By Koon Yew Yin
Quote from an angry Internet reader
If [the] market plunge(s), it will rise up again but if a country goes bankrupt, it is gone forever. I don’t know why you can’t get it in your brain unless your brain is always thinking of sex with your mistress.
During the last few weeks there have been increasing predictions from Barisan leaders emphasising that there will be a sharp fall in the share market should there be a Pakatan Rakyat victory.
The latest prediction by MCA leader Chua Soi Lek in a party event at Kepong argues that Malaysia will witness a “‘huge financial disaster if Pakatan Rakyat comes to power in the 13th general election”.
This type of electioneering tactic aimed at frightening the electorate is dangerous and irresponsible. How can the MCA president be so confident as to openly declare that our stock market will drop to 500 points within a week if the opposition wins power?
Challenge to Dr. Chua Soi Lek
Let us subject his prediction to closer analysis. Firstly, it is not clear whether he stated that the KLCI will drop by 500 points or drop to 500 points. Whichever is the correct version, his claim implies that anything from one to two thirds of the total share value of the KLCI will be wiped out due to the election result. Now if this were to happen, the drop will be unprecedented in the history of share markets anywhere in the world. So far as I am aware, no modern national stock exchange has had such a sharp fall as a result of a national election outcome and I am sure it will not happen in Malaysia.
I am willing to place a big bet with Dr. Chua that his fears of a 500 point are unfounded and baseless. The loser of the bet will have to donate an agreed sum of money to the other person’s preferred charity. I hope he will agree to this and prove to be a man of his word.
Will the market rise on a BN victory
Not only should we discount the possibility of a sharp fall, but we should also – on the basis of stock market behavior elsewhere in the world – not assume that the Malaysian share market will automatically rise as the result of a Barisan victory. For example, on November 7th, immediately after Obama, the incumbent Democrat president was returned to power, the Dow Jones industrial average plummeted as much as 369 points, or 2.8 per cent, in the first two hours of trading. It recovered in the afternoon, but ended down 313, its biggest point drop for more than a year.
Various analysts that I have talked with have made the point that Chua Soi Lek is not a stock market expert. They argue that in trying to exaggerate the prospect of a market meltdown, Dr. Chua is contradicting the Barisan’s argument that the economy is fundamentally sound and resilient.
At the same time, these analysts anticipate that there could be a market fall in the KLCI even if the Barisan is returned to power. They base this prediction on several factors:
Prediction of market rise with Pakatan victory
What is likely to happen should there be a Pakatan victory? My prediction is that there will be a rise in the share market should there be no attempt at violence or a coup d’etat by the losers. This is because of the following factors:
There are other indicators that the market will not take fright but will rally on account of a Pakatan victory. As pointed out by an SME investor, they include:
Proposals for a sustainable market rise
Although I am optimistic that the market will rise on account of a Pakatan victory, it is necessary for the new government to act decisively when it comes to power. I would like to propose the following measures to ensure that the post-elections market rise is sustainable: