Malaysian Stocks Drop on Election Concern: Kuala Lumpur Mover

Malaysian stocks fell, dragging the benchmark index to a seven-week low, on speculation the government will call an election by as early as March.

The FTSE Bursa Malaysia KLCI Index lost 0.6 percent to 1,627.73, its lowest close since Dec. 7. It was the only decliner among benchmark gauges in Asia today. The KLCI’s 10-day volatility was at 14.26, near its 13-month high of 14.34 on Jan. 28. Trading volumes were 26 percent above the 30-day average, data compiled by Bloomberg showed. YTL Power International Bhd. dropped 2.6 percent, leading declines in the index.

“Local funds are selling again as the election is getting nearer and nearer,” Ang Kok Heng, who helps manage the equivalent of $422 million as chief investment officer at Phillip Capital Management Sdn., said by phone in Kuala Lumpur.

The KLCI index has fallen after hitting a record high on Jan. 7 amid speculation the election may result in the ruling coalition losing seats. It’s down 3.6 percent this month, the worst performer among Asian benchmark gauges.

Prime Minister Najib Razak said last month the Barisan Nasional or National Front coalition, which has ruled the nation for 55 years, aims at restoring a two-thirds parliamentary majority it lost in 2008. At stake are programs Najib unveiled to boost economic growth, such as a $444 billion program of private sector-led construction projects announced in 2010. This includes a 48 billion-ringgit ($16 billion) mass rail network in the capital.

Najib, who must dissolve parliament by April 28, is having his weekly Cabinet meeting and couldn’t comment on the election timing, a government spokesperson said today. His approval rating fell to the lowest level in 16 months, the Merdeka Center for Opinion Research said in a statement on Jan. 10.

Continued Volatility

There’s speculation the vote may be held during school holidays at the end of March, Fiona Leong, a Kuala Lumpur-based analyst at Citigroup Inc., wrote in a note dated Jan. 23. Stock prices are likely to remain volatile until polling day, according to Leong. The KLCI index plunged 2.3 percent last week, its biggest weekly loss since May 18. It trades at 14.5 times estimated earnings, compared with the MSCI Emerging Markets Index’s multiple of 11 times.

YTL Power fell to its lowest level since Dec. 26, while Genting Bhd. dropped 1.8 percent to a four-week low. UEM Land Holdings Bhd., Malaysia’s biggest property developer by market value, retreated 2.3 percent, while palm oil producer Kuala Lumpur Kepong Bhd. slid 1.5 percent.

Najib cut personal income taxes, raised civil servants’ minimum pensions and gave cash handouts to low-income households in his 2013 budget announced in September, after increasing civil servants’ salaries in 2011 to boost domestic consumption.

Qatar Holdings LLC, a unit of the nation’s sovereign wealth fund, plans to invest more than $10 billion over the next five years in various projects in Malaysia, including the oil and gas development in Pengerang in the southern Johor state, the Business Times reported today, citing vice chairman Hussain Ali Al-Abdulla.