KUALA LUMPUR, Aug 17 — Further political instability and power grab among leaders is set to continue as the country scrambles to appoint a new prime minister following the resignation of Tan Sri Muhyiddin Yassin, said research firm Fitch Solutions.

A commentary by the Fitch Ratings’ unit’s Country Risk & Industry Research arm said the prolonged political quagmire will continue to undermine investor confidence, highlighting how the stock exchange opened 0.6 per cent lower yesterday morning on the back of Muhyiddin’s impending resignation.

“However, given that the government has appeared unstable for months, Muhyiddin’s resignation itself is unlikely to prove a surprise to the markets and we do not expect an outsized impact on both the equity and bond markets in Malaysia,” it wrote.

It also highlighted how Malaysia is headed towards appointing its third government in as many years, and with the general election not a viable option, several turnkey coalitions might have to surface to form a government.

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It suggested three possible scenarios, one of which would hypothetically see either Tan Sri Tengku Razaleigh Hamzah, Datuk Seri Ismail Sabri Yaakob, or Khairy Jamaluddin appointed as the next prime minister to allow Perikatan Nasional some familiarity.

“An unlikely, wildcard candidate in this case would be former PM [Datuk Seri] Najib Razak (2009-2018), who may be considered for his experience in running the country, but will have to have his convictions relating to the 1MDB scandal overturned or pardoned before he can assume the position,” said the statement.

The second scenario would see Pakatan Harapan( PH) and current Opposition leader Datuk Seri Anwar Ibrahim come into power as the government, which itself would have challenges of its own in order to regain majority in Parliament.

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A third scenario suggested by Fitch Solutions would see a unity government formed between PN and PH, but warned the potential friction between former allies carries risk of leading towards a dysfunctional government.

“As a result, the King is likely to consider this only as a last resort, though we see a unity government becoming likelier if there is a protracted stalemate in the power struggle after Muhyiddin’s resignation” it said referring to the constitutional duties of the Yang Di Pertuan Agong in appointing the next leader.

Muhyiddin, along with his Perikatan Nasional Cabinet, tendered their resignation to Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah yesterday.

This after months of pressure from the Opposition and even Muhyiddin’s allies to step down, having lost majority support of the Parliament, with the PN government lasting only 18 months following its formation as part of the ‘Sheraton Move’ coup.

Political leaders have since been summoned to Istana Negara to have an audience before the King today, presumably to discuss the formation of a new government.