Malaysian Stocks Fall Most in 8 Weeks After Polls Announcement

By Gan Yen Kuan & Liau Y-Sing 

Malaysian stocks fell the most in eight weeks and volatility surged to a two-month high after Prime Minister Najib Razak dissolved parliament for elections.

The FTSE Bursa Malaysia KLCI Index (FBMKLCI) sank 0.8 percent to 1,671.43 at 12:11 p.m. in Kuala Lumpur, poised for its steepest decline since Feb. 6. It earlier dropped as much as 3.1 percent. The index’s 10-day volatility gained to 10.6, the highest since Feb. 4. The KLCI index’s drop was the biggest among benchmark gauges in Asia. Trading volumes more than tripled from the 30- day average. Najib made the announcement on national television at 11:30 a.m. local time.

Najib’s 13-party Barisan Nasional coalition, which won the 2008 national vote by its slimmest margin, faces a resurgent opposition alliance led by former deputy prime minister Anwar Ibrahim. Najib’s approval rating slipped to 61 percent in February from 63 percent in December, a survey of 1,021 voters conducted Jan. 23 to Feb. 6 showed.

“The campaigning and the personalities behind the two main coalitions suggest that it’s going to be a close election,” Pankaj Kumar, director of investment at KSK Group Bhd., said by phone in Kuala Lumpur. “There is solid support for both sides. What is the telling factor is basically the 40 percent who are fence-sitters, who can be swayed either way. Barisan Nasional has the advantage of being in government.”

Unbroken Hold

The elections will determine whether Najib’s ruling coalition can extend its unbroken hold on power since the country won independence from the U.K. in 1957. Under Malaysian law, the contest must be held within 60 days of the dissolution of the legislature. The Election Commission will meet in a few days to announce a date for the poll, spokesman Sabri Said said in a text message.

Barisan Nasional, which means National Front in Malay, currently controls 137 seats inMalaysia’s 222-member parliament, with Najib’s United Malays Nasional Organisation its biggest component.

The ringgit was little changed after declining as much as 0.3 percent. Government bonds were little changed. The yield on the 3.26 percent notes due March 2018 held at 3.23 percent, data compiled by Bloomberg show.

The prospect of the ruling coalition losing seats in the election has helped make the KLCI Index the worst performing benchmark in Southeast Asia. The gauge has fallen 1 percent in 2013.

Local Funds

“There could be another group of local funds worrying about elections, hence the sell-down,” Ang Kok Heng, who helps manage the equivalent of $420 million as chief investment officer at Phillip Capital Management Sdn., said by phone in Kuala Lumpur.

The KLCI trades for 14.7 times 12-month estimated earnings, higher than its one-year average of 14.2, according to data compiled by Bloomberg. That compares with the MSCI Emerging Markets Index’s multiple of 10.4 times.

Petronas Chemicals Group Bhd. sank 3.9 percent, poised for its biggest loss since Dec. 3. YTL Corp. sank 4.2 percent, while Petronas Gas Bhd. slumped 3.4 percent.

“The dissolution of parliament doesn’t take away the uncertainty in terms of how much of its majority the government can hold on to and what this means for policies,” Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd., said by phone.

To contact the reporter on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net

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