Malaysia's Shock Election Result Leaves Regional Markets Unmoved

(Bloomberg) -- While offshore investors are selling Malaysian assets after an unprecedented election victory for the country’s political opposition, Southeast Asian markets seem to be taking the news in stride.

There’s little contagion in markets open Thursday after Mahathir Mohamad’s surprise win, with benchmark gauges from the Philippines and Singapore to India and Sri Lanka posting minor moves.

Southeast Asian currencies are also shrugging off the vote shock. The Philippine peso and the Singapore dollar rose 0.3 percent each, while the Sri Lankan rupee and Vietnamese dong were flat.

“Longer term, the outcome is positive as Malaysia starts off on a renewed slate, however getting the economy back on track is critical,” Madeleine Kuang, a portfolio manager with Fidelity International, wrote in a note.

Still, a rude awakening awaits domestic Malaysian investors when markets reopen Monday. The stock index could potentially slump 8 percent within three days and the ringgit may test the 4 level against the U.S. dollar, according to strategists.

Nomura Holdings Inc.’s Next Funds FTSE Bursa Malaysia KLCI exchange-traded fund tumbled as much as 5.4 percent in Tokyo, the biggest drop since November 2016.

To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net.

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Ravil Shirodkar

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