expected to continue until the dust settles. However, the time frame is unknown and as long as it goes on, there is a high risk of outflow in coming days,” he said.
CGS CIMB Securities said the strategy moving forward was to focus on defensive and export-oriented sectors — glove, technology, electronic manufacturing services and palm oil — which will be less affected by local uncertainties.
It said stocks with high foreign shareholding, like Malaysia Airports Holdings Bhd, Genting Malaysia Bhd and Public Bank Bhd, could see foreign selling.
“The ringgit is likely to weaken due to political uncertainties. There may also be some concerns on ‘sin’ sectors like brewers and gaming if Pakatan Nasional forms the new government.
“If there are changes at the state level, it could affect the property sector. On construction, we may see a delay in the rollout of some large projects and highway deals,” it said.