Malaysia’s Political Instability Benefits Singapore’s Stock Market

Billy Toh

November 24, 2022

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Malaysia’s wait for its next government and prime minister will stretch into Thursday at least, five days after polls resulted in a hung parliament during the country’s 15th general election (GE15).

The country’s King has called for a special meeting of Malaysia’s Council of Rulers to be held on Thursday.

I have talked about whether GE15 will provide clarity for investors going forward in my previous article and the current outcome points to divided votes among the PH and PN coalition.

On Monday, a total of RM 7.32 billion (US$1.61 billion) of market capitalisation value was wiped off the Bursa Malaysia in a knee-jerk reaction to the outcome of an inconclusive government.

Gaming stocks and breweries were the worst hit as the sell-down alone amounted to RM 2.75 billion market cap on Monday.

However, with so much uncertainty in Malaysia, the Singapore market could benefit as foreign investors look to markets that could offer political stability.

Singapore market can preserve wealth 

The Singapore market is seen as the market that helps investors to preserve wealth.

The equity benchmark index, the Straits Times Index (STI), is seen as a dividend-paying index with an historical average yield at between 3% to 4%.

The resilient stock market also offers stability as compared to others in the region.

To put this into context, Malaysia’s equity benchmark index, the FBM KLCI, was down by 8% year-to-date as compared to the STI, which has gained 4.1%.

Resilient Singapore Dollar adds to total return for investors

Aside from the stock market performance, the resilient Singapore dollar (SGD) is also another advantage for investors.

While the Malaysia Ringgit (MYR) was trading below the RM 2.50 level ten years ago, it is now hovering at RM 3.31 against the SGD.

Since GE15 shows that the political uncertainty in Malaysia is here to stay, it is unlikely for us to see a swift recovery and further downside risks are there for both the Ringgit and the Malaysian market.

Source: Yahoo Finance, ProsperUs

Singapore wants to be financial and R&D hub in SEA

Investors in the Malaysian market will continue to grapple with the political in-fighting and with no clear winner in the near term, some might look elsewhere.

This is where Singapore’s market would come in.

Already seen as the financial hub to overtake the Hong Kong market, the Singapore market will remain attractive for Malaysian investors.

It is not a coincidence that NIO Inc (NYSE: NIO) (SEHK: 9866) (SGX: NIO) opted to list on the SGX and become the first auto company to be listed on three exchanges.

I talked to NIO’s Head of Investor Relations, Rui Chen, and he shared that Singapore’s strategic significance as an international financial and technology centre are key reasons for the listing and that NIO is set to establish its R&D centre for Artificial Intelligence (AI) in Singapore.

According to Rui Chen, Singapore has the largest talent pools in advanced technology, such as AI.

With neighbouring countries, like Malaysia, continuing to be distracted by domestic political issues, Singapore has the advantage to extend its lead in these areas.

This will help the Lion City to position itself as the key hub for the next-gen growth opportunities in digital technology.

The country is already dominating in key sectors, such as data centres, despite the significantly higher costing as compared to its regional peers.

Meanwhile, the political landscape is Singapore is also getting more competitive but the ruling party, the People’s Action Party, is already planning ahead with its political succession.

This would see Finance Minister, Lawrence Wong, become the next party leader to lead it into the next general election, which must be held by 2025.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.