Malaysia 13th General Election – How Would It Move KLSE?

by ChingFoo Lieu on 12/07/2012

Malaysia 13th General Election (GE) – when is it happening and how is it going to affect Kuala Lumpur Stock Exchange (KLSE)?

The first question is anyone’s guess but the second question deserves some serious thoughts. Whether you are a value investor or a trader, it will inevitably impact your portfolio. There’s only 2 outcome – you could be feeling euphoric or you could be feeling extreme pain, at least in the short term. You could enter the market now as a fundamentalist, armed with tonnes of data and research to justify your stock of choice is undervalued, bla bla bla. But anyone who doesn’t have the holding power or a strong stomach to ride through the waves of volatility caused by the general election, sleepless nights would ensue. And understand that the movers behind stock markets are essentially human beings with emotions, so sentiment, plus herd mentality play a significant role. A wise man once said, whoever wishes to foresee must consult the past. So how did KLSE move before and after the previous Malaysia general elections?

malaysia general election

I present to you, KLCI performance during and post Malaysia General Elections since the 80′s

“The impending Malaysia 13th General Election – How Would It Move KLSE? Let’s see some historical facts during previous GEs.” <- Click to Tweet This

malaysia general election stock market Say, back in the Form Six days where you are required to complete this Pengajian-Am-like compulsory question, how would you interpret this table in no more than 120 words?

OH MY GOD! Sure fail already, not because I don’t have sufficient main points to write, but because there are so many things to write! But of course, there would not be any politically related sentiment in public exam questions. That would be so wrong, despite the fact that political sentiment is the all around us – they say, it’s like an elephant in the room which we choose to ignore. We were so naive and innocent while donning those blue pinafores and dark green pants.

Anyway, I digress. Okay, if I were to write a brief summary on this, here’s the main points I would list down:

The Explicit – otherwise known as Isi Tersurat

  1. Every time got general election in Malaysia, KLSE sure very volatile one.  –> very Ah Beng style :)
  2. Volatility can be up or down –> Tadaa! Thanks for stating the obvious!
  3. The impact is not so much before polling day
  4. The real impact to KLSE is only seen within a quarter after polling day

malaysia general election stock market sentiment

The Implicit – otherwise known as Isi Tersirat 

  1. Malaysia citizens (otherwise known as the Rakyat) were not very happy when Tun M. took the helm in 1982. KLCI slumped 11.8 percent after the general election.
  2. Tun M as PM proved his mettle as the de facto leader – I was still very wet behind the years that time but I knew Proton (every Malaysian’s ahem, pride)  was Tun’s brainchild.  So the Rakyat gave their full support to the Father of Malaysia modernization in 1986 general election. Good sentiment drove the stocks up 28.8 percent – holy sh*t!
  3. The people are probably neutral, and divided in 1990. Seats won were just over two-third majority, and KLCI barely moved after the election.  After effects from 1987′s turbulence inside Tun M’s club caused by Semangat 46 perhaps?  Someone enlighten me please?
  4. I copied this excerpt from Wikipedia: In 1991, Tun M announced Vision 2020, under which Malaysia would aim to become a fully developed country within 30 years. One of Vision 2020′s features would be to gradually break down ethnic barriers. Vision 2020 was accompanied by the NEP’s replacement, the National Development Policy (NDP), under which some government programs designed to benefit the bumiputera exclusively were opened up to other ethnicities. The NDP achieved success in one of its main aims, poverty reduction. By 1995, less than nine per cent of Malaysians lived in poverty and income inequality had narrowed. Tun M’s government cut corporate taxes and liberalised financial regulations to attract foreign investment. The government rode the economic wave and won the 1995 election with an increased majority.
  5. [Censored, but the cause for the drop in majority seats had to do with the forming of a new party, and a political insurgence with ended with a *cough* sotong-mee trial & conviction - Google for more details]. But investors certainly felt relieved and appreciated the stability of the ruling government returning to power after the general election, hence the stock market shot up to a 35.5 percent all time high in just 3 months!
  6. It was a landslide victory for the ruling coalition in 2004 Malaysia general election. However, it did seem that the policies of the new leader left little to be excited about – hence the stock market knee-jerk response to this all time high parliament majority seemed lacklustre. Which is good for investors who didn’t manage to get out fast enough from the market, as your portfolio probably lost no more than one fifth of its value.
  7. Stock market plunged an astounding 12.3 percent, first in the history, as much as the seats lost to the opposition parties when the ruling coalition failed to secure two third majority for the first time(?).  The people sentiment is growing restless, and investors who are not remotely interested in politics will not be spared from the grasp of downward volatility that’s threatening their portfolio return. Trying times ahead indeed as we approach the 13th Malaysia general election, latest by April 2013.

Maybank Investment Research original comments:

We expect the market to reach positively (albeit mildly) post the 13th general election. Construction stocks, selected oil and gas names, Tenaga Nasional and CIMB are likeliest to reach immediately.

So what grade do you think I deserve given the points above? :)

**This article is written for entertainment purpose and should be treated as an a politically-motivated rant/opinion.**

{ 2 comments… read them below or add one }

LCF on Personal Finance May 3, 2013 at 5:37 pm

Neither do I, else we’ll all be fengshui master. It has been the end for some already :) Thanks for dropping by hockthai!

Reply

hockthai May 3, 2013 at 2:57 am

Thank for posting. What will happen to the Malaysian Stock Market? I do not know. But it apparent the element of caution is felt. This GE13 will be the mother of all elections. To some dirty politicians, this will be their end, their political grave.

Reply

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