Prime Minister Najib Razak plans to dissolve Malaysia’s parliament for elections “very soon,” Bernama reported, citing the premier after meeting political leaders in the commodities-rich eastern state of Sabah.
Najib, whose ruling coalition won the 2008 vote by its narrowest margin in five decades, must dissolve parliament by April 28, after which the Election Commission must hold polls within 60 days.
“The market will likely react negatively to the increased political risk premium but it will settle down quite quickly,” Yeah Kim Leng, chief economist at Kuala Lumpur-based RAM Holdings Bhd., said by phone. “Whoever comes into power will likely put market stability as well as the economy as number one priorities.”
The FTSE Bursa Malaysia KLCI Index has fallen 3.9 percent after hitting a record on Jan. 7 on concern that Najib’s governing National Front alliance may lose seats in parliament, making it the worst performing leading benchmark stock index in Asia Pacific this year. The ringgit has fallen 1.2 percent this year, the fourth-worst performer within a basket of 11 Asian currencies tracked by Bloomberg.
Parliament may be dissolved in March, with voting by month- end, Yeah said.
Investors should shun Malaysia’s bonds and currency before the poll as the ruling coalition’s grip on power may be weakened, Kelvin Tay, Singapore-based chief investment officer for the southern Asia-Pacific region at UBS AG’s wealth management unit, said in an interview today.
Twelve-month non-deliverable ringgit forwards fell 0.1 percent to 3.1548 per dollar as of 5:01 p.m. today, the first drop in four days, according to data compiled by Bloomberg. The contracts to buy or sell the ringgit in a year traded at a 2 discount to the spot rate, which rose 0.2 percent to 3.093.
Growth in Southeast Asia’s third-largest economy has exceeded 5 percent in the five quarters through September as Najib boosted spending ahead of elections, extending cash handouts to low-income families and raising civil servants’ minimum pensions. Fourth-quarter data is expected Feb. 20.
In the last election in 2008, the governing parties lost the two-thirds parliamentary majority they had held for four decades. An opposition alliance headed by former deputy prime minister Anwar Ibrahim currently controls four of Malaysia’s 13 states, including Selangor and Penang.
Najib is on the ground explaining the government’s policies and direction to voters, Bernama reported yesterday during his Sabah trip. The prime minister was due to visit Perak in Peninsular Malaysia today, the national news service said.
The premier’s approval rating fell to 63 percent in December, down from 65 percent in November, the lowest since he received 59 percent support in August 2011, the Merdeka Center for Opinion Research said Jan. 10. The survey included 1,018 voters and had a margin of error of about 3 percent.
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