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SINGAPORE: All eyes are on Malaysia following reports on Thursday that Prime Minister Abdullah Badawi will be stepping down and handing power over to his deputy, Najib Razak, in June 2010.
The move is seen as one that is aimed at ending months of political uncertainty which have unnerved investors.
The Malaysian stock market has seen better days in recent months, just like most of its counterparts in the rest of Asia.
But sentiment in Malaysia has been weighed down by political concerns following the disappointing performance of the ruling coalition in the March general elections.
Analysts said a confirmed date for the premier to step down will restore investor faith in the Malaysian market.
Prasenjit K Basu, chief economist of Daiwa Institute of Research, said: "A confirmed date would contribute to easing uncertainty. The market has performed poorly partly because of the massive political uncertainty...
"I think valuations in Malaysia are beginning to look better and foreign investors will begin to nibble."
The Malaysian stock market has lost over 4 per cent in the past week on the back of political uncertainties and some analysts are expecting this to continue in the short term.
However, they have also noted that there is underlying strength in the Malaysian economy.
Prasenjit said: "I think the near term still looks somewhat murky, but the medium term is probably mildly positive because the economy is still in reasonably good shape.
"Malaysia has had very strong exports this year and economic growth over the last two or three quarters has been very good, so the economy is in fairly good fettle.
"The slight problem is that inflation is about to spurt upward, but that is happening for a good reason – Malaysia has reduced oil subsidies, which is a good thing for the medium term."
But the move to raise fuel prices did not go down well with the masses.
Inflation rates in Malaysia are expected to rise above 6 per cent for June after hitting their highest in nearly two years at 3.8 per cent in May.
- CNA/so
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