Asia Markets: Malaysia markets volatile after opening for the first time since election

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Malaysian stocks FBMKLCI, +0.43%   turned positive after opening nearly 3% lower as markets opened for the first time since the stunning election victory for Mahathir Mohamad’s opposition coalition last week.

Volatility was expected following the election, which ousted the political coalition that had ruled Malaysia since independence in 1957. In the U.S., an exchange-traded fund of Malaysian stocks slumped 6% on Wednesday before rebounding 1.8% on Thursday and falling 0.8% Friday.

Buying in Malaysia was led by government-backed local funds, investment bankers and analysts said. State-run funds are key players in Malaysia’s financial markets and they frequently support specific government-backed stocks—or at times the entire market—when there is major selling pressure.

“We believe any market selldown may be brief and offer accumulation opportunities,” Bernard Ching, an analyst with Kuala Lumpur-based AllianceDBS Research, said before the market opened Monday.

Still, “investors don’t like uncertainty and the first 100 days will be crucial for the new coalition government,” said Kit Weng Yip, head of investment banking at Nomura Securities Malaysia.

Meanwhile, prices of some Malaysian bonds—which traded overseas following the election—ticked up early Monday after heavy postelection selling. In addition, the Malaysian ringgit fell nearly 1% against the U.S. dollar after derivatives last week pointed to a decline of more than 2%.

Many stock market participants sold shares into Wednesday’s election as the opposition was gaining momentum. The benchmark Kuala Lumpur Composite Index fell more than 1% in each of the last two full weeks of trading before the polling. After the election, some investors said the result was as shocking as the U.K.’s vote to leave the European Union and U.S. President Donald Trump’s election victory in 2016.

Until the pre-election weakness, Malaysian stocks were regional outperformers. Local shares are up 2.8% year-to-date, placing them among the best performers in the Asia-Pacific region.

Around the region, China’s Shanghai Composite SHCOMP, +0.24%  was up 0.6%. Hong Kong’s Hang Seng HSI, +1.11% rose 1.3%. Australia’s S&P ASX 200 XJO, +0.26%  remained near a 10-year intraday high, last up 0.2%, while Japan’s Nikkei Stock Average NIK, +0.57%  rose 0.3%.