KUALA LUMPUR, May 10 — Nomura Holdings Inc analyst Chetan Seth was once a bull on Malaysia stocks — now he’s not so sure.

Just less than two months ago, Japan’s biggest brokerage had recommended investors to raise exposure in Asean stocks, with a preference in Malaysia and Singapore. Now, Nomura plans to wait and see "how the drama unfolds” over the next few days and will review its position as volatility returns following the surprise election outcome.

"We have held an overweight on Malaysia within the Asean context,” Seth said in a report published today. "We no longer can justify this stance which was — amongst other reasons — premised on the view of it being a defensive market in the region.”

Most strategists expect Malaysia’s markets to suffer a short-term blow after the former prime minister unexpectedly led the opposition to power for the first time in six decades. Nomura’s Next Funds FTSE Bursa Malaysia KLCI ETF slipped as much as 5.4 per cent in Tokyo, the most since December. The country’s 2045 dollar bond reached a 2016 low, while credit risks advanced.

His newfound uncertainty after Tun Dr Mahathir Mohamad’s shock victory in yesterday’s election has company. UOB Kay Hian Holdings Ltd’s head of research Vincent Khoo published a note today which put the firm’s end-2018 FTSE Bursa Malaysia KLCI Index target of 1,830 under review. — Bloomberg