The Kuala Lumpur Stock Exchange main barometer, 100-stock Composite Index (KLCI), which has dropped 50 points since Monday, may fall another 50 to 70 points if the local political uncertainties continue, according to a market analyst.

Yesterday the KLCI closed at 898.91, down 51.71 points from last Friday's close of 950.62.

The "uncertainties" related to MCA president Dr Ling Liong Sik's expressed wish to resign his Cabinet post of Transport Minister and the reported instability within the top Umno leadership.

A frontpage report in The Asian Wall Street Journal today said that "a potentially far-reaching policy change in Malaysia could exacerbate a growing rift between Prime Minister Mahathir Mohamad and his long-time confidant, Finance Minister Daim Zainuddin".

The Finance Ministry last week issued a directive that would remove some of Malaysia's most experienced senior executives from the boards of scores of state agencies, including state-led public companies and joint ventures with local and foreign investors, said AWSJ report datelined Kuala Lumpur.

The ruling, which has not yet been publicly disclosed, is reportedly resisted by the executives affected, would affect public-listed Telekom Malaysia, Tenaga Nasional and state oil corporation, Petronas (Petroliam Nasional).

The AWSJ report said that the new policy could become a tool for Daim to dispense patronage by filling the newly vacated positions in the state agencies with his own appointees.

The economic analyst contacted by malaysiakini noted that while most of the local newspapers said the CI declines from Monday to Wednesday were due to external factors, mainly the fall in the Dow Jones index, he believed it is "local political uncertainty" arising from the Ling's saga that was the chief factor.

"Even when the Dow went up yesterday, the KLCI still fell by about 4 points despite good economic figures like the GDP growth of 11.7 per cent for the first quarter of this year," he added.

Now that Ling is going away for two weeks' leave, he said it would only prolong the "uncertainty" in Umno-MCA politics which could destabilise the stock market.

If Mahathir-Daim rift is proven to be "true" and allowed to worsen, the KLCI could fall to 830 which would be "extremely worrying", he added.

"We can't afford such uncertainties as the economic recovery, especially among local businesses, is still very early and is at an extremely fragile stage," he added.

Both Mahathir and Daim have denied "market talk" of a rift between them.

Talk of a falling out between the country's two most powerful politicians began late last year when Mahathir overruled a Daim-mandated plan to consolidate Malaysia's 58 financial institutions into six banks.

Last month, Mahathir appointed Zeti Akhtar Aziz as Bank Negara governor instead of Daim's protege and former deputy finance minister, Mustapha Mohamad.

And more recently, a Daim-backed plan to team up debt-laden Time Engineering with Singapore Telecommunications was opposed by Mahathir.