By Ying Xian Wong


Share prices of so-called sin stocks in Malaysia were starkly lower after an Islamist party gained a substantial number of seats in national elections, with analysts saying the market will likely be volatile until a government is formed.

Malaysia's benchmark KLCI index fell Monday after weekend polls resulted in a hung parliament, with no political coalition garnering a simple majority in parliament. The Malaysian Islamic Party gained 49 out of 222 seats.

Casino operators Genting Bhd. and Genting Malaysia Bhd. were 4.7% and 4.1% lower, respectively, while breweries Heineken Malaysia Bhd. and Carlsberg Brewery Malaysia fell 6.0% and 5.1%, respectively. Lottery operators Magnum Bhd. and Sports Toto Bhd. were off 8.1% and 6.9%, respectively.

The hung parliament outcome will damp sentiment in the local market until it is resolved, Malacca Securities said in a note.

"The market may stabilize after the prime minister candidate is sent in at 2 p.m., but with some side effects," analyst Loui Low Ley Yee said.

Malaysia's king has set a Monday 2 p.m. local deadline for parties to form a new government and name their prime minister candidate.

If the Perikatan Nasional coalition, which includes the Malaysian Islamic Party, emerges to control government, the market may anticipate negative effects on alcohol, gambling and other such industries, Mr. Low said. But the brokerage also thinks Perikatan Nasional will weigh the pros and cons of such sectors, as they account for a sizable portion of economic activity.

Buying interest may build up in Shariah-compliant stocks, he added.

Maybank Investment Bank analysts said banks may be at risk as well, given Perikatan Nasional's pledge to offer loan extensions or a pause in repayment for small and medium enterprises affected by the economic slowdown.

East Malaysia construction and oil-and-gas stocks could benefit, as Sabah and Sarawak coalitions are once again the "kingmaker," with both major coalitions Perikatan Nasional and Pakatan Harapan needing their support to gain a simple majority to form a new government, Maybank said in a note.


Write to Ying Xian Wong at yingxian.wong@wsj.com


(END) Dow Jones Newswires

11-20-22 2302ET