This article first appeared in The Edge Financial Daily on May 9, 2019

A year ago, when the Pakatan Harapan government won the 14th general election (GE14), optimism sparked and spread across the nation with the birth of a “New Malaysia”.

The FBM KLCI, which recorded an all-time record high of 1,895.18 points just 12 months ago, has sunk to a two-year low of 1,619.73 in mid-April.

The year 2018 was bad for equity markets. Over the course of one year (May 9, 2018 to May 9, 2019), the KLCI was the worst performer among regional indices, down by 11.53%, although most other benchmarks were also in negative territory. Notably, China’s Shanghai Composite Index fell 8.47% during the same period while Japan’s Nikkei 225 declined 4.03%.

Sentiment has turned positive in 2019, with most regional indices having crawled into the positive territory. However, the Malaysian benchmark index was the only one still in the red, judging by its performance since the start of the year — having lost 3.37% year-to-date (YTD).

Looking back at the past one-year performances of the five most recent general elections (GEs), it was only during the first year of GE13, whereby the KLCI recorded positive growth of 6.19% driven by the post-election rally.

The index was in the negative zone during the one year after GE11 and GE10, declining 3.34% and 0.33% respectively.

It is observed that the KLCI performance during GE12, which coincided with the 2008 global financial crisis, saw the largest dip of 26.85%.

Investors could probably take comfort that, despite the market having entered uncharted territory with the change of government for the first time, the benchmark index did not perform as badly as it did during GE12.

That said, Bursa Malaysia Small Cap Index, on the other hand, fared better and outperformed the benchmark index, up 17.03% YTD, despite still seeing a 9.13% decline from a year ago.

Nonetheless, sentiment remains fragile mainly because the lack of policy direction has caused uncertainties on many fronts.

Stocks deemed politically linked to the Barisan Nasional government are still attempting to redeem themselves one year on, after their share prices took a nosedive following Pakatan’s historic win in GE14 that saw a change in government.

Telekom Malaysia Bhd, once a heavyweight blue chip, is now a lighter weight stock, having dropped off from the KLCI Component Stock list, no thanks to the cut on fixed broadband price.

Apart from the uncertainty in the domestic market, gloomy global market conditions triggered by trade tensions and extended weaknesses in commodity-related sectors did not help either.

Oil prices took a dip in the fourth quarter of 2018 to nearly US$50 per barrel level — due mainly to renewed fears of oversupply in the oil market. This raised concern that low crude prices would widen Malaysia’s fiscal deficit given that public revenue will shrink RM300 million for every US$1 drop in crude oil prices.

Crude oil prices have since rebounded this year. At the time of writing, Brent crude traded at US$69.71 (RM289.30) a barrel. And that helped to drive the oil and gas theme play on Bursa Malaysia early this year.

It is also worth noting that the revival of more mega projects would raise hope of a multiplier effect on the country’s economy, which will hopefully spill over to the equity market.