OPPOSITION HOLDS GROUND
An opposition win in Hulu Selangor would be huge for Anwar's People's Alliance, but would possibly increase political tensions with race and religion becoming triggers.
Najib promised more inclusiveness to woo minorities, who fled to the opposition in the 2008 polls, with a policy known as "1Malaysia". But many in his United Malays National Organisation are going the other way, playing up their race and religious credentials to pander to majority Malays.
A government loss in Hulu Selangor could embolden conservative elements in UMNO. Many support Malay groups who are pushing for the preservation of Malay economic privileges which Najib is trying to dilute.
This could spook investors, further alienate non-Malays who make up about 40 percent of the population and increase pressure on Najib to hit the brakes on economic reforms.
The could prompt a negative outlook for the markets.
OPPOSITION GAINS MOMENTUM FOR GENERAL ELECTION
A win in Hulu Selangor could give the opposition fresh momentum heading into the next general election.
If they do well in the by-election and also in Sarawak, then a takeover at the next general election will begin to turn into a possibility.