The last 48 hours in Malaysia was like episodes of drama series “Games of Thrones”, more exciting than stock market.
Dr M is supported unanimously by both ruling parties (PH) and opposition (BN, PAS, etc) to be the Prime Minister of Malaysia, probably the first case ever in the world politics. However, Dr M decides to resign as PM and Chairman of own party today.
Now, all interested parties and alliances would fight for endorsement by Dr M over the next few days. As an expert in politics (94 years old PM, a world record of most senior political leader), Dr M would leverage on this political “crisis” to reshuffle the power distribution, without any party leadership (he has resigned from own party), he could select supporters from parties or individuals who align with his vision to continue as new PM. In short, he would have the full control in formation of new government alliance unless the parliament is resolved to have a new General Election (if so, he may not be part of the new game).
Political crisis could be an opportunity, smaller parties could become “kingmaker” when position right. Dr M may need more support of both alliances (PH & BN), so that he could have stronger control.
Malaysia stock market falls nearly 3% today, KLCI is below the critical 1500 points (nearly last 10 years low), correcting more than 20% from the market peak a few years ago, fulfill the technical criteria of a bear market. Many Bursa blue chip stocks are falling to low optimism, attractive low prices.
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There are 3 similarities between Stocks and Politics.
1) Investing / Politics during Crisis
Crisis is also opportunity for stock market, provided one could position correctly, focusing only the right stocks (similar to choosing the right parties to support) with strong business fundamental, waiting patiently for the prices to fall to attractive level (similar to Dr M waits for both alliances to fight for his support now).
2) Diversification in 10 stocks portfolio and 10 parties alliance
As a smart investor, one does not need to invest in only 1 or a few stocks as right could be high (eg. PH with 4 parties, could collapse when 1 party is withdrawn). So, diversification over minimum 10 giant stocks would be safer to minimize unsystematic risks. Similarly, Dr M may also diversify his supporters from 4 parties in PH to 10 parties in entire Malaysia, so that political risk is the lowest (not controlled by 1 single party who has critical votes).
3) Leveraging in stock market and politics
An investor or trader with low capital may leverage with CFD to achieve higher return when there is good investing opportunity. Similarly, Dr M could leverage on this rare opportunity with power of only 1 person by balance the power to align with own political vision.
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Crisis is opportunity only for those who are prepared. Malaysia bursa stocks are bearish but buy low may get lower. If wait too long, the “crisis” may be over, when fear is gone, the correction may be over.
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