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Phew. Now the politics are done, it is back to business. Monday's post-election rally in Kuala Lumpur was a classic of the relief kind. Its stock market underperformance this year – flat – had been attributed to worries surrounding the vote. But just cheering a clear result misses the bigger point: Malaysia has been underperforming for longer than an election explains.
ASEAN countries have been among the hottest bets in emerging markets this year. New issues in Bangkok and Jakarta have been snapped up while domestic deals are being done at dizzying multiples. Not, however, in Malaysia: Kuala Lumpur's flat performance compares with an average 11 per cent gain among its fellow ASEAN founders. And it has also trailed its fellows over one year, while over five its one-third gains are less than half those of Thailand, Indonesia or the Philippines. Only mature Singapore has been weaker. There are good reasons to cheer the election result. Investors can hope for existing reforms to be pushed ahead with fresh vigour, including plans to improve energy and transport links. Development of south Johor – Singapore's hinterland – could do much for Malaysia in general and specifically for anyone with investments in development. Small wonder the biggest post-election gainers include developers, banks and utilities.
Stocks with good stories are one thing, but Malaysia's overall problem is its fellow ASEAN founders. Overall, the blue-chip KLCI is trading at a forward price/earnings ratio of 16, a point above its five-year average. Against Manila's eye-popping 22, it looks a bargain. But it is still only in line with Jakarta and Bangkok, who have stronger domestic growth stories. And with output per capita in each at less than half Malaysia's $10,000 (U.S.), both have theoretically more room to run. A clear result in this election is something to cheer, but not to get very excited by.