Fitch The Longer Govt Instability Less Confidence Investors Have

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International financial information services firm Fitch Group’s research unit has forecast that Malaysia risks bleeding more investors should government instability continue.
Fitch Solutions analysed that Muhyiddin Yassin’s resignation as prime minister alone will have a minimal financial impact.
In a statement yesterday, the data and analytics unit said this was because the decision came following months of political instability.
“Malaysia will see its third government in as many years as a result of Muhyiddin’s impending resignation and the second consecutive one to resign.
“Continued government instability will continue to undermine investor confidence.
“However, given that the government has appeared unstable for months, Muhyiddin’s resignation itself is unlikely to prove a surprise to the markets and we do not expect an outsized impact on both the equity and bond markets in Malaysia,” it said.
Muhyiddin will remain the caretaker prime minister until a replacement can be determined.
Yesterday, before Muhyiddin officially announced his resignation, the Kuala Lumpur Composite Index (KLCI) had opened slightly lower at 1496.7.


This morning, it opened higher at 1505.27.
Financial daily The Edge quoted Rakuten Trade attributing the higher opening to “bargain-hunting activities” with foreign funds as the net buyers.

Stagnant GDP

Yesterday, Fitch Solutions had also slashed its estimate for Malaysia’s 2021 gross domestic product (GDP) growth from 4.9 percent to zero percent.
This was after the country’s real Q2 2021 GDP figures contracted two percent quarter-on-quarter. It grew 16.1 percent year on year.
These were “far below” the unit’s expectations.
“All segments of the economy from an expenditure perspective except government consumption are likely to remain stagnant or even contract slightly from 2020 levels,” it had said in a separate statement.
It based its revision on a “high level of political risk” and the fact that Covid-19 cases had not dropped despite lockdowns.
It also had little confidence that Malaysia would be able to vaccinate most adults by year-end or see an economic surge by then.

The unit further expected lockdowns would remain for the rest of the year while local-level restrictions may extend into 2022. - Mkini

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