Investors are starting to part with Malaysian securities in an overwhelming response to the country's recent elections. The Malaysian stock market plunged by over 10% on Monday, and the nation's currency is quickly losing value. The current coalition suffered a setback in the voting process that caused panic selling. Trading was halted for an hour on Monday under stock exchange rules that help to prevent panic selling. The reason for the panic is that 5 of 13 states are now under the control of the opposition party which has vowed to review all current government projects. The economic growth in the country has been fueled, in part, by those federal development projects, and the review process has many overseas investors concerned.
The previous political stability that has been enjoyed in the region over the last several years ended abruptly, forcing many investors to look for the nearest exit. The stocks that were most affected were those linked to the government. One project specifically mentioned by the new powers at be was the $8 billion real estate development project in northern Penang. A major backer for this project is Patrick Lim, a friend of the prime minister's son. Investors are concerned that the opposition parties will put an end to this and other projects meant to improve infrastructure.
It is not known how long political unrest will effect both the stock and real estate markets. The loss of the two-thirds majority in parliament could mean delays in infrastructure projects, but that may not be long term. Credit rating agencies Fitch and Moody's have yet to give up on Malaysia and have decided to maintain their sovereign ratings on Malaysia pointing to the economy's sound foundation despite recent elections as a reason to stay involved. The element of uncertainty may have gone up, but the agencies feel the effects will be short lived.
