Stocks research firms (government officials are still stunned by Abdullah Badawi’s worst defeat in the history of the National Front since 1969) were scrambling to positively assure the investors that Monday’s 130 points plunge, the worst one day drop ever in the country’s stock market, was a temporary event. However the bear has somehow been energized with the latest political landscape simply because foreign investors normally shy away from uncertainties.

Today’s 30 points rebound reflects the fact that it’s still too early to jump in, not to mention it might takes weeks or even months before a clearer picture can be painted as to the direction of the local stock market. In short, volatility increases many folds. While investors are waiting patiently to see how the policies of three wealthiest states namely Penang, Selangor and Federal Territory would change inline with the new government (opposition), the same investors are waiting anxiously to see how Abdullah Badawi could resume control of his own coalition party.

It’s no secret that Badawi could no longer sleep as soundly as before considering that his position within UMNO has been weakened considerably. His deputy is waiting for him to throw in the towel while his other allies within the coalition namely MIC, Gerakan and PPP parties were literally wiped out to extinction, not to mention MCA is barely alive. Since such landscape has not occurs before, investors are watching with great interest. People familiar with local politics will tell you it’s too early to write the conclusion. In fact it opens up a new chapter as to the many possibilities both in politics and business.

There’re many things that could happen in the next couple of months. Regardless whether the pressure comes from his own deputy to quit or simply just to jack up the National Front’s two third majority, Abdullah Badawi might be forced to negotiate and invite opposition Anwar Ibrahim to rejoin UMNO (though Anwar reportedly reject such call). Such scenario will re-change the landscape again. Alternatively Badawi could dangle some carrots so that some opposition individuals cross over.

The opposite could happen as well and it would be interesting to see if Anwar could reinvent himself as the true political master by courting parties or individuals from National Front to join the opposition to make up the number to form the next government. If this happens it would be the greatest and interesting event that could goes down the history books. Furthermore the rest of the parties within National Front have been reduced to irrelevant, not that they are during the glory period in the first place. Even if UMNO could find a new leader who could put the house in order it will takes a long time to regain the trust from the people who voted them out.

Nevertheless external factors could relieve the local stock markets. Tuesday early trading in U.S. saw the Dow up 244 points after Federal Reserve and other central banks said they will pump $200 billion into the financial markets to help ease the strain from the credit crisis. Such example could help lift up the local stock market when it open on Wednesday. But the reverse could have the same impact if Dow decided to dives. And don’t forget that the oil prices have reaches above the $109 a barrel today, something that everyone is waiting anxiously if the government would crazily increase the fuel prices by huge quantum.

I guess the Prime Minister is too busy with his own problems, so much so that you can expect the fuel price to remains for the time being. In a way it’s a blessing in disguise that the National Front fare badly else you could be scrambling to the nearest station to fill up your tank.

Other Articles That May Interest You …

• General Election’s effect on local Stock Market
• BN lost 5 states and two third Majority – Badawi resigns?
• DAP captures Penang, PAS captures Kedah and more!

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March 11th, 2008 by financetwitter

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