KUALA LUMPUR: Malaysia’s ringgit declined as markets reopened after former prime minister Tun Dr Mahathir Mohamad led the opposition coalition to a surprise election victory last week, raising concerns over campaign promises to drop a consumption tax and bring back fuel subsidies.

The currency slipped as much as 0.9 percent, the most since Nov. 2016, to 3.9860, before trading at 3.9862 at 8:19 a.m. local time.

Moody’s Investors Service and Fitch Ratings warned of risks to the budget if the GST is abolished and not offset by other revenue-raising measures.

“Mahathir said that they will step in if there’s market disorder, hence this stabilized the market somewhat,” said Mingze Wu, an FX trader at INTL FCStone in Singapore.

“The key level to watch would still be 4.00. Volatility is definitely expected. The only way to calm investors would be to have the new economic road map.”

Mahathir has sought to reassure the markets by appointing a finance minister seen as a safe pair of hands, while saying he would lead a business-friendly administration.

While some, including CIMB Group

 Chairman Datuk Seri Nazir Razak, have expressed optimism for the financial markets following the election, other analysts said stocks and the ringgit may decline in the short term until there’s clarity on policies.

The opposition victory brings places the nation in uncharted territory, with an untried government. The Pakatan Harapan coalition had campaigned on a promise to scrap a consumption tax within its first 100 days in power, reintroduce gasoline subsidies and review toll road concessions.

In a Thursday press conference, Mahathir emphasized his focus on growing the economy and reducing debt.

Malaysian stocks had risen to a record close ahead of the election as global funds invested more than $600 million into local equities this year.

The ringgit has benefited from a recovery in crude prices and was the Asia’s best performer over the past year before trading was suspended for the election. – Bloomberg



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