Mahathir picks up finance reins

The resignation of Daim Zainuddin at the weekend has seen Mahathir take over the finance portfolio

KUALA LUMPUR, Malaysia -- Malaysian Prime Minister Mahathir Mohamad has taken on the job of finance minister after announcing the resignation of Daim Zainuddin at the weekend.

The move is seen as an interim step until Mahathir makes a decision on who should succeed Daim.

The Malaysian stock market was left undecided by Mahathir's action. The KLSE composite index was virtually unchanged Wednesday, losing 0.06 points to 567.30 by mid-morning.

"I am now acting minister of finance and minister of special functions," Mahathir told reporters late Tuesday at Putrajaya, the government's newly-built administrative headquarters, an hour outside Kuala Lumpur.

Second time Mahathir has taken post

This is the second time Mahathir has taken charge of what is regarded as the second most powerful position in the country. The last time was in 1998 after the sacking and jailing of Daim's predecessor Anwar Ibrahim.

Mahathir refused to say when he might hand over to someone else. "I am still thinking," he said, when asked whether he had drawn up a list of candidates to succeed Daim.

Mahathir said Daim had also stepped down from the influential post of party treasurer to the ruling United Malays National Organisation (UMNO), which leads the ruling federal coalition.

Wide range of candidates

Macquarie Bank regional economist Li Liang Ong told CNN on Wednesday that a cabinet shuffle was one possibility ahead of an appointment. She said Mahathir had a wide range of possible candidates.

Possibilities include his economic advisers, Nor Mohamed Yakcop and former central bank governor Ali Abul Hassan.

Awang Adek Hussin, who resigned as assistant governor at the central bank on Tuesday, is another name that has been raised. Two others are former finance minister Tengku Razaleigh Hamzah and Arab-Malaysian group executive chairman Azman Hashim.

Analysts say Mahathir may review and possibly reverse some controversial large projects and corporate restructuring plans previously approved by Daim.

"The key outstanding issue remains the leadership succession," wrote Singapore brokerage GK Goh. "Daim Zainuddin's recent resignation could be a precursor to other leadership changes."

Investors concerned about corporate governance

Malaysia continues to be shunned by foreign funds due to political uncertainty, a slowing economy, and investors' concerns about market practices and standards of corporate governance.

Mahathir's deputy and anointed successor is Abdullah Ahmad Badawi but political pundits question whether he has the clout within UMNO to keep the job for long, should he ever get it.

More immediately, analysts said the change at the finance ministry was unlikely to alter major economic policies, including the country's fixed exchange rate regime.

Malaysia, with Daim as the driving force, introduced the ringgit peg in 1998, along with capital controls, to stave off the Asian currency crisis. The government has repeatedly said it had no plans to change it.

Reuters contributed to this report.