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Malaysia Stocks Hit Record High After Elections

Malaysia's Prime Minister and Barisan Nasional (BN) chairman Najib Razak celebrates his election victory in Kuala Lumpur.
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Malaysia's Prime Minister and Barisan Nasional (BN) chairman Najib Razak celebrates his election victory in Kuala Lumpur.

Malaysia's financial markets witnessed a historic day on Monday as the benchmark FTSE Bursa Malaysia KLCI Index soared to an all-time high after the country's ruling coalition returned to power for a 13th term.

The stock index crossed the 1,720 mark for the first time ever, briefly touching an intra-day peak of 1,826 as investors cheered the victory by Barisan Nasional (BN) and incumbent Prime Minister Najib Razak as confirmed signs of political stability and policy continuity.

"There's more political certainty now. The market has been very cautious in the first quarter – we've seen many capital market transactions delayed. With today's results, I feel that the policies that have been announced earlier on, there will be a continuation of that," Zafrul Aziz, CEO of Maybank Investment Bank, said on CNBC Asia's "Squawk Box."

Analysts said the results are a boost for the country's macroeconomic outlook over both the short and long term.

"Najib has made it clear fiscal reform will remain a priority, aiming to bring the deficit-to-GDP ratio down to 3 percent and public debt-to-GDP to 50 percent by 2015," wrote economists at HSBC in a research note.

Sectors benefiting the most from the risk rally were financials and trading services firms. CIMB Groups, the nation's second-largest lender by assets, rallied over 7 percent. State-owned Petronas Gas Berhad (PGB) surged over 14 percent while property developer UEM Land rose 10 percent.

Meanwhile, the ringgit climbed to its highest levels against the dollar since September 2011 at the 2.9 handle.

Gerald Ambrose, managing director of Malaysia at Aberdeen Asset Management told CNBC's "The Call" that the outcome of these elections don't actually factor in Aberdeen's stock-pickings.

Ambrose, who runs about $2.6 billion in assets under management in Malaysia, did add that the party's victory may finally pave the way for the Malaysian market to outperform its Asian peers.

"It was in the middle of December last year that Malaysia fell behind its South Asian neighbors in terms of market performance and I think that was basically not foreign investors selling. It was local institutions who, when uncertainty increases, tend to put more cash in a percentage of their portfolio. That cash is now being poured back into the market."

(Watch Now: Malaysia Business Condition Post-Election)

The benchmark stock index has notched up gains of 3.6 percent since the start of 2013, compared to Indonesia's robust 15 percent gain and the Philippine's' 24 percent increase.

— By CNBC.Com's Nyshka Chandran; follow her on Twitter @NyshkaCNBC

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