Investment analysts and portfolio managers anticipate the shock outcome of the Malaysian election will result in short-term volatility, but also pockets of opportunity in the long-term.
The election of Malaysia’s former leader Mahathir Mohamad to prime minister will oust Najib Razac from a title he held for 61 years and represents the first change in the Malaysian government since 1957.
In a statement, Fidelity International analysts flagged that volatility could arise as an initial result of the election outcome.
“Short-term, we may see market volatility given uncertainty around policy implementation,” said Fidelity International portfolio manager Teera Chanpongsang.
Investors should anticipate “uncertainty to linger”, added portfolio manager Madeleine Kuang, as it remained to be seen whether deputy prime minister Anwar Ibrahim was able to “keep the government together and deliver on the election agenda”.
Fidelity International head of Asian fixed income Bryan Collins said the Malaysian currency (MYR) was “more volatile to these uncertainties,” but also noted “a lot of speculative positioning has eroded away”.
BNY Mellon Investment management senior sovereign analyst Aninda Mitra said the election outcome had been a “huge upset” that “ranks up there with Brexit and [the] Trump election”.
“It is a significant course correction following the corruption under Najib,” he said.
But Fidelity International signalled in the statement that the incoming government looked to be “market friendly” and intent on “generating economic growth”.
The new government could be reconsidering major infrastructure projects, such as the high-speed rail.
Despite previous comments made by Mahathir about ditching mega projects, he “himself was not anti-infrastructure spending” in the time that he was leader of the country.
“The new government may go back to the drawing board and decide which projects make sense near term,” the statement said.
“We expect infrastructure spending to be reduced to refocus on fuel subsidies and the removal of GST, but longer term, infrastructure projects should come back into focus.”
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