Sunday, 28 April 2013

Impact of GE13 Towards Investors

There's growing excitement of the upcoming 13th General Election has seen thousands of Malaysian thronging political "ceramah" every night. The topics spoken ranged from economic and social issues to plain slander between both coalition. While both the Barisan Nasional(BN) and the Pakatan Rakyat (PR) are laying claims that they will form the Federal Government come 6th of May 2013, foreign investors, local investors and fund managers are sweating in their palms as the day of election approaches. Will BN remain in power or will there be a change or as many call it "UBAH", allowing the PR coalition to form a new Federal Government after 50 years!

From an investing point of view, be it directly into shares from the Bursa or unit trust, the outcome of GE13 will definitely impact how our Bursa Malaysia's performance. Let's take a look at the possible scenarios of the 13th GE. 
Kindly note that I am writing from an investor's point of view with no relations or affiliations with either BN or PR. The last thing I want is for this blog post to be turned into a political topic.

Scenario 1:
BN Wins with a Landslide and Forms the Federal Government Once Again
If the existing ruling party, BN wins the 13th GE and has 2/3 majority to form the Federal Government, analyst and fund managers are predicting that it would be business as usual for the local Bursa.

Scenario 2:
BN Wins with a Slim Majority and Forms the Federal Government
There might be a temporary political instability in the BN's coalition as Najib's role as the Prime Minister might be challenged by the higher echelons of the BN party. Internal calls for change might arise to prevent another closed called election 5 years from now. However, the local Bursa should not be affected much as this issue should be internally resolved.

Scenario 3:
A Hung Parliament
Neither party has the sufficient majority to form a Federal Government. This would be a nightmare for many investors as without a country head, all plans for economic development would have to be put on hold. Nothing can be decided until the situation is resolved which might take months. Local Bursa will be affected as foreign investors would not dare to come in as long as the situation remains unsolved. I pray that this does not occur at all.

Scenario 4:
PR Wins with a Slim Majority and Forms the Federal Government
In view of this outcome, there will be a moment of instability for both political and economic outlook of the country as the new government tries to get the house in order. If PR manages to settle down quickly, then the market should not be badly affected.

Scenario 5:
PR Wins with a Landslide and Forms the Federal Government
Similar to Scenario 4, but with quicker recovery of the political and economic outlook of the country. Knowing that PR is a coalition consisting of 3 parties, we cannot rule out the possibility of internal bickering on who should hold key minister posts in the federal government. Unless of course PR has already decided way before the election with regards to this issue.

Other Impacts
Scramble for Power
If Scenario 2, 3 or 4 were to occur, there's also the possibility of further instability as both parties will try to entice independent elected MP's or MP's from opposing party to jump boats. This would definitely put on hold all key actions from respective party's manifesto and create further uncertainty to the local Bursa.

Wiping out Corruption and Cronyism
If PR were to form the Federal Government, one of the key promise they made is to wipe out corruption and cronyism. PR has also vowed to bring to justice those who are involved in dubious deals and contracts. The two most famously quoted billionaire in Malaysia that PR intends to scrutinized are Syed Mokhtar Al-Bukhary and T.Ananda Krishnan as reported in the Bloomberg News.

Share prices for companies belonging to the two tycoons would likely suffer loss in confidence as investors might start selling their shares if an investigation were to take place. 

Key companies owned by Syed Mokhtar Al-Bukhary (SMAB) that are listed in Bursa Malaysia are:
1) MMC Corporation Berhad (51.76% held by SMAB )

2) DRB HICOM Berhad (55.92% held by SMAB)

3) Padi Beras Nasional Berhad (to be delisted - takeover)

4) Tradewinds Berhad (to be delisted - takeover)

Key companies owned by T.Ananda Krishnan (TAK) that are listed in Bursa Malaysia are:
1) Maxis Communication Berhad (64.99% held by TAK)

2) Bumi Armada Berhad (42.419% held by TAK)

3) ASTRO Malaysia Holdings Berhad (newly listed on the Bursa)

With the expected battle between BN and PR to be very close, the possibility of Scenario 2, 3 or 4 would be the likely outcome. Regardless of whatever the outcome of the 13th GE, our local Bursa would most likely suffer a drop. The question is how much of a drop and how long?

For shares and unit trust investors, time to accumulate your cash as investing opportunities will surface after the 13th GE. Also you might want to consider looking for unit trust investment in the Asia Pacific region for the mean time.

Cheers and Happy Investing!

P.s : If you are based in Johor Bahru and would to know more about unit trust investing, feel free to e-mail me at

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  1. How this might affect the Ringgit Malaysia with respect to other currency, e.g the Euro?

  2. Hi there Anonymous, I'm unable to provide you with any insight on the forex market as it is not a field that I am investing in.