Ringgit slides with Malaysian stocks as 1MDB woes come back into focus

Malaysian ringgit notes are seen among other currency notes.
Malaysian ringgit notes are seen among other currency notes.PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - The ringgit led declines in Asia and Malaysian stocks fell as state-investment company 1Malaysia Development Bhd came back to haunt the currency just as a pickup in oil was stoking a recovery.

A week after Prime Minister Najib Razak, who chairs the company's advisory board, was cleared in a probe over any wrong doing related to a political donation, the Singapore authorities said on Monday (Feb 1) they had seized many bank accounts related to possible money laundering associated with the firm, which was in the limelight last year due to concern about its rising debt.

This followed an announcement days ago by Swiss Attorney-General that it's pursuing an investigation into alleged diversion of funds from 1MDB.

The ringgit weakened 0.7 per cent to 4.1845 per US dollar as of 9.56am in Kuala Lumpur, after last week posting its biggest rally since October as the outlook for the oil-exporting nation's finances improved amid a recovery in Brent crude. Oil fell for a second day on Tuesday as Malaysian markets reopened after a holiday on Monday.

The ringgit also weakened to 2.9393 to the Singapore dollar as of 10.41am, 0.7 per cent lower than its close on Monday.

"It appears that the dust is being kicked up on 1MDB all over again," said Mr Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. "Downside pressures for the ringgit could re-emerge."

The ringgit climbed 3.3 per cent in January, more than any other in emerging markets, on speculation 2015's 19 per cent decline was overdone.

Malaysia's benchmark stock index fell 0.5 per cent after climbing 2.6 per cent in the five days through Jan 29. Government bonds due in 2020 rose, with the yield falling two basis points to 3.36 per cent, Bursa Malaysia prices show.

1MDB has been the subject of overlapping investigations at home plus Switzerland and Hong Kong amid allegations of financial irregularities. Singapore has seized "a large number" of bank accounts in connection with possible money laundering, the Monetary Authority of Singapore and Commercial Affairs Department said in a joint e-mailed statement on Monday in response to queries on the company.

A statement from Swiss prosecutors last week said they are seeking legal assistance from Malaysia after a probe they conducted into 1MDB revealed "serious indications" that about US$4 billion (S$5.69 billion) may have been misappropriated. Datuk Seri Najib is "not one of the public officials under accusation" in that investigation, Mr Andre Marty, a spokesman for the Swiss Attorney-General's office, said on Monday in a statement.