US-China trade war does not favour the GE
THE guessing game over when the general election will be held has been going on for some time now.
The current sitting of the Parliament is the last one in the five-year mandate given to Barisan Nasional. The mandate ends on June 24, 2018. The government needs to go back to the people for a fresh mandate within 60 days, which means technically the general election needs to be held before mid August.
In the past, elections are normally held months or even a year before the mandate ends. Under Prime Minister Datuk Seri Najib Tun Razak, the general election is held closer towards the end of the five-year mandate.
In 2013, Parliament was dissolved on April 3, hardly a month before the mandate ended. This time around, there is still another three months before the term is due.
The good thing about stretching the mandate down to the last few months is that elected representatives can go about doing their jobs until the last moment. The entire government machinery, right down to the city and district councillors, can go about fulfilling promises on what they had set out to do to the voters.
There is a view that stretching the general election until the end of the five-year term will wear out the opposition. It cost money and a lot of effort to keep the tempo of campaigning up until Parliament is dissolved. The party machinery needs more than money to run smoothly. It involves a lot of coordination and work on the ground.
However, the downside to stretching the polls until the last few months is when the unexpected happens and it negatively impacts sentiment of the people. The developments unravelling at the global stage at the moment are an example of how things beyond the control of local shores can impede voter sentiments.
Nobody expected President Donald Trump to open up a trade war with China and the other major economies. It has caught the world by surprise and sparked an over-whelming bearish sentiment.
Sentiment on Bursa Malaysia has not been good since February with foreigners being net sellers of stocks. The escalating global trade war between the US and China is not helping the situation either.
Malaysia is a trading nation and will certainly feel the impact over the medium term. Some companies such as Sime Darby Bhd that does business with China are watching the situation closely.
Steel and aluminium producers say that there is no immediate impact from the tariffs imposed by the US. However they are not sure how it will impact them in the longer term.
The best time to call for polls is when there is an over-riding feel good factor sweeping among the people. A good indicator is the stock market.
Another barometer of a feel good factor is the property market, which seems to be on a better footing compared with the stock market due to its consolidation since 2015, thanks to Bank Negara.
Banks, at the behest of the central bank, have imposed stringent conditions before approving loans.
Nevertheless, there are excesses in highend condominiums and commercial properties such as retail space.
The view is that buyers in both these segments of properties would be able to tide over the situation should there be any rise in interest rates because they are seen to be better off financially compared to the normal households.
The Malaysian property market is not in a “bubble” if compared to the likes of Hong Kong, where property prices increase by double-digit every year. This year the Hong Kong property market is likely to see some sharp sell-down due to the tightening liquidity in that country caused by the rise in US interest rates.
Malaysia is likely to see a hike in interest rates in the second half of this year. However, the possibility of severe downturn due to the property sector is remote.
Nevertheless, nobody can say what is going to happen on the global stage with President Donald Trump at the helm of the world’s largest economy. The rise in US interest rates will also bog down emerging market currencies such as the ringgit.
At the moment, emerging market currencies are still holding up despite the rise in US interest rates because the outlook for the dollar is weak. The US dollar index is at 2014 levels due to the deteriorating US budget deficit and the protectionist trade policies
But we never know what will happen in the next few months. Sentiment may change on the dollar.
Having a general election when the world economy is fraught with uncertainties is certainly not something any government would like to see. Sometimes, stretching the polls to the last few months of a five-year mandate brings lesser benefits.