Published September 16, 2008

KL's political uncertainties expected to continue

Investors want to see a leadership change, says analyst

By PAULINE NG
IN KUALA LUMPUR
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EVEN assuming a much vaunted leadership change occurs in Malaysia, analysts do not expect domestic political uncertainties to abate anytime soon, although they acknowledge that it could have a positive effect on the lacklustre stock market in the shorter term.

Even so, Sept 16 or more commonly referred to as 916 - the date by which Opposition leader Anwar Ibrahim had initially set to lead the new federal government by engineering lawmakers to defect from the ruling Barisan Nasional (BN) - is likely to pass with Prime Minister Abdullah Ahmad Badawi still in charge.

However, judging by events of the past weeks and recent days in particular, Mr Abdullah's grip on power is not expected to last, pressure coming not only from Mr Anwar's behind-the-scene moves, but also from manoeuvring within his own party United Malays National Organisation (Umno) to unseat him on the grounds that the BN is rapidly disintegrating under his weak leadership.

'At this juncture, things aren't positive because of various rumours as to who will be the next prime minister. Investors feel uncertain as to whether it will be Anwar or a continuation of the BN government,' said Malaysian Investors Association president PHS Lim.

A local fund manager who did not want to be named was certain that investors want to see a leadership change. 'Definitely - it's a comedy court here,' she said referring to last weekend's shocking use of the Internal Security Act to detain a blogger, journalist and Opposition politician on grounds of 'national security'.



Arrested under the ISA, a law which allows for indefinite detention without trial, the journalist was released after 18 hours. A government minister's comment that she was detained for her own protection following alleged death threats against her, because of her news report on a BN politician's speech that had raised racial tensions, was widely ridiculed.

Predictably, the Kuala Lumpur Composite Index (KLCI) headed south yesterday, losing 12 points or 1.2 per cent to 1,032 points, with Wall Street jitters on Lehman Brothers' impending bankruptcy proceedings and forced restructuring of American Insurance Group also weighing on the market. Since the beginning of the year, the KLCI has fallen about 28 per cent.

Resource-rich Malaysia has hardly any exposure to the US sub-prime problems and in the past two to three years, has actually benefited from high commodity prices. But political uncertainties have been unending.

'In the 18 years I've been in Malaysia, I can't remember a period where there's been so much political uncertainty,' remarked Aberdeen Asset Management managing director Gerald Ambrose, whose fund is nonetheless nearly fully invested in the market.

Foreign investors might consider Malaysia worth a second look, he said, 'was there light at the end of the tunnel'.

Most foreign short-term traders have left the local market, the exodus starting in March after the general election results saw BN losing their traditional two-third majority and control of five states.

Pointing to recent policy flip-flops, the local fund manager said that there had been very slight 'nibbling' in recent days as investors looked for reasons to come back ahead of 916.

A former deputy prime minister, Mr Anwar was likely to bring greater policy clarity to investors and would be a better choice, she opined, adding that the current Deputy Prime Minister Najib Razak's credibility was somewhat tarnished by the on-going Alantuya Sharriibuu case where a close associate and two members of Mr Najib's security detail have been charged with her murder.