REGARDLESS of which coalition secures the seat of power in Putrajaya during the forthcoming 15th General Election (GE15), RHB Research expects the impact on Malaysia’s stock market to be likely neutral.
This is given challenges remain with neither side has yet to prove that its leadership offerings and ideas are superior to the other.
“Neither side has yet put through meaningful reforms to bring through the next generation of leaders that can resonate with the younger voters, let alone show the electorate ample reasons why they should shed the yoke of political fatigue, and get more engaged with the political process,” opined head of research Alexander Chia in a regional market strategy report.
“The continuity of key policies and ensuring that the rule of law applies is the market’s basic expectation regardless of the victor in GE15 – assuming there even is a clear victor.”
On the contrary, RHB Research reckoned that a negative outcome could surface if the election result does not allow the winning coalition to emerge with a reasonably comfortable parliamentary majority.
“A ‘hung parliament’ scenario would lead to more unsavoury horse-trading, party-hopping and side deals that are not in the country’s democratic interests,” suggested the research house.
Prospect of GE15 occurring sooner rather than later is bright these days with the current sitting of Parliament ending in mid-2023 and amid recent landslide victories for Barisan Nasional (BN) in Melaka and Johor with BN strategists already urging the Prime Minister (PM) to dissolve Parliament and kick off GE15.
While the Government’s memorandum of understanding (MOU) with the opposition specifies that the Parliament should not be dissolved before July 31, pressure is already being brought to bear on the PM.
On the same note, RHB Research is also concerned with heightened risks underpinned by the apparent lack of political will to achieve fiscal consolidation, hence raising the spectre of higher taxes going forward following the propensity for continued populist measures in the run-up to GE15.
“In our opinion, regulatory and policy risks will remain high and will return to the mainstream of investor discourse the closer we get to the tabling of Budget 2023 in 4Q 2022,” the research house pointed out.
Elsewhere, high debt level is also a concern with Malaysia’s direct debt as of end-2021 standing at RM979.8 bil – an equivalent to 63% of gross domestic product (GDP) – ballooning to RM1.29 tril (83.5% of GDP) after adding debt guarantees.
“Debt services charges are running at RM43.1 bil for 2022, equivalent to 18.4% of projected revenue,” noted RHB Research. “A rising interest rate environment and growing subsidy bill will only make the Government’s 6% fiscal deficit target more difficult to achieve.” – April 21, 2022
