Malaysia's newly elected prime minister Mahathir Mohamad
Regular readers will recall that Nazir Razak, a lifelong CIMB man who is also the younger brother of ousted Malaysian prime minister Najib Razak, sometimes posts Game of Thrones images on his Instagram to convey the political troubles in his country.
Recent events in Malaysia – with 92-year-old Mahathir Mohamad, who more or less invented the Malaysian establishment, returning from retirement as leader of the opposition to oust his own protégé, with a promise to pass the reins to Anwar Ibrahim, who he was personally responsible for jailing for sodomy – would have seemed too much even for Game of Thrones.
But what does it mean for banking and finance in Malaysia?
There is something like consensus on the macro side. Economic growth is likely to slow with the upheaval, Mahathir’s first act – removing a goods and services tax – will boost consumption, but could see a cut in public spending and investment to fill the revenue gap, and there will be a delay at the very least in implementing some public Najib projects.
Signs of uncertainty
In markets, there are signs of uncertainty. One would normally have expected to see more capital markets activity from sovereign wealth fund Khazanah by this point of the year, for example, and there are a number of IPOs, such as Edra Power, which might be delayed waiting for certainty on market outlook and valuation.
Foreign direct investment, particularly from China, might be impacted, as any deal seen as having been politically connected – and plenty are in Malaysia – will be re-evaluated.
But really, the big issue is that 1MDB is back in the headlines. Anyone with a passing acquaintance of Mahathir knows that age won’t stop him pursuing the previous administration if there is evidence of corruption – and the US Department of Justice (DoJ), for one, is in little doubt that there is plenty.
So who falls with Najib? AmBank, which has suffered plenty from having been Najib’s banker despite its apparent efforts to warn Bank Negara about troubling transactions, can look forward to going through the mill again, as can a host of others named in the DoJ complaint.
Among internationals, all the internationals fined by the Monetary Authority of Singapore over 1MDB – UBS, DBS, Standard Chartered, Credit Suisse – will roll their eyes at the prospect of matters they considered resolved being publicized again.