SINGAPORE- Malaysia’s share market and ringgit currency weakened in early trade on Monday, after a national election over the weekend resulted in the first hung parliament in the country’s history, to leave rival parties scrambling for coalition partners.
The ringgit fell almost 0.8 percent against the greenback, its steepest drop in seven months as investors reacted to the prospect of prolonged instability and compromise. The ringgit was last at 4.58 per dollar, off a two-month peak of 4.495 hit last week.
Kuala Lumpur stocks’ benchmark index fell more than 1 percent to its lowest level since Nov. 4, hitting a trough 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 Malays National Organisation (UMNO) came a distant third.
That has left a conservative Malay Muslim alliance led by former prime ministerMuhyiddin Yassin to battle it out with a multi-ethnic alliance headed by veteran opposition leader Anwar Ibrahim to find other partners needed to secure an outright majority.
“There is a question mark that is 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, the political uncertainty, along with the global economic slowdown, I think, should keep the upside pressure on the US dollar/ringgit pair,” he said — meaning downward pressure on the ringgit.
