FBM KLCI in a tailspin due to political uncertainties

THE market barometer FBM KLCI slumped more than 2% this morning to open at below the psychological level of 1,500 points on heightened uncertainty due to political developments in the country.

At noon, the index slipped 2.3% to 1,495 points. It had dropped by 35.2 points from Friday’s close. The latest news has further dampened the local bourse with the benchmark index having fallen 17% since the 2018 general election, making it one of the 10 worst performers globally.

On Feb 23, the political mill was set abuzz by talk that an imminent change of government would take place and the Pakatan Harapan (PH) government would be disbanded. A faction led by PKR vice-president, Datuk Seri Azmin Ali is said to have orchestrated a move to align MPs from Umno, PAS, Warisan and GPS to obtain a simple majority to form a new government.

The market does not like uncertainty and Malaysia’s economy is facing major challenges as it has to deal with the Covid-19 outbreak and a tepid economy which was manifested in its weakest gross domestic product (GDP) growth in a decade for 4Q19 at 3.6%.

Phua Lee Kerk, chief strategist at Phillip Mutual Bhd, tells FocusM that it would be difficult to assess a bottom for the market at this juncture.

“Events are still unfolding as we speak and nobody has a concise picture of what is taking place. Until then, it would be difficult to gauge the full impact of the political development and its repercussions on the stock market,” he says.

However, he said a better gauge of the downside to the market would be in the afternoon, when foreign fund managers re-peg their risk assessments of the local market.

Meanwhile, UOB Kay Hian in a strategy report today said the political imbroglio could see further selling in the market. However, it notes that there could be a sharp rebound if the new administration (if any) exercises rational policies.

“Nevertheless, the market may quickly snap back if the new ruling coalition swiftly implements sensible business policies,” it says, noting that there can be a few quick fixes to improve sentiment. “However, it remains to be seen whether the backdoor coalition (if it comes to power) would still adopt some of PH’s policies, for example, anti-monopoly and open tenders for government contracts,” said UOB Kay Hian.

Professor Nazari Ismail of University Malaya tells FocusM that the political “games” being played out were to serve the selfish political ambitions of some politicians.

“I think the rakyat will be extremely disappointed with some leaders who are involved in trying to bring down the current government. The country is facing serious economic problems but some leaders are more interested in their own personal political future.

“We need leaders who are more concerned for the long-term welfare of our country if we want to see real positive changes taking place in our country. Unfortunately at the moment, not many politicians belong to that category. But not all our leaders are bad. Some, such as our health minister, seem very focused on his job compared to others. So we need more leaders who are like him,” said Nazari. – Feb 24, 2020

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