Ringgit Slides With Stocks as 1MDB Woes Come Back Into Focus

  • Malaysia markets started to recover last week on oil's rise
  • Swiss Attorney General looking into alleged diversion of funds

The ringgit declined the most in Asia and 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 wrongdoing 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 1.3 percent to 4.2090 a dollar in Kuala Lumpur, the steepest loss since Nov. 9. It posted its biggest rally last week 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 percent in January, more than any other in emerging markets, on speculation 2015’s 19 percent 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 0.9 percent after climbing 2.6 percent in the five days through Jan. 29. Government bonds due in 2020 rose, with the yield falling one basis point to 3.35 percent, Bursa Malaysia prices show.

Malaysia Response

1MDB has been the subject of overlapping investigations at home and in 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 $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.

1MDB said in a statement Saturday that it hasn’t been contacted by any foreign legal authorities on any matters relating to the company. Malaysia will cooperate with its Swiss counterparts and review the findings before determining a course of action, Attorney General Mohamed Apandi Alisaid in a statement Saturday. A spokesman for the Prime Minister’s Office said they won’t be commenting on the matter.

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