Investors watching closely latest political scenario

Socio-Economic Research Centre executive director Lee Heng Guie(pic) told StarBiz: “At this juncture, the last thing investors want to see is political turbulence. Moreover, the government’s ability is being tested as to how it would deal with the economic disruptions and uncertainty associated with the Covid-19 outbreak amid a slowing economic situation.

PETALING JAYA: The latest political development that points towards a new coalition government being formed would be closely watched by stock market investors.

With the stock market bogged down by the Covid-19 outbreak, poor corporate earnings, a slowing economy and lingering political uncertainty, analysts said the latest developments would add a new wrinkle for investors to digest.

Socio-Economic Research Centre executive director Lee Heng Guie(pic) told StarBiz: “At this juncture, the last thing investors want to see is political turbulence. Moreover, the government’s ability is being tested as to how it would deal with the economic disruptions and uncertainty associated with the Covid-19 outbreak amid a slowing economic situation.

“The persistent uncertainty associated with an unstable political environment would undermine investor confidence, weaken consumer sentiment and reduce our pace of economic development.”

Former investment banker Ian Yoong said: “Retail and institutional investors are perplexed by the volatile political situation over the past 12 months.

“We do not expect the level of uncertainty to subside as there are many unanswered questions. What will happen to the policies and strategies of the government?

“A change in government will not assuage the concerns of investors. Our capital markets need stability and greater certainty.”

Areca Capital chief executive officer Danny Wong said sentiment would be affected by the latest political scenario.

“It will chase away investments, both local and foreign. The market thrives in an environment of certainty and foreign investors expect stability.

“While the whole world is focusing on boosting economic growth, the government here is busy politicking. This is going to disappoint the market seriously.”

Following a meeting by the Pakatan Harapan coalition on Friday when Prime Minister Tun Dr Mahathir Mohamad said he would decide his own future as PM, major political parties in the ruling coalition as well as in the opposition held a series of meetings yesterday that observers point to the forming of a new political coalition and government.

A fund manager who declined to be named said that for months, investors have been unhappy with Pakatan Harapan’s performance. There was clear market fatigue from investor expectations that were not met.

“With the possible new coalition, it is important to see the strength of the component parties; how strong is the support for them. If the support is small, we can expect disputes.

“But be it strong or otherwise, markets will be volatile and will not react well until some sort of stimulus or stability kicks in. It is going to be a rocky ride, ” he said.

Dr Mahathir is expected to announce a fiscal stimulus package on Thursday to deal with the economic effects from Covid-19.