PENANG, Malaysia, March 9, 2008 (AFP) – Weekend elections that have reshaped Malaysia’s political landscape will reverberate in the stock market and could dampen investor confidence, economists said Sunday.
Massive defections by the small but economically dominant Chinese community and once loyalist minority Indians have highlighted resentment towards the Malay-led government’s economic policies, they said.
The Barisan Nasional coalition, led by Prime Minister Abdullah Ahmad Badawi’s United Malays National Organisation (UMNO) failed to win a two-thirds majority in parliament for the first time in four decades.
It also lost control of four states, including the technology hub of Penang, to a resurgent opposition in Saturday’s polls.
Analysts said that although the government also suffered a rejection from the Muslim Malays who form its bedrock, investors may be concerned that the results could trigger political and racial instability.
“Fund managers will be concerned with the racial divide,” Chua Hak Bin, a Singapore-based economist with Citigroup told AFP.
“With the Chinese and Indians voting for the opposition, you raise the question if Malaysia’s fundamentals are intact and w