Malaysia's shock election results, which have left an untested opposition ruling key states, have raised fears over economic growth and investment prospects, analysts said today.
The stock market plunged 9.5 percent on Monday in a panicky reaction to the gains by the opposition, which today moved to reassure investors that it would implement "business-friendly" policies.
Today, the market recovered slightly with a 3 percent increase.
Economists said growth could be affected if the new coalitions running five states clash with the federal government over planned infrastructure mega-projects and funding allocated under a national development blueprint.
But they said that while the stock market will remain under substantial short-term selling pressure, when the political dust settles it could reveal a brighter future under a revitalised government.
In Saturday's watershed elections, the Barisan Nasional coalition failed to secure two-thirds of the vote for the first time in almost 40 years, and conceded four states to the opposition in addition to one it already held.
They include Selangor and Penang - Malaysia's most developed and industrialised states which account for nearly half the national economy.
A funds manager with an insurance firm said the changeover could derail contracts that have already been awarded, and jeopardise the government's stated plans to lure billions of dollars in investment to Malaysia's regions.
"The country's political risk premium has gone up a few notches because of the uncertainties. Land approvals are handled by the states. The fear is that projects could be scrapped," he told AFP on condition of anonymity.
Mood bearish until PM's fate is known
Credit Suisse analyst Stephen Hagger predicted a bearish mood on the local bourse until questions over beleaguered Prime Minister Abdullah Ahmad Badawi's future are resolved.
"Malaysia will be dead money until there is some political clarity that emerges over the next six to 12 months," he said.
Foreign research firm Merrill Lynch said the negative reaction on the stock market, which staged a partial recovery today, was due to an expected slowdown in the decision-making process with a strong opposition in parliament.
"There will also be some short-term uncertainties with regards to investment growth especially in states which are now held by the opposition parties," it said.
Anwar Ibrahim, the former deputy premier who rallied three opposition parties to the resounding election result, said today that there could be a review of state projects.
"We will have to respect the existing agreements. But where adjustments are required, we have to look at it, especially those that imposed hardship to the people," Anwar told reporters.
He nevertheless downplayed concerns projects could be cancelled.
"I may be in the opposition but I will not sacrifice the economic performance of this country. I assure that we will be market friendly and implement all the initiatives (of the previous administration)," he said.
"The country should be stable and we should be able to instill confidence among domestic and foreign investors."
Poll results a 'blessing in disguise'
Musa Hitam, a former deputy prime minister, said investors who were familiar with the administration that has presided for half a century were understandably spooked, but that change could be beneficial.
"Each group will be in healthy competition to prove they are better and this will lead to the creation of a better environment for foreign direct investment," Musa was quoted saying in the New Straits Times.
Merrill Lynch described the results as "a blessing in disguise for Malaysia in the long-term".
"The current status quo has been shaken and the government may address some of its shortfalls which will eventually help the competitiveness of the country," it said.
No comments:
Post a Comment