Malaysia's investors are preparing for political uncertainty after recent speculation on whether Prime Minister Mahathir Mohamad will step down for his designated successor Anwar Ibrahim before the next election, as agreed by their Pakatan Harapan (PH) coalition.
Tun Dr Mahathir has given a time frame of two to three years for the handover, but a public spat between Datuk Seri Anwar, president of Parti Keadilan Rakyat (PKR), and his deputy Azmin Ali over a sex video that surfaced in June has raised prospects of a tussle between the PKR leaders for the top job.
"Most investors are already factoring in some risk that it might not be Anwar who becomes the next PM, so it won't come as a complete shock," said Mr Hasif Murad, investment manager at Aberdeen Standard Investments.
"Investors are likely to have a wait-and-see approach, especially with regard to policy leanings, before making a decision," he said.
A full-blown leadership tussle could slam the brakes on investors who are already dealing with heightened risks from the trade war between the United States and China.
Fund managers, however, say capital flight is unlikely to ensue if there is a leadership battle, as investors are pouring money into companies considered less likely to be affected by changing politics.
Foreign direct investment (FDI) in Malaysia looks promising, rising from RM59 billion (S$19.5 billion) in 2016 to RM80.5 billion last year. In the first quarter of this year alone, approved FDI stood at RM53.9 billion.
"We invest in companies that are less prone to political risks, where policies and regulations are more free market than in the hands of political leaders," said Mr Jalil Rasheed, investment director at Invesco Singapore.
"We are more focused on the individual state of our companies, instead of being bogged down by speculation of change at the top," he said.
Investors have had practice at weathering political instability, after Malaysians voted in May last year for their first change in government in more than six decades.
"We don't believe an inherent leadership battle will lead to an immediate rush of capital out the door, unless it is likely that there will be significant policy changes that follow," Mr Hasif added.
PKR has the most number of lawmakers in Malaysia's 222-seat Parliament, with 50 MPs. The next biggest party is its ally Democratic Action Party, with 42 lawmakers.
The feud between Mr Anwar and Mr Azmin, who is Economic Affairs Minister, has raised concerns of whether Mr Anwar commands enough support from his party and its allies within PH; namely DAP, Dr Mahathir's Parti Pribumi Bersatu Malaysia and Parti Amanah Negara.
"While there have been persistent rumours and conspiracy theories, barring any dramatic changes in his political fortunes or health, Anwar appears to be still on track to becoming Malaysia's next Prime Minister as per PH's agreement," said Mr Amir Fareed Rahim, strategy director at political risk consultancy KRA Group.
"However, there are multiple permutations and combinations of how this could play out in pursuit of a majority in Parliament," he added.
Political volatility may bring about a repricing in investment valuations, Mr Hasif said. While this may be negative in the short term, a downward repricing may make Malaysia cheaper than its regional counterparts, thereby attracting investors.
Analysts say factors that are more critical for investors are the ease of doing business, availability of quality labour and reform of government-linked companies (GLCs).
"The government could do with a comprehensive plan on future economic drivers, growth sectors, labour masterplan, revenue collection, role of government in business, GLC restructuring and so forth," said Mr Jalil. "Malaysia needs a stock market catalyst."