Going into GE14, the market has priced in a BN win. As such, this unexpected election results outcome will likely heighten political uncertainties in the short term. Questions will arise on the stability of the new government as the component parties may have opposing beliefs and might have clashed in the past.

Recall that in the first trading session after the 2008 elections, the KLCI had hit its 10% limit-down, with circuit breakers kicking in for the first time ever. We expect significant stock market volatility this time round too. However, the impact may be partially mitigated by the new government’s plans to improve institutional and political reforms.