Ringgit slides with stocks as 1MDB woes come back into focus
[KUALA LUMPUR] The ringgit led declines in Asia and stocks fell as state-investment company 1Malaysia Development Bhd (1MDB) 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 Swiss Attorney General announced it's pursuing an investigation into alleged diversion of funds from 1MDB.
Singapore has also seized 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.
The ringgit weakened 0.7 per cent to 4.1845 a dollar as of 9:56 am 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. The commodity fell for a second day on Tuesday as Malaysian markets reopened after a holiday on Monday.
"It appears that the dust is being kicked up on 1MDB all over again," said 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. The dollar's 14-day relative-strength index dropped below 30 last week, indicating to some traders that the greenback was poised to rebound.
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 statement 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 may have been misappropriated.
Najib is "not one of the public officials under accusation" in that investigation, Andre Marty, a spokesman for the Swiss attorney general's office, said Monday in a statement.
BLOOMBERG
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