The thrashing that the Barisan Nasional (BN) received at the hands of Pakatan Harapan (PH) was totally unexpected and shocking! The traditional two pillars that propped up the Malaysian political scene was dismantled overnight, torn down by a big “Malay Tsunami”, threats to the livelihood of the people and, most importantly, a serious desire to dethrone a corrupt government as perceived by the Malaysia Rakyat (people)!
When news started to leak that BN was losing ground, the iShares MSCI Malaysia Index Fund (ETF) started to lose ground. If not for the two days of public holidays, the Kuala Lumpur Composite Index and the Ringgit would have been hammered on Thursday and Friday, possibly beyond these two days.
Reasons For The Hammering!
If not for the fact that Mahathir was sworn-in as the Prime Minister, I believe that the impact could be even more severe as the 92 year-old former Prime Minister held on to power from 1981 to 2003. His experience would be the key in helping to stabilize the country during the transitional period and beyond.
Nevertheless, we are talking about a country’s establishment being demolished so it is inevitable that investors will be very concerned about not just the health of the economy, but also the political future of Malaysia. After all, Malaysia is in no man’s land with the sudden collapse of BN, which has been in charge since Malaysia’s independence. What will be Malaysia’s economic plans from now? Will Mahathir, known for being critical of countries such as Singapore and the US, inject more uncertainty?
Pre-election promises, which can be broken at will, have stated that the Goods & Services Tax (GST) will be lifted. Mahathir also displayed his same xenophobic traits by planning to review China’s investments in Malaysia eg. Forest City, whereby reclaimed land has been “sold” to foreigners. And what about the high-speed rail project with Singapore?
Known to be less-than-friendly towards Singapore during his reign as Prime Minister, how will Mahathir behave towards Singapore although he openly declared that his role is only interim in nature with power to be transferred to his former deputy Anwar Ibrahim after his release from prison, if he will even be released in the first place.
Such uncertainties scare investors although we can view this as a buying opportunity for long-term investment-grade blue chips, or a special category of stocks linked to the powers to be.
Opcom Holdings, a fiber optic company listed on Bursa, is owned by Mukhriz Mahathir. It was reported that during the period that Tun Mahathir was “out of favour”, Mukhriz and his siblings cashed out of a few companies earning his younger brother Mokhzani the accolade of being the ninth richest person in Malaysia in 2014. Hence it is important to note that companies that the Mahathir family touches normally turns into gold; remember to follow the leader, ok?
We do not know how the winning parties will share the spoils of the BN scalp. But seen alongside Mahathir most of the time, former Deputy Prime Minister (Najib’s cabinet) Muhyiddin Yassin has stakes in Eden Inc. Berhad and Thriven Global Berhad.
Eden is an F&B and tour operator while Thriven is involved in property development. One can probably expect both companies to profit in the long-term.
Gabriel Gan was a Senior Vice President at AmFraser Securities. He left to join DMG Securities (now renamed as RHB Securities) to take on a similar role. During his stints at the stockbroking firms, he dealt in equities, performed advisory role and executed corporate finance deals for his clients.
Since 2001, he has been invited by the media (both Mediacorp and SPH) for his stock market opinions. On radio, he spoke on 95.8FM for more than a decade; he now speaks every Wednesday and Thursday mornings on SPH radio 96.3 FM, delivering his opinion in Mandarin. On TV, Gabriel appeared on Channel NewAsia, the former Channel U and various Channel 8 financial segments including Good Morning Singapore, Hello Singapore and MoneyWeek. On print media, he continues to give quotes and comments on the economy and stock market for Lianhe Zaobao, Lianhe Wanbao and Shinmin Daily. On top of that, Gabriel was a columnist for the now defunct My Paper.