[ Laman Ehwal Semasa ReformIS ]
Date: 13 Aug 1999
Time: 04:45:56
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Malaysian boost from Morgan Stanley points to imminent elections
KUALA LUMPUR, Aug 13 (AFP) - As Malaysian stocks surged with the announcement of reinstatement on the Morgan Stanley indices, speculation is rife a general election will be held in September, analysts said Friday.
Analysts said the inclusion of Malaysia in the indices, announced before MSCI's quarterly review on August 17, and a long time before the February inclusion date, will push Kuala Lumpur stocks higher and restore the "feel-good-factor" essential for any general election.
The Kuala Lumpur Stock Exchange composite index soared 50.20 points, or 7.0 percent to close mid-session at 779.16, off a high of 803.83.
Morgan Stanley Capital Index (MSCI) said Thursday it would reinstate Malaysia in its emerging market and all-country indices from February 2000 as long as there is no reversal of the country's financial liberalisation.
A research head with a local bank-linked brokerage told AFX-Asia, an AFP financial news affiliate, that the market over-reacted to Morgan Stanley's announcement.
"Yes, definitely it is good news ... at least better. But the market cannot sustain 40 points (yesterday) and 70 points rises consecutively."
He said although on the surface, the announcement was seen as a positive piece of news, it raises many questions.
"Why February? Everyone is asking that question. And if it is February, why make the announcement now?
"There is really no urgency to make the announcement now. It is not really their style. Furthermore, they have always been tight-lipped."
He believed the announcement would now pave the way for Prime Minister Mahathir Mohamad to call for early general elections.
"The announcement has given some confidence (to Mahathir and his policies). Yes, it would facilitate calling elections soon, most likely in September," he added.
Another research head with a local brokerage noted Malaysia is not being re-instated in the developed market series, a move which would prevent the return of more longer-term foreign funds.
" ...there will be some (funds) that will want to have some exposure in the bourse but don't forget that we are back only on the emerging markets index.
"Prior to this, Malaysia was in both the developed and emerging markets indices," he added.
The research head also said the MSCI reinstatement would likely lead to the country's general elections being held sooner than expected.
"There is no doubt that this will be the present administration's trump card for the elections ... I will not be too surprised if the elections are held before the end of September," he added.
But Jomo Sundram, professor of economics at University Malaya said while the reinstatement was positive news it would not persuade Mahathir to go to the polls so soon.
"Other issues are not too favourable to Mahathir," he said, citing the numerous police reports made by ousted deputy premier Anwar Ibrahim against Mahathir and other senior cabinets.
"I think elections will be held in early November after the budget announcement in October."
General elections are due by next June but widely expected to be held in the next few months as the economy recovers from a recession.