(Sept 2): Officially, the starting pistol has yet to be fired for an election. But in Malaysia's palm oil plantations, the battle for key votes is well underway.
Seeking re-election, Malaysian Prime Minister Najib Razak in July offered cash hand-outs and debt relief to palm oil farmers, a show of government largess that political commentators say is aimed at securing the support of a traditionally key vote bank.
The opposition, with stronger support among urban Malaysians angry with a series of corruption scandals, has typically struggled to dislodge the ruling United Malay National Organization (UMNO) party's stranglehold on the rural heartlands.
That may change after influential former Prime Minister Mahathir Mohamad quit the ruling party last year, formed his own party — called Bersatu — and defected to the opposition.
Though still fragmented, the opposition is betting that its re-alignment and Mahathir's involvement will narrow the chances of the incumbent cruising to victory in polls due mid-2018.
"I think we could really make a dramatic impact," said Wong Chen, a member of the opposition People's Justice Party, said in an interview in late July. "Bersatu's main role is to take the fight to the rural areas where UMNO is strongest."
Bersatu president is former Malaysian Deputy Prime Minister Muhyiddin Yassin. He and Mahathir are "very combative, very old school politicians with deep roots in the rural areas," Chen said.
Paul Stadlen, who handles media inquiries for Najib, did not respond to CNBC's e-mailed requests for comment.
'Going to be close'
An opposition win would break the ruling Barisan Nasional coalition's six decade grip on power, marking a watershed in post-independence Malaysian politics. In fact, any indication of a credible challenge to the political status quo could trigger a bout of volatility in Malaysian assets.
"This one's going to be close," said Gerald Ambrose, CEO of Aberdeen Asset Management Malaysia. "If there was a victory for the opposition there would be a lot of people who would be concerned about the outlook in the near term. It has been the same administration here for the past 60 years."
Ambrose added: "In the urban areas, it does look as though a lot of people are thinking very seriously about for whom they vote. In the rural areas I think there's still a lot of loyalty towards the ruling coalition."
Economically, much is at stake.
BMI Research this month raised its 2017 growth forecast for Malaysia to 5.3 from 4.7 percent, and its 2018 forecast to 5.0 percent from 4.6 percent, citing strong export demand for electronics and higher oil prices.
Election-related spending, BMI Research added, will provide a boost to headline GDP growth: "The government has announced a series of measures aimed at shoring up support among its various voter bases and we believe that this could ramp up as elections draw nearer."
Volatility
Malaysia's benchmark KLCI is the world's longest-running bull market, the ringgit has rebounded from a 19-year low and the International Monetary Fund recently upgraded Malaysia's 2017 growth forecast to 4.8 percent from 4.5 percent.
But the higher cost of living has been a common complaint, worsened by a national goods and services tax imposed in 2015, and putting in jeopardy the votes of Malaysia's 1.6 million public servants, another typically reliable vote bank for the ruling party.
"There will be volatility in any election," said Chou Chong, head of Asian equities at Natixis Asset Management. "We see that globally now." But given the robust growth outlook in Malaysia and the broader Southeast Asia region, Chong said election-related volatility presented an opportunity to "get in" and increase exposure.
Foreign investors want more policy certainty and for any newly-elected future administration to draw a line under a spate of high-profile governance scandals, particularly related to 1MDB, the troubled state fund established by Najib.
1MDB is the subject of money-laundering investigations in at least six countries, including the United States, Switzerland and Singapore. The fund has denied any wrongdoing and Najib has denied all allegations of corruption against him.
President Donald Trump plans to meet Najib on September 12 at the White House, officials from both countries said.
Top of form
"Overall, the international investment community has a keen interest in Malaysia," said Kay Van-Petersen, a macro strategist at Saxo Bank in Singapore. "However, they want real structural steps towards greater comfort on transparency, shareholder protection, the rule of law and, of course, clarity on the political climate."
Some believe Malaysia's political environment is a secondary factor to the country's currency regulations, which many feel are distorting foreign investor perceptions.
In November, Malaysia's central bank stepped in to discourage what it saw as currency speculators in the non-deliverable forwards (NDF) market, as the ringgit languished as Asia's worst performer in the aftermath of Trump's presidential election win.
The central bank later announced new measures to boost liquidity and domestic trade of the ringgit — steps that the central bank said have helped stabilize the currency.
"Given the fact that the NDF currency market has been effectively shut down for months, it's hard to get a sense of what is truly priced in," Van-Petersen said. "I would have expected the MYR to be much stronger, simply given what its [emerging market] cousins have done."
From a debt point of view, Jean-Charles Sambor, BNP Paribas' deputy head of emerging market fixed income, noted that foreign investors are not as heavily positioned toward Malaysia compared to last year. That reduces the risk of out-sized moves in the local debt markets.
"The political factor is something that we have to monitor," Sambor told CNBC's "Squawk Box" last week. "But I would say that, compared to a few years ago, the positioning is much lighter and the risk of massive outflows is much lower and the macro story is in a much better shape."