Malaysian Stocks, Ringgit Collapse As Opposition Set To Win Election

Update 1: Of the 152 seats tallied, BN has 63 and the opposition coalition 71, while PAS, a potential kingmaker, has 14.

And Malaysian stocks are collapsing...down 8% - the biggest drop in at least 2 1/2 years...

And the Ringgit is tumbling amid fears of capital controls...

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Unofficial results from Malaysia"s general election Wednesday show the opposition alliance is making strong gains at the expense of the ruling coalition, and along with rumors of the Malaysian Army"s deployment, the Ringgit has tumbled into the red for 2018...

Results are in for 57 out of 222 seats -- Prime Minister Najib Razak"s Barisan Nasional has won 30, with the opposition alliance taking 23

As AP reports, in the federal election, Prime Minister Najib Razak"s National Front is lagging behind the opposition, which campaigned on a platform of saving Malaysia from a corrupt elite after a multibillion-dollar corruption scandal at a state investment fund set up by Najib.

At least two Cabinet ministers appear to have lost their parliamentary seats and the opposition also made gains in state contests, potentially threatening the grip of Najib"s party on Johor state, where it was founded, and other states.

"There is a massive swing across races. It"s a big shift. This is a repudiation of Najib"s government from all walks of life from the very rural northern states to the more industrial southern coast," said Bridget Welsh, a Southeast Asia expert at John Cabot University in Rome.

Angered by the graft scandal, Mahathir, who was prime minister for 22 years until 2003, emerged from political retirement and joined the opposition in an attempt to oust Najib, his former protege.

Bloomberg reports that Malaysia"s chairman of the opposition coalition Mahathir says he believes Prime Minister Najib is unable to win based on the opposition"s own quick vote count. He tells supporters he thinks his alliance will secure the 112 seats needed for a majority, and take five states.

“From our official count, they are not forming government."

If Mahathir is right, he"d be returning to office at the age of 92. For now, though, the official tally from the Election Commission stands at 44 seats counted.

Additionally, pictures began to circulate showing the Malaysia army being deployed - which spooked markets - but the military swiftly denied these "rumors circulating on social media that army assets and personnel have been stationed to control Putrajaya," according to an official statement from armed forces late Wednesday.

The statement urged the public to immediately stop circulating the pictures.

 

And along with the rest of the EM FX market, the Ringgit (1mo NDFs in this case) is plunging...This is the biggest drop in the Ringgit since Nov 2016 (Trump election)

Here"s why the currency is plunging... Mahathir said in an interview last month with Bloomberg, when asked whether he"d consider repegging the ringgit to ward off "currency manipulators":

“When a currency weakens, the country loses money, the people lose money and costs of imports go up and generally the economy can’t do well. Capital control would become necessary in unusual situations.”

Additionally, MSCI Malaysia ETF is tumbling...