Malaysian Stocks, Ringgit Slump After Abdullah's Poll Losses

Malaysia's stock index slumped the most in almost 10 years and the ringgit fell after the ruling coalition lost its two-thirds majority in parliament, sparking concern the opposition will delay state projects.

Malaysian Resources Corp. and UEM World Bhd., which are among companies building roads and bridges under a 200 billion ringgit ($63 billion) public works program, plunged while state banks including Bumiputra-Commerce Holdings Bhd. sank.

The Kuala Lumpur Composite Index tumbled 6.3 percent to 1,214.71 at 11:17 a.m. local time, set for its biggest drop since Sept. 8, 1998, after dropping as much as 7.6 percent. It has fallen 20 percent from its Jan. 11 record high, signaling a bear market.

Prime Minister Abdullah Ahmad Badawi's five-year government infrastructure program risks being delayed after his National Front coalition lost its majority in parliament -- stripping it of the power to change the constitution unopposed -- and relinquished power in five of 12 states contested in the March 8 election.

"We're entering uncharted territory,'' said Mushtaq Ibrahim, who manages about $1.4 billion at Amanah SSCM Asset Management Bhd. Foreign investors "have been selling down the market in the last month over external factors, now they have this domestic issue that will cause them more worries,'' he said.

Opposition parties claimed the government had failed to reduce corruption and poverty in Southeast Asia's third-largest economy. It also campaigned to end race rules that favor the nation's majority Malays but disadvantage its sizeable ethnic Chinese and Indian communities in housing, jobs and education.

'Slap in the Face'

The National Front has won 140 of 222 parliamentary seats, while the opposition clinched 82, according to the latest data from the Election Commission. Prime Minister Abdullah Ahmad Badawi said yesterday he won't resign because he has the support of his party's leaders, according to the state-owned Bernama news agency.

It's a "slap in the face for Abdullah and the government,'' said Pankaj Kumar, who manages about $460 million as chief investment officer at Kurnia Insurans Bhd. in Petaling Jaya, outside Kuala Lumpur. "The market will be disappointed. The government will really have to win back the people's confidence.''

The ringgit lost 1 percent to 3.1983, the most since June 8, 2007, according to data compiled by Bloomberg. Malaysia's benchmark 10-year bond yields were quoted at about 3.75 percent as of 10:25 a.m. in Kuala Lumpur, according to Amanah Butler Malaysia Sdn Bhd, compared with a 3.7 percent yield on March 7 on the central bank data.

Barisan Nasional, the ruling coalition, has been in power since Malaysia gained independence in 1957. The government has boosted spending on new infrastructure and said it will use money from retirement funds to buoy home ownership.

'Panic Situation'

Gamuda Bhd., the No. 1 builder, plunged 19 percent while MMC Corp., its joint venture partner that's building the nation's largest rail contract, lost 15 percent.

"We believe uncertainties on the implementation of some projects in opposition-held states'' will hurt stocks such as UEM and Malaysian Resources, Loong Chee Wei, an analyst at CLSA Asia- Pacific Markets wrote in a report today. Even Gamuda and MMC's rail project "is at risk,'' he said.

State-owned Bumiputra-Commerce Holdings Bhd., Malaysia's second-biggest bank, tumbled 1.10 ringgit, or 11 percent, to 9.10 ringgit.

"It's a panic situation. People are concerned some government projects might be delayed'' or reviewed, said Scott Lim, who helps manage $400 million at CMS Dresdner Asset Management in Kuala Lumpur.

Government-controlled Tenaga Nasional Bhd., the largest power producer hurt by rising coal prices, lost 1.25 ringgit, or 15 percent, to 7.35 ringgit after Loong of CLSA said there is a "risk of delays'' in its plan to increase electricity rates.

State-controlled Telekom Malaysia Bhd., the No. 1 phone company, slid 6.4 percent. (Bloomberg.com)

***** The plunge is partly due to market 'sentiment' as would occur anywhere else whenever a drastic change takes place. However in a crony-based economy like ours there is real fear and panic because the opposition has a thrown a spanner in the works and the largesse may not be distributed as intended to the favoured groups.
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