OVERVIEW

? A new beginning. When victory was certain for the Pakatan Harapan (PH) alliance as the official results were announced a day after the 14th General Election (GE14) on May 9th, it marked the starting point for the new coalition government to clean up the mess that have been allegedly accumulated by the previous regime under Datuk Seri Najib Abdul Razak for nearly a decade. The former coalition government, Barisan Nasional (BN), had been in power ever since Malaysia achieved its independence from the British colonial in 1957.Hence, a change in the ruling party, after 61 years marks a history in Malaysia.

? The biggest comeback. The GE14 victory is remarkable as it was led by Prime Minister Tun Dr. Mahathir Mohamad who ousted BN, the ruling coalition he once steered under the United Malays National Organisation (UMNO) banner. During his premiership from 1982 till 2003, he served as Malaysia’s 4th and longest serving PM. Aside from being the first Malaysian PM to not represent the long-serving coalition, Tun Mahathir’s current premiership makes him the first Malaysian PM to serve from two opposing parties and on non-consecutive terms. After retiring from politics for 15 years, he made a comeback on 8 January 2018 when he was announced as the PH coalition candidate for PM for the GE14. At the age of 92, he is also the world's oldest head of state. However, Tun Mahathir has expressed that that he would only be a caretaker leader of the new government and will eventually hand over the premiership to his former deputy PM Anwar Ibrahim upon the King’s pardon.

? Against the odds. PH coalition won by a commendable margin with 122 or 54.5% of the total 222 parliamentary seats despite many alleged attempts of gerrymandering and dirty tactics in the GE14 by the then-incumbent BN government. In terms of total votes, it garnered 66.8% of total turnout, a significant improvement from 50.8% in the last election. More surprisingly the alliance won 9 out of the 14 states in Malaysia including Johor, the birth state and stronghold of UMNO. PH also made almost a clean sweep on the west coast of peninsular namely gaining Negeri Sembilan and Melaka while retaining Federal Territory and Selangor. The alliance technically won more seats in the state of Kedah, Perak and Sabah but not enough to form a state government. Surprisingly, the Islamic party or PAS, though not part of the PH, secured 18 parliamentary seats in Kelantan and Terengganu.

? Dismal BN results. Meanwhile, BN managed to secure only 79 or 35.6% of the 222 parliamentary seats compared to 60.0% in the last election. In terms of total number of votes BN only managed to secure 33.2% of the total, a record low. Hence, the BN coalition managed to retain only three states, namely Perlis, Pahang, and Sarawak.

? Peaceful transition. We believe the main reason why the GE14 came in as a surprise to market and our base case scenario (of a simple majority win for BN) is because the rakyat (people) has dauntlessly expressed what was perceived as mere dissatisfaction and concern towards alleged corruption, governance and transparency on to action via the ballot box. The dissatisfaction from the rakyat largely came about from the alleged handling of the 1 Malaysia Development Bhd (1MDB) scandal, which had put Malaysia on the map as one of the most corrupted countries in the world, among others. In addition, the outgoing BN government has allegedly failed to address the perennial issue of rising cost of living despite various initiatives including large annual cash handouts or BR1M as well as various forms of assistance and subsidies since the last election. Wages and household income remained relatively low and did not keep up with the inflated cost of living especially in the urban areas. Adding salt to the wound was the imposition of Goods and Services Tax (GST) of 6.0% since April 2015. The volatile and weak Ringgit, largely stemming from negative news flow from the 1MDB scandal, weakened purchasing power and reportedly did little to help improve the financial wellbeing of most Malaysians.

Source: Kenanga Research - 14 May 2018