KL market plays guessing game about elections

KL market plays guessing game about elections

By Bill Tarrant

KUALA LUMPUR (Reuter): Malaysia's rumor-driven stock market has been in a lather about national elections even though they're not due for more than a year and the outcome is hardly in doubt.

Prime Minister Mahathir Mohamad's National Front coalition is expected to win the polls, not due until October, 1995, as it has in every previous election since Malaysia became independent of Britain in 1957.

It's the spoils of campaigning that has Malaysia's punters panting.

"During the election the government will announce a lot of projects, that always tends to be the case," William Chan, research manager of Seagrott & Campbell Securities, said. "That will give a big boost to the market."

The government has announced 40 government agencies or projects will be privatized later this year. Eighty billion ringgit ($30 billion) in infrastructure projects are in the pipeline over the next two years.

The Kuala Lumpur Stock Exchange rallied last Wednesday on rumors, apparently emanating from Singapore, that Mahathir was about to announce an election date.

The KLSE, one of the world's fastest-growing bourses -- its market capitalization more than doubled last year to nearly 620 billion ringgit ($238 billion) -- slumped back to its present state of doldrums when Mahathir left later that night for a three-week holiday.

It wasn't the first time, nor will it be the last, that players tried to move the market with an election rumor, financial analysts said.

Until a few months ago, the betting was an election would probably be held in August or September, taking advantage of the country's bright economic picture after six straight years of eight per cent economic growth.

But several cabinet ministers in background talks with foreign correspondents have indicated the election might be put off until next year after all.

"What's wrong with serving out a full five-year term," Deputy Prime Minister and Finance Minister Anwar Ibrahim said, a sentiment echoed by several of his colleagues in the cabinet.

The 47-year-old former Islamic firebrand, a riveting orator and shrewd political operator, is Mahathir's heir apparent.

The rapid ascension of Anwar in the United Malays National Organization (UMNO), the dominant partner in the National Front coalition, may be another reason to delay elections until next year, some analysts say.

Key figures within UMNO want to slow down the Anwar train. After his supporters dominated the last UMNO convention in November, the next cabinet and key party slots will likely be filled by Anwar's people, the analysts said. In Malaysia, that can make all the difference to a company when it comes to winning government contracts.

"An early election would involve a major change-over of personalities, giving Anwar supporters the opportunity to obtain access to government largess much more quickly than would otherwise be the case," said Bruce Gale, regional manager of the Political & Economic Risk Consultancy.

Political analysts say there is no love lost between Anwar and his predecessor as finance minister, Daim Zainuddin, UMNO's treasurer and a close friend of Mahathir's who has been a key figure in Malaysia's ambitious privatization program.

"The guy who controls the government's contracts and the guy who controls the private companies are fighting. Mahathir has to step in and resolve this," one UMNO official said.

The polls could also be delayed by logistical problems. Nine hundred thousand eligible voters have yet to be enrolled, including 400,000 members of UMNO out of a total voting population of seven million, party officials said. Registration begins in July and will take three months.

Moreover, all 180 parliamentary constituencies are being redrawn to add 12 seats. New UMNO local committees will have to be appointed after the exercise is completed. "It will take months for the dust to settle," the UMNO official said.

An election could be held in the first half of October. But the federal budget is to be unveiled in the last week of that month.

And after that the budget would have to move through the parliamentary approval process, which would take all of November and December, ruling out an election at that time, analysts said.

"It's the biggest guessing game in town, but the only one who really knows when the election will be is Mahathir," an Asian diplomat said.