Photo: Bernama

KUALA LUMPUR: Malaysia saw its net outflow dominated the equity market last week, surpassing a net sell of over RM1.15 billion compared with the previous week’s RM447.9 million due to the unnerving political turmoil which culminated in the scramble among political parties seeking to form the next government.

An analyst said the one-week political instability had caused the net outflow to spike on Monday as the main index, the FBM Bursa Malaysia KLCI (FBM KLCI), declined 2.68 per cent or 41.14 points to 1490.06 points, as well as on Friday, with the index tumbling 1.52 per cent or 22.95 points to 1,482.64. 

“As the index plunged to almost a nine-year low, the oversell scenario is in place. However, the downside risk of the prolonged political crisis combined with Covid-19 concerns would keep the investors at bay for now,” she said. 

Over the week, the country fell into a sinkhole after the ruling Pakatan Harapan collapsed following the resignation of the then Prime Minister Tun Dr Mahathir Mohamad which led to the dissolution of the cabinet.

However, shortly after his resignation, Dr Mahathir was re-appointed as interim Prime Minister by the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah to resolve the stalemate.

On Saturday, in a stunning turn of event, His Majesty appointed Tan Sri Muhyiddin Yasin as the eighth prime minister.

High Highness made his decision in line with article 40(2)(a) and article 43(2)(a) of the Federal Constitution on the basis that Muhyiddin possibly had the support of a majority in parliament, an Istana Negara’s statement said Saturday.

The statement was issued by the Comptroller of the Royal Household Ahmad Fadil Shamsuddin.

Muhyiddin was sworn in as prime minister at Istana Negara at about 10.30am Sunday.

On Thursday, Dr Mahathir, as interim Prime Minister, presented the 2020 Economic Stimulus Package worth RM20 billion to shield the country’s economy from the Covid-19 impact and boost local consumption, while assisting the sectors affected the most such as tourism and services.

Besides the political squabble, the market would also be influenced by the corporate results season, as well as the upcoming FTSE World Government Bond Index (WGBI) review in March, where an exclusion from the WGBI list would cost the local bourse its international market accessibility. 

On the ringgit performance, the political realignment had caused the local currency to decline to 4.2120/2180 on Friday compared with 4.1900/1940 previously, while the FBM KLCI dropped 48.56 points to 1,482.64.

According to an analyst, the ringgit is expected to remain on the downside due to lack of positive catalysts, the political scene, as well as the prevailing Covid-19. 

Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the risk aversion had been prevalent since the Covid-19 outbreak outside China spread at a rapid pace alongside the domestic political uncertainty.

“We could see the bond yields had fallen with the 3-,5- and 10-year Malaysian Government Securities (MGS) yields dropping by 8.0, 10.0 and 8.0 basis points on week-on-week basis to close at 2.62 per cent, 2.67 per cent and 2.83 per cent, respectively, on Friday.

“Given the current Covid-19 situation, all eyes will be focusing on the February’s PMI indices to gauge its immediate impact to the economy,” he said.

As for next week, Afzanizam said investors would await the next Bank Negara Malaysia’s decision on its overnight policy rate (OPR) on March 3.

“We see a high chance that BNM would reduce the OPR by 25 basis points to 2.50 per cent to complement the fiscal stimulus measures announced on Feb 27,” he said. – Bernama