Malaysian stocks, ringgit fall on political crisis

By HO WAH FOON

KUALA LUMPUR (The Star/ANN): Malaysia’s stocks plunged and the ringgit fell on Monday (Feb 24) morning on a series of news that there may be a realignment of the ruling coalition and change of government.

At noon close, the key stock index KLCI fell 38.94 points or 2.61% to 1492.94 points – below the psychological level of 1,500 for the first time this year.

At 9am open, the local note fell 240 basis points to open at 4.2140/2180 against the greenback from last Friday's close of 4.1900/1940.

Lee Heng Guie, executive director of the Socio-economic Research Centre, tells The Star “At this juncture, investors least want to see is political turbulence, more so when the government’s ability to deal with economic disruptions and uncertainty associated with China’s Covid-19 outbreak amid a slowing economic situation is being tested.

“The persistent uncertainty associated with an unstable political environment has undermined investor confidence, weakened consumer sentiment and reduced pace of economic development.”

Kenanga Investment Bank Research said the fissures caused within the ruling Pakatan Harapan by a series of political manoeuvres from Friday to Sunday have caused damage that may have become unsalvageable.

The political uncertainty that has clouded Malaysia for some time is mainly fuelled by the reluctance by Prime Minister Tun Dr Mahathir Mohamad to step down in favour of Datuk Seri Anwar Ibrahim, as agreed to by all parties in the ruling Pakatan coalition before they won the general election in May 2018.

Last Friday night, there was an important meeting of top leaders of Pakatan headed by Tun Dr Mahathir Mohamad, who had been pressured to fix a date to pass the premiership to Anwar.

The tense meeting on Friday turned out to be an anti-climax as the outcome was that Dr Mahathir would stay on as premier and leave as and when he wished.

However, on Sunday several parties in the ruling coalition – including Dr Mahathir’s small party Bersatu, as well as the opposition parties that have shown support for Dr Mahathir, suddenly held a series of meetings.

This commotion rekindled speculations on the formation of a new government.

In the past week, speculations were strong that Dr Mahathir’s party Bersatu would align with opposition parties Umno and PAS, as well as a faction within Anwar’s party, to form a new government that would exclude Anwar and coalition partners DAP and Amanah.

Dr Mahathir’s men reportedly had tried to solicit support of MPs for a mandate for the 94-old leader to stay on as premier until the next general election.

Last night, Anwar described the action by his deputy Datuk Seri Azmin Ali and Dr Mahathir’s Bersatu as “a betrayal”.

“The whole messy affair has led to increased uncertainty about Malaysia’s political future.

Before this, investors already had reservations about uncertainties around leadership succession. This got worse over the weekend, ” said Kenanga Investment Bank Research.

Although Azmin and leaders of Umno and PAS had met with the King on Sunday, there was no outcome.

The flurry of activities over possible realignment of the country’s political landscape continues on Monday (Feb 24) with several events scheduled to take place.

But the most important event is that Anwar is scheduled to have an audience with the Agong at the Istana Negara this afternoon.

The King is empowered to appoint the leader with most popular support as premier under the Federal Constitution of Malaysia. - The Star/Asia News Network