PROLONGED Government instability will continue to undermine investor confidence even as former Prime Minister (PM) Tan Sri Muhyiddin Yassin’s resignation itself is unlikely to prove a surprise to Malaysian financial markets.
Given that the Government has already appeared unstable for months, Fitch Solutions Country Risk & Industry Research does not expect an outsized impact on both the equity and bond markets in Malaysia.
“As we have previously laid out, the next most likely development is for the King to consult with Parliament and appoint an interim, caretaker Government,” the research house (which is not affiliated with Fitch Ratings) pointed out in a commentary.
“Elections are still too risky a proposition given that daily COVID-19 caseloads still hover around 20,000.”
Considering that Muhyiddin resigned partly due to a withdrawal of support from Umno MPs, one possible configuration is for the Perikatan Nasional (PN) coalition remaining in power with a new leader commanding the support of all its members, according to Fitch Solutions.
Under this scenario, Fitch Solutions is of the view that the next PM could be one of the three Umno MPs:
- Veteran MP Tengku Razaleigh Hamzah who is a respected figure within the party;
- Current Deputy PM Datuk Seri Ismail Sabri Yaakob; or
- Science, Technology and Innovation Minister Khairy Jamaluddin whose reformist stance could help restore a more collegiate atmosphere in Parliament.
“An unlikely, wildcard candidate in this case would be former PM Datuk Seri Najib Razak (2009-2018) who may be considered for his experience in running the country, but will have to have his convictions relating to the 1MDB scandal overturned or pardoned before he can assume the position,” suggested the research house.
“Whether PN will remain as the (ruling) Government would depend however on Muhyiddin’s party, Parti Pribumi Bersatu Malaysia (BERSATU) in sustaining the coalition’s parliamentary majority.”
Alternatively, Fitch Solutions said the King could appoint a Government led by the Pakatan Harapan (PH) coalition though that will require the coalition acquiring the support or smaller regional parties in order to regain a majority in Parliament.
Under this scenario, the likely PM would be PH leader Datuk Seri Anwar Ibrahim.
“A third scenario would be a unity Government comprising of both PN and PH parties though we see high risks of government dysfunction as infighting is much more likely,” opined Fitch Solutions.
“As a result, the King is likely to consider this only as a last resort though we see a unity Government becoming likelier if there is a protracted stalemate in the power struggle after Muhyiddin’s resignation.” – Aug 17, 2021
Photo credit: The Straits Times
