KUALA LUMPUR (Sept 24): The re-emergence of political instability, just seven months after Prime Minister Tan Sri Muhyiddin Yassin took over following the collapse of the Pakatan Harapan government, will lead to higher volatility in the market with downside risks, said CGS-CIMB Research.

Yesterday, opposition leader Datuk Seri Anwar Ibrahim said he had secured a "formidable" majority of lawmakers to oust current prime minister Muhyiddin and form a new government.

Anwar said he commands support from close to two-thirds of the legislature’s 222 lawmakers, without giving actual numbers or disclosing who had pledged support.

In a strategy note today, CGS-CIMB said political instability would likely only be partially offset by the RM10 billion stimulus package announced by the government yesterday.

CGS-CIMB analyst Ivy Ng Lee Fang said this may lead to foreign selling due to concerns over a weaker ringgit, and local investors reducing their exposure to the equity market due to concerns over earnings risks.

“We believe the sectors least affected by such uncertainties are export-oriented industries (gloves, oil and gas, agri, tech and electronic manufacturing services), while the sectors most affected by domestic policies are banking, construction and property.

“We keep our FBM KLCI target of 1,520 points and top three picks (Malaysian Pacific Industries Bhd, Public Bank Bhd and Tenaga Nasional Bhd),” she said.

At 9.45am, the KLCI had fallen 1.02 points to 1,495.46.

Market breadth was negative with 416 losers and 233 gainers, while 356 counters traded unchanged. Trading volume was 1.04 billion shares valued at RM559.5 million.