2022 15th Malaysia General Election (GE15) – Market Impact

03 Nov 2022

Malaysian Prime Minister Ismail Sabri Yaakob dissolved parliament on Oct. 10, paving the way for a general election to be held. This will be the 15th general election since independence, aptly named GE15. The 3 key dates are- Nomination day on Saturday, November 5, early voting on Tuesday, November 15 for security personnel, and Polling Day on Saturday, 19th November. This brings the overall campaign period to 14 days.

Although several high profile politicians have yet to confirm the seats they will be standing for and alliances between major parties are yet to be finalized; the political battle is expected to revolve around 3 main coalitions of parties- the Anwar led-Pakatan Harapan (PH), Muhyiddin led-Perikatan Nasional (PN), and the Ismail/UMNO led-Barisan Nasional (BN) who will all be at the forefront of GE15. Critically, 112 seats or more than 50% of the 222 seats is needed in order to attain a simple majority government while 148 out of 222 seats are needed for a strong majority government.

We believe that 2 possible scenarios could play out in the upcoming elections:

  1. A strong/simple majority government: In this scenario, a single coalition is able to win more than 50% of the available seats. This could result in a less market volatility and a positive market reaction as the new ruling coalition will be able to pass policies through more decisively without much opposition. We believe that a majority government could bring political stability and clarity which the stock market will welcome with open arms.
  2. A minority government: Alternatively, in the scenario where the dominant coalition controls less than 50% of the available seats, we believe this could result in increased market volatility and a negative market reaction as it will be harder for the ruling party to push policies through. It also runs the risk of a sudden reversal in the previously announced fiscal measures in Budget 2023.  A minority government also significantly increases the chances of internal turmoil and political instability, which could result in depressed market sentiment.

With 3 credible coalitions- BN, PH, and Perikatan Nasional (PN), competition for majority seats is likely to be fierce. We expect Gerakan Tanah Air (GTA) who is led by Muhammad Mahatir, the former prime minister for 22 years and one of the oldest politicians in the world at the age of 97, will be a wildcard in the coming election. Furthermore, new party Malaysian United Democratic Alliance (Muda), which aims to attract younger voters could also play a significant role in the outcome of the election. This is crucial as a key change from the previous election to monitor would be the introduction of younger voters, who are likely voting for the first time after the legal voting age was lowered to 18 years old in 2019. This new group of around 21 million voters aged 18 to 21 likely adds to the unpredictability of the current election.

On a technical perspective, we believe that Polling Day, November 19th, will be a key market catalyst. We expect the KLCI to stay on its current bullish momentum, as seen in the chart below:

Post-elections, in the scenario that a majority government is formed, we believe the KLCI could move further upwards towards 0.764 Fibonacci level of 1561.94. However, in the alternate scenario that a minority government is formed, we expect market sentiment to fall and the KLCI could move back downwards towards the 0.382 Fibonacci level of 1467.26. Nevertheless, we also note that there is a possibility that similar to GE14, Bursa Malaysia may announce a special holiday and close the KLSE on 21October, the day the KLCI opens post- GE15, to prevent extreme price movements in the stock market in the case of a shock opposition victory.


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