KUALA LUMPUR (BLOOMBERG) - The world's longest bull run ended its 12-year reign as political upheaval helped push Malaysian stocks down more than 20 per cent from their peak.

The FTSE Bursa Malaysia KLCI Index closed down 2.7 per cent in Kuala Lumpur on Monday (Feb 24), extending the drop from its April 2018 all-time high to over 21 per cent. The benchmark had been in a bull run since 2008, rebounding from the global financial crisis to weather the European sovereign debt crisis, the US-China trade war and Malaysia's first change of government since independence.

Unrest resulting in the abrupt resignation of Malaysian Prime Minister Mahathir Mohamad coupled with concern over the coronavirus outbreak have finally pushed the index into bear territory. The prospect of Malaysia's growth continuing to slow from a decade-low has also pressured the stock gauge this year, after a 6 per cent fall in 2019, which was the worst performance by a major Asian stock market.

Mahathir's party exited the ruling coalition, throwing Malaysia into renewed distress after infighting over his successor came to a head. Mahathir's supporters had been reportedly maneuvering to form a new government that would exclude Anwar Ibrahim, the man that had been positioned to take his place.

"Given the many possible political configurations at this junction, investors should be watching events cautiously for now," said Chang Wei Liang, a macro strategist at DBS Group Holdings in Singapore. "It is too early to jump to any conclusions, and we would have to wait and see. US dollar/Malaysian ringgit stability will be an important policy objective during this period."

The ringgit weakened as much as 0.9 per cent to 4.2271 per US dollar, the lowest since September. Bonds fell across the curve. The nation's largest stocks were among the biggest drag on the benchmark index on Monday, with MISC, Sime Darby, and RHB Bank each falling at least 4.5 per cent.