Strategy Note / Malaysia

Malaysia's next fragile government led this time by Anwar

  • Opposition leader Anwar Ibrahim claims the backing of c55% of MPs, which the King will verify
  • Another fragile political mandate under new leadership likely (next scheduled election in September 2023)
  • FBM100 equity index down 2% ytd, on 19x forward PE (c40% earnings growth) but we prefer Vietnam, Indonesia in small Asia
Malaysia's next fragile government led this time by Anwar

Anwar claims support of 55% of MPs – still a slim majority

The UMNO is split between those loyal to former Prime Minister Najib Razak (who has been convicted of corruption) and those willing to side with opposition leader Anwar Ibrahim.

The King of Malaysia will now verify Anwar's claims of a supporting majority and determine whether to appoint him as prime minister or order a no-confidence motion in the current government. The next scheduled election is not until September 2023.

Global demand for technology hardware, trade relations between the US and China, oil and palm commodity prices, and new waves of Covid-19 infections (and lockdowns) are outside the control of Malaysia's politicians. However, the one factor in their control, the establishment of a clear political mandate to implement reform, still appears beyond them. 

It is not clear that there are great differences within all parties in parliament on the substance of policy. All accept the need for:

  • Economic orthodoxy (inflation and fiscal deficit control);

  • Structural reform to raise productivity (ie better infrastructure, more efficient public procurement, empowering anti-corruption institutions and practices, raising education standards, increasing female labour force participation, improving the ease of doing business);

  • Pandering to domestic ethnic concerns (ie promising inclusive growth for all but prioritising the 50% ethnic Malay population);

  • Balancing the geopolitical pull of the US-centric and China camps.

Related reading

Malaysia: Fragile government in peril, no guarantee of a stronger one (Sep 2020)

Malaysia: Government weakened by Najib verdict, politics a drag (July 2020)

Malaysia: Old men lacking in confidence but not ambition (May 2020)

Asia equity strategy: Vietnam tops a strong group (July 2020)

EM central bank firepower (Sep 2020)

China manufacturing is irreplaceable but India and other Asians can win share (June 2020)

Corruption: The ugly truth for EM and ESG investors, (July 2020)

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