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Political instability root cause of economic downturn?

Electronic digital interface at a stock exchange or bourse showing the fluctuating prices of stocks and shares on the markets charting their performance

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) index declined 11.69 points to 1,518.46 at 9.06am yesterday from 1,530.15 at Wednesday’s closing.

The key index opened 4.25 points lower at 1,525.9.

On the broader market, losers outnumbered gainers by 482 to 61, while 196 counters were unchanged, 1,449 untraded and 10 others suspended.

Malacca Securities said it expects the ongoing Movement Control Orders (MCO) in several localities as well as the Covid-19 situation in Malaysia will continue to affect the local bourse.

“There are a number of developments in the political arena that may be contributing to market instability,” it said in a research note yesterday.

Concurrently, The ringgit opened lower against the US dollar as market participants took into account political developments and the Covid-19 situation in Malaysia, dealers said.

Economist of Bank Islam Malaysia Bhd, Adam Mohamed Rahim said the sentiment towards the ringgit was influenced mainly by the decision of the Umno Supreme Council meeting last night in which the party withdrew and ended its immediate support for the Perikatan Nasional (PN) government led by Prime Minister Tan Sri Muhyiddin Yassin.

“Such political instability is not liked by investors because the development of the country’s economic agenda may be delayed,” Bernama reported, noting that such a situation would put downward pressure on local units.

At 9am, the local currency dropped 95 basis points (bps) to open at 4.1700/1750 against the US dollar from 4.1605/1625 at the close on Wednesday.

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