Now if you read the papers especially after the recent elections, local newspapers have been reporting non-stop about the politics in Malaysia. Since the opposition captured 5 states in the Peninsula and 82 seats in parliament, there are rumours that Pakatan Rakyat will be forming the new government soon. Statements by PR leaders about MPs crossing over to the PR side in Sabah will swing the simple majority held by BN in Parliament over to PR.

We all know what happened to our market when it re-opened after the elections. Circuit breaker was activated and KLSE stopped trading for 1 hour to cool off the sell-off in the market. But counters with fundamentals still intact regain their composure and politically linked stocks are punished. Now if there was a complete change of government to PR, can you imagine what would happened to most of the GLCs therefore bringing down the KLCI index even lower. I won't be surprised if the circuit breaker was to be activated again.


My question is, if that were to happen again and the sell off doesn't stop when the market re-open, what would be your actions during these times? Do you sell, hold or buy more? Or even stand at the sidelines and watch the fireworks.

I ask this now because it seems inevitable something will be happening soon in the political scene in Malaysia.

It's hard to foresee what would happen. Even during the last election, both sides restrain themselves when the results were official. Although I do have my own share of fear of the chaos that might occur if PR were to suddenly take power. The issue is the transition of power whether it would be as smooth as the last election which is not perfect but not totally chaotic. but lets not divert from the topic.

The question still stand, what would you do with your investments in KLSE when the politics in Malaysia goes upside down. It's no secret that if the present BN governemnt were to fall, a lot of GLCs might take a real beating and might not even recover. Although not all GLCs are completely useless, it can't be helped to think that they can be what they are at the moment without the help of the government. I doubt the smaller ones can survive and will most likely be gobbled up by their bigger counterparts.

KLSE weighted average depends a lot on GLCs to hold it where it is. If all major GLCs are sold-off, we can probably see KLCI drop to 500-800 points again I'm guessing. But imagine other counters that are not GLC, like if Public Bank were also sold off in the panic and drop to RM6.00 again for instance, will you buy it?