SINGAPORE (Reuters) – Malaysia’s stock market and ringgit currency weakened in early trading on Monday, after a national election over the weekend resulted in the first suspended parliament in the country’s history. , leaving rival parties rushing to find coalition partners.
The ringgit fell nearly 0.8% against the greenback, its biggest drop in seven months, as investors reacted to the prospect of prolonged instability and compromise. The ringgit was last at 4.58 to the dollar, after hitting a two-month high of 4.495 last week.
Kuala Lumpur’s benchmark equity index fell more than 1% to its lowest level since Nov. 4, hitting a low of 1,427.75.
Malaysia elected a hung parliament for the first time in its history, as the ruling Barisan Nasional, led by the United Malayan National Organization (UMNO), came a distant third.
This left a conservative Malay Muslim alliance led by former Prime Minister Muhyiddin Yassin to battle with a multi-ethnic alliance led by veteran opposition Anwar Ibrahim to find other partners needed to secure an outright majority.
“There is a question mark being triggered by this rise of ethno-religious politics in Malaysia, with longer-term implications for economic and social policy,” said Alvin Tan, head of Asia FX strategy. at RBC Capital Markets in Singapore.
“In the near term, political uncertainty, as well as the global economic slowdown, I think, should keep the upward pressure on the US dollar/ringgit pair,” he said, meaning downward pressure. drop on the ringgit.
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Muhyiddin’s Perikatan Nasional alliance won 73 seats in the lower house – winning support from two political blocs on Sunday as it sought to form a new government, although it has yet to win the required majority.
Having been a junior partner in the incumbent government, Muhyiddin could seek support within the defeated UMNO party to which he once belonged.
“It’s not ideal for Malaysia, which has been facing political challenges for some time now,” said Trinh Nguyen, emerging Asia economist at Natixis in Hong Kong.
“The results confirm the concern that even if a coalition is formed, no ruling party means it is very difficult to move forward decisively, as politics now takes precedence over economics.”